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 31 of 37)
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off e nse, (B) (A) an independent basis exists to retain the article as
evidence of a violation of law, or (€) (B) the article constitutes
contraband or other property the possession of which would be
illegal, and the forfeiture may not take place. "

Such an amendment would be consistent with existing law for the seizure of conveyances
for drug related offenses. 21 U.S.C. §888(c). DOJ's analysis refers to this provision (see last
full paragraph, page 3) but neglects to state that that provision requires the action to be
filed with 60 days, not 90, and that it prohibits the subsequent forfeiture if the time
requirements for filing are not met. Thus, DOJ's representation that its proposed amendment
makes 21 U.S.C. §888(c) unnecessary and that it should be repealed "in the interest of
uniformity" is, at best, misleading.

D. Similar amendments should be made to Sections (n)(2) and (n)(3) [DRUG
FORFEITURES] to make them consistent with (k)(2) and (k)(3), above.

E. The proposed amendment extending the time in which to file an answer [Section (d)]
is reasonable and welcomed, and we urge its adoption.



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4. Section 104 . Stay of Civil Forfeiture Action.

A. The uovenunent should be required to establish probable cause in an advcrsariai
hearing that the propeny is subject to forfeiture before obtaining a stay (this is e'^pecially true
if the claimant must establish standing before requesting a stay). Othenvise. the claimant may
be deprived of his or her propeny for several vears. without ever being afforded a hearing to
contest the seizure. Even if the Claimant ultimately prevails, the losses occasioned by such a
delay are irreparable As recently observed by the United States Supreme Coun;

The purpose of an adversary hearing is to ensure the
requisite neutrality that must inform all governmental
decisionmaking. That protection is of panicular imponance here,
where the Government has a direct pecumary interest in the
outcome of the proceeding. . . Moreover, the availabilit\' oi a
postseizure hearing mav be no recompense for losses caused bv
erroneous seizure . . . And even if the ultimate judicial decision
is that the claimant was an innocent owner, or that the Government
lacked probable cause, this determination, coming months after the
seizure, "would not cure the temporary deprivation that an earlier

hearing might have prevented." Doehr, supra, at . 115

L.Ed. 2d 1, 111 S.Ct. 2105.

United States v. James Daniel Good Real Propeny, 510 U.S. , 126 L.Ed. 2d 490, 504-05,

114 S.Ct. 492 (1993)

B. There is no good reason to relax the requirement of "for good cause shown."
Consequently, we recommend that subsection (a)(l)(i) be amended to add the word "unduly
before the word "infringe" in the fourth line.

C. We welcome the amendment to make the request for stay reciprocal, although we
note that the courts have been willing to grant stay requests for claimants despite the absence
of express stamtory language. However, serious questions are raised by the proposed
amendment. For example, how is the Claimant supposed to establish that there is a related
"investigation." Investigation of whom? Is it sufficient merely to assen that there is an
investigation? If the claimant assens that there is an investigation, does the government get to
respond in camera? Doesn't the mere fact that the property has been seized suggest that there
is going to be, or already is, some investigation pending?



5. Section 105 . Narrowing of Statutory Innocent Owner Defense.

In her October 18, 1993 letter to Rep. Jack Brooks (D-TX), Chairman of the iiuuse
Judiciary Committee. Attorney General Reno stated that DOJ's forfeiture reform proposals
would "improve current procedures to insure fairness and due process to all innocent owners."



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DOJ now prCf-oses to all but abolish the stacutor.' innocent owner defense, which protects
property owners who lack knowledge that their properrv is being (or will be) used for an
unlawful purpose. DOJ proposes to replace the current statutors' defense with a much more
narrow defense - one which requires the property owner to demonstrate not merely that he or
she lacked knowledge of the illegal activity and was not willfully blind, but that he or she took
all reasonable steps to prevent the property from being put to illegal use. In short. DOJ
proposes to limit the defense to the bare constiaiiional minimum allowed by the Supreme Coun
in Calero-Toledo v. Pearson Yacht Leasing Co.. 416 U.S. 663. 688-690. 40 L.Ed. 2d 452, 94
S.Ct. 2080 (1974) (it would be difficult to reject the constioitional claim of an owner who
proved not only that he was unmvolved in and unaware of the wrongful activit>'. but also that
he had done all that reasonably could be expected to prevent the proscribed use of the properr.'.)

