United States v. Patel

• Decision Date: 11 January 2013
• Docket Number: Criminal Action No. 5:11cr031.
• Citation: 949 F.Supp.2d 642
• Parties: UNITED STATES of America, Plaintiff, v. Anjay PATEL, et al., Defendants.
• Court: U.S. District Court — Western District of Virginia

949 F.Supp.2d 642

UNITED STATES of America, Plaintiff,

v.Anjay PATEL, et al., Defendants.

Criminal Action No. 5:11cr031.

United States District Court,

W.D. Virginia,

Harrisonburg Division.

Jan. 11, 2013.

Robert Chase Abendroth, United States Attorney's Office, Charlottesville, VA, Sharon Burnham, United States Attorney's Office, Roanoke, VA, Grayson A. Hoffman, Louis K. Nagy, Jeb T. Terrien, United States Attorney's Office, Harrisonburg, VA, for Plaintiff.

Ian Michael Comisky, Blank Rome LLP, Philadelphia, PA, Kenneth W. Ravenell, Paula Xinis, Murphy & Falcon PA, Baltimore, MD, Pat Munroe Woodward, Counselor at Law, Annapolis, MD, for Defendant Anjay Ravindrabhai Patel.

Stuart Alexander Sears, Schertler & Onorato LLP, Washington, DC, Jonathan Shapiro, Greenspun Shapiro PC, Fairfax, VA, John Kenneth Zwerling, Zwerling, Moseley & Sears, PC, Alexandria, VA, for Defendant Shilpaben Patel.

MEMORANDUM OPINION

MICHAEL F. URBANSKI, District Judge.

In this contraband cigarette trafficking and money laundering prosecution, defendant Anjay Patel (“Patel”) seeks to modify the protective order to release assets restrained by the government in pretrial forfeiture. In the notice of forfeiture appended to the indictment, the government seeks to forfeit $20.9 million in Patel's assets, representing the purchase price of the contraband cigarettes bought by members of the Patel conspiracy. Patel claims that: (1) there is insufficient probable cause to support restraint at the $20.9 million figure; (2) pretrial restraint of substitute assets is contrary to law; and (3) he needs release of certain of these assets to pay counsel of his choice. The court cannot accept Patel's arguments. First, probable cause supports the $20.9 million sought by the government, as the applicable forfeiture statutes authorize the forfeiture of gross proceeds obtained from contraband cigarette trafficking and money laundering as well as any property involved in the money laundering. Second, although the law in other circuits is to the contrary, Fourth Circuit precedent authorizes pretrial restraint of substitute assets subject to forfeiture. Third, given the fact that counsel for Patel has been paid sufficient funds to defend this case, the Sixth Amendment does not require release of forfeitable assets for counsel fees. As such, Patel's motion (Dkt. # 334) is DENIED.

I.

After a lengthy undercover sting operation conducted by law enforcement in the Western District of Virginia, Anjay Patel, his wife Shilpaben Patel, and others were named in an 180 count indictment charging conspiracy to traffic in contraband cigarettes, conspiracy to commit money laundering, conspiracy to dispose of untaxed cigarettes, conspiracy to traffic in counterfeit state tax stamps, trafficking in contraband cigarettes, trafficking in counterfeit state tax stamps, and various forms of money laundering. The indictment charges that during the course of the conspiracy, defendants purchased from undercover law enforcement officers approximately 925,329 cartons of untaxed cigarettes at a cost of $20,924,498.56.

The notice of forfeiture attached to the indictment provides notice that certain property of defendants is forfeitable under various forfeiture statutes, including 18 U.S.C. § 981(a)(1)(C), 18 U.S.C. § 982(a)(1), 28 U.S.C. § 2461, and 49 U.S.C. § 80303. Paragraph 2 of the notice of forfeiture specifies certain property to be forfeited, including a $20.9 million monetary judgment,¹ various business entities, a $400,000 promissory note, certain bank accounts, several vehicles, and a parcel of real property used as a distribution facility in Anderson, South Carolina. Paragraph 3 of the notice of forfeiture seeks forfeiture of substitute assets pursuant to 21 U.S.C. § 853(p) and encompasses all of the bank accounts, real property, business entities and conveyances identified by the government as being owned by defendants.

On October 26, 2011, the court issued a protective order to prevent defendants and others from alienating, encumbering, or wasting forfeitable property and substitute assets, thereby preserving the status quo.² The protective orders restrain all of Patel's property identified by the government, including bank accounts, businesses, vehicles, and real property, and enjoin him from conducting any transactions that would affect the marketability, value, or availability of those assets for forfeiture. As a result, Patel asserts that he is unable to afford counsel of his choice. ³ Patel has requested modification of the protective orders to release sufficient substitute assets to pay his legal fees. The government opposed this request, arguing that all of the assets referenced in the protective orders are properly restrained as forfeitable assets, and, therefore, Patel cannot use the assets to pay his legal fees or for any other purpose.

