United States. Congress. House. Committee on the J.

Civil Asset Forfeiture Reform Act : hearing before the Committee on the Judiciary, House of Representatives, One Hundred Fourth Congress, second session, on H.R. 1916 ... July 22, 1996 online

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Online LibraryUnited States. Congress. House. Committee on the JCivil Asset Forfeiture Reform Act : hearing before the Committee on the Judiciary, House of Representatives, One Hundred Fourth Congress, second session, on H.R. 1916 ... July 22, 1996 → online text (page 11 of 37)
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applying the standards of temporary restraining orders under Rule
65 to § 853(e)(1) restraints. The amendment ma)ces clear that
Rule 65 does not apply to restraints imposed under any of the
provisions of § 853(e) and § 1963(d) because, in light of the
amendments made by this section, those provisions will contain
their own procedural requirements.

Section 212 Availability of Criminal Forfeiture

Under current law, 28 U.S.C. § 2461(a), a statute that
provides for forfeiture without prescribing whether the
forfeiture is civil or criminal is assumed to authorize only
civil forfeiture. Thus, in such cases the government is required
to file parallel civil and criminal cases in order to prosecute
an individual and forfeit the proceeds of the offense. See e.g.
18 U.S.C. § 1955 (gambling).

The amendment resolves this probleUPBy" authorizing criminal
forfeiture whenever any form of forfeiture is otherwise
authorized by statute.

Section 213 Appeals in Criminal Forfeiture Cases

The amendments in this section clarify the government's
authority to appeal an adverse pre-trial or post-trial decision
in a criminal forfeiture case.

In United States v. Horak . 833 F.2d 1235, 1244 (7th Cir.
1987) , the Court of Appeals for the Seventh Circuit held that it
did not have jurisdiction under 18 U.S.C. § 3731 to hear an
appeal by the government from a district court ' s denial of
forfeiture pursuant to 18 U.S.C. § 1963(a). As noted by the
Court of Appeals, absent express Congressional authorization, the
government has no authority to appeal in a criminal case. Id. at
1244 . The Court concluded that there is no statutory basis for
government appeal under § 3731 when a district court refuses to
enter an order of forfeiture because that statute provides only
that the government can appeal upon the dismissal of an indict-
ment or information or a count thereof, or upon the granting of
new trial as to one or more counts after verdict or judgment.



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The Court reasoned that the denial of a forfeiture is not
analogous to the dismissal of an indictment and held that section
3731 did not authorize a government appeal from the district
court's decision denying the forfeiture. Id. at 1248. The Court
held that the forfeiture order was part of Horak's sentence and
that section 3731 does not provide a basis for a government
appeal from a sentence. Id. at 1246-48.

The government has been allowed to appeal forfeiture deci-
sions in other cases. In United States v. Investment Enterpris-
es. Inc. . 10 F.3d 263, 264 (5th Cir. 1993), the Court of Appeals
for the Fifth Circuit held that the denial of a motion for order
of forfeiture was appealable by the government under 18 U.S.C.
§ 3742(b) which permits the government to appeal a sentence. But
that statute does not presently make clear whether the government
may appeal when the district court orders the forfeiture of some
but not all of the subject property, or when the district court
mitigates a forfeiture in order to address a perceived violation
of the Excessive Fines Clause. (Avoidance of a constitutional
violation is the only basis on which a court may mitigate a
forfeiture in a criminal case.)

Accordingly, § 3731 is amended to permit the government to
appeal from orders dismissing a forfeiture count in an indictment
or dismissing individual assets named in a forfeiture count. In
addition, § 3742 is amended to make explicit the statutory basis
for a government appeal from a denial or mitigation of forfei-
ture, in whole or in part.

Section 214 Discovery Procedure For Locating Forfeited Assets

This section amends 18 U.S.C. § 1963 (k) and 21 U.S.C.
§ 853 (m) to give the court the discretion to exclude a convicted
defendant from a post-trial deposition conducted for the purpose
of locating the defendant's forfeited assets if the defendant's
presence could frustrate the purpose of the inquiry. The
provision is necessary because otherwise, under Rule 15 of the
Federal Rules of Criminal Procedure, the defendant would have the
right to be present at a deposition conducted for the purpose of
locating assets that have been declared forfeited. United States

v. Saccoccia . F. Supp. , 1996 WL 28968 (D.R.I. Jan. 19,

1996) . If, for example, the assets include funds in bank
accounts that the defendant had hoped to conceal from the
government and the court, the defendant's presence at the
deposition could frustrate its purpose because upon learning that
the government had discovered the location of his secret
accounts, the defendant could quickly take steps to remove the
assets before government agents could recover them.

