United States v. $933,000.00 in U.S. Currency

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UNITED STATES OF AMERICA, Plaintiff, v. $933,000 IN U.S. CURRENCY, Defendant in rem.

Civ. No. 13-01170 (MAJ)

United States District Court, D. Puerto Rico

June 10, 2024

OPINION AND ORDER

MARIA ANTONGIORGI-JORDAN UNITED STATES DISTRICT JUDGE

I. Introduction

Before the Court is a Motion to Dismiss (ECF No 58) filed by Aguas Del Caribe Inc. (“AGUAS”) and Luis Santana Mendoza (“Santana”) (collectively “Claimants”) challenging the Civil Forfeiture Complaint (the “Complaint”) (ECF No 2) brought by Plaintiff the United States of America (the “Government”). On February 27, 2013, the Government initiated the instant civil action in rem to enforce the forfeiture of $933,000.00 in U.S. currency because it is allegedly traceable or involved in various criminal offenses. Id.

Specifically, the Complaint alleges that the Defendant property is subject to forfeiture pursuant to 18 U.S.C. §§ 981(a)(1)(A) (civil forfeiture) and 982(a)(1) (criminal forfeiture) as property involved in a transaction or attempted transaction in violation of 18 U.S.C. §§ 1956-1957 (laundering of monetary instruments, and engaging in monetary transactions in property derived from specified unlawful activity, respectively), and 21 U.S.C. § 881(a)(6), as money furnished or intended to be furnished in exchange for a controlled substance. Id. at 2 ¶ 6.

Claimants contest the Government's forfeiture action on several grounds. They argue first that the Government's delay in litigating this action constitutes a violation of their Fifth Amendment Due Process rights. (ECF No. 58). Second, that the Complaint fails to meet the pleading requirements of Rule G(2) of the Supplemental Rules of Certain Admiralty and Maritime Claims (“Supplemental Rules”). Id. Third, that the Government fails to satisfy various other Civil Asset Forfeiture Reform Act (“CAFRA”) procedural requirements. Id. And lastly, that the forfeiture constitutes an excessive fine in contravention of the Eighth Amendment. Id. For the reasons detailed below, Claimants' Motion to Dismiss is DENIED.

II. Background^[1]

On February 27, 2013, the Government initiated the instant civil forfeiture action against $933,000 in U.S. currency. (ECF No. 2). Claimant Santana is the owner of various construction companies, including Claimant AGUAS, and PAIRO CRL (“PAIRO”). (ECF No. 2-1 at 6).

The Complaint alleges that in 2011, Homeland Security Investigations (“HSI") initiated an investigation regarding the unusual financial transactions between Juan R. Zalduondo (“Zalduondo") and others, including Santana, in various financial institutions. Id. at 3 ¶ 7.

Between September 30, 2011, and May 29, 2012, Zalduondo deposited $3,246,980 in U.S. currency in various financial institutions. Id. at 4. Most of the monies deposited were in the form of currency or cash notes of twenty-dollar bill denominations, wrapped in bundles held together by rubber bands. Id. Notably, some of these notes “contained markings similar to the ones utilized by drug trafficking organizations to maintain accountability of the ill-gotten proceeds.” Id. According to interviews conducted by “Cornerstone Agents” and the Declaration's affiant of the financial institutions' managers and employees who witnessed the voluminous currency deposits, Zalduondo stated on various occasions that he did not know for certain the exact amount of currency or cash money he was depositing. Id. The majority of the deposits were set aside and inspected by a United States Customs and Border Protection (“CBP”) narcotics detector dog and CBP chemist. Id. During the inspections, the narcotics detector dog alerted positive to the odor of narcotics, and the CBP chemist found cocaine and/or heroin at trace levels on the currency. Id. at 5.

The Complaint goes on to state that in September or October of 2011, Zalduondo made two cash deposits that amounted to $520,000 in U.S. currency at Banco Santander de Puerto Rico (“BSPR”). Id. He provided no supporting documentation, and simply alleged the cash originated from the sale of real estate property. Id. Thereafter, on November 21, 2011, Zalduondo opened a corporate bank account at La Puertorriquena Credit Union (“LPCU”) and made an initial cash deposit of $303,000 in U.S. currency. Id. When asked about the source of the funds, he presented a signed contract showing an alleged sale of shares between his company JUAZA and Santana's company PAIRO. Id.

The contract between PAIRO and JUAZA indicated that on or about October 5, 2012, Santana purchased 50% of JUAZA's shares for $1,160,000. Id. at 7. According to the contract, Santana was to pay in the following instalments: $250,000 in managers check on October 2, 2011; $300,000 in cash on November 15, 2011; $300,000 in cash on December 15, 2011; and $310,000 in cash on January 12, 2012. Id. In February 2012, BSPR followed up with Zalduondo to obtain supporting documentation for the $520,000 deposited in the fall of 2011. Id. at 5. Zalduondo presented the same contract he presented to LPCU. Id.

