United States v. $16,072.00 in U.S. Currency

Decision Date15 March 2019
Docket Number1:17-cv-308 (GLS/DJS)
Citation374 F.Supp.3d 205
Parties UNITED STATES of America, Plaintiff, v. $16,072.00 IN U.S. CURRENCY et al., Defendants.
CourtU.S. District Court — Northern District of New York

Adam J. Katz, U.S. Department of Justice—Albany Office, Albany, NY, Tamara Thomson, Office of United States Attorney—Syracuse Office, Syracuse, NY, for Plaintiff.

Joshua G. Stegemann, Berlin, NH, pro se.


Gary L. Sharpe, U.S. District Judge

On May 2, 2013, after a lengthy investigation into a large narcotics trafficking operation in the Berkshires, the Rensselaer County Drug Task Force seized $ 296,172.00 and a 2008 Ford Expedition (hereinafter "SUV") from claimant Joshua G. Stegemann's premises pursuant to a New York search warrant.2 (Am. Compl., Dkt. No. 32 ¶¶ 2-3, 5, 12, 24, 27; Dkt. No. 44, Attach. 1.) A few days later, the Berkshire County Drug Task Force seized $ 160,020.00 inside a safe at Stegemann's sister's residence pursuant to a Massachusetts search warrant. (Am. Compl. ¶¶ 4, 31;3 Dkt. No. 44, Attachs. 2, 4.) Thereafter, the government obtained ex parte turnover orders4 from the respective state courts, which authorized a transfer of the seized property identified above (hereinafter "the defendant property") to the Drug Enforcement Administration (DEA) for the commencement of administrative forfeiture proceedings, "upon probable cause to believe that it was used to facilitate a violation of a drug offense or represents drug proceeds." (Dkt. No. 44, Attachs. 3, 4.) Following execution of the turnover orders, the DEA served administrative forfeiture notice upon Stegemann; in turn, Stegemann filed claims for the defendant property.5 (Am. Compl. ¶¶ 35-36.)

On September 18, 2013, a grand jury indicted Stegemann, charging him with violations of 21 U.S.C. § 841(a)(1) (possession with intent to distribute controlled substances), 18 U.S.C. § 924(c)(1)(A) (possession of firearms in furtherance of a drug trafficking crime), and 18 U.S.C. § 922(g)(1) (possession of firearms and ammunition by a prohibited person). (Dkt. No. 10, 1:13-cr-357 at 1-2.) The indictment also included a forfeiture allegation naming the defendant property, pursuant to 21 U.S.C. § 853(a), as proceeds from and property used or intended to be used to commit or facilitate violations of 21 U.S.C. § 841(a)(1). (Id. at 3-6.) After lengthy motion practice6 and a trial, a jury convicted Stegemann on all counts, (Dkt. No. 150, 1:13-cr-357), and determined that the defendant property was subject to forfeiture, (Dkt. No. 151, 1:13-cr-357). Thereafter, the court ordered forfeiture of the defendant property. (Dkt. No. 208, 1:13-cr-357.)

However, on appeal to the Second Circuit, the government conceded that it failed to demonstrate the requisite nexus between the defendant property and the criminal activity outlined in 21 U.S.C. § 841(a)(1) because, in its opinion, "the evidence at trial proved only that the cash was likely the proceeds of prior drug transactions and that the [SUV] was the instrumentality of prior drug transactions." (United States of America v. Stegemann , Case No. 16-2596, Dkt. No. 75 at 60-62.) On the same day as the government's concession, it filed this civil forfeiture proceeding alleging that the defendant property is subject to forfeiture pursuant to 21 U.S.C. § 881(a)(4) and (6). (Compl. ¶¶ 9-10, Dkt. No. 1.) Eventually, the Second Circuit reversed the order of forfeiture as to the defendant property, based on the government's lack of opposition. (Dkt. No. 223, 1:13-cr-357.)

Stegemann then sought dismissal of the government's complaint in rem as well as various other forms of relief, (Dkt. No. 10), which the court denied, (Dkt. No. 31). At the time, the court noted that "the government has thus far failed to convince the court that it took the proper steps to maintain custody of the [defendant] property or that [ 18 U.S.C.] § 983(a)(3)(B)(ii)(II) is not implicated," but it stopped short of fully addressing the argument because it was improperly raised in Stegemann's reply papers. (Id. at 4 n.2.) Thereafter, the government filed an amended complaint, (Am. Compl., Dkt. No. 32), which was followed by Stegemann's pending motion to dismiss pursuant to Rule G(5)(b) of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions and Fed. R. Civ. P. 12(b)(6), (Dkt. No. 33).7 Stegemann argues that, like the initial complaint in rem , the amended complaint in rem must be dismissed because the government failed to satisfy the requirements of 18 U.S.C. § 983(a)(3)(B)(ii)(II).8 (Id. , Attach. 1 at 9-13.) For the following reasons, Stegemann's motion is denied with leave to renew in part.

