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Chaim v. United States

March 3, 2010

GMACH SHEFA CHAIM, PLAINTIFF,
v.
UNITED STATES OF AMERICA, DEFENDANT.



The opinion of the court was delivered by: Falk, U.S.M.J.

OPINION

I. INTRODUCTION

The Gmach Shefa Chaim ("the Gmach") commenced this civil equitable proceeding by filing a motion pursuant to 18 U.S.C. § 983 and/or Federal Rule of Criminal Procedure 41(g) for the return of $508,985.21 seized from an account at Valley National Bank in Union City, New Jersey, pursuant to a criminal search warrant. While this action was pending, the United States of America (the "Government") obtained a criminal indictment against a real estate developer from Hudson County named Moshe Altman ("Altman") that contained a forfeiture allegation against the Gmach's seized funds. As a result of the indictment, there are two active proceedings pending in this District that involve the seized property, one criminal and one civil. The Gmach wishes to continue with this civil action, as it is not a party to the criminal case. The Government claims that the civil action is moot and that all issues relating to the property should be resolved in the pending criminal case. This Court must determine whether a subsequent criminal indictment containing a forfeiture allegation renders moot a first-filed civil action challenging the seizure. This precise question appears to be one of first impression in this Circuit.

In order to address the issue, it is appropriate to briefly review the law relating to Rule 41(g) motions and determine the proper standard to apply under these circumstances, a subject of some disagreement between the parties.

For the reasons set forth below, this Court concludes that the proper standard involves the consideration of multiple equitable factors. Applying those factors in this case, the Court finds that the pending criminal case provides the Gmach with an adequate remedy at law to pursue a return of the seized funds. Therefore, the Court will decline continuing equitable jurisdiction over this case and dismiss the Gmach's motion.

II. BACKGROUND

A. Factual Allegations

This case arises out of seizure of funds made in connection with a large-scale money laundering and corruption sweep by the Government in the summer of 2009, which resulted in criminal charges against 44 individuals, including three New Jersey mayors, two state assemblymen and five rabbis.

The Gmach is a not-for-profit Hasidic free loan society run by its President, Moshe Shwartz, and its Vice President, Aaron Askal. (Pl.'s Opening Br. 1; CM/ECF No. 1.) The Government alleges that the Gmach's bank accounts were used by an individual arrested in connection with the sweep, Moshe Altman, to facilitate a money laundering scheme that laundered more than $668,000 over the course of more than two years. (Gvt.'s Opp. at 1; CM/ECF No. 4.) Based on information recovered during a search of Altman's offices, the Government alleges that out of the $668,000 Altman allegedly laundered, $357,500 was "laundered through Gmach bank accounts." (Id.) Although Altman has no formal connection with the Gmach, the Government contends that Altman was recorded by a cooperating witness, Solomon Dwek, stating that he had "washing machines" through which he could launder funds known to be "ill-gotten gains." (Id. at 2.) The supposed "washing machines" are alleged to be the Gmach's accounts. Moreover, as part of the scheme, the Government alleges that Dwek wrote "sizeable checks" to the Gmach, which were returned to him less a 15% fee. (Id.)

The Government states that Altman used three Gmach bank accounts in connection with the scheme. The seized funds at issue here were taken from one of the three accounts -- i.e., account number 54169097 at Valley National Bank in Union City, New Jersey ("the seized account"). The Gmach is the sole account holder for the seized account; the only authorized signatures for the account are those of the Gmach's President and Vice President. (Pl.'s Opening Br. 2-3; Affidavit of Madeline Selwyn in Support of Plaintiff's Motion for the Return of Property ¶ 2; CM/ECF Nos. 1, 1-1.) The Gmach argues that none of the supposed money laundering checks written by Dwek were deposited into the seized account. (Pl.'s Reply Br. 4-5, Declaration of David G. Liston, Esq., in Support of Plaintiff's Mot. for Return of Property ¶¶ 6-7; CM/ECF Nos. 8-9.) However, the Government counters that more than $1.5 million passed through the three accounts combined, and that money laundering checks were deposited into the Gmach's other two "operating" accounts which were then filtered into the Gmach's seized account. (Letter from Bradley A. Harsch, Esq., dated January 29, 2010, at 3; CM/ECF No. 12.) According to the Government, the commingling of tainted funds within the three accounts makes the seizure lawful and the funds subject to criminal forfeiture. (Id.) The Gmach disagrees and seeks an immediate return of its funds.

