U.S. v. U.S. Currency in Amount of $119,984.00, 01-6077.

• Citation: 304 F.3d 165
• Decision Date: 05 September 2002
• Docket Number: No. 01-6077.,No. 01-6193.,01-6077.,01-6193.
• Parties: UNITED STATES of America, Plaintiff-Appellant/Cross-Appellee, v. U.S. CURRENCY IN THE AMOUNT OF $119,984.00, MORE OR LESS, Defendant-Appellee/Cross-Appellant, Cesar Castro and Maria Ansueto, Claimants.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

304 F.3d 165

UNITED STATES of America, Plaintiff-Appellant/Cross-Appellee, v. U.S. CURRENCY IN THE AMOUNT OF $119,984.00, MORE OR LESS, Defendant-Appellee/Cross-Appellant Cesar Castro and Maria Ansueto, Claimants.

No. 01-6077.

No. 01-6193.

United States Court of Appeals, Second Circuit.

Argued: April 25, 2002.

Decided: September 5, 2002.

COPYRIGHT MATERIAL OMITTED

David L. Goldberg, Assistant United States Attorney, Brooklyn, N.Y. (Alan Vinegrad, United States Attorney for the Eastern District of New York, Deborah B. Zwany, Arthur P. Hui, Assistant United States Attorneys, of counsel), for plaintiff-appellant/cross-appellee United States of America.

Steven L. Kessler, Law Offices of Steven L. Kessler, New York City (Eric M. Wagner, of counsel), for claimants Cesar Castro, Maria Ansueto.

Before: F.I. PARKER, STRAUB, and SOTOMAYOR, Circuit Judges.

STRAUB, Circuit Judge.

This appeal stems from the seizure of United States currency totaling approximately $119,984 by the United States Customs Service from claimant Cesar Castro as he was attempting to leave the country; Castro's subsequent criminal prosecution, guilty plea and sentencing; and the ensuing civil forfeiture action. Plaintiff-Appellant-Cross-Appellee United States of America ("Government") appeals from a judgment entered March 8, 2001 by the United States District Court for the Eastern District of New York (Charles P. Sifton, Judge) in the forfeiture action brought against the seized currency. The District Court granted summary judgment to claimants Castro and Maria Ansueto and dismissed the forfeiture action, reasoning that its earlier findings at Castro's sentencing regarding the source and intended use of the currency estopped the Government from arguing in the forfeiture action that the currency was either derived from an unlawful source or intended for an unlawful use. See United States v. U.S. Currency in the Amount of $119,984 ("$119,984"), 129 F.Supp.2d 471 (E.D.N.Y.2001). We disagree, and for the reasons stated below, we vacate the judgment of the District Court and remand for further proceedings consistent with this opinion. Claimants cross-appeal from the District Court's unreported bench ruling on June 4, 2001, denying them pre-judgment interest on the seized funds, but we need not reach the merits of the cross-appeal.

BACKGROUND

On November 22, 1996, at the John F. Kennedy International Airport in New York City, Cesar Castro was preparing to board a flight to the Dominican Republic when he was stopped by an inspector of the United States Customs Service. After Castro was advised orally and in writing that anyone transporting more than $10,000 in currency into or out of the United States is required to file a declaration to that effect, he signed a written declaration that he was carrying $2,000 in currency. The customs inspector then searched Castro's briefcase, discovering $11,500 in hundred-dollar bills. Castro apologized, but denied having any additional currency to report. The inspector proceeded to search Castro's person and remaining luggage, and found additional undeclared currency. In total, Castro was carrying $119,984 in United States currency, concealed on his person and in his luggage. He was arrested and the currency was seized.

In an indictment filed on December 5, 1996, Castro was charged with one count of violating the currency reporting provisions of 31 U.S.C. § 5316¹ and one count of making false statements in violation of 18 U.S.C. § 1001. On January 16, 1997, pursuant to a written plea agreement, Castro pled guilty to violating the currency reporting law.

In the plea agreement, the United States Attorney's Office for the Eastern District of New York ("Office"), "[b]ased upon information now known to it," estimated the likely offense level under the United States Sentencing Guidelines then in effect ("1995 Guidelines") to be level four. This conclusion was based on the following calculation: subsection 2S1.3(a) of the 1995 Guidelines provided a base offense level of six,² and two levels were deducted pursuant to subsection 3E1.1(a) for Castro's acceptance of responsibility, yielding an adjusted offense level of four. The plea agreement further provided that "the Office recommends to the Probation Department that the calculation set forth... be adopted. If the Probation Department finds that any portion of the calculation set forth ... is incorrect, the Office reserves the right to argue that the Court should adopt the Probation Department's finding." Significantly, the agreement "[did] not prohibit the United States, any agency thereof, or any third party from initiating or prosecuting any civil or administrative proceedings directly or indirectly involving the defendant, including, but not limited to, proceedings by the Internal Revenue Service relating to potential civil tax liability or forfeiture of assets."