Thus, the "one uniform innocent owner defense" (see DOJ's Section-by-Section analysis
at p. 7; proposed by DOJ is the minimal due process defense already afforded by the constimtion.
Far from "insuring fairness to innocent owners." DOJ would saddle innocent owners with what
even DOJ concedes is a more onerous burden of proving that they did all that they could
reasonably be expected to do to prevent the proscribed use of the their propert>'.

At oral argument in Austin v. United States, 113 S.Ct. 2801, 125 L.Ed 488 (1993),
several justices questioned how the forfeiture of an innocent persons property could be deemed
"excessive" under the Eighth Amendment's Excessive Fines Clause. In other words, those
justices could not reconcile claimant Austin's position with the traditional view expressed in the
Calero-Toledo decision, which is based on the legal fiction that an m rem action is one against
inanimate property. The Coun's unanimous ruling in favor of Austin thu? clearly casts doub:
on the continued vitality of the Calero-ToLdo decision. See also, Sheldon v. United States, 7
F.3d 1022 (Fed. Cir. 1993) (accepting Takings Clause argument rejected by the Supreme Coun
in Calero-Toledo). Following Austin, it is difficult to believe that there will be many cases
where the forfeiture of an innocent person's property on the ground that he or she failed to
exercise the highest standard of care would not be deemed excessive. Thus, the onerous
standard proposed by DOJ would be unconstitutional in the vast majority of cases.

Entirely apan from these constitutional problems. DOJ's proposal is simply bad policy.
It would require every property owner to investigate the background of persons with whom they
conduct business if there was anything even the least bit "suspicious" about the other party or
the proposed transaction. Such a burden of investigation is unrealistic, impractical, and most
imponantly, unfair. It would impose unnecessary costs on legitimate businesses and accomplish
nothing - except the occasional forfeinire of an innocent person's property when a prosecutor
decides that die person deserves to be punished for not conducting an adequate investigation or
for not taking sufficient precautions.

We agree with DOJ that it would be desirable to create a uniform statutory innocent
ov/ner defense. However, that defense should be based on the current stamtory defense for
innocent owners found in 21 U.S.C. §881(a) and 18 U.S.C. §981(a)(2). the f"" .tiost imporum
civil forfeiture stanites. We also agree with DOJ that there should be a separate defense for
innocent owners based upon lack of consent, as is currently interpreted bv the majorit\' of
circuits (but whjch is not currently found in §98 1(a)(2)) The majority of federal circuits have
held that an owner mav avoid forfeiaire bv estabiishine either lack of knowledae or lack of



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consent. See. e.g.. United States v. 6109 Grubb Road. £06 F.2(l 61S. 625 (5rd Cir. 1989):

United States v. 141si Street Corp.. 911 F.2d 870, 878 (2nd Cir. 1990i, cen. denied. U.S.

, 111 S.Ct. 1017. 112 L.Ed. 2d 1099 (1991); United States v. One Parcel of Real Estate a:

1012 Germantown Road. 963 F.2d 1496 (11th Cir. 1992). This, we believe, is the corrc::
application of the defense.

We also agree that when an owner learns that his or her property was or is being used
in the commission of an illegal act, he or she should be required to do "all that reasonably could
be expected to terminate such use of the property." This however, is very different than
imposing an onerous duty of investigation on al! propeny owners.

In sum. like DOJ, we propose that a uniform innocent owner defense be adopted to apply
to ail forfeiaires. We therefore propose that DOJ's proposed §983 itself be amended to read as
follows:

"§983. Innocent Owners.

(a) An innocent owner's interest in property shall not be forfeited
under any civil forfeiture statute.

(1) With respect to a property interest in existence at the time the
illegal act or omission giving rise to forfeiture took place, a person
is an innocent owner if:

(a) that person did not know of, and was not
willfully blind to, the act or omission giving rise to
forfeimre; or

(b) that upon learning of the act or omission giving
rise to the forfeiture, he or she d'H all that
reasonably could be expected under the circum-
stances to terminate such use of the property.

(2) With respect to a property interest acquired after the act
giving rise to forfeiture has taken place, a person is an innocent
owner if at the time that person acquired the interest in the
property that person did not know of. nor was willfully blind to.
the act or omission giving rise to the forfeimre, or the fact that the
property was subject to forfeimre.

