United States v. $1,002,327.00 in U.S. Currency
| Decision Date | 31 August 2015 |
| Docket Number | Case No.: 2:13-cv-00947-JCM-GWF,Case No.: 2:13-cv-00100-JCM-GWF |
| Parties | UNITED STATES OF AMERICA, Plaintiff, v. $1,002,327.00 in UNITED STATES CURRENCY seized from Fidelity Investment Account No. xxxxx9730; $46,173.56 in UNITED STATES CURRENCY seized from Bank of America Account No. xxxxxxx3971; $39,451.60 in UNITED STATES CURRENCY seized from Gulf Coast Community Bank Account No. xxxxxx4690; $296,746.66 in UNITED STATES CURRENCY seized from Gulf Coast Community Bank Account No. xxxxxx5034; $177,844.68 in UNITED STATES CURRENCY seized from Gulf Coast Community Bank Account No. xxxxxx4740; 2012 Ford F-250 truck, VIN: 1FT7W2BT1CEC44330; and 2011 Chevrolet 3500 Express Van, VIN: 1GB3G3CG9B1113885. Defendants. |
| Court | U.S. District Court — District of Nevada |
This matter is before the Court on the United States of America's (hereinafter "Government") Motion to Compel Discovery (Docket No. 99 in Case No. 2:13-cv-100-JCM-GWF, and Docket No. 90 in Case No. 2:13-cv-947-JCM-GWF) filed June 3, 20151. The Claimants filed their Response (#110) on June 22, 2015, and the Government filed its Reply (#114/100) on July 2, 2015. The Court conducted a hearing in this matter on July 14, 2015. At the conclusion of the hearing the Court requested that the Government file a supplement to its motion describing the financial or asset information pertaining to the Claimants and their businesses that it has already obtained through investigation or otherwise. The Government filed its Supplemental Memorandum (#118) on August 10, 2015. The Claimants filed their Supplement (#103) regarding the same matter on August 10, 2015.
The Government seeks the forfeiture of United States currency totaling $1,562,543.50 and two motor vehicles which it alleges are proceeds, or assets purchased with proceeds, from the unlawful distribution of controlled substance analogues in violation of 21 U.S.C. §§ 813 and 841. Amended Complaint (#72). More particularly, the Government alleges that Claimants and their associates sold "spice" products containing the chemical substance 1-5(5-Fluoropenty1)-3-(2,2,3,3-tetramethylcyclopropoyl)indole, commonly known as XLR-11, which is an analogue of JWH-018, a Schedule I controlled substance. Amended Complaint (#72), ¶¶ 24- 28.
In order to prevail in this civil forfeiture action, the Government must prove the same elements that it would be required to prove in a criminal prosecution for distribution or conspiracy to distribute controlled substance analogues. Pursuant to the definition of "controlled substance analogue" in 21 U.S.C. § 802(32)(A), the Government must prove (i) that the chemical structure of the substance sold by the Claimants was substantially similar to the chemical structure of a Schedule I or II controlled substance; (ii) that the substance sold by Claimants had a stimulant, depressant or hallucinogenic effect on the central nervous system that is substantially similar to orgreater than the stimulant, depressant or hallucinogenic effect on the central nervous system of a Schedule I or II controlled substance; or (iii) that the Claimants represented or intended that the substance have a stimulant, depressant or hallucinogenic effect on the central nervous system that is substantially similar to or greater than the stimulant, depressant or hallucinogenic effect on the central nervous system of a Schedule I or II controlled substance. The Government must also prove that Claimants intended that the substance be consumed by human beings. 21 U.S.C. § 803(32)(C)(iv).
