United States v. Real Property , 437 F. App'x 754 ( 2011 )

FILED
United States Court of Appeals
Tenth Circuit
September 1, 2011
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
Clerk of Court
FOR THE TENTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 11-6064
(D.C. No. 5:10-CV-00832-C)
REAL PROPERTY KNOWN AS 7501 (W.D. Okla.)
N.W. 210TH STREET, OKLAHOMA
CITY, OKLAHOMA; ONE 2006
FORD EXPEDITION, VIN
#1FMFU19556LA87027; ONE 2003
LINCOLN TOWNCAR, VIN
#1LNHM82W03Y700559; $6,400.00
IN U.S. CURRENCY; $188,914.60
SEIZED FROM BANK ACCOUNT
#XXX2602 AT QUAIL CREEK
BANK; $42,265.49 SEIZED FROM
BANK ACCOUNT #XXX7618 AT
QUAIL CREEK BANK; $7,766.11
SEIZED FROM BANK ACCOUNT
#XXX2591 AT QUAIL CREEK
BANK; $4,365.35 SEIZED FROM
BANK ACCOUNT #XXX5661 AT
QUAIL CREEK BANK,
Defendants.
______________________
FRANK H. REYNOLDS,
Claimant-Appellant.
ORDER AND JUDGMENT *
*
After examining the briefs and appellate record, this panel has determined
(continued...)
Before KELLY, GORSUCH, and MATHESON, Circuit Judges.
Frank H. Reynolds appeals pro se from the district court’s denial of his
motion to file a claim out of time in this civil forfeiture proceeding. Exercising
jurisdiction under 28 U.S.C. § 1291, we affirm because Mr. Reynolds lacks
Article III standing.
Background
The United States filed this action under 18 U.S.C. §§ 981(a)(1)(A) & 985
seeking forfeiture of certain properties it alleged were involved in
money-laundering transactions in violation of 18 U.S.C. § 1956. In the related
criminal case, Robert Hodgins, Virtual Money Inc. (VMI), and others were
charged in the United States District Court for the District of Connecticut with
conspiring to commit money laundering and with specific acts of money
laundering. See United States v. Hodgins, No. 3:08-cr-00097-MRK (D. Conn.
April 10, 2008). The superseding indictment in the criminal case also sought
*
(...continued)
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument. This order and judgment is
not binding precedent, except under the doctrines of law of the case, res judicata,
and collateral estoppel. It may be cited, however, for its persuasive value
consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
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forfeiture of over $7 million of property involved in the offenses and traceable
thereto.
According to the superseding indictment, Mr. Hodgins is the president of
VMI, a Dallas, Texas-based provider of “stored value cards,” which are plastic
cards that can be loaded with amounts of money and used to withdraw the funds
at remote locations. 1 The superseding indictment alleged that Mr. Hodgins’
co-conspirators directed their agents to provide the proceeds from sales of
controlled substances to agents of VMI, who loaded the proceeds in United States
dollars onto VMI stored value cards. The indictment further alleged that agents
of the co-conspirators later withdrew the funds in Colombian pesos at ATM
machines in Colombia.
In this case the government’s Verified Complaint For Forfeiture In Rem
(Forfeiture Complaint) identified the property that was subject to forfeiture as one
tract of real property, two automobiles, currency, and funds seized from several
1
According to the federal government’s 2007 National Money Laundering
Strategy:
Stored value cards (sometimes referred to as prepaid cards) are
an emerging cash alternative for both legitimate consumers and
money launderers alike. The term ‘stored value cards’ can cover a
variety of uses and technologies. Some cards have embedded data
processing chips, some have a magnetic stripe, and some cards (e.g.,
prepaid phone service cards) just have an access number or password
printed on them (the card itself cannot access or transfer cash).
Supp. R. at 150.
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bank accounts. The Forfeiture Complaint also identified the record owners of the
property and the persons from whom it had been seized. Andrew Western, Inc.,
was listed as the record owner of the real property. The bank accounts were in
the names of Andrew Western, Inc., Global Star Products, Ltd., Cleansip2000,
Inc., and Robert E. Hodgins and/or Donna M. Andrew. Mr. Hodgins and
Ms. Andrew were alleged to be signatories on each bank account. The
automobiles and currency were seized from the residence of Mr. Hodgins and
Ms. Andrew. Their residence is the real property defendant in this action. The
automobiles were registered to Global Star Products, Ltd., and Virtual Money Inc.
