United States District Court for the District of Columbia
April 2, 2004.
UNITED STATES OF AMERICA, Plaintiff,
REAL PROPERTY IDENTIFIED AS: PARCEL 03179-005R, LEGAL DESCRIPTION SEC 19 TWN 9, RNG 10, PORT ST. JOE, FLORIDA, WITH ALL APPURTENANCES AND ATTACHMENTS THEREON, et. al. Defendants
The opinion of the court was delivered by: REGGIE WALTON, District Judge
Currently before the Court is the government's renewed motion for
summary judgment*fn1 regarding the civil forfeiture of a defendant
aircraft. For the reasons set forth below, the Court concludes that the
aircraft is subject to forfeiture.
I. Factual Background
The facts that resulted in the filing of this forfeiture proceeding are
thoroughly set forth in the Court's October 21, 2003, Memorandum
Opinion, and will not be recounted here again. See United States v. Real
Property Identified As: Parcel 03179-005R, 287 F. Supp.2d 45, 62 (D.D.C.
2003). In its prior memorandum opinion, the Court determined that the
defendant real property, identified as Parcel 03179-005R,
Legal Description Sec 19 TWN 9, RNG 10, Port St. Joe, Florida, was
subject to forfeiture pursuant to the Civil Asset Forfeiture Reform Act
of 2000, ("CAFRA"), 18 U.S.C. § 981 (2000), and granted the
government's motion for summary judgment as it pertained to that
property. However, the Court denied both the government's and the
defendants' motions for summary judgment as to those aspects of the
motions that related to the defendant 1977 Piper Aztec Aircraft.
The facts regarding the defendant aircraft are not in serious dispute.
Defendant Kinley Howard was found guilty of mail and wire fraud for
conduct he engaged in regarding his administration of the estate of his
deceased aunt, Mildred Powell, who died on July 15, 1996. Defendant's
fraudulent activity occurred between approximately December, 1996 and
May, 2000. The aircraft that is at issue was fully paid for by 1995.
Verified Complaint for Forfeiture In Rem ("Compl.") ¶ 22; see also
Pl.s Supp. Mem. at 2*fn2 ("[Claimant] had purchased the defendant
aircraft prior to his fraudulent activities giving rise to this case. .
. ."). In 1991, Dr. Howard used the aircraft, "along with other assets,
as collateral for the consolidation of numerous loans he had previously
obtained from the First National Bank of Northwest Florida (hereafter
"FNB")." Id. at 3 (citation omitted). As a result, "FNB held a lien on
the defendant aircraft for its full value." Id. In September 1999, when
FNB sought payment in full from Dr. Howard for several loans he had
obtained from the bank, Dr. Howard obtained a second mortgage on the
defendant real property in the amount of $300,000 from Citizens Federal
Savings Bank of Port St. Joe, located in Port St. Joe, Florida. Dr.
Howard then used the funds from this second mortgage to pay the remaining
balance owing on the loans he had obtained from FNB in the amount of
$268,162.57. Id. at 3-4. "Upon receipt of that payment, FNB released its
liens, in May 2000, on the full value of the defendant aircraft, as well
as the other assets used as collateral for the consolidated loans." Id.
at 4 (citation omitted). The government posits that because the "lien on
the defendant aircraft was satisfied with proceeds traceable to
claimant's fraudulent activities[,]" id. at 3, the aircraft is subject to
forfeiture. The Court agrees.
A. Standard of Review
"When a motion for summary judgment is made and supported as provided
in [Federal Rule of Civil Procedure 56], an adverse party may not rest
upon the mere allegations or denials of the adverse party's pleading, but
. . . by affidavits or otherwise provided in this rule, must set forth
specific facts showing there is a genuine issue for trial." Fed.R. Civ.
P. 56(e). The Court must grant the motion for summary judgment "forthwith
if the pleadings, depositions, answers to interrogatories, and admissions
on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is
entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c).
B. Whether the Defendant Aircraft is Subject to Forfeiture
The sole legal issue before the Court is whether the defendant
aircraft, which was paid for prior to the commission of Dr. Howard's
fraudulent scheme, but was then used as collateral for loans that caused
a lien to be placed on the aircraft, is subject to forfeiture because the
lien on the aircraft was released through the use of funds that were
acquired as a result of Dr. Howard's illegal activities.*fn3 Neither
party has directed the Court to any case authority that precisely answers
this question. The government contends, however, that it is
"unrealistic" for the claimants to "expect the government to provide
support for its theory of forfeiture of the defendant aircraft by citing
a case with facts identical to the facts presented here." Pl.'s Supp.
