United States v. Sum of $185,336.07 U.S. Currency Seized from Citizen's Bank Account L7N-01967

• Decision Date: 09 June 2014
• Docket Number: 08-CV-6287L
• Parties: UNITED STATES OF AMERICA, Plaintiff, v. THE SUM OF $185,336.07 UNITED STATES CURRENCY SEIZED FROM CITIZEN'S BANK ACCOUNT L7N-01967, Defendant. DOMINIC PELLEGRINO, Claimant
• Court: U.S. District Court — Western District of New York

UNITED STATES OF AMERICA, Plaintiff, v. THE SUM OF $185,336.07 UNITED STATES CURRENCY SEIZED

FROM CITIZEN'S BANK ACCOUNT L7N-01967, Defendant.

DOMINIC PELLEGRINO, Claimant

08-CV-6287L

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NEW YORK

Dated: June 9, 2014

DECISION AND ORDER

INTRODUCTION

This is an action in rem, by which the Government seeks the forfeiture of the contents of a Citizen's Bank Brokerage Account, totaling $185,336.07, as proceeds of drug activity, pursuant to 21 U.S.C. § 881(a)(6). The Government contends that the entire sum in the account is subject to forfeiture as proceeds from criminal conduct; specifically, the sale of controlled substances. The Government contends that the sole owner of the account, Dominic Pellegrino (hereinafter "claimant" or "Pellegrino") made a series of deposits to the account over several years, which represented the proceeds of illegal drug trafficking.

Pellegrino was arrested and charged in New York State Court with criminal possession of a controlled substance. On July 11, 2008, Pellegrino pleaded guilty in Monroe County Court to a misdemeanor charge of Criminal Possession of a Controlled Substance in the Seventh Degree. Thatplea involved admissions that claimant possessed controlled substances at his residence on Rosedale Street in Rochester in May 2007.

After Pellegrino's arrest, on June 30, 2008, the Government commenced this action seeking forfeiture of the brokerage account pursuant to 21 U.S.C. § 881(a)(6).

On May 2, 2012 (Dkt. #23), this Court granted summary judgment in favor of the Government. United States v. Sum of $185,336.07 United States Currency, 858 F.Supp.2d 246 (W.D.N.Y. 2012). Pellegrino appealed and on September 25, 2013, the Second Circuit reversed and vacated the Court's grant of summaryjudgment. Id., rev'd, 731 F.3d 189 (2d Cir. 2013). Although the Second Circuit affirmed several findings made by this Court, it vacated the decision on grounds not raised by either party. Familiarity with this Court's decision and the Second Circuit's decision is presumed here.

Two motions are now pending before this Court. First, Pellegrino has filed a motion (Dkt. #27) for partial summary judgment seeking return of $100,000 of the defendant funds. The Government has opposed that motion and has cross-moved for summary judgment in its favor (Dkt. #31), seeking forfeiture of the entire balance of the brokerage account. For the reasons that follow, both motions are denied.

DISCUSSION

The Second Circuit's decision was based upon its interpretation of the legal standards for forfeiture imposed by the Civil Asset Forfeiture Reform Act of 2000 ("CAFRA"), 18 U.S.C. § 983. The Circuit discussed the heightened burden of proof that CAFRA imposes on the Government in forfeiture cases. As the Circuit made clear, the burden of proof now rests solely with the Government to show by a preponderance of the evidence, rather than mere probable cause, that the defendant funds are subject to forfeiture. Moreover, CAFRA "replaced the existing 'nexus standard' with the more rigorous 'substantial connection' test." Sum of $185,336.07, 731 F.3d 189 at 195-96. Unlike the pre-CAFRA framework for analysis of forfeiture actions, the burden of proof never shiftsto the claimant. See United States v. $557,933.89, 287 F.3d 66, 79 (2d Cir. 2002) ("[i]f the government fails to meet its burden of proof . . . the claimant need not produce any evidence at all - i.e., the claimant has no 'case' that he must present or 'elements' to which he bears the burden of proof").

Before determining whether summary judgment lies in favor of either party, the Court must determine the nature of the burden of proof. CAFRA provides that when "the Government's theory of forfeiture is that the property was used to commit or facilitate the commission of a [specific] criminal offense, or was involved in the commission of a [specific] criminal offense, the Government shall establish that there was a substantial connection between the property and the offense." 18 U.S.C. §983(c)(3). However, where, as here, the Government seeks forfeiture pursuant to 21 U.S.C. §881(a)(6) on a theory that the property constitutes proceeds "traceable to" an exchange for narcotics, it need not prove that there is a substantial connection between the property and any specific drug transaction. Rather, "the Government may prove more generally, based on a totality of the circumstances, that the property is substantially connected to narcotics trafficking." United States v. United States Currency in the Sum of One Hundred Eighty-Five Thousand Dollars more or less, 455 F. Supp. 2d 145, 149 (E.D.N.Y. 2006), aff'd, 2008 U.S. App. LEXIS 11484 (2d Cir. 2008). See also United States v. $60,020.00 United States Currency, 2011 U.S. Dist. LEXIS 117947 at *27 (W.D.N.Y. 2011) (when seeking forfeiture on a proceeds theory, Government need not show a substantial connection between the property and any specific drug transaction, but may prove generally that the property is substantially connected to drug trafficking, based on a totality of the circumstances); United States of America v. $421,090.00 in United States Currency, 2011 U.S. Dist. LEXIS 82105 at *16 (E.D.N.Y. 2011) (same); United States v. $22,173.00 in United States Currency, 716 F. Supp. 2d 245, 250 (S.D.N.Y. 2010) (same).

Pellegrino's present motion for partial summary judgment seeks a declaration that the sum of $100,000, which is essentially the sum initially deposited in the brokerage account, is not forfeitable and should be made available to Pellegrino, the only claimant. The Government and Pellegrino appear to agree on the timing and amount of this deposit, which was discussed at some length by the Second Circuit. The Circuit's primary concerns were that this initial deposit occurred on or about May 25, 2004, well before the "Spring 2005 - May 2007" period of drug activity established by the Government's witnesses, principally a confidential source, and that the initial deposit was much larger than those that followed. The Circuit was not subtle in its conclusion that the Government's proof was woefully insufficient to demonstrate entitlement to summary judgment as a matter of law, because it failed to establish by a preponderance of the evidence that the $100,000 deposit was connected to drug trafficking. As such, the Court of Appeals found that the evidence did not demonstrate entitlement to forfeiture as a matter of law, at least as to the initial $100,000 deposit. Sum of $185,336.07, 731 F.3d 189 at 197-98.

The Government, once again, seeks judgment as a matter of law, relying principally on the same evidence and arguments advanced previously. The Government asserts that there are no material facts in dispute, although Pellegrino strongly disagrees. After reviewing all the arguments and admissible evidence before the Court, I conclude that the issues at the heart of this case, particularly those related to whether the initial...