Section 215 Scope of Criminal Forfeiture



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35-668 96-4



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This section makes a significant change in the scope of
criminal forfeiture. Under current law, only the property of the
defendant is forfeitable in a criminal case. That is, if a court
or a jury pursuant to Rule 31(e) of the Federal Rules of Criminal
Procedure, finds that property is subject to forfeiture and that
the defendant has an interest in the property, the property is
forfeited to the extent of the defendant's interest. But
property in which the defendant has no interest is not
forfeitable in a criminal case. See United States v. Ham . 58
F.3d 78 (4th Cir. 1995) (district court cannot enter order of
forfeiture unless jury has entered a special verdict regarding
the extent of the defendant's interest in the property).

Thus, in a drug case, the defendant's interest in real
property used to facilitate the drug violation is subject to
forfeiture, but the interest of his spouse is not, even if the
spouse was complicit in the crime. To forfeit the spouse's
interest, the government has to file a parallel civil forfeiture
action. See United States v. Jimerson . 5 F.3d 1453 (11th Cir.
1993) .

The ancillary proceeding provisions in 21 U.S.C. § 853 (n)
and 18 U.S.C. § 1963(1) exist to give third parties the
opportunity to dispute the court or jury's finding that the
defendant was the owner of the property. They do not, however,
currently provide a vehicle to allow the government to forfeit a
third party's interest in the criminal case where there has been
no finding that the property belonged exclusively to the
defendant. In other words, unlike a ci'vii - in_rem provision, the
ancillary hearing provision does not allow the government to
forfeit the interest of a spouse, lienholder or other co-owner of
property who knowingly allowed the defendant to use the property
for an illegal purpose; if a third party establishes superior
ownership, he or she will prevail in the ancillary proceeding
even if he or she is not an "innocent owner."

This situation leads to wasteful and duplicative litigation
as the government must file parallel civil proceedings every time
it seeks to divest a non- innocent third party of his or her
interest in property. The amendment resolves this problem by
explicitly authorizing the government to forfeit in a criminal
case any property in which the defendant has an interest,
notwithstanding the interest of a spouse, lienholder or other
third party. It also allows the ancillary proceeding to be used
as an in rem proceeding to forfeit the third party interests so
that it is no longer necessary to file a parallel civil
proceeding.

In a case where the government invokes this provision to
forfeit a third party's interest in the criminal case,- the third
party would, of course, have the right to challenge the finding,
by the court or jury, that the property was subject to

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forfeiture. This does not alter the general rule that where only
the defendant's property is being forfeited, a third party may
attempt to show a superior interest in the property, but may not
contest the finding that a crime occurred and that the property
involved in or derived from that criminal offense.

TITLE III - PROPERTY SUBJECT TO FORFEITURE

Section 301 Forfeiture of Proceeds of Federal Crimes

This amendment makes the proceeds of any crime in title 18,
United States Code, subject to civil and criminal forfeiture. It
does not override more specific provisions authorizing forfeiture
of facilitating property and instrumentalities of crime under
existing forfeiture statutes. See e.g. 18 U.S.C. § 1955(d)
(relating to gambling); § 981(a)(1)(A) and § 982(a)(1) (relating
to money laundering) .

By providing for forfeiture of the proceeds of all federal
title 18 offenses, the amendment ensures that the government will
have a means of depriving criminals of the fruits of their crim-
inal acts without having to resort to the RICO and money launder-
ing statutes - provisions which currently permit forfeiture of
criminal proceeds but which also carry higher penalties - in
cases where it is unnecessary to do so or where the defendant is
willing to enter a guilty plea to the offense that generated the
forfeitable proceeds but not to the RICO or money laundering
offense .

The section includes a set of congressional findings
intended to make it clear that Congress regards the forfeiture of
criminal proceeds to be remedial, not punitive, in nature. This
conforms with the majority of cases to address this issue in the
context of the 8th Amendment's Excessive Fines Clause and the 5th
Amendment's Double Jeopardy Clause. See United States v. Tillev .
18 F.3d 295 (5th Cir. 1994) (forfeiture of proceeds does not
implicate double jeopardy because it is not punitive) ; United
States v. Alexander . 32 F.3d 1231 (8th Cir. 1994) (forfeiture of
proceeds cannot constitute an excessive fine because it is not
punitive) .

