U.S. v. One Parcel of Real Property with Bldgs., C.A. No. 97-0718L.

• Citation: 40 F.Supp.2d 74
• Decision Date: 19 March 1999
• Docket Number: C.A. No. 97-0718L.
• Parties: UNITED STATES of America, Plaintiff, v. ONE PARCEL OF REAL PROPERTY WITH BUILDINGS, APPURTENANCES, AND IMPROVEMENTS KNOWN AS 352 NORTHUP STREET, LOCATED IN THE CITY OF CRANSTON, RHODE ISLAND, Defendant.
• Court: United States State Supreme Court of Rhode Island

40 F.Supp.2d 74

UNITED STATES of America, Plaintiff, v. ONE PARCEL OF REAL PROPERTY WITH BUILDINGS, APPURTENANCES, AND IMPROVEMENTS KNOWN AS 352 NORTHUP STREET, LOCATED IN THE CITY OF CRANSTON, RHODE ISLAND, Defendant.

C.A. No. 97-0718L.

United States District Court, D. Rhode Island.

March 19, 1999.

COPYRIGHT MATERIAL OMITTED

Michael P. Iannotti, AUSA, U.S. Attorney's Office, Providence, RI, for plaintiffs.

Thomas F. Connors, Providence, RI, for defendant.

DECISION AND ORDER

LAGUEUX, Chief Judge.

This case is before the Court for decision following a bench trial. Plaintiff United States of America ("United States") seeks the forfeiture pursuant to 21 U.S.C. § 881(a)(6) of defendant real estate located at 352 Northup Street in Cranston, Rhode Island (the "Property"). The United States alleges that the Property was purchased with the cash proceeds of illegal narcotics transactions conducted by Charles Kennedy, Jr. ("Kennedy Jr."), who is currently serving a fifteen year sentence for narcotics trafficking imposed by this Court. Challenging the forfeiture is claimant Bellevue Limousine Service, Inc. ("Bellevue"), a Rhode Island corporation controlled by Charles Kennedy, Sr. ("Kennedy Sr."), the father of Kennedy Jr. Kennedy Sr. counters that he purchased the Property on behalf of Bellevue with "clean" money unconnected to his son's drug dealing. For the reasons detailed below, the Court concludes that the Property is subject to forfeiture to the United States but that claimant has an untainted interest therein.

I. Standard of Law for Bench Trials

Pursuant to Federal Rule of Civil Procedure 52(a), this Court may enter judgment following a trial without a jury. See Fed. R.Civ.P. 52(a). In crafting a decision following a bench trial, the Court "shall find the facts specially and state separately its conclusions of law thereon." Id. It is within the purview of the trial court to weigh the credibility of witnesses for the purpose of making findings of fact. See id.; United States v. One Lot of U.S. Currency ($36,634), 103 F.3d 1048, 1054-55 (1st Cir. 1997) (finding in a probable cause determination that a claimant's explanation was not believable).

II. The Federal Law of Forfeiture

Federal statutes provide for the civil forfeiture to the United States government of property exchanged, or intended to be exchanged, for illegal narcotics. See 21 U.S.C. § 881(a). The subsection of this statute relevant to this proceeding provides that:

(a) The following shall be subject to forfeiture to the United States and no property right shall exist in them:

....

(6) All moneys, negotiable instruments, securities, or other things of value furnished or intended to be furnished by any person in exchange for a controlled substance or listed chemical in violation of this subchapter, all proceeds traceable to such an exchange, and all moneys, negotiable instruments, and securities used or intended to be used to facilitate any violation of this subchapter....

Id. § 881(a)(6). Real property may constitute proceeds and therefore be forfeited under § 881(a)(6). See United States v. Parcels of Land, 903 F.2d 36, 48 (1st Cir. 1990).

The forfeiture statute instructs that the burdens of proof in these actions are governed by 19 U.S.C. § 1615, the statute allowing for forfeiture of property for customs violations. See 21 U.S.C. § 881(d). The government bears the initial burden of demonstrating probable cause to believe the property at issue may be forfeited. See 19 U.S.C. § 1615; $36,634, 103 F.3d at 1052. The United States Court of Appeals for the First Circuit has explained that the government must establish "the existence of probable cause to believe that the property had the requisite nexus to a specified illegal purpose." United States v. One Lot of U.S. Currency ($68,000), 927 F.2d 30, 32 (1st Cir.1991). The government has satisfied this standard when it has shown that there is probable cause to believe that the property represented the proceeds of an illegal narcotics transaction. See $36,634, 103 F.3d at 1053. Significantly, although the government must establish a nexus between the property and some illegal narcotics transactions, it need not link the property to any particular transaction. See United States v. Parcels of Property, With Building Appurtenances and Improvements Located at 255 Broadway, Hanover, 9 F.3d 1000, 1004 (1st Cir.1993). Furthermore, "`the government's evidence need not exclude other plausible hypotheses of the source of the money.'" United States v. One Parcel of Real Property, 921 F.2d 370, 377 (1st Cir.1990) (quoting United States v. $250,000, 808 F.2d 895, 899 (1st Cir.1987)).