Finally, we believe it would be useful to create a safe harbor provision that would assure
innocent property owners of protection where, having acquired knowledge of illegal activity
involving their property, they take reasonable steps to terminate the illeghl use. We would
suggest Congress consider the safe harbor provision in the March 15. 1994 Draft Uniform
Controlled Substances Act (Anicle V - Forfeimre), which provides as follows:



1/



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Reasonable measures to prevent a [wrongdoer's] conduct or assist its
prosecution include, to the extend permitted by law:

(1) notifying an appropriate law enforcement agency of information that
led the owner to know the conduct would occur and other information the law
enforcement agency reasonably requests to prevent or prosecute the conduct; and

(2) revoking permission for the [wrongdoer] to use the property or taking
reasonable actions in consultation with a law enforcement agency to discourage
or prevent the illegal use of the property, provided that a person shall not be
required to undertake any action which may threaten any person's personal
security or safety.

This safe harbor provision would not preclude a claimant from showing lack of consent in some
other fashion.



DOJ also wants a different standard to apply to owners who acquire property subsequent
to the unlawful conduct giving rise to forfeiture, even where the owner had no knowledge of the
pnor activity. The United States Supreme Coun recently held that a donee can be an iimocent
owner, and that anyone acquiring an interest in property prior to the government's title vesting
in the property following a decree of forfeiture can raise any defense that would have otherwise

been available. See, United States v. A Parcel of Land, etc.. 307 U.S. , 122 L.Ed. 2d 469,

113 S.Ct. 1126 (1993). There is no reason to treat donees differently than bona fide purchasers.
Donees have just as much right to be secure in their ownership of property received as a gift,
devise, or bequest as do bona fide purchasers. Nevertheless. DOJ now wants to legislate away
the Supreme Court's holding, but does not proviae any justification for such a change.

DOJ's proposed subsection (d), which provides for forfeimre of property jointly held,
is unreasonable and unacceptable. It constitutes an assault on long established and time honored
state law principles of property ownership. DOJ offers no valid reason for interfering with state
property laws.

DOJ's proposed subsection (e), which provides a rebuttable presumption that a financial
institution acted "reasonably" under ceruin conditions, is reasonable.

6. Section 106 . Judicial Forfeitures of Real Property.

■We have no objection to this proposal, which amends 19 U.S.C. §1610 to require that
all forfeitures relating to real property be done through judicial proceedings, rather than
administratively.

7. Section 107 . Review of Administrative Forfeitures.

This proposed amendment, which would require the seizing agency to review the
evidence supporting probable cause for forfeiture even where no claim is filed, is reasonable and
appropriate. However, if the cost bond requirement is not eliminated, there should also be a
provision allowing judicial review of an administrative decision of forfeirare in contested cases.



336



8. Section IPS . Preservation of Arrested Real Property.

As dratted by DOJ. this provision is clearly unconstiaitional See. Uniied States v. James
Daniel Good Property et at., supra. This amendment will compon with due process onlv if,
prior to the issuance of any such order, the government establishes probable cause for the
seizure at an adversarial hearing.

9. Section 109 . Elimination of Right to Article III Judge in Smaller Cases.

As DOJ points out. this amendment will only work where the panies consent to waive
jur\'. due to the Seventh Amendment right to a jury trial. However, DOJ fails to recognize that
a claimant also has a constitutional right to a bench trial before an Article III judge. The
Supreme Coun has held that the question of whether Anicle III allows Congress to assign
adjudication of a cause of action to a non-Anicle III tribunal is the same as the question whether
the Seventh Amendment permits Congress to assign adjudication to a tribunal that does not
employ juries as fact finders. Granfinanciera, S.A.. v. Nordberg, 492 U.S. 33, 53-54 (1989)
Thus. DOJ's proposal is consiinitionally deficient.

Clearly, there should be a right to a jury trial in civil forfeiture proceedings, indeed, the
S'Lamte should make the right to a jury trial explicit in al] forfeiture cases. Under current law,
forfeitures of vessels on certain navigable watcri are not subject to jury trials. There is no
modem justification for treating the forfeiture of vessels differently from other types of property,
(consequently, the stamte should be amended to e.xpicisly provide the right to a jury trial in aU
forfeitures.