Section 302 Uniform Definition of Proceeds

Sections 981 and 982 were amended and expanded in 1988,
1989, 1990 and 1992 to add new offenses to the list of crimes for
which forfeiture is authorized. In each instance, Congress chose
a different term to describe the property that could be forfeit-
ed, leading to great confusion as to the difference, if any,
between "proceeds" and "gross proceeds" and between "gross pro-
ceeds" and "gross receipts." The amendment eliminates this
problem by using the term "proceeds" throughout the statutes and
by defining that term to mean all of the property derived, di-

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rectly or indirectly, from an offense or scheme, not just the net



profit .



A recent example of the confusion inherent in current law
is the decision in United States v. 122.942 Shares of Common
Stock , 847 F. Supp. 105 (N.D. 111. 1994). In that case, a court
found that stock in a financial institution had been obtained
through fraud and that the stock was forfeitable under
§ 981(a) (1) (C) . The court held, however, that in the absence of
a definition of "proceeds, " it had to interpret "proceeds" to
mean only net profits. Therefore, the court ordered the
government to return to the wrongdoer the money he had fraud-
ulently invested to obtain the stock.

This makes no sense. A person committing a fraud on a
financial institution has no greater right to recover the money
he invested in the fraud scheme than a drug dealer has to recover
his overhead expenses when ordered to forfeit the proceeds of
drug trafficking.

The definition of "proceeds" is intended to be interpreted
broadly. It applies to any kind of property, real or personal,
obtained at any time as a result of the commission of a criminal
offense, and any property traceable to it. Thus, for example,
the money received as a result of a false loan application would
be the proceeds of the bank fraud offense. If the loan proceeds
were used to buy a car, the car would be considered traceable to
the proceeds of the bank fraud offense and would be forfeitable
even if the loan were subsequently repaid Because the offender
would have had the use of the fraudulently obtained loan to
purchase the property, and the statute makes all property ob-
tained as a result of the offense forfeitable, not just the net
profit.

The last two sections of the amendment extend the same
uniform definition of proceeds to the drug forfeiture statutes
and RICO.

Section 303 Forfeiture of Firearms Used in Federal Crimes

The amendment adds the authority to forfeit firearms used to
commit crimes of violence and all felonies to 18 U.S.C. §§ 981



® The amendments to the criminal forfeiture statutes refer
to the proceeds of the entire scheme or course of conduct because
otherwise the forfeiture might be construed as limited to the
property derived directly from the offense of conviction. There
is no need for a similar provision in the civil forfeiture
statutes, because property is subject to forfeiture in rem if it
was derived from criminal activity generally. See United States
V. Parcels of Land . 903 F.2d 36, 42 (1st Cir. 1990).

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and 982. This authority would be in addition to the authority
already available to Treasury agencies under 18 U.S. C. § 924(d).

The purpose of the amendment is 1) to provide for criminal
as well as civil forfeiture of firearms; and 2) to permit
forfeiture actions to be undertaken by Department of Justice law
enforcement agencies who have authority to enforce the statutes
governing crimes of violence but who do not have authority to
pursue forfeitures of firearms under the existing statutes.

Section 924 (d) of title 18 already provides for the civil
forfeiture of any firearm used or involved in the commission of
any "criminal law of the United States." The statute, however,
is enforced only by the Treasury Department and its agencies; it
provides no authority for the FBI, for example, to forfeit a gun
used in the commission of an offense over which it has sole
jurisdiction. Moveover, § 924(d) provides for civil forfeiture
only.

Subsection (d) adds a provision to 18 U.S.C. § 924(d) in-
tended to permit the Bureau of Alcohol, Tobacco and Firearms to
forfeit property that otherwise would have to be forfeited by
another agency. Under § 924 (d) , ATF is presently authorized to
forfeit a firearm used or carried in a drug trafficking crime.
Property involved in the drug offense itself, such as drug pro-
ceeds, may also be forfeitable under the Controlled Substances
Act, 21 U.S.C. § 881, but ATF does not presently have authority
to forfeit property under that statute and has to turn the for-
feitable property over to another agency. The amendment does not
expand the scope of what is forfeitable in any way, but does
allow the forfeiture to be pursued by ATF when the agency is
already involved in the forfeiture of a firearm in the same case.