The majority of federal courts have adopted a conjunctive reading of 21 U.S.C. § 802(32)(A) "[which] requires two things: (1) the substance in question must have a chemical structure substantially similar to a controlled substance (criterion one) and (2) it must either have a substantially similar effect on the central nervous system (criterion two) or be purported or intended to have such an effect (criterion three)." United States v. Turcotte, 405 F.3d 515, 521 (7th Cir. 2005); United States v. Approximately $50,205 in United States Currency, 2013 WL 3729573, *4 (E.D.Wis. 2013). Turcotte also held that the government must prove that the defendant knew that the substance at issue has a chemical structure substantially similar to that of a controlled substance, and he must either know that it has similar psychological effects or intend that it have such effects. Turcotte stated that "if the scienter requirement is met with respect to the second part of the analogue definition (knowledge or representation of similar physiological effects), the jury is permitted-but not required-to infer that the defendant also had knowledge of relevant chemical similarities." Id. 405 F.3d at 527.2 The Fourth Circuit has held that the government is not required to prove that the defendant knew the substance was a controlled substance analogue. United States v. McFadden, 753 F.3d 432, 443-44 (4th Cir. 2014). The district court in United States v. Gross, 60 F.Supp.3d 1245, 1249 (S.D.Ala. 2014), which involved an alleged conspiracy to distribute XLR-11, notes that the Eighth and Second Circuits have also adopted a scienter requirement. See United States v. Sullivan, 714 F.3d 1104, 1107 (8th Cir. 2013) and United States v. Robinson, 363 F.3d118, 123 n.1 (2nd Cir. 2004). The court in Gross also applied the scienter requirement. The Claimants have previously asserted that Turcotte's scienter requirement applies in this case. For purposes of this discovery motion, the Court assumes that the scienter requirement applies and that the parties are entitled to obtain discovery relevant to that requirement.
In response to the instant motion to compel discovery and in previous arguments to the Court, Claimants have made clear that their defense in this case is that the chemical structure of XLR-11 is not substantially similar to the chemical structure of JWH-018. Claimant's Response to Government's Motion to Compel (#110), pg. 3. Claimants also state that they Id.
Claimants, however, have not abandoned their defense of lack of scienter if the Government proves that the chemical structure of XLR-11 and JWH-018 are substantially similar. To the contrary, Claimants allege that they believed the substances used in their products were not illegal or controlled substance analogues. In this regard, Claimants allege that in July and September 2012, Claimant Ritchie met with DEA Special Agent Claude Cosey, who toured Claimants' manufacturing facilities. During those meetings Claimant Ritchie told Agent Cosey that he was using "5FUR144" in his products, provided Agent Cosey with other details about his operations including how much it cost him to produce his product, and the price lists for the products.3 Claimant Ritchie "told Agent Cosey that he believed what he was doing was legal but that if Agent Cosey told him it was illegal he would stop." Claimants' Response (#110), at pg. 3, citing Agent Cosey's testimony at pgs. 50-53, 33, 38. Claimants also assert that Agent Cosey told Mr. Ritchiethat he did not believe 5FUR144 "was illegal at that time." Id., citing Agent Cosey's testimony at pg. 55. The Claimants have also reportedly claimed that the products were tested by an independent private lab to assure that they were in compliance with federal drug laws. The Government contends, however, that these lab tests were based on incomplete information regarding the ingredients in the products. Amended Complaint (#72), ¶¶ 29, 32.
The Government alleges that Claimants Ritchie, Galecki and their corporate and individual conspirators marketed the "spice" products "as incense and aromatherapy when they were well aware of the psychotropic qualities of the substances that they sold." Amended Complaint (#72), ¶ 18. The Government further alleges that ¶ 19. Although the products were labeled with the statement that they were not for human consumption, the Government alleges that this statement was misleading "since other factors, such as the presence of analogue controlled substance ingredients as well as the pricing of the products demonstrates that they were intended for sale and use as illicit recreational drugs." ¶ 20. The products were also "marketed in single-use packages which is more consistent with how illicit drugs are sold" than with how incense or other similar products are sold. Id.
The Government has served interrogatories and requests for production of documents on Claimants which seek information relating to Claimants' financial conditions and assets. Claimants have objected to the discovery requests on the grounds that they are irrelevant and unduly burdensome. The following discovery requests by the Government are in dispute:
Interrogatory No. 1 asks for Claimants' personal identification information, i.e., full name, prior names, nicknames, date and place of birth and Social Security number. Claimants object to providing their Social Security numbers.
Interrogatory No. 7 asks for the identification of each financial institution in which Claimants have maintained accounts since 2010.
Interrogatory No. 18 asks Claimants to state where they have been employed since 2010 and to...
To continue reading
Request your trial