Further, existing law already allovv-s forfeimre cases (including forfeitures involving more
than 510,000) to be tried by a magistrate with the panies consent. Accordingly, there is no
reason to alter existing law The solution to the problem of handling small cases is for DOJ to
be more aiscruninating in the cases it adopts for seizure - not to pass unconstitutional
legislation.

10. Section 110 . Burden of Proof; Adverse Inferences; Rebuttable Presumptions.

A. We wholeheartedly support a change which would place the burden of proof on the
seizing agency, but we believe that the constimtion requires, in light of Austin, supra, that the
standard of proof should be at least by clear and convincing evidence, as proposed in the Hyde
bill (H.R. 2417).

B. Standing . We reject DOJ's proposal that would require the claimant to establish
standing pre-trial, for several reasons. First, DOJ's proposal violates the constimtion's Seventh
Amendment right to a jury trial on this issue. Ownership is currently an issue for the jury. F':^'-
example, in cases where the claimant has initially denied ownership of thi." property, t.he claimant
should be able to explain the circumstances to a jury.



337



Second. DOJ proposes in other sections of the bill to iii..it the definition of who is an
owner, or who has standing to contest a foneiture. For example, DOJ proposes to legislate
away the Supreme Court's decision in A Parcel of Land, supra, to deny standing to all but bona
fide purchasers.



C. Hearsay . Hearsay should not be admissible in forfeiture proceedings. A majority
of courts currently allow hearsay to establish probable cause justifying the seizure of the
property and the instinition of the forfeiture action. But even these couns bifurcate the probable
cause hearing, so that the hearsay does not come before the jury.

However, since DOJ agrees that the burden of proof should be on the seizing agency by
a preponderance of the evidence (Section 105), the justification for allowing hearsay evidence
in the forfeiture trial no longer exists. Questions regarding the legality of the seizure, in which
hearsay may be admissible, can be litigated pre-trial in the form of motions to suppress, or for
return of property pursuant to Fed.R.Crim.Pro. 41(e), thus eliminating the justification for the
use of hearsay at trial.

Generally, hearsay is inadmissible under the Federal Rules of Evidence. These rules
expressly declare that they "apply generally" in all federal coun cases, unless otherwise provided
in the rules themselves. E.R. 1101(b). E.R. 1101(e) expressly provides that the rules of
evidence apply to proceedings under "pan IV of the Tariff Act of 1930 (which includes 19
U.S.C. §1615). See generally. D. Smith, Prosecution and Defense of Forfeiture Cases, *[11.03
[5]. See also, Jones v. U.S. Drug Enforcement Administration. 819 F.Supp. 698, 721, n. 24.
(M.D. Tenn 1993).

D. Section (d) (Affirmative Defenses) is unnecessary.

E. Section (e) (Adverse Inferences) in unreasonable, and clearly unconstimtional. There
may be no adverse inferences drawn from the legitimate exercise of Fifth Amendment privilege.
This is especially imponant in view of the fact that the Supreme Court has held that forfeimres
are punishment. See, Austin v. United States, supra; Boyd v. United States, 116 U.S. 616, 29
L.Ed. 2d 746 (1886).

F. Section (g) (Rebuttable Presumptions). The DOJ giveth (burden shift), and the UUJ
taketh away (rebuttable presumptions). These rebutuble presumptions have the practical effect
of putting the burden right back on the claimant, rendering illusory DOJ's proposed burden shift.

(1) Subsection (m). DOJ's comparison to 21 U.S.C. §853 is absurd. The
presumption under §853(d) arises only with respect to a person who has been
convicted (found guilty beyond a reasonable doubt) of a felony drug trafficking
offense. DOJ wants to extend this presumption to cases where the seizing agency
merely establishes by a preponderance that the person was engaged in an offense.
Furthermore, there is no need for such a provision, because the DOJ can use the
"net worth" method of proof.



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'2) The presumptions in subsection (b)(1) and (b)(2) are equally onerous,
for the same reasons. Section (b)(2) makes no sense. Does this mean that just
because money was separated into amounts of less than $10,000. without any
attempt to conduct a financial transaction, it is subject to forfeiture for violation
of §5324?



11. Section 121. Use of Grand Jury Information for Civil Forfeitures.

Subsection (a). There is no valid reason to extend the use of grand jury information by
government attorneys to civil forfeiture cases. (The provision the FIRREA Act of 1989
authorizing such use should be repealed.)

