The opinion of the court was delivered by: Reggie B. Walton, United States District Judge.
This controversy centers around property that the government alleges was obtained through illegal means, and which the government seeks to subject to civil forfeiture. Presently before the Court*fn1 are the government's motion to strike the claims and answers of two putative claimants, its motion for summary judgment, and the claimants' motion for partial summary judgment. For the reasons that follow, the Court will deny the motion to strike, will grant in part and deny in part the government's motion for summary judgment, and will deny the claimants' motion for partial summary judgment.*fn2
The facts that form the basis of this civil in rem action are identical to those that underlie the criminal prosecution of Dr. Kinley Howard. This civil action was filed on March 30, 2001. The government alleges in its complaint that the defendant properties in this case – real property located in St. Joe, Florida*fn3 and a 1997 Piper Aztec aircraft – were obtained by Dr. Howard with proceeds derived from specified unlawful activity. Specifically, the verified complaint alleges that Dr. Howard"devised a scheme to defraud his aunt's estate depriving her estate and her heirs of approximately $207,000." Verified Complaint for Forfeiture In Rem ("Compl.") ¶ 9.
Dr. Howard's scheme began on December 30, 1996, after the death of his aunt, Mildred Powell, who died intestate on July 15, 1996, when Dr. Howard"petitioned the Probate Division of the Superior Court for the District of Columbia ("Superior Court") to be appointed co-personal representative of Ms. Powell's estate along with his mother, Lillian Powell Howard (Ms. Powell's sister) by forging his mother's signature on the petition...." Id. The complaint further alleges that Dr. Howard misrepresented in the petition (1) that his mother resided at his home address in Panama City, Florida, despite the fact that his mother was living in a nursing home in Lynchburg, Tennessee; (2) that the address of his podiatry business was actually his home address; (3) that he listed the value of Ms. Powell's estate as $29,500, when the estate was actually worth over $200,000; and (4) that there were no other family members who were willing to serve as personal representative of the estate. Id. The petition also failed to list all of the estate's heirs. Id. Furthermore, after Dr. Howard was appointed as the estate's personal representative on January 2, 1997, he failed to notify"certain interested parties of his appointment and transferred over $187,000 in funds from the estate into his own bank accounts for his own personal use and benefit." Id.
After acquiring control of the estate funds, Dr. Howard engaged in a series of transactions that were the basis for his criminal convictions of mail and wire fraud pursuant to 18 U.S.C. §§ 1341 and 1343. For example, he mailed letters to each of the four banks which held funds belonging to Ms. Powell, indicating that he was the copersonal representative of Ms. Powell's estate and requested that each account be closed and the funds transferred electronically to one of the two estate accounts he had established in Florida. Id. ¶ 11. He also forged his mother's signature on each of these letters. Id. Thereafter, between January 1997 and September 1997, Dr. Howard withdrew the funds from the two estate accounts he had established, and transferred $146,253.77 of the estate funds to his personal and business bank accounts with checks drawn on the two estate accounts. Id. ¶ 13. He also forged his mother's signatures on"the majority of the checks [transferring the funds to his personal account]...." Id. These transactions formed the basis for the mail and wire fraud criminal charges for which Dr. Howard was convicted in his criminal case.*fn4
On March 1, 1997, when Dr. Howard's mother died, Dr. Howard failed to notify the Superior Court of her death. Id. ¶ 14. In addition, he continued to transfer and deposit over $94,000 of Mildred Powell's estate assets into the two estate accounts he had established, as well as transferring over $142,000 in funds from the two estate accounts into his own personal and business accounts. Id. Dr. Howard also continued to forge his deceased mother's signature on the checks drawn on the estate accounts. Id. On August 6, 1997, Superior Court Judge Cheryl M. Long issued an order suspending Dr. Howard's fiduciary powers over Ms. Powell's estate. Id. ¶ 15. Despite the suspension, Dr. Howard"continued to withdraw over $53,200 in funds from the Emerald Coast estate account by continuing to forge his deceased mother's signature." Id. On June 16, 1998, Judge Long issued a second order in which she removed Dr. Howard as the personal representative of Ms. Powell's estate and entered a judgment against him in the amount of $207,589.99. Id.
The government alleges that Dr. Howard utilized the proceeds of his illegal activity to purchase real estate located in Port St. Joe, Florida on December 29, 1997, for $202,500.*fn5 Id. ¶ 18. Furthermore, Dr. Howard allegedly used the defendant aircraft, which had been paid for completely by 1995, as collateral for a loan for over $350,000 that he obtained from First National Bank of Northwest Florida ("First National"). Id. ¶ 22. The transaction resulted in First National holding a lien against the aircraft in the amount of $85,000.00. Id. When Dr. Howard became delinquent on the loan, First Bank demanded payment in full, and on May 15, 2000, Dr. Howard obtained a second mortgage on the St. Joe property in the amount of $300,000, which he used to pay the balance due on his First National loan. Id. Thereafter, First National released the lien on the aircraft.*fn6
Based on the above facts, the government argues that the defendant real estate and aircraft are subject to forfeiture because they were purchased with the proceeds of bank, wire and mail fraud.*fn7 See Compl. Counts I-III. The government also alleges in Count IV of the complaint that forfeiture is appropriate because, pursuant to 18 U.S.C. § 981(a)(1)(C), both of the properties were purchased with the proceeds"traceable to interstate transportation of stolen property, in violation of 18 U.S.C. § 2314...." This allegation refers to Dr. Howard's removal of United States savings bonds from Ms. Powell's apartment located in the District of Columbia to Florida, where he deposited the bonds in one of the two estate accounts he had established. Id. ¶ 34. Count V of the complaint alleges that forfeiture is appropriate pursuant to 18 U.S.C. § 1956(a)(1)(B), which makes it a crime to utilize"the proceeds of specified unlawful activity...." Id. ¶ 38(a), and 18 U.S.C. ¶ 1957, which criminalizes use of the"proceeds of specified unlawful activity, to wit: bank fraud." Id. ¶ 38(b). It is the government's contention that"the defendant aircraft as well as the defendant real property are property involved in or traceable to property involved in a violation of 18 U.S.C. §§ 1956 or 1957 and [are] therefore subject to forfeiture pursuant to 18 U.S.C. § 981(a)(1)(A)[,]" because the properties were involved in transactions involving money laundering. Id. ¶ 39.