Mem. at 5. And, while the claimants note that the government has not
cited a case directly analogous to the current situation, they have not
cited any case directly on point either.
1. Whether Forfeiture is Proper Pursuant to 18 U.S.C. § 981(a)(1)(A)
Pursuant to 18 U.S.C. § 981 (a)(1)(A), the following "is subject to
forfeiture to the United States: Any property, real or personal, involved
in a transaction or attempted
transaction in violation of section 1956, 1957 or 1960*fn4 of this
title, or any property traceable to such property." This provision only
permits the forfeiture of money or property related to a violation of the
money laundering statutes.*fn5 Thus, to establish forfeiture pursuant to
this provision, the government must establish that the Piper aircraft was
involved in one of Dr. Howard's money laundering transactions. See
United States v. Iacaboni, 221 F. Supp.2d 104, 111 (D. Mass. 2002)
(noting that under 18 U.S.C. § 982(a)(1), only "property that was
. . . `involved in' defendant's money laundering in violation of
[§] 1956 [would] . . . be subject to forfeiture.").
Pursuant to 18 U.S.C. § 1956, there are two possible avenues for
finding that the aircraft was involved in a money laundering offense. The
first would be if Dr. Howard knew the "property involved in a financial
transaction represent[ed] the proceeds of some form of unlawful activity
. . .[,] " and with that knowledge Dr. Howard used the property to
"conduct or [to] attempt to conduct such a financial transaction which in
fact involves the proceeds of specified unlawful activity. . . ."
18 U.S.C. § 1956(a)(1); see also Iacaboni, 221 F. Supp.2d at
112 ("The phrase `proceeds' of some form of unlawful
activity . . . has widely been interpreted to include any money
instrument that is obtained as the result of an illegal activity, or the
`total revenue' that is obtained from an illegal enterprise.") (citing
United States v. Haun, 90 F.3d 1096, 1101 (6th Cir. 1996); United States
v. Akintobi, 159 F.3d 401, 403 (9th Cir. 1998)) (emphasis added).
Second, if Dr. Howard used the aircraft to "conduct or [to] attempt to
conduct a financial transaction involving property represented to be the
proceeds of specified unlawful activity, or property used to conduct or
facilitate specified unlawful activity. . . ." 18 U.S.C. § 1956(a)(3).
Such a finding based on this second approach is dependent on the
government demonstrating that the defendant. . . inten[ded] to "carry
on specified unlawful activity;" or "to conceal or disguise the nature,
location, source, ownership, or control of property believed to be the
proceeds of specified unlawful activity[.]" Id. § 1956(a)(3)(A), (B).
The government argues that because the lien on the aircraft was
released due to the payment of funds obtained from a second mortgage that
was secured by the defendant real estate, which the Court has already
concluded is subject to forfeiture because it had been acquired with
funds obtained by Dr. Howard through his illegal activity, the aircraft
is also subject to forfeiture. Clearly, as found by the Court
previously, the house was purchased with illegally obtained funds. See
Real Property Identified As: Parcel 03179-005R, 287, F. Supp.2d at 63-64
("The facts, in conjunction with the overwhelming evidence of Dr.
Howard's guilt presented at his criminal trial, conclusively demonstrates
that Dr. Howard knowingly orchestrated a fraudulent
scheme to obtain the proceeds of Mildred Powell's estate. And, he then
used those funds to purchase the St. Joe, Florida real estate.").
Specifically, there was ample evidence that the defendant fraudulently
obtained control of his deceased aunt's assets; that he engaged in a
series of bank and wire transfers in which he transferred funds from his
deceased's aunt's accounts into his personal accounts and otherwise
deposited into his accounts assets belonging to the estate, and that, on
December 29, 1997, Dr. Howard used those funds to purchase the St. Joe,
Florida real estate. See Verified Complaint for Forfeiture In Rem
("CompL") ¶¶ 9-18. Thus, it has been clearly established that Dr.