The general rules regarding civil forfeiture proceedings are outlined by Section 2 of the Civil Asset Forfeiture Reform Act of 2000 (CAFRA), P.L.106-185, 114 Stat. 202 (2000), which is codified at 18 U.S.C. § 983(a)(3) and states, in pertinent part:

(A) Not later than 90 days after a claim has been filed, the [g]overnment shall file a complaint for forfeiture in the manner set forth in the Supplemental Rules for Certain Admiralty and Maritime Claims or return the property pending the filing of a complaint, except that a court in the district in which the complaint will be filed may extend the period for filing a complaint for good cause shown or upon agreement of the parties.
(B) If the [g]overnment does not—
(i) file a complaint for forfeiture or return the property, in accordance with subparagraph (A); or(ii) before the time for filing a complaint has expired
(I) obtain a criminal indictment containing an allegation that the property is subject to forfeiture; and
(II) take the steps necessary to preserve its right to maintain custody of the property as provided in the applicable criminal forfeiture statute ,
the [g]overnment shall promptly release the property pursuant to regulations promulgated by the Attorney General, and may not take any further action to effect the civil forfeiture of such property in connection with the underlying offense .
(C) In lieu of, or in addition to, filing a civil forfeiture complaint, the [g]overnment may include a forfeiture allegation in a criminal indictment. If criminal forfeiture is the only forfeiture proceeding commenced by the [g]overnment, the [g]overnment's right to continued possession of the property shall be governed by the applicable criminal forfeiture statute.

(internal marks altered and emphases added). Given that the government retained the defendant property and did not file a civil forfeiture complaint within ninety days of Stegemann's claims, it was required to satisfy the mandates of 18 U.S.C. § 983(a)(3)(B) in order to preserve its ability to later seek civil forfeiture of the same. See 18 U.S.C. § 983(a)(3)(A),(B). The court has already decided that the government satisfied § 983(a)(3)(B)(ii)(I) by indicting Stegemann and naming the defendant property in the indictment. (Dkt. No. 31 at 4.)

The only issue now before the court is whether the government "t[ook] the steps necessary to preserve its right to maintain custody of the [defendant] property as provided in [ 21 U.S.C. § 853 ],"9 as required by § 983(a)(3)(B)(ii)(II). If not, CAFRA mandates the prompt release of the defendant property and bars the government from taking any further action to effect its civil forfeiture in connection with the underlying offense. See § 983(a)(3)(B)(ii)(II) ; see also Stefan D. Cassella, The Civil Asset Forfeiture Reform Act of 2000: Expanded Government Forfeiture Authority and Strict Deadlines Imposed on All Parties, 27 J. Legis. 97, 146 (2001) ("[I]n those cases where an indictment is obtained within the ninety-day period, the government must remember that to protect itself from the ‘death penalty’ for civil forfeiture, it must re-seize or restrain the property with criminal process.") (internal footnote omitted).

Although case law addressing this niche area of CAFRA is not well developed, courts have indicated that, generally, the government can comply with 18 U.S.C. § 983(a)(3)(B)(ii)(II) by obtaining a protective order under 21 U.S.C. § 853(e) or—if the government demonstrates that a protective order is insufficient to assure the property's availability for forfeiture—a criminal seizure warrant under 21 U.S.C. § 853(f). See, e.g. , United States v. Kramer , No. 1:06-cr-200, 2006 WL 3545026, at *2-4 (E.D.N.Y. Dec. 8, 2006) (granting motion for return of property initially seized pursuant to civil seizure warrant and later included in criminal indictment within ninety days of defendant's claim where government had custody of the property but failed to take steps to obtain criminal seizure warrant or otherwise perfect its custody); United States v. Martin , 460 F.Supp.2d 669, 675-76 (D. Md. 2006) (holding government barred from effecting civil forfeiture of property initially seized pursuant to the civil forfeiture statute where it failed to obtain criminal seizure warrants until defendant filed motion seeking return of property in the criminal proceeding); see also United States v. Dupree , 781 F.Supp.2d 115, 131 n.9, 132 (E.D.N.Y. 2011) (holding government properly converted civil forfeiture proceeding into criminal forfeiture proceeding where property was originally seized pursuant to both civil and criminal forfeiture statutes and government obtained criminal indictment that included forfeiture allegations).

As one commentator notes,

If the government is already in lawful possession of property ..., it seems silly to have to go back to a magistrate or judge for a seizure warrant under § 853(f) to re-seize the same property, or to get a restraining order under § 853(e). Nevertheless, the requirement is plain, and is in fact repeated in [§] 983(a)(3)(C).

Cassella, 27 J. Legis. at 146-47 (internal footnote omitted). Thus, courts have found that where the government already has custody of property, as here, the government can discharge its obligation under § 983(a)(3)(B)(ii)(II) and preserve the...

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