UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
filed: June 24, 1992; As Amended August 6, 1992.
UNITED STATES OF AMERICA
ONE PARCEL OF REAL PROPERTY LOCATED AT: 456 CAFFERTY ROAD, TINICUM TOWNSHIP, BUCKS COUNTY, PENNSYLVANIA, AND ALL IMPROVEMENTS AND APPURTENANCES THEREON, AND ONE KEOUGH ACCOUNT/CERTIFICATE OF DEPOSIT IN THE NAME OF MARK A. WALYNETZ AT BUCKS COUNTY BANK (& TRUST) COMPANY, AND ANY AND ALL PROCEEDS FROM THE SALE OF THE AFORESAID ASSETS; CLAIMANT MARK A. WALYNETZ, APPELLANT
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA. (D.C. Civil No. 89-8896). District Judge: Hon. Charles R. Weiner
Before: Greenberg, Nygaard and Weis, Circuit Judges
NYGAARD, Circuit Judge
This is a civil forfeiture action brought by the United States of America under 21 U.S.C. § 881(a)(6) and (7) against appellant's house and his Keough account.*fn1 Mark A. Walynetz, appellant, filed a claim for the return of the property. Following a trial before the district court, sitting without a jury, a judgment of forfeiture was entered in favor of the United States. Walynetz appeals. We will affirm.
The government presented evidence that Walynetz derived all or most of his income during the years 1979 through 1984 by importing and distributing marijuana. The government presented evidence that claimant purchased the house along with his partner in the drug trade, created a front corporation to launder drug proceeds, and made significant improvements to the house and large contributions to the Keough account. A witness against Walynetz was Robert Broff, Walynetz' partner in the drug trade for five years.
The district court concluded that the government met its burden of establishing probable cause to forfeit the assets. District Court's Memorandum and Order at 11-14 (DCMO). Walynetz produced anecdotal evidence of legitimate business ventures purporting to account for his income during the critical period. Nonetheless, Walynetz was unable to produce any documents to support these businesses' income, and could not legitimately account for the large income he claimed during this period. The district court concluded that Walynetz failed to meet his burden of proving that the house and the Keough account were acquired through a legitimate source of money.
On appeal, Walynetz makes three arguments. First, he claims that the government did not meet its burden of showing probable cause for forfeiture because it did not show that the house was purchased and the Keough account was funded with money directly traceable to drug transactions. Second, he claims that his evidence of legitimate business ventures sufficiently rebutted the government's showing of probable cause for forfeiture. Last, he claims that the district court erred by its finding of fact number 34, describing the alleged use of an accountant to falsify tax returns for this period. Each of the arguments are without merit.
Walnetz' first argument, that the government must first show that assets subject to forfeiture are directly traceable to illegal drug transactions, is contrary to the law of this circuit. The claimant would impose upon the government the burden of showing the actual drug transactions from which the assets subject to forfeiture were derived. But we have held to the contrary:
In determining whether proceeds are traceable to drug transactions, '[t]here is no need to tie the [property] to proceeds of a particular identifiable elicit drug transaction. (citation omitted)
In determining whether probable cause exists for forfeiture,
all that is required is that a court be able to look at the 'aggregate' of the facts and find reasonable grounds to believe that the property probably was derived from drug transactions. (citation omitted)
United States v. A Parcel of Land Known as 92 Buena Vista Avenue, 937 F.2d 98, 104 (3d Cir. 1991).
Thus, under the drug forfeiture statute, 21 U.S.C. § 881, the government is only required to show a reasonable ground for belief that there was an unlawful drug transaction and a substantial connection between the transaction and the property subject to forfeiture. The government's showing may be based on less than prima facie proof, but more than mere suspicion. In light of the substantial evidence presented by the government of Walynetz' drug involvement (including marijuana transactions of up to 7,000 pounds per shipment) the district court did not err by finding a substantial connection between his elicit drug activity and the house he purchased and the Keough account he funded.
Next, Walynetz challenges the district court's Conclusion that he did not rebut the government's evidence that the properties were subject to forfeiture. This is patently without merit. In the face of substantial evidence that most, perhaps all, of claimant's income was derived from drug sales during the period between 1979 and 1984, Walnetz presented little evidence of legitimate sources of income.
His rebuttal case consisted of five witnesses, two persons having business delaings with Walynetz, two family members, and an accountant who reviewed his tax returns for the period in question. Of these witnesses, none testified to specific amounts or dates of transactions, and none provided documentary support for the extent of business dealings with Walynetz. The district court specifically found that Walynetz provided no evidence or records to support his claims of legitimate sources of income. DCMO p.7.
Walynetz offered the testimony of his accountant to establish that he had up to 2.8 million dollars of income available during the period in question, based upon Walynetz' tax returns and purported business records. But the government elicited on cross-examination that the accountant's analysis of records provided by Walynetz' attorney (which were not produced by the defendant at trial) was not based on the accuracy of the returns and records. In essence, the accountant was merely asked to determine the amount of Walynetz' income during the seven-year period, not the source. The court did not err by concluding that Walynetz did not meet his burden of rebutting the government's forfeiture case.
Finally, Walynetz claims that the district court abused its discretion by admitting the affidavit of an FBI agent because it contained heresay. The substance of the heresay was that the affidavit described conversations between Walynetz and Robert Broff about an accountant who was skilled at falsifying income tax returns. It is clear from the district court's memorandum opinion that the court properly admitted the document for a limited purpose.
The district court did not abuse its discretion by admitting it. The government may establish probable cause for forfeiture by heresay evidence. United States v. Parcel of Real Property Known as 6109 Grubb Road, 886 F.2d 618 (3d Cir. 1989). There we held:
[B]ecause the question of whether the government has established probable cause to seek forfeiture depends not upon the admissibility of evidence upon which the government relies, but upon the legal sufficiency and reliability of the evidence, [claimant] cannot challenge the use of deposition testimony as impermissible hearsay as to the issue of probable cause.
886 F.2d at 621.
But this rule only extends to the limited scope of the government's probable cause. When the burden shifts to the claimant for rebuttal, the government must independently establish its admissibility of the hearsay statements if it intends to offer them in response to the claimant's claim. Id. 886 F.2d at 622.
It is clear from the district court's memorandum that the affidavit was admitted and used for the limited purpose of establishing the threshold question of probable cause. The court's analysis of Walynetz' rebuttal case did not mention the affidavit or any facts alleged in it. Indeed, the court's analysis was based upon the lack of credible evidence offered by Walynetz' own witnesses. DCMO p.14-15.
In sum, based upon the foregoing, we will affirm the order of the district court.