Howard conducted a financial transaction that involved the aircraft with
the proceeds of specified unlawful activity, i.e., the payment of the
loans that released the lien on the aircraft with funds obtained from the
second mortgage secured by the St. Joe, Florida real estate.
"The heart of an act of money laundering is a transaction involving
illegal proceeds." Iacaboni, 221 F. Supp.2d at 116. In Iacaboni, the
Court held that the defendant's home was not subject to forfeiture
pursuant to 18 U.S.C. § 982(a)(1).*fn6 Id. at 117. The criminal
defendant there had "pled guilty to two counts of gambling-related
conspiracy, one count of managing an illegal gambling business, and one
count of money laundering. In a separate information, he also pled guilty
to substantive money laundering." Id. at 105. The evidence showed that
the defendant engaged in an
extensive illegal gambling scheme, using the proceeds from his scheme to
pay his employees and to make deposits into his bank account. Id. at
107-110. The Court noted that, "[g]iven . . . the nature of an illegal
gambling operation, defendant satisfied the initial requirement of the
money laundering statute i.e., a monetary transaction knowingly
involving the proceeds of an illegal activity nearly every time
the illegal gambling money changed hands." Id. at 112. However, the Court
noted that "not every financial transaction involving the proceeds of an
illegal activity constitutes money laundering." Id. at 113 (citation
omitted). In this vein, the Court held that the defendant's residence was
not subject to forfeiture under the statute. Although the evidence showed
"that the . . . property was used to promote defendant's gambling
business[,]" because "[e]nvelopes with money and documents were dropped
off and picked up in the garage, faxes and phones calls related to the
enterprise came to and went from the residence, football tickets were
`corrected' on the premises, and meetings were held in the house[,]" the
Court held that it was "equally clear, however, that the conduct
centering on the house itself could not constitute the crime of money
laundering, since the house was neither the `proceeds' of any illegal
activity, nor a part of any `transaction' as the money laundering statute
defines that term." Id. at 115.
In contrast to the house held not to be subject to forfeiture in
Iacaboni, here, there was a monetary transaction involving the proceeds
of Dr. Howard's money laundering scheme, as the St. Joe, Florida property
had been obtained purely with illegally obtained funds. Thus, when Dr.
Howard used the Florida property to obtain the funds secured
by the second mortgage, he knew he was using property that had been
purchased with proceeds of specified unlawful activity to acquire the
funds. And, when he then used the funds he received from the second
mortgage to obtain the release of the lien on the aircraft, he engaged in
money laundering activity that involved the aircraft. This amounted to a
violation of 18 U.S.C. § 1956. As the Court noted in United States
v. All Assets of Blue Chip Coffee, Inc., 836 F. Supp. 104, 107 (E.D.N.Y.
1993), a pre-CAFRA case, "property need only be `involved' in a
transaction or attempted transaction[,]" to be subject to forfeiture
pursuant to 18 U.S.C. § 981(a)(1)(A). The Blue Chip Coffee Court
rejected the claimants' argument "that to be `involved' in a criminal
activity for the purposes of forfeiture under 18 U.S.C. § 981, the
property must `represent proceeds of a specified criminal activity.'" Id.
(emphasis added). Rather, the Court noted, the statute "provides for the
forfeiture of any property involved in a transaction or attempted
transaction `in violation of . . . section 1956. . . ." Id. at 108.
Relying on this reasoning, which has not been altered by the enactment of
CAFRA, the Court concludes that the government has demonstrated that the
aircraft was involved in a monetary transaction involving the proceeds of
specified unlawful activity. Clearly, this involvement renders the
aircraft subject to forfeiture pursuant to
18 U.S.C. § 981(a)(1)(A)*fn7
Because the Court is now satisfied that the government has established
that the defendant aircraft was involved in a monetary transaction
involving specified unlawful activity, the Court concludes that the Piper
aircraft is subject to forfeiture. The government is directed to provide
the Court with a proper Order for forfeiture of the aircraft.
In accordance with the Memorandum Opinion that accompanies this Order,
it is hereby
ORDERED that the government's Motion for Summary Judgment as it
pertains to the Piper Aircraft is granted. It is further
ORDERED that the government is directed to submit a proposed order
regarding forfeiture of the Piper Aircraft within ten (10) days of the
date of this Order.