On September 5, 2003, a jury found Dr. Howard guilty in his criminal case of mail and wire fraud.*fn8 On December 6, 2002, this Court sentenced Dr. Howard to a forty-six month term of incarceration followed by three years of supervised release. In addition, Dr. Howard was ordered to pay a $20,000 fine and restitution in the amount of $156,813. Dr. Howard filed a notice of appeal of his conviction on December 16, 2002. His appeal is currently pending before the UNITED STATES COURT OF APPEALS for the District of Columbia Circuit.
A. Plaintiff's Motion to Strike the Claims and Answers of Judy Howard and Kinco Aviation [#45]
The government's Verified Complaint in this action was filed on March 30, 2001. An answer on behalf of the defendant properties was filed by attorney Joel W. Anders on May 1, 2001, however, the government successfully motioned the Court to have that answer stricken because a response to its motion to strike was not timely filed. Accordingly, the motion to strike was treated as conceded. Thereafter, Mr. Anders moved to withdraw as counsel for the defendant properties on November 7, 2001, after his services were terminated by Dr. Howard. Thereafter, the government moved for partial default as to the defendant aircraft, which resulted in a default being entered by the clerk of the court on December 17, 2001. This Court then granted the government's motion for a default judgment against the aircraft on March 8, 2002. Subsequently, Dr. Howard filed a motion for an emergency hearing to challenge the entry of the default judgment, and a hearing on the motion was held on March 14, 2002. At that time, the Court scheduled a full evidentiary hearing for March 20, 2002, to address Dr. Howard's arguments concerning default judgment. At the evidentiary hearing, Dr. Howard represented that it was his belief that his prior attorney (Mr. Anders) had responded to the government's verified complaint. This representation resulted in the Court vacating the default judgment and"Dr. Howard [was given] 20 days from [March 20, 2002] to file any pleadings that he deem[ed] appropriate in reference to this forfeiture action."
Transcript of Proceedings dated March 20, 2002 ("Tr.") at 73. Dr. Howard's answer to the complaint was filed on April 3, 2002. On that same date, Dr. Howard's wife, Judy Howard, and his company, Kinco Aviation, Inc., filed a claim and answer in this action. The government thereafter filed a motion to strike these claims and the answers on the ground that they were untimely.
It is clear that none of the claimants, with the exception of Citizens' Bank, filed timely answers to this action. Pursuant to 18 U.S.C. § 983(a)(4)(A),"any person claiming an interest in the seized property may file a claim asserting such person's interest in the property... except that such claim may be filed not later than 30 days after the date of service of the Government's complaint...." (emphasis added). In addition to filing a claim, the persons"asserting an interest in seized property... shall file an answer to the Government's complaint for forfeiture not later than 20 days after the date of filing the claim." 18 U.S.C. § 983(a)(4)(B) (emphasis added).
The government argues that this Court's order granting Dr. Howard 20 days to file any appropriate pleadings in this matter cannot be read to permit the filings submitted on behalf of Judy Howard and Kinco Aviation. The claimants argue, however, that the basis for this Court granting Dr. Howard additional time to file pleadings, i.e., because Dr. Howard believed that his prior counsel had filed the appropriate papers on his behalf, applies equally to Mrs. Howard and Kinco Aviation and thus, they should be afforded the same courtesy. For the reasons the Court expressed during the March 20, 2002, hearing regarding Dr. Howard's failure to timely respond to the Verified Complaint in this matter, the Court concludes that it would be inappropriate to deny Mrs. Howard and Kinco Aviation, a company owned by Dr. and Mrs. Howard, the opportunity to also challenge the government's efforts to forfeit the property at issue. See Tr. at 71-72. Accordingly, for the same reasons this Court afforded Dr. Howard additional time to challenge the forfeiture, the Court holds that the claims of Judy Howard and Kinco Aviation should not be stricken.
B. The Government's Motion for Summary Judgment [#53]
The government argues that it is entitled to summary judgment pursuant to the Civil Asset Forfeiture Reform Act of 2000 ("CAFRA"), 18 U.S.C. § 981. According to the government, civil forfeiture is appropriate because the evidence presented at Dr. Howard's criminal trial"establish[es], by a preponderance of the evidence, that the defendant properties [were] derived from proceeds traceable to [Dr. Howard's] fraudulent activities and are property involved in, or traceable to property involved in, the laundering of those proceeds." Memorandum in Support of Motion for Summary Judgment and Decree of Forfeiture ("Pl.'s Mem.") at 12. The government further ...