back doctrine, Buena Vista demands precisely what American Express Bank has been provided: an opportunity to assert any defenses available under the statute prior to the perfection of the government's title.
American Express Bank also makes a series of constitutional arguments in the instant L-Claim: that its rights to due process were violated, because it was not afforded a pre-seizure hearing; that it has been exposed to multiple liability; that its property was taken without just compensation; that 18 U.S.C. § 1963 deprives it of its right to a jury trial; that it has been forced to bear the burden of proof and denied an opportunity to be heard in the underlying criminal action; and that its right to equal protection was violated because it was treated differently from similarly situated entities without a countervailing rational basis. See L-Claim PP 51-53; Opposition to the Motion to Dismiss at 43-44. The bank relies upon the Supreme Court's decision in United States v. James Daniel Good Real Property, 510 U.S. 43, 126 L. Ed. 2d 490, 114 S. Ct. 492 (1993). See Notice to the Court at 2. With the exception of their arguments regarding the decision in James Daniel Good Real Property, neither American Express Bank nor the government has expended much effort to make, or rebut, these arguments, and only a brief discussion is warranted here. For the reasons stated below, the bank's constitutional challenge to 18 U.S.C. § 1963(l) will be rejected.
Section 1963 has consistently survived constitutional challenges, see, e.g., United States v. Sarbello, 985 F.2d 716, 724 (3rd Cir. 1993); United States v. Reed, 924 F.2d 1014, 1017 & 1018 (11th Cir. 1991); United States v. Tunnell, 667 F.2d 1182, 1188 (5th Cir. 1982); United States v. Grande, 620 F.2d 1026, 1037-39 (4th Cir.), cert. denied sub nom. Castagna v. United States, 449 U.S. 830, 66 L. Ed. 2d 35, 101 S. Ct. 98 (1980); United States v. Amato, 367 F. Supp. 547, 548-49 (S.D.N.Y. 1973), and American Express Bank has presented no persuasive reasons for this Court to hold otherwise here. The Supreme Court has reviewed the statutory provisions of RICO on numerous occasions, recognizing the statute's broad sweep but never questioning its facial constitutionality. See Russello, 464 U.S. at 26-29; United States v. Turkette, 452 U.S. 576, 585, 588-593, 69 L. Ed. 2d 246, 101 S. Ct. 2524 (1981); see also Caplin & Drysdale v. United States, 491 U.S. 617, 628, 629-30, 105 L. Ed. 2d 528, 109 S. Ct. 2646, 109 S. Ct. 2667 (1989). Congress established the criminal forfeiture provisions in RICO to provide the government with a powerful, but rational, weapon to assault organized crime and its economic roots. See Russello, 464 U.S. at 26-29; see also Caplin & Drysdale, 491 U.S. at 630. In doing so, Congress recognized the potential impact upon the third parties.
However, the mere fact that a third party, like American Express Bank, cannot satisfy the criteria that Congress established to determine whether a court must amend an order of forfeiture does not mean that the statute offends the constitutional provisions guaranteeing due process or equal protection. Section 1963(l) establishes a rational procedure that protects a third party's "opportunity to be heard in a meaningful time and meaningful manner," Mathews v. Eldridge, 424 U.S. 319, 333, 47 L. Ed. 2d 18, 96 S. Ct. 893 (1976), and American Express Bank has not demonstrated to the contrary.
Nor does James Daniel Good Real Property offer American Express Bank a safe harbor. That case involved the seizure of real property pursuant to a warrant that was issued by a magistrate without prior notice to the property owner or without providing the owner with an opportunity to be heard. In holding that the property owner's due process rights had been violated in that civil forfeiture action under 21 U.S.C. § 881(a)(7), the Supreme Court expressly limited its opinion to the seizure of real property. 510 U.S. at 61. The Court stated that, absent exceptional circumstances, the seizure of real property does not justify the postponement of notice and a hearing. Id. However, the decision left undisturbed the Court's earlier decisions that held that pre-seizure notice is not required under the Due Process Clause where the seizure involves movable property. Id. at 51-52 (distinguishing Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 40 L. Ed. 2d 452, 94 S. Ct. 2080 (1974)). The Court expressly stated that it did "not address what sort of procedures are required for preforfeiture seizures of real property in the context of criminal forfeiture." 510 U.S. at 62 n.3. (citing 21 U.S.C. § 853 and 18 U.S.C. § 1963).