The grand jury is not a tool for civil enforcement by the government. United States v.
Sells Engineering. Inc.. 463 U.S. 418. 103 S.Ct. 3133. 3142 (1983). Expansion of this section
will permit the government to surreptitiously expand the evidence gathering function of grand
juries to gather evidence for civil forfeiture cases. Grand jury secrecy rules will preclude
effective oversight. Legitimate challenges will also be difficult because of the grand jury's
legitimate investigation of criminal forfeitures.

This proposal would permit the government to utilize the investigatory powers of the
grand jury while forcing cl-T'-^ints to rely on the cv'W discovery process. After obtaining grand
jury information, the government could then elect to pursue civil forfeiture remedies which have
lower burdens of proof and more limited subpoena power. Civil subpoenas availabli- to
claimants can be served only within 100 miles of the courthouse. The government would, on
the other hand, be able to compel evidence from all judicial districts.

The government can freely elect between civil and criminal forfeiture. However,
claimants in civil forfeinire cases are bound by strict filing deadlines and bond requirements.
Innocent owners are also limited by the federal discovery rules and relevancy requirements that
do not apply in the grand jury. The government could, therefore, obtain all the investigative
advantages of pursuing criminal forfeitures and later benefit from the lesser burdens of proof
applicable in civil cases.

Under this proposal, the government could also gather its evidence through the grand jury
and then obtain a stay of civil forfeiture proceedings (See §104, supra), effectively preventing
claimants from gathering evidence because of the pending criminal proceeding.

Grand jury material is not needed by the government in civil forfeiture cases because
civil discovery is available to the government as well as to claimants. Furthermore, the
government can get already obtain grand jury materials under Fed.R.Crim.Pro 6(e) upon a
proper showing of need.

Subsection (b). The same arguments are made against expanding the use of grand jury
materials in administrative forfeitures.



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12. Section 122. Civil Investigative Demands.

There is no valid reason, and DOJ has offered none, why it is necessary to establish an
inquisitorial method of obtaining information from citizens in civil investigations. DOJ
proposes, in the context of civil enforcement, to provide a procedure analogous to the issuance
of a gr:.r,d jury subpoena that allows the government to gather evidence before the filing of a
civil complaint. A civil proceeding is not a criminal prosecution. Most of the constimtional
protections guaranteed to criminal defendants do not attach in civil foneitures. Under DOJ's
proposal, the government would not even have to have an aniculable suspicion of any
wrongdoing, and the prosecutor conducting the inquisition would not be subject to any coun
supervision, or other safeguards traditionally associated with grand jury proceedings. Thus, the
government should not be permined to bring the intrusive powers of law enforcement to bear
in civil forfeimre proceedings.

Contrary to DOJ's assertions, the government does gather evidence for use in civil
forfeiture cases by way of their criminal investigations. These investigations, which include
extensive interviews of witnesses provide substantial investigative information not available tc
claimants. The government also retains its ability to conduct discovery after the civil complaint
IS filed. Additionally, the goverrunent may file a civil forfeiture complaint and have the action
stayed pending the outcome of any related criminal proceeding (See §104, supra). At the
conclusion of the criminal case, the government will have available all the evidence gathered by
the United States for the cruninal case. Claimants, on the other hand, are limited by the civil
discovery rules and the 100 mile limitation on subpoenas power in civil cases.

The scope of the civil demand here is broader than even the civil investigative demands
authorized under RJCO, 18 U.S.C. §1968. This demand authorizes the government to
administer oaths and compel testimony as well as compel the production of documents. The
current RICO provision (Section 1968) only authorizes civil demands for the production of
documents. DOJ's proposed amendment goes far beyond anything ever contemplated by
Congress and far beyond any even remotely similar existing provision. There is no valid
reason to expand the government's authority to compel evidence before a complaint is filed in
a civil case. The proposed section also reduces the period for filing a petition opposing
compliance to as shon as five days. Under RICO, a party may file a petition up to 20 days after
service.

The notification provisions of Subsection (d) prevent notification under circumstances that
have historically been limited by stamte and confined to criminal investigations leading to
indictment. Use of the information has also been limited to the grand jury. There is no valid
law enforcement reason to extend this authority to civil investigations by the government.

The government's financial interest in the outcome of civil and criminal forfeiture
proceedings provides additional motive for overreaching where disclosure of the demand is



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 31 of 37)