It is clear from the papers submitted, and claimant does not deny, that claimant initially intended that the bond he filed be treated as a substitute res bond, not as a cost bond. The fact remains, however, that the DEA treated it as a cost bond, holding it for nearly two months without returning the Property to claimant and then forwarding the matter to the U.S. Attorney for initiation of judicial forfeiture proceedings, still without returning the res to claimant. The question to be determined is whether the DEA's action, and the U.S. Attorney's subsequent acquiescence for several months in the DEA's treatment of the bond, converted it from a substitute res bond to a cost bond.
The government accuses claimant of using the government's clerical errors to create a windfall for himself, first by "snapping up" the DEA's offer to accept a $ 5,000 substitute res bond for a seized property which the government alleges is worth $ 50,000, and then by re-naming the bond a "cost bond" when it appeared it might help him get rid of the forfeiture action altogether. It does appear that claimant, on the advice of counsel, made a conscious decision to forego judicial forfeiture proceedings when he declined to file a claim and cost bond pursuant to the instructions of the Notice.
To allow claimant to prevail on a technicality in a proceeding he seems consciously to have waived would be somewhat incongruous.
On the other hand, the government, whether intentionally or not, has also benefited from convenient recharacterizations of the bond. First, the DEA neutralized the U.S. Attorney's alleged mistake in offering to accept a $ 5,000 substitute res bond for a $ 50,000 property by treating it as a cost bond and retaining the res. Now, however, that claimant has challenged the complaint under section 888(c), the government relies on claimant's initial characterization of the bond to argue that "cost bond" procedures do not apply. Meanwhile, the government has retained both the Property and the $ 5,000 bond -- the former since its seizure in January 1993 and the latter since its filing in June 1993. This, too, appears incongruous.
The claim and cost bond filing is a strict prerequisite for judicial challenge of a civil forfeiture. See, e.g., Litzenberger v. United States, 1994 U.S. Dist. LEXIS 14633, Civil Action No. 93-6488, 1994 WL 568486 (E.D. Pa.) (where government complied with notice requirements and claimant failed to file claim and cost bond, court refuses to disturb administrative forfeiture despite assertion of innocent owner defense).
Given the confusion on both sides regarding the nature of the bond, the U.S. Attorney's two- or three-month delay in filing the instant forfeiture action does not justify dismissal of the action. Since claimant never intended to initiate judicial forfeiture proceedings in the first place, a refusal to dismiss them on the technical requirement of section 888(c) will not unduly prejudice him. The Court will, however, order the immediate return of the $ 5,000 bond to claimant, with interest at the statutory rate.
2. Sufficiency of the Complaint Under Rule E(2)(a)
Under Rule E(2)(a), judicial forfeiture proceedings must be pleaded with greater specificity than the mere notice pleading generally allowed in civil actions under Federal Rule of Civil Procedure 8(a). United States v. 1625 Delaware Ave., 661 F. Supp. 161, 162 (E.D. Pa. 1987) ("Delaware Ave. No. 1"); United States v. 5100 Whitaker Ave., 727 F. Supp. 920, 924 (E.D. Pa. 1989). The rule provides:
. . . the complaint shall state the circumstances from which the claim arises with such particularity that the defendant or claimant will be able, without moving for a more definite statement, to commence an investigation of the facts and to frame a responsive pleading.
The complaint must contain more than conclusory allegations; although it need not plead evidence, it must plead facts to support its allegations. 5100 Whitaker Ave., 727 F. Supp. at 924; Delaware Ave. No. 1, 661 F. Supp. at 163. Claimant must be able to respond to it with something more than a general denial. United States v. U.S. Currency in Amount of $ 150,660.00, 980 F.2d 1200, 1204 (8th Cir. 1992); United States v. $ 39,000.00 in Canadian Currency, 801 F.2d 1210, 1216 (10th Cir. 1986).