PRDT tax return information revealed that from 2007-2010, Santana reported a taxable net income of less than $13,000 each year. Id. at 10. PAIRO, which was incorporated in October 2011, had not yet filed any tax returns. Id. at 11. According to a purported settlement agreement between Santana and the Puerto Rico Department of Treasury (“PRDT”), he had an unreported dividend income of $10,345,843.26. Id. at 7. It is estimated Santana was to pay $1,374,109.86 to the PRDT for taxes in arrears. Id.

In June 2012, HSI agents witnessed a meeting between Zalduondo, Santana, and a Leticia Rivera-Marrero and Luis Lugo-Emmauelli. Id. at 9. On June 23, 2012, Santana, Leticia Rivera-Marrero, and a Jacinto Delgado Claudio made a cash deposit of $933,000. Id. A Vargas-Ruiz was also present and presented a draft of the aforementioned settlement agreement to justify the deposit.^[2] Id.

Thereafter, HSI agents interviewed employees at the branch regarding the deposit. Id. They noted that the cash was carried in three sport bags; packed in the form of currency or cash notes of twenty dollar bill denominations; wrapped in bundles that were held together with rubber bands; emanated a peculiar odor; appeared to be moist as if it had been stored in a humid enclosure for an extended period of time; that Santana mentioned he was not certain how much cash he was depositing; and that the source was from his construction business over the years. Id.

In addition, the Declaration notes that Santana is a convicted felon who served a year in federal prison for violations of 21, U.S.C. Sections 331(a), 333(a)(2), and 18 U.S.C. § 371.^[3] Id. at 6. It further notes that between 2008 and 2009, Santana was the President of a construction company called CAMODA INC. Id. at 6. During this time, he was a business associate of Carlos Morales-Davila, who is a former federal fugitive and leader of a drug trafficking organization responsible for the importation of multi-kilogram quantities of cocaine and heroin, as well as the murder of individuals belonging to or associated with rival drug trafficking organizations. Id. The two opened a bank account together at Banco Bilbao Vizcaya Argentaria on behalf of CAMODA INC., in which both appeared as signers. Id. at 6. Toll records also revealed that Santana had been in contact with Morales-Davila at least four times during the period of August 2012 to September 2012. Id. at 11 ¶ 18.

On the same day the Government launched the forfeiture action, it simultaneously filed a motion to stay the forfeiture proceedings due to the ongoing criminal investigation involving potential claimants, a motion to seal the case, and a motion for issuance of a warrant in rem. (ECF Nos. 1, 3, 4).^[4] The Court granted all three and regularly checked in with the Government until 2015. (ECF Nos. 9-11, 13, 17, 21, 24, 25, 27, 29, 35).

Thereafter, the case was transferred to the district judge presiding over the related criminal matter. (ECF No. 37). Once transferred, the Court also granted the Government's request to stay the case during the pendency of the related criminal action, which is still ongoing. (ECF Nos. 34-37). The stay was ultimately lifted on September Civ. No. 13-01170 (MAJ) Page 6 25, 2023, and transferred to the undersigned's docket on November 1, 2023. (ECF Nos. 43, 44, and 47). On November 17, 2023, the Government filed a Notice of Publication, after which the Claimants filed their Verified Claim. (ECF Nos. 53, 55). Now comes the instant motion. (ECF No. 58).

III. Legal Standard

Civil forfeiture actions must comply with the heightened pleading requirements of Supplemental Rule G(2), which demands that the complaint "state sufficiently detailed facts to support a reasonable belief that the government will be able to meet its burden of proof at trial." Supp. R. G(2)(f). Applied here, the Government's civil forfeiture action must comply with the more stringent pleading requirements of the Supplemental Rules rather than the liberal provisions of Fed.R.Civ.P. 8. See United States v. One Parcel of Real Prop. With Bldg., Appurtenances, & Improvements Known as 304-390 W. Broadway, S. Bos., Mass., 964 F.2d 1244, 1248 (1st Cir. 1992) (“[T]he Admiralty Rules demand more particularity in the crafting of forfeiture complaints than is generally required in authoring complaints under the Civil Rules.”).

While the Court accepts as true all factual allegations and draws reasonable inferences in the Government's favor-the heightened pleading standard requires more than mere conclusory allegations. Cebollero-Bertrdn v. P.R Aqueduct & Sewer Auth., 4 F.4th 63, 69-70 (1st Cir. 2021); United States v. Mondragon, 313 F.3d 862, 865 (4th Cir. 2002). However, the allegations in the complaint need not stand...