US v. $256,235.97

691 F. Supp.2d 932

UNITED STATES of America, Plaintiff, v. TWO HUNDRED FIFTY-SIX THOUSAND TWO HUNDRED THIRTY-FIVE DOLLARS AND NINETY-SEVEN CENTS ($256,235.97) In Proceeds from Universal Life Insurance Policy # 62826776 Issued by New York Life Insurance and Five Hundred Five Thousand Three Hundred Fifty-Six Dollars and Sixty-Seven Cents ($505,-356.67) In Proceeds from Universal Life Insurance Policy #62827946 Issued by New York Life Insurance, Defendants.

No. 09-CV-1013-LRR.

United States District Court, N.D. Iowa, Eastern Division.

March 8, 2010.

Martin J. McLaughlin, U.S. Attorney's Office, Cedar Rapids, IA, for Plaintiff.

ORDER

LINDA R. READE, Chief District Judge.

TABLE OF CONTENTS
I. INTRODUCTION.........................................................934
  II. RELEVANT PROCEDURAL BACKGROUND.......................................934
      A. Instant Action....................................................934
      B. Criminal Action...................................................934
 III. SUBJECT MATTER JURISDICTION..........................................935
  IV. STANDARD OF REVIEW...................................................935

V. FACTS...................................................................936
      A. Rubashkin Family & Agriprocessors.................................936
      B. The Trust.........................................................936
      C. The Defendant Property............................................937
         1. Policy 1.......................................................937
         2. Policy 2.......................................................937
      D. Bensasson.........................................................937
      E. The 2951 Account..................................................938
      F. Unionizing Efforts at Agriprocessors' New York Location...........938
      G. Enforcement Action................................................938
      H. Special Agent Fischels'Conclusions................................938
      I. Equity in Agriprocessors..........................................938
VI. ANALYSIS...............................................................939
      A. Government's Failure to Comply with Local Rules...................939
      B. Civil Asset Forfeiture Reform Act.................................939
      C. Whether Harboring is a Specified Unlawful Activity................940
      D. Whether the Defendant Property is Forfeitable.....................940
         1. Whether proceeds include cost savings..........................940
         2. Substantial connection.........................................942
         3. Whether the Defendant Property facilitated a money laundering
              offense............................................................944
      E. Whether the Trust is an Innocent Third Party......................945
      F. Deposit...........................................................946
VII. CONCLUSION............................................................946

I. INTRODUCTION

The matter before the court is the Motion for Summary Judgment ("Motion") (docket no. 20), filed by Claimant Aaron Rubashkin Trust ("Trust").

II. RELEVANT PROCEDURAL BACKGROUND

A. Instant Action

On March 17, 2009, the government filed a Verified Complaint for Forfeiture in Rem ("Complaint") (docket no. 1). The government seeks forfeiture of: (1) $256,235.97 in proceeds from Universal Life Insurance Policy number 62826776 issued by New York Life Insurance; and (2) $505,356.67 in proceeds from Universal Life Insurance Policy number 62827946 issued by New York Life Insurance. The court refers to these insurance policies together as the "Defendant Property."

On April 13, 2009, the Trust filed a Notice of Claim (docket no. 3). On May 26, 2009, the Trust filed a Verified Answer (docket no. 8).

On October 22, 2009, the Trust filed the Motion. On December 17, 2009, the government filed a Resistance (docket no. 32). On December 21, 2009, the government filed a Supplement (docket no. 33) to the Resistance. On January 7, 2010, the Trust filed a Reply (docket no. 36).

B. Criminal Action

The instant action is related to United States v. Rubashkin, case no. 08-CR-1324-LRR ("Criminal Action"). On July 16, 2009, a grand jury returned a 163-count Seventh Superseding Indictment (docket no. 544 in the Criminal Action) against Sholom Rubashkin. Count 1 charged Sholom Rubashkin with Conspiracy to Harbor Undocumented Aliens for Profit, in violation of 8 U.S.C. § 1324(a)(1)(A)(v)(I) and 1324(a)(1)(B)(i). Counts 2 through 70 charged Sholom Rubashkin with Harboring and Aiding and Abetting the Harboring of Undocumented Aliens for Profit, in violation of 8 U.S.C. § 1324(a)(1)(A)(iii), 1324(a)(1)(A)(iv), 1324(a)(1)(A)(v)(II) and 1324(a)(1)(B)(i). Count 71 charged Sholom Rubashkin with Conspiracy to Commit Document Fraud, in violation of 18 U.S.C. § 371. Count 72 charged Sholom Rubashkin with Aiding and Abetting Document Fraud, in violation of 18 U.S.C. §§ 1546(a) and 2. Counts 73 through 86 charged Sholom Rubashkin with Bank Fraud, in violation of 18 U.S.C. § 1344. Counts 87 through 110 charged Sholom Rubashkin with False Statements and Reports to a Bank, in violation of 18 U.S.C. § 1014. Counts 111 through 124 charged Sholom Rubashkin with Wire Fraud, in violation of 18 U.S.C. § 1343. Counts 125 through 133 charged Sholom Rubashkin with Mail Fraud, in violation of 18 U.S.C. § 1341. Counts 134 through 143 charged Sholom Rubashkin with Money Laundering and Aiding and Abetting Money Laundering, in violation of 18 U.S.C. §§ 1956(a)(1)(A)(i), 1956(a)(1)(B)(i) and 2. Counts 144 through 163 charged Sholom Rubashkin with Willful Violation of an Order of the Secretary of Agriculture and Aiding and Abetting a Willful Violation of an Order of the Secretary of Agriculture, in violation of 7 U.S.C. § 195 and 18 U.S.C. § 2.