Rule E(2)(a) has a compelling purpose. Civil forfeiture is a powerful tool in the government's battle against crime, and its use is circumscribed by important Fourth and Fifth Amendment rights. It must be carried out scrupulously within constitutional bounds. Accordingly, "the requirements of Rule E(2)(a) are more than a mere technicality; they are a means of upholding this drastic remedy against a possible due process challenge and of preventing the seizure of the defendant property for long periods of time when, in fact, the government had no claim to the property." 5100 Whitaker Ave., 727 F. Supp. at 924, citing United States v. Pole No. 3172, 852 F.2d 636, 638 (1st Cir. 1988). The Court must apply Rule E(2)(a) with this important purpose in mind.
At an actual forfeiture proceeding the government has the initial burden of showing probable cause that forfeiture is appropriate, after which the burden shifts to the claimant to show innocent ownership. Schrob, 948 F.2d at 1413 n.9. The reason the law places the burden of going forward on the government is obvious; it is, after all, the government that is attempting to deprive a person of his or her property.
The government's burden of going forward at trial is reflected in the standard for a sufficient forfeiture complaint. As the government points out, it need not prove probable cause at the pleading stage. United States v. 613 Warwick Rd., 1995 U.S. Dist. LEXIS 4793, Civil Action No. 95-339, 1995 WL 214451 (E.D. Pa.). However, it "must plead 'facts sufficient to support a reasonable belief that the government can demonstrate probable cause for finding the property tainted.'" Id. at *1 (emphasis supplied); United States v. One 1987 Chevrolet Corvette Convertible, 1992 U.S. Dist. LEXIS 7219, No. 91 C 6524, 1992 WL 107302 (N.D. Ill.) (same, citing cases from other circuits applying same standard). If the law required anything less, the government could hold property for long periods of time based on allegations without sufficient factual basis.
Rule E(2)(a) does not enumerate exactly what facts must appear in a civil forfeiture complaint. As pointed out by the Eleventh Circuit in United States v. 3097 S.W. 111th Ave., 921 F.2d 1551, 1555 (11th Cir. 1991), evaluating the sufficiency of pleadings in "proceeds" forfeitures can be especially tricky.
In cases where the basis for forfeiture is that the seized property was itself involved in the crime at issue, the connection between the property and the crime is usually obvious. Generally, where the government has indicated that it can show probable cause that the activity in which the property was involved was criminal, it has established a connection between the property and the crime at the same time. In "proceeds" cases, by contrast, the government must put on a two-step proof: first, of the predicate criminal acts, and second, of the direct or indirect connection between the property and the acts. At the forfeiture proceeding, showing this connection can be a substantial task:
In a typical proceeds case, the government shows that a drug trafficker has acquired substantial assets, often purchased with cash, but has no legitimate or declared source of income that could account for more than a fraction of his wealth. Frequently, he has filed no tax returns for several years, and, of course, there is always strong evidence of a 'likely source, from which the [trier of fact] could reasonably find that the net worth increases sprang.' Such evidence is usually enough to show probable cause to believe that all of the trafficker's more valuable property is subject to forfeiture.
United States v. 2323 Charms Rd., 726 F. Supp. 164, 169 (E.D. Mich. 1989), quoting D. Smith, Prosecution and Defense of Forfeiture Cases P 4.03 (1988) (citations omitted). Likewise, the government bears a burden of pleading a connection between the seized property and the predicate acts at the complaint stage.
If the government were only required to indicate in its complaint that it can show probable cause that the claimant committed a crime, it could bring forfeiture proceedings against the property of everyone who has ever committed a crime for money. Clearly, Rule E(2)(a) requires more than this, as the courts have recognized. See, e.g., United States v. 1625 S. Delaware Ave., 661 F. Supp. 161, 1989 WL 18848, *2 (E.D. Pa.) ("Delaware Ave. No. 2") (allegations that claimant told other persons he purchased seized property with proceeds of drug transactions failed to plead "specifics" or "factual circumstances" to support allegation that seized property was derived from illegal proceeds); 2323 Charms Rd., 726 F. Supp. at 169 (government "could survive a motion to dismiss by alleging, with sufficient particularity, that [claimant] is a drug trafficker, that he has no other known source of income, and that he accumulated substantial assets during the period in which he had no known source of income") (emphasis supplied).