In connection with his motion to release substitute assets to pay his counsel, Patel urged the court to conduct a hearing pursuant to United States v. Farmer, 274 F.3d 800 (4th Cir.2001), to assess whether probable cause exists to support the protective orders and determine whether any assets could be released. In an order entered on August 22, 2012, based on the record that existed at that time,⁴ the court granted Patel's request for a Farmer hearing and took his motion for release of substitute assets under advisement until that hearing could be convened.

Prior to the scheduled date for the Farmer hearing, Patel requested release of the applications supporting the protective orders and the grand jury materials directed to the issue of probable cause for the wholesale pretrial restraint of his assets. The government agreed to the release of the applications, but as the applications themselves simply referred back to the indictment, they provided no additional information regarding the probable cause for the pretrial restraint of defendant's assets. The government objected to disclosure of any grand jury materials, and the court ordered their production for an in camera review. Following such review, the court issued a memorandum opinion and order on October 4, 2012, releasing certain grand jury materials related to the forfeiture issue. The grand jury materials released consisted of two items: (1) the testimony that the undercover sting operation sold participants in the Patel conspiracy 925,329 cartons of cigarettes for $20,924,498.56; and (2) an explanation provided by the Assistant United States Attorney (“AUSA”) to the grand jury concerning the notice of forfeiture that “[y]ou do not need to consider the money judgmentor the property listed as substitute assets.” ⁵

The Farmer hearing was held on October 17, 2012.⁶ At the hearing, the government called Special Agent Eric Flagg of the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”). Flagg testified that during the nearly two year span of the undercover operation, the ATF regularly sold contraband cigarettes to Patel and his codefendants for resale outside of Virginia. Flagg testified that during the course of the undercover operation, Patel and his codefendants purchased 925,329 cartons of contraband cigarettes at a cost of $20,924,498.56. Flagg inferred from statements made by Patel and his codefendants that some of the money used to purchase contraband cigarettes from the sting operation were proceeds of the sale of cigarettes purchased previously. Flagg estimated that the gross value of all of the Patel assets restrained to date was $14,093,675.89. This sum included the assets listed under paragraphs 2.B., 2.C., 2.D., 2.E. and 2.F. of the notice of forfeiture, the so-called tainted assets, as well as the substitute assets listed under paragraph 3 of the notice of forfeiture. Flagg could not provide an estimate as to the value of the tainted assets alone. The government also called Special Agent Joy Cuffee of the Internal Revenue Service, who testified that based on her investigation and substantial efforts, no additional assets of Patel had been identified.

II.

The notice of forfeiture identifies the statutory framework applicable to the contraband cigarette and money laundering counts of the indictment. For certain crimes, Congress has expressly authorized criminal forfeiture. See18 U.S.C. § 982. Other enumerated violations of law are subject to the civil forfeiture statute, 18 U.S.C. § 981. Pursuant to 28 U.S.C. § 2461, the government may seek both criminal and civil forfeiture in a criminal case. This case involves violations of law implicating both the civil and criminal forfeiture statutes.

Paragraph 1.A. of the notice of forfeiture concerns the forfeiture of proceeds of both contraband cigarette trafficking and money laundering. Paragraph 1.A., invoking the civil forfeiture statute, 18 U.S.C. § 981(a)(1)(C), provides the only route by which the government may seek forfeiture of property as a result of contraband cigarette violations. In contrast, there are two avenues open to the government for forfeiture of property as a result of a money laundering violation, civil forfeiture of proceeds under 18 U.S.C. § 981(a)(1)(C), and criminal forfeiture of property involved in or traceable to a money laundering offense under 18 U.S.C. § 982(a)(1).

The “proceeds” flank of the government's forfeiture campaign is grounded in the civil forfeiture statute. This statute, 18 U.S.C. § 981(a)(1)(C), subjects to forfeiture any property “which constitutes or is derived from proceeds traceable to a violation of ... any offense constituting ‘specified unlawful activity’ (as defined in section 1956(c)(7) of this title).” “A tortuous journey through the federal code reveals that ‘specified unlawful activity’ includes trafficking in contraband cigarettes.” United States v. Funds From First Regional Bank Account # XXXXX1859, 639 F.Supp.2d 1203, 1215 (W.D.Wash.2009).⁷ Thus, under § 981(a)(1)(C), any property, real or personal, belonging to Patel “which constitutes or is...