B. Procedural History

On October 23, 2009, the Gmach filed its motion for return of property pursuant to 18 U.S.C. § 983 and/or Federal Rule of Criminal Procedure 41(g). See CM/ECF No. 1.

On November 30, 2009, the Government opposed the motion. See CM/ECF No. 4. The Government's primary opposition was that it planned to file a criminal forfeiture action within 90 days, which it claimed would "moot" the Gmach's motion. On January 25, 2010, the Gmach filed a reply brief, challenging the merits of the Government's initial seizure, disputing the propriety of the amount seized, and arguing that the filing of a criminal forfeiture action would not moot the current proceedings. See CM/ECF No. 8.

On January 28, 2010, an indictment was returned against Moshe Altman. See CM/ECF No. 12. In the indictment, the Government brought a criminal forfeiture allegation against the funds seized from the Gmach's account. The Gmach was not indicted and has not been accused of any criminal wrongdoing.

On February 5, 2010, the parties consented to the jurisdiction of the Undersigned to conduct all proceedings in this case pursuant to 28 U.S.C. § 636(c). See CM/ECF No. 15.

On February 19, 2010, the Court held oral argument.

II. DISCUSSION

The Gmach's motion presents two alternative avenues through which it argues that it is entitled to a return of its seized funds -- i.e., 18 U.S.C. § 983, and Federal Rule of Criminal Procedure 41(g). As this matter has proceeded, the parties have focused their arguments on the Gmach's request for relief under Rule 41(g), and further, to whether this independent equitable proceeding is the proper forum to resolve the dispute. However, before considering the Gmach's request under Rule 41(g), it is appropriate to briefly address the Gmach's statutory argument advanced pursuant to 18 U.S.C. § 983.

A. The Gmach's Claim under 18 U.S.C. § 983

18 U.S.C. § 983 is part of the Civil Asset Forfeiture Reform Act ("CAFRA") of 2000. It provides, in part:

(1)(A)(i) Except as provided in clauses (ii) through (v), in any non-judicial civil forfeiture proceeding under a civil forfeiture statute, with respect to which the Government is required to send written notice to interested parties, such notice shall be sent in a manner to achieve proper notice as soon as practicable, and in no case more than 60 days after the date of the seizure. . . .

(F)If the Government does not send notice of a seizure of property in accordance with subparagraph (A) to the person from whom the property was seized, and no extension of time is granted, the Government shall return the property to that person without prejudice to the right of the Government to commence a forfeiture proceeding at a later time. The Government shall not be required to return contraband or other property that the person from whom the property was seized may not legally possess.

Id. (emphases added).

On October 23, 2009, the date the motion was filed, the Gmach alleged that its funds had been seized and held for more than 60 days without the Government commencing a forfeiture action. They alleged this conduct violated 18 U.S.C. § 983(1)(A)(i), and that the Government was required, under subsection (F) above, to return the property.

In opposition, the Government explained that the above statute only applies to "non-judicial civil forfeitures," and not to seizures made pursuant to a criminal search warrant, as was the seizure in this case. Thus, the Government argued that the statute is inapplicable and the Gmach's reliance on it should be rejected. In its reply brief, the Gmach appears to concede this point. The Government's position is correct.

"Non-judicial civil forfeitures" are governed by statute and cannot exceed $500,000. See 19 U.S.C. § 1607(a)(1). Here, the funds seized are in excess of that amount. Thus, the Government is not permitted to commence a non-judicial civil forfeiture of the Gmach's funds. See id. The scant case law on the subject, none of which is cited by the parties, is uniform in holding that the statute the Gmach attempts to rely upon is limited to non-judicial civil forfeitures and does not apply to seizures made pursuant to a search warrant. As the Ninth Circuit Court of Appeals has explained:

The district court properly granted the Government's motion for summary judgment. By its terms, 18 U.S.C. 983 applies only to "property seized in a non-judicial civil forfeiture proceeding under a ...


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