The government alleged facts showing that the defendant properties were
traceable to the money-laundering offenses. None of the properties or persons
listed mentioned Mr. Reynolds.
Forfeiture actions in rem arising from a federal statute are governed by
Rule G of the Supplemental Rules for Admiralty or Maritime Claims and Asset
Forfeiture Actions (Supplemental Rules). Supplemental Rule G(5)(a)(i) provides:
A person who asserts an interest in the defendant property may
contest the forfeiture by filing a claim in the court where the action
is pending. The claim must:
(A) identify the specific property claimed;
(B) identify the claimant and state the claimant’s interest in the
property;
(C) be signed by the claimant under penalty of perjury; and
(D) be served on the government attorney . . . .
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Supplemental Rule G(5)(a)(ii) sets forth the deadlines for filing claims, which are
based on the means of notice applicable to the claimant. Supplemental Rule G(4)
prescribes the requirements for notice by publication and direct notice. As to
direct notice, “[t]he government must send notice of the action and a copy of the
complaint to any person who reasonably appears to be a potential claimant on the
facts known to the government before the end of the time for filing a claim [based
on published notice].” Supplemental Rule G(4)(b)(i).
Mr. Reynolds is a former agent of VMI. He sought leave to file a late
claim in this action. In his Verified Motion for Leave to Submit Statement of
Interest 2 Out of Time (Verified Motion), he argued that his claim was untimely
because the government failed to provide him direct notice of the action under
Supplemental Rule G(4)(b)(i). He asserted that he was entitled to direct notice
because the government is aware of his interest in the forfeiture proceeding. In
support of this contention, Reynolds stated that the government knew he had
submitted a complaint to the Department of Justice (DOJ Complaint) on behalf of
a group called Select Agents 4 the Restoration of VMI (Select Agents). He
described Select Agents as “a group of individuals who had contracted with
[VMI] to market the Virtual Money® debit card.” Supp. R. at 24 n.1. He also
2
“Statement of Interest” is the term used in the Supplemental Rules
applicable to admiralty proceedings. See Supplemental Rule C(6). Supplemental
Rule G(5)(a) uses the term “claim.”
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pointed to an amicus curiae brief that Select Agents filed in the related criminal
case. Finally, he argued that the government was aware of his interest in the
forfeiture case based on the government’s allegation in the Forfeiture Complaint
that various VMI franchise holders had participated in the money-laundering
activities.
In the DOJ Complaint, Mr. Reynolds made the following allegations:
Select Agents contracted with VMI to market the VMI debit card. VMI and
MasterCard Worldwide are direct competitors. MasterCard Worldwide contracted
with the Treasury Department to distribute government benefits to recipients via
MasterCard debit cards. The DOJ instituted a criminal prosecution against VMI
in collusion with the Treasury Department and MasterCard Worldwide solely to
bring about the demise of VMI. As a direct result of these actions, Select Agents
suffered injury because their businesses were destroyed. Similarly, the Select
Agents’ amicus curiae brief stated, “VMI is being subjected to criminal
prosecution in order to eliminate its debit card from competition with the
Treasury’s Direct Express debit card, and . . . the DOJ is complicit in this
exercise.” Supp. R. at 39.
The district court denied Mr. Reynolds’ Verified Motion, holding that strict
compliance with Supplemental Rule G(5) is required and that Mr. Reynolds failed
to show his late filing was the result of excusable neglect. The court found that
Mr. Reynolds had no right to direct notice under Supplemental Rule G(4)(b)(i)
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because he “does not claim that he is the rightful owner of any of the seized
assets.” Supp. R. at 270. It concluded that the government satisfied due process
vis-a-vis Mr. Reynolds by publishing notice on an official government website
pursuant to Supplemental Rule G(4)(a)(iv)(C). The court also cited additional
factors that weighed against a finding of excusable neglect: Mr. Reynolds was
aware of the seizure of the assets before the deadline to file a claim; the United
States would be prejudiced, albeit minimally, by the late filing; and Mr.
Reynolds’ pro se status did not excuse his non-compliance with the procedural
rules. Mr. Reynolds filed a motion to reconsider, which the district court also
denied.
Discussion
Mr. Reynolds reiterates on appeal his argument that the government’s
failure to provide him direct notice of the action resulted in his untimely claim.