In contrast to the facts of the civil forfeiture in James Daniel Good Real Property, this case involved a post-forfeiture seizure in a criminal case. Unlike the lack of pre-seizure notice in James Daniel Good Real Property, American Express Bank knew of the government's intention to forfeit the set off amount before the assets were actually turned over to the government. Moreover, although the statute provides no such right, American Express Bank requested and received an opportunity to be heard at a hearing before the seizure was effected. At that hearing, this Court considered the bank's arguments for a stay of the order directing seizure of the funds. American Express Bank's arguments were expressly rejected then, just as they are now. And, since that hearing, American Express Bank's claim has been adjudicated pursuant to the process established by Congress. See In re Petition of Chawla, 46 F.3d at 1190; see, e.g., County of Oakland by Kuhn v. Vista Disposal, Inc., 826 F. Supp. 218, 222 (E.D. Mich. 1993).
For these reasons, American Express Bank's constitutional challenges are rejected. The bank has failed to explain how it has been denied equal protection, and the Court's independent review indicates only that the petitioner has failed to satisfy the statutory criteria in a legislative regime that is rationale and has been correctly applied. With respect to due process, the challenge is equally flawed: American Express Bank has been provided all of the process to which it is constitutionally entitled.
The "dissipated" assets claim.
Finally, American Express Bank has raised a final shield, claiming that it dissipated the set off amount before January 31, 1992, and it is, therefore, excused from turning over substitute assets under the authority of In re Moffitt, Zwerling & Kemler, P.C., 846 F. Supp. 463 (E.D. Va. 1994), aff'd sub nom. United States v. Moffitt, Zwerling & Kemler, P.C., 83 F.3d 660 (4th Cir. 1996), cert. denied, 136 L. Ed. 2d 730, 117 S. Ct. 788 (1997); In re Moffitt, Zwerling & Kemler, P.C., 875 F. Supp. 1152 (E.D. Va. 1995), aff'd in part and rev'd in part sub nom. United States v. Moffitt, Zwerling & Kemler, P.C., 83 F.3d 660 (4th Cir. 1996), cert. denied, 136 L. Ed. 2d 730, 117 S. Ct. 788 (1997); and In re Moffitt, Zwerling & Kemler, P.C., 875 F. Supp. 1190 (E.D. Va. 1995), aff'd in part and rev'd in part sub nom. United States v. Moffitt, Zwerling & Kemler, P.C., 83 F.3d 660 (4th Cir. 1996), cert. denied, 136 L. Ed. 2d 730, 117 S. Ct. 788 (1997).
Moffitt involved the criminal prosecution of a drug dealer who transferred $ 103,000 in drug proceeds to his attorneys in payment of his legal fees. At the time of the drug dealer's conviction, the court ordered the forfeiture of the $ 103,000 under the provisions of 21 U.S.C. § 853(a). Because transfers of forfeitable property by defendants to third parties are voidable under Section 853(c), the $ 103,000 was subject to forfeiture unless the law firm established that it was a bona fide purchaser of the funds and that it was reasonably without cause to know that the property was subject to forfeiture under 21 U.S.C. §§ 853(c), (n)(6)(B), which mirror the RICO provisions at issue in this case. The district court rejected the firm's third-party petition, holding that it was not a bona fide purchaser under Section 853(n)(6)(B). See Moffitt I, 846 F. Supp. at 472.
After the court rejected the law firm's petition, the firm advised the court that it had spent or otherwise dissipated all but a small fraction of the $ 103,000. The government then sought a sum equal to the $ 103,000 to satisfy the order of forfeiture. The court rejected the government's argument, holding that the substitute assets provision of Section 853(p) does not apply to third party transferees. See Moffitt II, 864 F. Supp. 527 at 541. The district court explained that while Congress had failed to provide the government with a remedy where a third party dissipated forfeitable assets received from a criminal defendant before the government took action to forfeit or restrain the property, the third party remained liable to forfeit any property in its possession at the time the forfeiture order was entered that was derived from or traceable to the defendant. Id. at 543-44. Later, in separate rulings, the court reaffirmed that the law firm must forfeit traceable property and provide discovery as to how the funds had been dissipated, Moffitt III, 875 F. Supp. 1152 at 1163, and it held that the government's common law claims were preempted by federal forfeiture law. Moffitt IV, 875 F. Supp. 1190 at 1204.
