US v. ALL MONIES ($477,048.62) IN ACC. XX-XXXX-X, 89-00469 ACK.

• Decision Date: 23 January 1991
• Docket Number: No. 89-00469 ACK.,89-00469 ACK.
• Citation: 754 F. Supp. 1467
• Parties: UNITED STATES of America, Plaintiff, v. ALL MONIES ($477,048.62) IN ACCOUNT NO. XX-XXXX-X, ISRAEL DISCOUNT BANK, NEW YORK, NEW YORK, Defendant.
• Court: U.S. District Court — District of Hawaii

754 F. Supp. 1467

UNITED STATES of America, Plaintiff, v. ALL MONIES ($477,048.62) IN ACCOUNT NO. XX-XXXX-X, ISRAEL DISCOUNT BANK, NEW YORK, NEW YORK, Defendant.

No. 89-00469 ACK.

United States District Court, D. Hawaii.

January 23, 1991.

COPYRIGHT MATERIAL OMITTED

Daniel Bent, Florence Nakakuni, Stefan D. Cassella, Trial Atty., U.S. Dept. of Justice, Washington, D.C., for plaintiff.

Stillman Friedman & Shaw, Edward Shaw, New York City, Hart & Wolfe, Peter Wolfe, Honolulu, Hawaii, for defendant.

ORDER PARTIALLY GRANTING AND PARTIALLY DENYING PARTIES' MOTIONS FOR SUMMARY JUDGMENT

KAY, District Judge.

This matter comes before this Court pursuant to Motions for Summary Judgment on behalf of both Plaintiff United States and Claimant Henry Lelouch.

A. THE MELENDEZ AND DIRIMEX ORGANIZATIONS

Emilio Melendez was part of a drug trafficking organization in Peru headed by his brother, Carlos Melendez. As part of their operation, the Melendez organization used the services of two professional money exchangers, Maria Elena Sarria and Luz Mary Aguad, as well as Emilio Melendez, to launder the illegal proceeds of the activity. Carlos Melendez and other drug traffickers would acquire United States currency from the sale of drugs. Sarria, Aguad, and Emilio Melendez, using their exchange house named Dirimex, would "launder" these U.S. dollars by selling them to Peruvian capitalists through the black, or "parallel," market in Lima. The capitalists would pay for the dollars with Peruvian currency. Generally, but with some notable exceptions, Sarria, Aguad, and Melendez would transfer the illegal dollars by wire to their own accounts in the United States. Then the money would be wired to the capitalists' accounts held in New York and Miami. Some of the Peruvian currency obtained by Sarria, Aguad, and Emilio Melendez would then be used to provide the drug traffickers with local currency to purchase raw materials necessary for their drug operations. There were also direct transfers from accounts of the Medellin cartel in South America to the capitalists' accounts in New York and Miami to accomplish the laundering.

Four of the principals in the Melendez/Sarria organization have been charged with criminal offenses in the United States: (1) Emilio Melendez was convicted of conspiring to import cocaine into the United States; (2) Carlos Melendez has been indicted in Florida for conspiring to violate the money laundering laws of the United States; (3) Sarria has also been indicted on money laundering charges in Florida; (4) Jaime Ferreyra, a Peruvian lawyer who represented Sarria and other Melendez organization members in connection with the Peruvian arrests, was indicted and pled guilty in Hawaii on charges of attempting to obstruct justice. Ferreyra attempted to bribe Emilio Melendez in return for Melendez giving false testimony in support of the claimants in civil forfeiture cases arising out of the organizations' operations.

Numerous civil forfeiture cases, of which the instant case is one, have stemmed from this underlying criminal investigation. These cases are collectively referred to as the "All Monies" cases. The accounts seized in the All Monies cases are suspected of being accounts to which some of the illegal dollars were transferred. The claimants are capitalists suspected of purchasing money from Sarria, Aguad, and Emilio Melendez.

The claimant in this case, Henry Lelouch, owns a money exchange, or "cambio," in Peru. A major part of his business is the buying and selling of U.S. dollars and Peruvian intis. Lelouch owns a bank account under the name "Ontivero" at the Israel Discount Bank in New York. The Ontivero account received several deposits of dollars which have been traced to illegal drug transactions carried out by the Melendez organization and laundered by the Sarria organization. The Ontivero funds in the Ontivero account were seized and they are the subject of this civil forfeiture action.

