U.S. v. Funds Deposited in Account No. 20008524845, 00-CV-236-J,-0CV-239-J.

• Decision Date: 05 September 2001
• Docket Number: No. 00-CV-236-J,-0CV-239-J.,00-CV-236-J,-0CV-239-J.
• Citation: 162 F.Supp.2d 1325
• Parties: UNITED STATES of America, Plaintiff, v. ALL FUNDS DEPOSITED IN ACCOUNT NO. 200008524845, First Union National Bank, 441 Market Street, Philadelphia, Pennsylvania, Account Holder National Fuels Corporation, 1420 Fifth Avenue, Suite 2200, Seattle, Washington 98101, Defendants. and United States of America, Plaintiff, v. All Funds Deposited in Account No. 3000034807771, First Union National Bank, 441 Market Street, Philadelphia, Pennsylvania, Account Holder, Peppermint Revocable Trust and Tanja Fredette, Defendants.
• Court: U.S. District Court — District of Wyoming

162 F.Supp.2d 1325

UNITED STATES of America, Plaintiff, v. ALL FUNDS DEPOSITED IN ACCOUNT NO. 200008524845, First Union National Bank, 441 Market Street, Philadelphia, Pennsylvania, Account Holder National Fuels Corporation, 1420 Fifth Avenue, Suite 2200, Seattle, Washington 98101, Defendants. and United States of America, Plaintiff, v. All Funds Deposited in Account No. 3000034807771, First Union National Bank, 441 Market Street, Philadelphia, Pennsylvania, Account Holder, Peppermint Revocable Trust and Tanja Fredette, Defendants.

No. 00-CV-236-J,-0CV-239-J.

United States District Court, D. Wyoming.

September 5, 2001.

Thomas D. Roberts, Assistant U.S. Attorney, Cheyenne, for Plaintiff.

Timothy C. Kingston, Graves, Miller & Kingston, Cheyenne, Charles E. Graves, Graves, Miller & Kingston, Sheridan, for Defendant.

NUNC PRO TUNC ORDER DENYING RELIEF FROM DEFENDANT'S MOTION FOR RECONSIDERATION OF COURT'S ORDER TO STAY CIVIL FORFEITURE PROCEEDINGS PURSUANT TO 18 U.S.C. § 981(g)

ALAN B. JOHNSON, District Judge.

This civil forfeiture action involves funds that had been seized by the Government pursuant to a verified complaint for forfeiture in rem and a finding for probable cause and order for arrest of property in rem issued on December 13, 2000, by United States Magistrate Judge William C. Beaman in Civil Action No. 00-CV-236 and on December 15, 2000, in Civil Action No. 00-CV-239. The Magistrate Judge found that sufficient probable cause existed to warrant the seizure of the defendant Funds on the ground that they were subject to forfeiture pursuant to 18 U.S.C.A. § 981(a)(2)(B) as constituting property subject to forfeiture to the United States pursuant to 18 U.S.C. § 981(a)(1)(C) as amended by Pb. L. 106-185, April 25, 2000. The United States subsequently commenced a criminal investigation into the activities of National Fuels Corporation and its principal employees and owners for possible violations of federal law prohibiting wire fraud (18 U.S.C. § 1343), and mail fraud (81 U.S.C. § 9341). On January 5, 2001, a search warrant was executed at the premises of National Fuels Corporation, located at Holiday, Florida. On February 22, 2001, the United States filed its motion to stay civil forfeiture proceedings pursuant to 18 U.S.C. § 981(g) on the basis that to allow civil discovery in this matter would prejudice the ability of the United States to continue its related criminal investigation. On February 23, 2001, an Order submitted by the United States was executed by the Court granting the requested stay. This matter returns for consideration on the claimants/defendants' response to plaintiff's motion and request for reconsideration of the stay, filed on February 28, 2001.

The Government's own motion to stay was supported by a sealed, ex parte, affidavit. The claimants/defendants argue that they were not afforded an opportunity to respond to the plaintiff's motion; that matters that would have been raised by the claimants/defendants were not presented; that the order was entered without a hearing; that the order was entered prior to the 10-day time period for response provided by the Local Rules; and that the granting of the motion to stay occurred without due process.