The complaint in this case is inadequate. Although it alleges the predicate violations of the customs laws and the Controlled Substances Act with sufficient particularity, the government gives no indication that it will be able to trace the proceeds of claimant's alleged criminal activity to his purchase of the Property. The complaint does not allege when claimant purchased the Property, how much he paid for it, that he purchased it with cash, under an alias or in any other suspicious manner, whether he has earned income from sources other than criminal enterprises or, if so, during what time periods. It simply alleges that claimant "earned huge sums of money" by illegally distributing controlled substances which he had participated in illegally importing to this country (Compl. p. 2), then conclusorily states that claimant used the proceeds of these sales to purchase "the various components" of the Property (Compl. p. 3) and that the Property "is traceable to" proceeds from sales of controlled substances "including, but not limited to, anabolic steroids" (Compl. p. 4). These allegations are too vague to pass muster under Rule E(2)(a).
The complaint also asserts that claimant purchased the Property "with the intent to promote the carrying on of specified unlawful activity; or with the intent to engage in conduct constituting a violation of Section 7201 or 7206 of the Internal Revenue Code of 1986; or was made knowing that the transaction was designed in whole or in part to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or to avoid a transaction reporting requirement under State or Federal law in violation of 18 U.S.C. § 1956." (Compl. p. 3) (emphasis supplied). Again, these allegations are unacceptably vague. The complaint alleges no other indicia of intent to conceal or disguise funds and, as set forth above, alleges no connection between the funds used to purchase the Property and proceeds of the criminal activity. It would be virtually impossible for claimant to respond to these alternative allegations with anything other than a general denial.
The thesis of the complaint seems to be that, because claimant allegedly engaged in illegal activities which generated proceeds, the Property ipso facto must have been purchased with these proceeds and/or purchased to conceal or disguise them. No such presumption attaches, without more, to the property of persons who have committed crimes.
The government also points out that it "need not plead its evidence, especially where the surrounding facts are peculiarly within the opposing party's knowledge." Delaware Ave. No. 1, 661 F. Supp. 161 at 162. Although the government need not prove its entire case at the pleading stage, it "must plead facts " rather than conclusory allegations, id. at 163, even where the claimant is already in possession of those facts. The reason for this, once again, lies in the purpose of the increased particularity standard in civil forfeiture actions:
In addition to enabling the defendant or claimant to begin an investigation and to frame a responsive pleading, the particularity requirement affords the opportunity to form a reasonable belief that the claim has merit, guards against the improper use of the admiralty seizure proceedings and their drastic nature, and has been cited as a safeguard in cases upholding the constitutionality of the admiralty remedies against due process attack.
Delaware Ave. No. 1, 661 F. Supp. at 162 (citations omitted).
Accordingly, claimant's motion to dismiss the complaint will be granted without prejudice. If the government files an amended complaint, it will be deemed to relate back to the date of the original filing and, therefore, it will not be necessary to release the Property from seizure.
For the reasons provided above, claimant's motion to dismiss will be granted without prejudice, claimant's motion for return of the Property will be denied, and the government will be ordered to remit the $ 5,000.00 bond to claimant with interest at the statutory rate.
An appropriate order is attached.
Dated: September 20, 1995
ALFRED M. WOLIN, U.S.D.J.
In accordance with the Court's Memorandum Opinion filed herewith,
It is on this 20th day of September, 1995,
ORDERED that the motion to dismiss of claimant, Mac Arthur Crudup ("claimant"), is granted without prejudice; and it is further
ORDERED that claimant's motion for return of the property is denied; and it is further
ORDERED that the government remit the $ 5,000.00 bond to claimant with interest at the statutory rate; and it is further
ORDERED that the government is granted leave to file an amended complaint within sixty (60) days of the date of this Order.
ALFRED M. WOLIN, U.S.D.J.