B. SUMMARY JUDGMENT STANDARD

Summary judgment shall be granted where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). One of the principal purposes of the summary judgment procedure is to identify and dispose of factually unsupported claims and defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). The United States Supreme Court has declared that summary judgment must be granted against a party who fails to demonstrate facts to establish an element essential to his case where that party will bear the burden of proof of that essential element at trial. Id. at 322, 106 S.Ct. 2548. "If the party moving for summary judgment meets its initial burden of identifying for the court the portions of the materials on file that it believes demonstrate the absence of any genuine issue of material fact citations omitted, the nonmoving party may not rely on the mere allegations in the pleadings in order to preclude summary judgment." T.W. Electrical. Serv. v. Pacific Elec. Contractors Assoc., 809 F.2d 626, 630 (9th Cir.1987). Instead, Rule 56(e) requires that the nonmoving party set forth, by affidavit or as otherwise provided in Rule 56, specific facts showing that there is a genuine issue for trial. Id. At least some "significant probative evidence tending to support the complaint" must be produced. Id. Legal memoranda and oral argument are not evidence and do not create issues of fact capable of defeating an otherwise valid motion for summary judgment. British Airways Bd. v. Boeing Co., 585 F.2d 946, 952 (9th Cir.1978).

The standard for a grant of summary judgment reflects the standard governing the grant of a directed verdict. See Eisenberg v. Ins. Co. of North America, 815 F.2d 1285, 1289 (9th Cir.1987), citing, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). Thus, the question is whether "reasonable minds could differ as to the import of the evidence." Id.

The Ninth Circuit has established that "no longer can it be argued that any disagreement about a material issue of fact precludes the use of summary judgment." California Architectural Bldg. Products, Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir.1987). Moreover, the United States Supreme Court has stated that "when the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1355, 89 L.Ed.2d 538 (1986). Indeed, "if the factual context makes the nonmoving party's claim implausible, that party must come forward with more persuasive evidence than would otherwise be necessary to show that there is a genuine issue for trial." Franciscan Ceramics, 818 F.2d at 1468 (emphasis original), citing, Matsushita, supra, 475 U.S. at 587, 106 S.Ct. at 1356. Of course, all evidence and inferences to be drawn therefrom must be construed in the light most favorable to the nonmoving party. T.W. Elec. Services, 809 F.2d at 630-31.

C. PROBABLE CAUSE

Before forfeiture will lie, the government must demonstrate probable cause to believe that the seized property was involved with illegal drug or money laundering transactions in one of the ways specified in the governing statutes. In determining the existence of probable cause, the court must look to the "aggregate facts." United States v. Padilla, 888 F.2d 642, 643-44 (9th Cir.1989) (citing United States v. $5,644,540.00 In U.S. Currency, 799 F.2d 1357, 1363 (9th Cir.1986)). Probable cause exists when the aggregate of facts gives rise to more than a mere suspicion that the property was involved in or intended to be involved in the illegal activity; the presence or absence of any single fact is not dispositive. Padilla, 888 F.2d at 643-44.

Hearsay evidence is admissible to prove probable cause in forfeiture cases. United States v. One 56-Foot Yacht Named Tahuna, 702 F.2d 1276, 1283 (9th Cir.1983). However, hearsay evidence is not admissible to establish or rebut a claimant's innocent owner defense. United States v. Property Known as 6109 Grubb Road, 886 F.2d 618, 622 (3d. Cir.1989); Smith, Prosecution and Defense of Forfeiture Cases, ¶ 11.035 (1988). This distinction is important in this case because much of the government's evidence is contained in declarations by people who investigated the Melendez organization. See Declarations of Raymond Byrne, Helmut Groebe, and David Panek. A substantial amount of hearsay evidence is contained in those declarations.

An illegal seizure will not preclude forfeiture if the government can establish probable cause with untainted evidence obtained through investigation and/or discovery conducted after the initial seizure. United States v. One 1985 Cadillac Seville, 866 F.2d 1142, 1146 (9th Cir.1989). The claimant does not allege that any of the evidence put forth by the government in this case is tainted.

The government has been able to show probable cause to believe that several transfers of dollars into Lelouch's "Ontivero" bank account were proceeds of narcotics transactions as defined in 21 U.S.C. § 881(a)(6). Further, the government has been able to show probable cause that the dollars in those transfers qualify as property involved in illegal money laundering transactions as defined in 18 U.S.C. § 981(a)(1)(A) & (B). Claimant Lelouch concedes that the government has carried its burden of showing there was probable cause to seize $242,012.69 of the $477,048.62 in his account at time of seizure. The claimant has not conceded, however, that probable cause has been shown as to the remaining money in his account. This Court must therefore address the issue of probable cause as it pertains to the balance of the account over $242,012.69 before addressing the issue of the claimant's innocent owner defense.

The government has...