On June 25, 2009, the court ordered separate trials on Counts 1 through 74 ("Immigration Counts") and Counts 75 through 143 ("Financial Counts").¹ From October 13, 2009 to November 12, 2009, the court held a jury trial on the Financial Counts, which the court renumbered as Counts 1 through 91. The renumbered Counts are as follows: Counts 73 through 86 became Counts 1 through 14, Counts 87 through 110 became Counts 15 through 38, Counts 111 through 124 became Counts 39 through 52, Counts 125 through 133 became Counts 53 through 61, Counts 134 through 143 became Counts 62 through 71 and Counts 144 through 163 became Counts 72 through 91.

On November 12, 2009, the jury returned verdicts of guilty on Counts 1 through 71, 73 through 80, 84 through 89 and 91 (docket no. 736 in Criminal Action). The jury returned verdicts of not guilty on Counts 72, 81, 82, 83 and 90. With respect to Counts 1-9, 15-23 and 39-47, the jury found that Sholom Rubashkin had committed the crimes of bank fraud, making false statements to a bank and wire fraud by falsely stating that Agriprocessors was in compliance with all laws when in fact it was harboring or conspiring to harbor undocumented workers.

III. SUBJECT MATTER JURISDICTION

The court has original jurisdiction over the instant action. See 28 U.S.C. § 1345 ("Except as otherwise provided by Act of Congress, the district courts shall have original jurisdiction of all civil actions, suits or proceedings commenced by the United States."); 28 U.S.C. § 1355(a) ("The district courts shall have original jurisdiction . . . of any action or proceeding for the recovery or enforcement of any . . . forfeiture.").

IV. STANDARD OF REVIEW

Summary judgment is appropriate "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). "An issue of fact is genuine when `a reasonable jury could return a verdict for the nonmoving party' on the question." Woods v. DaimlerChrysler Corp., 409 F.3d 984, 990 (8th Cir.2005) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). A fact is material when it "might affect the outcome of the suit under the governing law." Anderson, 477 U.S. at 248, 106 S.Ct. 2505. "To establish the existence of a genuine issue of material fact, `a plaintiff may not merely point to unsupported self-serving allegations.'" Anda v. Wickes Furniture Co., 517 F.3d 526, 531 (8th Cir.2008) (quoting Bass v. SBC Commc'ns, Inc., 418 F.3d 870, 872 (8th Cir.2005)). Rather, the nonmoving party "`must substantiate its allegations with sufficient probative evidence that would permit a finding in its favor.' " Anda, 517 F.3d at 531 (quoting Bass, 418 F.3d at 873). The court must view the record in the light most favorable to the nonmoving party and afford it all reasonable inferences. Baer Gallery, Inc. v. Citizen's Scholarship Found. of Am., Inc., 450 F.3d 816, 820 (8th Cir.2006) (citing Drake ex rel. Cotton v. Koss, 445 F.3d 1038, 1042 (8th Cir.2006)).

Procedurally, the moving party bears "the initial responsibility of informing the district court of the basis for its motion and identifying those portions of the record which show a lack of a genuine issue." Hartnagel v. Norman, 953 F.2d 394, 395 (8th Cir.1992) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). Once the moving party has successfully carried its burden under Rule 56(c), the nonmoving party has an affirmative burden to go beyond the pleadings and by depositions, affidavits, or otherwise, "set out specific facts showing a genuine issue for trial." Fed.R.Civ.P. 56(e)(2); see, e.g., Baum v. Helget Gas Prods., Inc., 440 F.3d 1019, 1022 (8th Cir. 2006) ("Summary judgment is not appropriate if the non-moving party can set forth specific facts, by affidavit, deposition, or other evidence, showing a genuine issue for trial."). The nonmoving party must offer...