Section 3 04 Forfeiture of Proceeds Traceable to Facilitating
Property in Drug Cases

Currently 21 U.S.C. § 881(a)(4) permits the forfeiture of
conveyances used to facilitate a controlled substance violation.
Similarly, § 881(a) (7) permits the forfeiture of real property
used to facilitate such a violation. Neither statute, however,
explicitly extends to the forfeiture to the proceeds traceable to
the sale of such conveyances or real property. Not infrequently,
for investigative reasons, facilitating property is not immedi-
ately seized. Thus, the owners are able to sell the property and
the proceeds of that sale are outside the purview of the statute.
Similarly, if property is destroyed before it is seized, the
government is unable to forfeit the insurance proceeds.

The amendment revises §§ 881(a) (4) and (7) to permit forfei-
ture of proceeds traceable to forfeitable property, including
proceeds of a sale or exchange as well as insurance proceeds in
the event the property is destroyed. The amendment also insures

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that the "innocent owner" exceptions apply to the forfeiture of
traceable property in all cases where the facilitating property
itself would not be forfeitable. (This latter provision is
necessary, of course, only if the uniform innocent owner provi-
sions of 18 U.S.C. § 983 are not enacted. If § 983 is enacted,
these innocent owner provisions will be stricken by conforming
amendments . )

The portion of this amendment relating to § 881(a) (4) passed
the Senate in 1990 as § 1907 of S. 1970.

Section 305 Forfeiture for Alien Smuggling

These amendments to the Immigration and Nationality Act (the
INA) would enhance the ability of the Immigration and Naturaliza-
tion Service (the Service) to address the problem of alien smug-
gling by broadening the authority to obtain forfeiture of proper-
ty used in or derived from smuggling operations.

Under current law, the Service may obtain forfeiture of
conveyances (vehicles, boats, aircraft) used to smuggle, trans-
port, or harbor aliens. This section would amend section 274(b)
of the INA, 8 U.S.C. 1324(b), to broaden this forfeiture authori-
ty. The amendment maizes subject to civil and criminal forfeiture
all property, both real and personal, used or intended to be used
to smuggle aliens. Also subject to forfeiture would be any
property, real or personal, which constitutes, is derived from,
or is traceable directly or indirectly to the proceeds of the
smuggling, transportation, or harboring oT aliens.

Innocent owners of property are protected by the proposed
uniform innocent owner statute, to be codified at 18 U.S.C.
§ 983.

Section 306 Forfeiture of Proceeds of Certain Foreign Crimes

Inspired by the government ' s experience in the BCCI case and
certain terrorism cases, this provision expands the scope of the
forfeiture statutes to permit forfeiture of the proceeds of
certain foreign crimes, including bank fraud, murder, robbery,
kidnapping and extortion, if found in the United States.

In 1992, the same foreign crimes were added to the defini-
tion of "specified unlawful activity" in the money laundering
statute, 18 U.S.C. § 1956(c)(7)(B). Thus, it is presently a
crime to launder the proceeds of some of these offenses in the
United States, and such proceeds are forfeitable if they are
laundered under § 981(a) (1) (A) . The amendment, which passed the
Senate in another form as § 955 of S.543 in 1991, would amend
§ 981(a) (1) (B) so that the same proceeds and the proceeds of
additional offenses are forfeitable directly without the
government's having the additional and unnecessary burden of

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showing that a money laundering violation took place. This would
be consistent with the treatment of foreign drug proceeds which
are forfeitable if found in the United States whether they are
laundered here or not .

The purpose of the amendment is two- fold: to make it more
difficult for terrorists and perpetrators of international bank
fraud schemes to use the United States as a haven for the profits
from their crimes, and to permit the United States to assist
foreign governments in recovering the proceeds of crimes commit-
ted abroad. Foreign organized crime groups frequently invest the
proceeds of the illegal activities in real property. For exam-
ple, this is a particularly serious problem in Hawaii where real
property has been purchased by the Japanese Yakuza. Under cur-
rent law, those properties may be forfeited only if and when they
are involved in a future money laundering offense. Under the
amendment, they would become forfeitable immediately, and any
foreign government that assisted the United States in the forfei-
ture action would be eligible to receive a portion of the for-
feited property under § 981 (i). Because the federal courts are
not currently authorized to enforce foreign forfeiture orders,
the property cannot be returned to the foreign government if it
is not forfeitable under our law.

As is the case for the existing provision relating to for-
eign drug crimes, the forfeiture provision in § 981 would only
apply where the foreign offense was punishable by at least one
year in prison in the foreign country, and would be recognized as
a felony under federal law if committed— wi^;hin the jurisdiction
of the United States.