He contends that he was entitled to direct notice under Supplemental Rule
G(4)(b)(i) based on the government’s awareness of his interest in the forfeiture
matter. And he claims that his due process rights were violated by the
government’s failure to provide him direct notice and the district court’s denial of
leave to file his claim out of time.
The United States argues that the district court’s ruling should be affirmed
because Mr. Reynolds failed to show that he has Article III standing to file a
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claim in this forfeiture action. We agree and affirm the district court’s denial of
leave to file a late claim.
We may raise the issue of Article III standing at any time. See Wilson v.
Glenwood Intermountain Props., Inc., 98 F.3d 590, 592-93 (10th Cir. 1996).
“Whether a claimant has constitutional standing is a threshold jurisdictional
question.” United States v. $148,840.00 in U.S. Currency, 521 F.3d 1268, 1273
(10th Cir. 2008). “To satisfy the Article III standing requirement, a party must
establish three elements: (1) injury in fact, (2) a causal relationship between the
injury and the challenged conduct, and (3) likelihood that the injury will be
redressed by a favorable decision.” Wilson, 98 F.3d at 593. We have addressed
the question of Article III standing in a civil forfeiture action:
As the party seeking to intervene in an in rem forfeiture action, a
claimant bears the burden of establishing his own constitutional
standing at all stages in the litigation. At the pleading stage, a
claimant satisfies this burden by alleging a sufficient interest in the
seized property, such as an ownership interest, some type of lawful
possessory interest, or a security interest.
$148,840.00 in U.S. Currency, 521 F.3d at 1273 (citations omitted).
Mr. Reynolds did not attach a separate proposed claim to his Verified
Motion. He instead indicated his intent to incorporate the substance of his claim
into his Verified Motion. See Supp. R. at 25 (stating “Reynolds is submitting his
Statement of Interest herein in the most timely manner possible under the
circumstances . . . .” (emphasis added)). We note that Mr. Reynolds signed his
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Verified Motion under penalty of perjury, as required for submission of a claim
under Supplemental Rule G(5)(a)(i)(C). We look to the allegations in his
Verified Motion to determine if he established Article III standing. We liberally
construe his pro se filing. See Hall v. Bellmon, 935 F.2d 1106, 1110 (10th Cir.
1991).
The defendant property in this civil forfeiture action includes real property,
automobiles, currency, and the funds in several bank accounts. Although
Mr. Reynolds asserted in his Verified Motion that he has an interest in this action,
we agree with the district court that he failed to allege an ownership interest in
any of the seized properties. See $148,840.00 in U.S. Currency, 521 F.3d at 1273.
In fact, he listed the properties in the DOJ Complaint, and as to each specific
property he identified the owner or owners as a person or entity other than
himself. He also did not allege a possessory or security interest in any of the
defendant properties. See id. Nor does he even mention any of the seized
properties in his appeal brief.
Mr. Reynolds did assert, by reference to the DOJ Complaint and the Select
Agents’ amicus brief, that as a former agent of VMI, he suffered an injury due to
the loss of his business. But his own allegations trace that injury to the United
States’ criminal indictment of VMI rather than to an unlawful forfeiture of the
defendant properties in this action. See United States v. Cambio Exacto, S.A.,
166 F.3d 522, 528-29 (2d Cir. 1999). In Cambio Exacto, the Second Circuit
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stated that “[s]ubstantial economic harm is plainly the type of injury for which
parties may seek redress in federal court.” Id. at 528. Moreover, where that
injury is the direct result of the government’s allegedly unlawful forfeiture and
could be redressed by a successful challenge to the forfeiture, Article III standing
is satisfied. See id. Applying those principles, the court affirmed the district
court’s denial of a claimant’s motion for leave to file a late notice of claim in a
civil forfeiture action because the claimant failed to establish Article III standing.
See id. at 529. The court concluded that the claimant did not have constitutional
standing because its alleged injury was not the direct result of the forfeiture and
would not be redressed by a successful challenge to the forfeiture, which would
result in a return of the seized property to a party other than the claimant. See id.Here, as in Cambio Exacto, Mr. Reynolds has not alleged any facts showing that
his alleged economic injury is the direct result of the forfeiture of the defendant
properties, or that a successful challenge to the forfeiture and a return of the
properties to their owners would redress his alleged injury.
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Because Mr. Reynolds failed to meet his burden to establish constitutional
standing to bring a claim in this civil forfeiture action, we AFFIRM the district
court’s order denying him leave to file his claim out of time.
Entered for the Court
Scott M. Matheson, Jr.
Circuit Judge
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