Prior to his sentencing, Castro was interviewed by the Probation Department. At the interview, he stated that the money at issue was a loan from claimant Maria Ansueto, the mother-in-law of his recently remarried ex-wife, and he submitted several documents to show that Ansueto had the financial resources to make such a loan. On March 11, 1997, the Probation Department issued a Pre-Sentence Report ("PSR") that recommended that the District Court sentence Castro based on an offense level of four. The PSR, like the plea agreement, proposed an initial base offense level of six under subsection 2S1.3(a). But unlike the plea agreement, the PSR recommended increasing the base offense level by six levels, also pursuant to subsection 2S1.3(a), to account for the value of the $119,984 in funds. See 1995 Guidelines §§ 2S1.3(a); 2F1.1(b)(1)(G). The PSR also found that Castro's statements during his pre-sentence interview and the documents that he provided to the Probation Department "seem to support the fact that it was possible for Ms. Ansueto to be in possession of funds in the amount allegedly loaned to the defendant." Therefore, according to the PSR, "[t]he defendant has provided proof that the funds were the proceeds of lawful activity, and they were to be used for a lawful purpose." Accordingly, the PSR recommended a six-level reduction based on subsection 2S1.3(b)(2), which was not mentioned anywhere in the plea agreement and provided:

If (A) subsection (b)(1) [corresponding to related unlawful activity] does not apply; (B) the defendant did not act with reckless disregard of the source of the funds; (C) the funds were the proceeds of lawful activity; and (D) the funds were to be used for a lawful purpose, decrease the offense level to level 6.

Lastly, the PSR, like the plea agreement, recommended a reduction of two levels for Castro's acceptance of responsibility, pursuant to subsection 3E1.1(a), yielding a final adjusted offense level of four.

At a hearing on March 27, 1997, the District Court sentenced Castro to two years' probation and a $2,500 fine. At the hearing, the following colloquy occurred:

THE COURT: So this money is going to be forfeited?

MR. TATUM [Assistant United States Attorney]: Is that directed at the government or Ms. Monasebian [defense counsel]?

THE COURT: Well, forfeiture doesn't happen without both sides having something to say about it. I take it you're not contesting the forfeiture?

MS. MONASEBIAN: Right now the forfeiture proceedings are in abeyance pending resolution in this case, Your Honor.

THE COURT: What's going to happen when they are no longer in abeyance?

MS. MONASEBIAN: I believe, based upon the probation report and the documents we submitted, that there was no illegal proceeds involved in this case, and the funds were not to be used for anything improper and, based upon that, I believe we'll be trying to get the money returned to us in a civil proceeding after this case is determined, Your Honor.

THE COURT: Okay.

MS. MONASEBIAN: Your Honor, if I may —

THE COURT: Does the government have any position on that at this point or not?

MR. TATUM: No, the government does not.

THE COURT: Does not.

MR. TATUM: Have a position.

THE COURT: Okay. Yes, did you have something else you wanted to say?

MS. MONASEBIAN: Just that the defendant provided the proof that the funds were the proceeds of lawful activity and they were to be used for lawful purpose [sic], and that is indicated on page 5 of the report.

THE COURT: Well, I'm not making a finding on that. I will not prejudge the issue.

MS. MONASEBIAN: I understand, Your Honor.

THE COURT: I mean, I don't have enough evidence here to find that the funds were the proceeds or are to be used for any illegal purpose.

Well, I said that, but then I see that actually this sentence is based on a specific offense characteristic, which the defendant is entitled to upon a showing that he did not act with reckless disregard to the source of the funds, that the funds were the proceeds of lawful activity, and the funds were used for lawful purpose [sic].

I have to say having read it, it doesn't make much sense, since if the funds were the proceeds of lawful activity, I don't know what it means to say that the defendant did not act with reckless disregard of the fact that they were the proceeds of lawful activity.

In any event, it seems to me he's entitled to this, if there's evidence to support that finding. The evidence is recited in the probation report, and the government has not — is disputing — is not offering me any evidence in this proceeding to the contrary. Accordingly, I'm prepared to accept the conclusion of the Probation Department that this is a case in which the offense level is appropriately decreased to a level six.

Whatever the impact of a government's failure to offer any proof to rebut this proffer by the defendant in the context of the criminal sentencing proceeding, may have in the context of a forfeiture proceeding, I leave to the finder of fact in the forfeiture proceeding.

I just want clear...