On March 16, 2001, counsel for the claimants/defendants appeared at a scheduled hearing of the motion for reconsideration and presented their arguments with those by counsel for the Government. A second supplemental ex parte submission by a special agent of the Federal Bureau of Investigation, detailing concerns related to the investigation in the criminal proceedings was filed on April 5, 2001. Claimants/defendants have submitted a reiteration of the points they made at earlier hearings opposing the stay and the use of ex parte, confidential submissions in support of such requests. Approximately 150 claims have been received in the meantime from third-parties, seeking reimbursement of amounts paid to the claimants-defendants, totaling over $5,000,000. The investigation which led to the filing of the verified complaints for forfeiture commenced on December 11, 2000, when Lance W. Alexander, a special agent of the Federal Bureau of Investigation (FBI), received a police report and documentation from Gillette, Wyoming, reflecting that Mike Davis, d/b/a Davis Chevrolet, had been contacted by a person representing National Fuels Corporation, (NFC), 1400 Fifth Avenue, Suite 2200, Seattle, Washington. The representative advised Davis that he was offering a promotional and incentive program where the automobile dealer, Davis, would purchase a gasoline voucher good for $500 worth of gasoline for only $45. The vouchers could then be used by the dealer to give to automobile customers in lieu of cash discounts. The customer could choose from National Fuel Companies such as Chevron, Exxon, Mobil, Standard, and Texaco, using their vouchers to purchase gasoline. According to the representative of National Fuels, Davis's customers would send their gasoline receipts to National Fuels Corporation for reimbursement.

Davis purchased the vouchers and delivered them to his customers as an incentive and benefit to those who purchased automobiles. However, Davis began receiving complaints that National Fuels Corporation was not reimbursing customers for gasoline purchases. Davis had given out between $30,000 and $40,000 worth of gasoline vouchers to his customers.

Davis attempted to resolve the issues of non-payment with National Fuels Corporation representatives. His calls, however, were unanswered. Contacts with others reflected complaints received by the Seattle Better Business Bureau. The premises listed to National Fuels Corporation in Seattle was actually owned by another company renting temporary office space, meeting rooms and mailboxes. That company forwarded approximately 2,000 pieces of mail received daily in behalf of National Fuels Corporation to another post office at Holiday, Florida.

STATUTORY AUTHORITY

Title 18, U.S.C. Section 981(g) provides the basis for a stay of a civil forfeiture proceeding based upon a court determination that civil discovery will adversely affect the ability of the United States to properly investigate and prosecute a criminal case. The statute provides:

Section 981. Civil forfeiture.

(g)(1) Upon the motion of the United States, the court shall stay the civil forfeiture proceeding if the court determines that civil discovery will adversely affect the ability of the Government to conduct a related criminal investigation or the prosecution of a related criminal case.

(2) Upon the motion of a claimant, the court shall stay the civil forfeiture proceeding with respect to that claimant if the court determines that—

(A) The claimant is the subject of a related criminal investigation or case;

(B) The claimant has standing to assert a claim in the civil forfeiture proceeding; and

(C) Continuation of the forfeiture proceeding will burden the right of the claimant against self-incrimination in a related investigation or case.

(3) With respect to the impact of civil discovery described in paragraphs (1) and (2), the court may determine that a stay is unnecessary if a protective order limiting discovery would protect the interest of one party without unfairly limiting the ability of the opposing party to pursue the civil case. In no case, however, shall the court impose a protective order as an alternative to a stay if the effect of such protective order would be to allow one party to pursue discovery while the other party is substantially unable to do so.

(4) In this subsection, the terms "related criminal case" and "related criminal investigation" mean an actual prosecution or investigation in progress at the time at which the request for the stay, or any subsequent motion to lift the stay is made. In determining whether a criminal case or investigation is "related" to a civil forfeiture proceeding, the court shall consider the degree of similarity between the parties, witnesses, facts, and circumstances involved in the two proceedings, without requiring an identity with respect to any one or more factors.

(5) In requesting a stay under paragraph (1), the government may, in appropriate cases, submit evidence ex parte in order to avoid disclosing any matter that may adversely affect an ongoing criminal investigation or pending criminal trial.

(6) Whenever a civil forfeiture proceeding is stayed pursuant to this subsection, the court shall enter any order necessary to preserve the value of the property or to protect the rights of lienholders or other persons with an interest in the property while the stay is in effect.

(7) A determination by the court that the claimant has standing to request a stay pursuant to paragraph (2) shall apply only to this subsection and shall not preclude the Government from objecting to the standing of the claimant by dispositive motion or at the time of trial.

Title 18, U.S.C. Section 981(g) is part of the Civil Asset Forfeiture Reform Act of 2000 ("CAFRA") which became effective on August 23, 2000. Predecessor statutes found at 18 U.S.C. § 981(g) and 21 U.S.C § 881(i) provided in pertinent part as follows:

(1) The filing of an indictment or information alleging a violation of law, Federal, State or local, which is also related to a forfeiture proceeding under this section shall, upon motion of the United States and for good cause shown, stay the forfeiture proceeding.

18 U.S.C. § 981(g), repealed on August 23, 2000.

The filing of an indictment or information alleging a violation of this subchapter or subchapter II of this chapter, or a violation of State or local law that could have been charged under this subchapter or subchapter II of this chapter which is also related to a civil forfeiture proceeding under this section shall, upon motion of the United States and for good cause shown, stay the civil forfeiture proceeding.

21 U.S.C. § 881(i), repealed effective August 23,...