Although each fact presented to the court in a probable cause proceeding must be weighed for probity, the final probable cause determination must be reached by considering the totality of the facts before the court, not by examining specific facts out of context. See United States v. $250,000, 808 F.2d 895, 899 (1st Cir.1987) (explaining that courts must view the "`aggregate' of the facts"). In this Circuit, probable cause "requires more than `mere suspicion,' but less than `prima facie proof.'" $36,634, 103 F.3d at 1054 (quoting 255 Broadway, 9 F.3d at 1004). In essence, the court's task is to search for a "reasonable ground" for believing that the property is linked to illegal narcotics transactions. Id.

Every probable cause inquiry is unique because of the myriad of factual scenarios upon which forfeiture cases are based. Precedent in this area of the law, therefore, is less important than application of sound principles and common sense. See 255 Broadway, 9 F.3d at 1004 ("`[B]ecause there are so many variables in the probable cause equation, probable cause findings are not invariably bound by precedent.'") (quoting United States v. Maguire, 918 F.2d 254, 258 (1st Cir.1990)); One Parcel of Real Property, 921 F.2d at 376 (applying "common sense," "reason," and "common experience considerations" to the probable cause inquiry). Furthermore, probable cause may be based on any reliable evidence, including circumstantial evidence, as well as evidence that would be inadmissible at trial. See Parcels of Land, 903 F.2d at 38.

If the government is successful in demonstrating probable cause, the burden of proof shifts to the claimant to prove by a preponderance of the evidence that the subject property should not be forfeited. See United States v. Parcel of Land and Residence at 28 Emery Street, Merrimac, Mass., 914 F.2d 1, 3 (1st Cir.1990). The claimant must "establish that some or all of the property is not traceable as proceeds from an illegal exchange of controlled substances." One Parcel of Real Property, 921 F.2d at 375.

A claimant who fails to prove that the property is not the proceeds of illegal narcotics transactions may have recourse to a second defense. The forfeiture statute contains an "innocent owner defense" providing that "no property shall be forfeited under this paragraph, to the extent of the interest of an owner, by reason of any act or omission established by that owner to have been committed or omitted without the knowledge or consent of that owner." 21 U.S.C. § 881(a)(6). Therefore, a claimant may be able to preserve an interest in the property if that claimant demonstrates both an ownership interest in the property and ignorance of the property's tainted past. See United States v. 92 Buena Vista Ave., 507 U.S. 111, 123, 113 S.Ct. 1126, 122 L.Ed.2d 469 (1993); United States v. 170 Westfield Drive, 34 F.Supp.2d 107, 114 (D.R.I.1999). Opportunities to successfully invoke this provision, however, are uncommon. See United States v. Real Property Located at 20832 Big Rock Drive, 51 F.3d 1402, 1410 (9th Cir.1995) ("The innocent owner exclusion from forfeiture comes into play only in those situations, admittedly rare, where a purchaser uses drug money to buy an asset, or an interest in an asset, without knowing the illegal source of the money. The clearest example of this would be a gift....").

Even if the government is successful in establishing probable cause and the claimant fails to rebut that finding, the government may only be entitled to a portion of the property. "[A]n entire defendant property is not forfeitable on a mere showing that there is probable cause to believe that a portion of the property is traceable as proceeds from an exchange of controlled substances." One Parcel of Real Property, 921 F.2d at 375. Rather, the government is entitled only to that portion of the property which it can demonstrate was acquired with tainted funds. See United States v. Pole No. 3172, Hopkinton, 852 F.2d 636, 639-40 (1st Cir.1988); 170 Westfield Drive, 34 F.Supp.2d at 116. It is the duty of the court to determine "the respective interests of the government and the claimant to the cash proceeds that result[] from the sale of the forfeited assets." United States v. One 1980 Rolls Royce, 905 F.2d 89, 92 (5th Cir.1990); see One Parcel of Real Property, 921 F.2d at 377.

III. Findings of Fact

This Court has carefully reviewed the evidence presented by the parties during the three day bench trial and makes the following findings of fact based on those submissions.

At the heart of this forfeiture action is the tale of Kennedy Jr.'s criminal narcotics operation. In 1997, this Court sentenced Kennedy Jr. to fifteen years imprisonment on his convictions for conducting a continuing criminal enterprise, conspiracy to distribute controlled substances, and money laundering. These convictions were the result of federal law enforcement investigations that dated back to the 1980s. Uncovered by the investigators was a criminal organization, headed by Kennedy Jr., that included suppliers, brokers, and couriers who transported marijuana and cocaine from California, Mexico, and Florida to Kennedy Jr.'s East Greenwich, Rhode Island home. It is undisputed that the activities of this criminal ring were planned and directed by...