Section 307 Forfeiture of Property Used to Facilitate Foreign
Drug Crimes

In accordance with the United Nations Convention Against the
Illicit Traffic in Narcotic Drugs and Psychotropic Substances
(the "Vienna Convention"), which the United States ratified on
November 11, 1990, the United States is obligated to enact pro-
cedures for the forfeiture of both the proceeds and the in-
strumentalities of foreign crimes involving drug trafficking. 18
U.S.C. § 981(a)(1)(B) already provides for the forfeiture of
foreign drug proceeds, but it does not provide for the forfeiture
of facilitating property. The amendment rectifies this omission.

Section 308 Forfeiture for Violations of Section 60501

Sections 981 and 982 are the civil and criminal forfeiture
statutes pertaining to money laundering. Presently, they provide
for forfeiture for money laundering violations under the Bank
Secrecy Act (31 U.S.C. § 5311 et seq. ) and the Money Laundering
Control Act (18 U.S.C. §§ 1956-57). The amendment would add



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Section 60501 of the Internal Revenue Code to this list in both
statutes.

Section 60501 is the statute that requires any trade or
business receiving more than $10,000 in cash to report the trans-
action to the IRS on Form 8300. Subsection (f) makes it an
offense to structure a transaction with the intent to avoid the
filing of such form. Thus, Section 60501 is the counterpart to
31 U.S.C. §§ 5313 and 5324 which require the filing of CTR and
CMIR forms by financial institutions whenever a $10,000 cash
transaction takes place, and by other persons whenever they send
more than $10,000 in currency into or out of the United States.
Including a reference to Section 60501 in Sections 981 and 982
thus means that violations of the Form 8300 requirement will be
treated the same as CTR and CMIR violations for forfeiture pur-
poses .

Section 309 Criminal Forfeiture for Money Laundering
Conspiracies

Current law provides for the forfeiture of property involved
in the substantive money laundering offenses set forth in titles
18 and 31. It also provides for the forfeiture of property
involved in conspiracies to commit violations of 18 U.S.C.
§§ 1956 and 1957 because such conspiracies are charged as viola-
tions of § 1956 (h) . There is no provision, however, for the
forfeiture of property involved in conspiracies to violate the
title 31 money laundering offenses bec ause such conspiracies are
charged as violations of 18 U.S.C. § 371, a' statute for which
forfeiture is not presently authorized. The amendment plugs this
loophole by providing for forfeiture of the property involved in
a conspiracy to commit any of the offenses listed in § 982(a) (1)
following a criminal conviction on the conspiracy count.



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Section 310 Seizure of Vehicles with Concealed Compartments
Used for Smuggling

This section amends the seizure and forfeiture provisions of
the Ant i- Smuggling Act of 1935, 19 U.S.C. § 1703, to subject
trucks and private automobiles to seizure if there is a concealed
compartment used for smuggling, whether or not there is
contraband or narcotics residue.

Under current law, vessels and aircraft having a hidden
compartment can be seized and forfeited under 19 U.S.C. §§ 1590
and 1703. These provisions, however, do not permit the seizure
and forfeiture of automobiles, trucks, or other vehicles that are
similarly equipped with hidden compartments designed to smuggle
contraband. This provision would cover compartments that are"
specifically built or fitted for smuggling; it would not reach
other compartments (e.g., glove boxes or car trunks) that are
part of the normal vehicle configuration.

Section 311 Forfeiture of Instrumentalities of Terrorism,
Telemarketing Fraud and Other Offenses

This section adds new civil and criminal forfeiture provi-
sions to sections 981 and 982, respectively, to cover the instru-
mentalities used to commit certain fraud offenses and violations
of the Explosives Control Act. These provisions are necessary
because in many such cases forfeiture of the proceeds of the
offense alone is an inadequate sanction. For example, in a
computer crime case in which the defendantr^has penetrated the
security of a computer network, there may not be any proceeds of
the offense to forfeit, but the perpetrator should be made to
forfeit the computer or other access device used to commit the
offense. The description of the articles subject to forfeiture
in such cases is derived from 18 U.S.C. 492, the forfeiture
provision for instrumentalities used to commit counterfeiting
crimes. The reference to specific items such as computers in the
statutory language is not intended to limit the generic descrip-
tion of the articles subject to forfeiture to those particular



Online LibraryUnited States. Congress. House. Committee on the JCivil Asset Forfeiture Reform Act : hearing before the Committee on the Judiciary, House of Representatives, One Hundred Fourth Congress, second session, on H.R. 1916 ... July 22, 1996 → online text (page 11 of 37)