The petitioner's reliance on Moffitt for the proposition that the dissipation of tainted assets can be used as a valid defense was effectively undermined by the Fourth Circuit on appeal. United States v. Moffitt, Zwerling & Kemler, P.C., 83 F.3d 660, 669 (4th Cir. 1996), cert. denied, 136 L. Ed. 2d 730, 117 S. Ct. 788 (1997). While acknowledging that only defendants themselves are subject to the substitute assets provision of 21 U.S.C. § 853(p), the Court of Appeals rejected the law firm's argument that it could spend assets that were subject to forfeiture and then use the substitute assets provision as a shield from the broad forfeiture tools available to the government. 83 F.3d at 669.
The district court's opinions in Moffitt do not, despite the petitioner's suggestion otherwise, allow third parties to avoid RICO forfeiture by promptly dissipating transferred assets which constitute the ill-gotten gains of criminal defendants. Not only is the reasoning of this portion of the Moffitt opinions less than compelling, but such reasoning is inapplicable here, given the substantially different facts underlying American Express Bank's petition. Both parties agree that when BCCI opened its account and deposited $ 150,000,000, American Express Bank acquired title to the funds and BCCI became a general creditor to the petitioner in the amount on deposit. Unlike in Moffitt, where the criminal defendant transferred $ 103,000 as payment for legal services which was deposited in a specific account, specific funds are not at issue. The property interest transferred to American Express Bank is the credit taken by that bank to reduce its liabilities. The set off taken by the bank did not involve acquisition of an identifiable res. The set off reduced the bank's liabilities and increased its net worth. Taking a set off is not the same as acquiring funds, placing those funds into a specific account and then dissipating them, as occurred in Moffitt.
When tainted and untainted funds are commingled in a specific account, accounting principles have been applied to trace the funds. See, e.g., United States v. Moore, 27 F.3d 969, 976-77 (4th Cir.), cert. denied, 513 U.S. 979, 130 L. Ed. 2d 367, 115 S. Ct. 459 (1994); United States v. Laykin, 886 F.2d 1534, 1541 (9th Cir. 1989), cert. denied, 496 U.S. 905, 110 L. Ed. 2d 267, 110 S. Ct. 2586 (1990); United States v. Banco Cafetero Panama, 797 F.2d 1154, 1161 (2d Cir. 1986); see also Moffitt, 83 F.3d at 670-71. However, it is not at all clear that the credit resulting from American Express Bank's set off fits this mold, thus requiring the application of a "lower intermediate balance" test. Nor is it entirely clear that the tracing rules outlined in Banco Cafetero even apply, since that case involved a civil forfeiture prior to the enactment of 18 U.S.C. § 984. See United States v. All Funds Presently on Deposit or Attempted to be Deposited in any Accounts Maintained at American Express Bank, et al., 832 F. Supp. 542, 551-58 (E.D.N.Y. 1993). Nevertheless, accepting arguendo that tracing rules do apply and assuming that the set off credit was commingled with the bank's general assets, the government may retain the set off (i.e., the amount of the credit) unless American Express Bank's net worth fell below the value of the credit prior to entry of the Order of Forfeiture. See Banco Cafetero, 797 F.2d at 1161.
The government's motion will be granted.
For the reasons stated above, it is hereby
ORDERED that the government's Motion for Summary Judgment is granted. The Petition of American Express Bank, Ltd., Pursuant to 18 U.S.C. § 1963 is dismissed with prejudice. Judgment will be entered by separate order issued this date.
IT IS SO ORDERED.
April 22, 1997.
JOYCE HENS GREEN
United States District Judge
In accordance with the Memorandum Opinion and Order issued this date and pursuant to Fed.R.Civ.P. 58, judgment is hereby entered in favor of the United States and against the petitioner, American Express Bank, Ltd.
IT IS SO ORDERED.
April 22, 1997.
JOYCE HENS GREEN
United States District Judge