United States of America v. $72,050.00 In United States Currency et al, No. 5:2008cv00057 - Document 53 (E.D. Ky. 2013)
Court Description: MEMORANDUM OPINION & ORDER: (1) Claimant Vernon Smith's 46 Motion to Correct Mistake Pursuant to Fed R Civ P 60(b)(1) is GRANTED IN PART and DENIED IN PART. (2) Claimant's 50 Motion for an evidentiary hearing is DENIED. Signed by Judge Joseph M. Hood on 8/8/2013. (SCD)cc: COR,6CCA
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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF KENTUCKY CENTRAL DIVISION at LEXINGTON UNITED STATES OF AMERICA, ) ) Plaintiff, ) ) v. ) ) $72,050.00 IN UNITED STATES ) CURRENCY, ONE FIRST SOUTHERN ) NATIONAL BANK CASHIERS CHECK ) #062629 IN THE AMOUNT OF ) $60,649.64, AND ONE WHITAKER ) BANK CASHIERS CHECK #022175 ) IN THE AMOUNT OF $100,000.00, ) ) Defendants. ) Civil Case No. 08-cv-57-JMH MEMORANDUM OPINION & ORDER *** This matter is before the Court on Claimant Vernon Smith s Motion to Correct Mistake Pursuant to Fed. R. Civ. P. 60(b)(1) [DE 46]. Response [DE 49]. The United States has filed a The time to file a Reply has expired, see LR 7.1(c), and Claimant has made no further filing in support of his Motion. Claimant has, however, filed an additional Motion, seeking an evidentiary hearing [DE 51]. The Court has considered that request and will deny an evidentiary hearing is not necessary to an it as informed resolution of the motion at hand. Federal trial court Rule to of Civil relieve a Procedure party from 60(b)(1) a final allows a judgment because of mistake, inadvertence, surprise, or excusable neglect. A party seeking relief from the judgment must show the applicability of the rule. Jinks v. Alliedsignal, Inc., 250 F.3d 381, 385 (6th Cir. 2001) (citing Lewis v. Alexander, 987 prerequisite to F.2d 392, relief 396 under (6th Rule Cir. 1993)) 60(b), a ( As party a must establish that the facts of its case are within one of the enumerated relief reasons from contained judgment.).1 in Rule Rule 60(b) 60(b) that motions warrant are not designed to allow a litigant a second chance to convince 1 The Sixth Circuit has recognized that mistake encompasses a claim of legal error, and has held that a 60(b)(1) motion based on legal error must be brought within the normal time for taking an appeal. Pierce v. United Mine Workers of Am. Welfare & Retirement Fund for 1950 and 1974, 770 F.2d 449, 451 (6th Cir. 1985). Of course, the filing of a Notice of Appeal generally divests the district court of jurisdiction; however, where the notice is filed while a timely motion for relief from a final judgment is pending, the notice has no effect. See Brown v. Univ. Comprehensive Assessment & Training Servs., No. 12-cv-123-KSF, 2013 WL 1687886, *1-2 (E.D. Ky. Apr. 18, 2013) (determining that motion under Rule 59(e) was timely and that jurisdiction remained in district court since notice of appeal was filed while motion was pending) (citing Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58 (1982)); Pittock v. Otis Elevator Co., 8 F .3d 325, 327 (6th Cir. 1993); United States v. Real Property Located at U.S. Highway S., 23 F. App'x 523, 526 (6th Cir. 2001); Meyers v. Hurst, 7 F.3d 234, 234 (6th Cir. 1993); Young v. Rochte, 791 F.2d 936, 1986 WL 16969 at *1 (6th Cir. Apr[.] 18, 1986) (Table)). Here, Claimant filed his Motion to Correct several minutes prior to filing his Notice of Appeal. Accordingly, Claimant argues that a legal error was made in a timely motion, and the Court will consider his argument. the Court to rule in his favor by presenting explanations, legal theories, or proof. Id. new Neither can Rule 60(b) motions be used to re-litigate the merits of the forfeiture case or to raise challenges that can be raised on appeal. See United States v. One Rural Lot No. 10,356, 238 F.3d 76, 78 (1st Cir. 2001). Claimant s motion primarily espouses the same legal theory that he did in his summary judgment filings, which the Court presumes that he will also present on appeal. Ultimately, he disagrees with the tracing analysis in the Court s Memorandum Opinion and Order of April 3, 2013 [DE 43]. Again, he cites to lengthy portions of Craig Butler s affidavit made. and reiterates many of the arguments already This Court had the benefit of Mr. Butler s affidavit and the evidence available from other witnesses, as well as the bank records associated with each cashier s check, when it reached its conclusion on the motions before it that resulted motion.2 2 in the judgment Clearly, which Claimant is the disagrees subject with the of this Court s Claimant also argues that there was a procedural error in the decision making process because he was never able to cross-examine government witness Dale Cannon, upon whose testimony the United States relies in part to support its position, because he was not a party at the trial in Frankfort Criminal Action No. 3:08-cr-31. Claimant does not explain, however, why he did not seek to depose Dale Cannon during the period of discovery available in this analysis of that evidence. Court has experienced This does not mean that the confusion, as he suggests, regarding transactions at bar, nor does it necessarily lead to the conclusion that the Court made a legal error. Those issues may be taken up on appeal in due course but will not be addressed further by this Court at this time. He has, however, presented the Court with a compelling argument which merits further consideration on one issue. Specifically, Claimant argues that the Court s decision is founded, in part, on a legal error because it determined that the commingling of tainted funds (the proceeds of Target s fraud) with legitimately obtained funds (Vernon Smith s own funds received from black lung and social security benefit payments deposited directly and regularly into his account) in order to purchase the certificates of deposit rendered the entire value of the certificates of deposit purchased with those funds forfeitable, relying on United States v. Huber, 404 F.3d 1047, 1057 58 (8th Cir. 2005). He reasons that, in fact, Huber has to do less with forfeitability of funds because they were briefly combined with tainted funds in a bank account than their matter or seek to postpone a decision on the merits of the motion for summary judgment so that he might do just that. In other words, the Court sees no error which would merit relief on these grounds. forfeitability because of the way that those funds were involved in facilitating a money laundering scheme by the party claiming an interest in those funds and objecting to the forfeiture. See also United States v. Funds on Deposit at Bank One Indiana Account 1563632726, No. 2:02-cv-480, 2010 WL 909091, at *9 (N.D. Ind. Mar. 9, 2010); United States v. Warshak, 562 F. Supp. 2d 986, 1005 (S.D. Ohio 2008). The Court understands that Claimant wishes for the Court to conclude that the value of the cashier s checks which is attributable to funds drawn from his own legitimate funds (i.e., black lung and social security benefits and other deposits not traced by the United States to Target investor funds) in his bank account should not be subject to forfeiture and that his claim to that amount is valid because he did not have the requisite knowledge of the fraudulent provenance of the funds with which his own untainted funds were co-mingled. Upon reconsideration and in the absence of evidence to establish Target that fraud he knowingly itself or a participated money in laundering either scheme the with respect to the proceeds of that fraud (i.e., that he knew or should have known that the money his son deposited in his account was the proceeds of fraud), the Court agrees. No one suggests that the funds in Claimant s bank account other than those traceable to Target were associated with Target s fraud except, through commingling. as the government has argued, The government s own tracing evidence reveals that some portion of the funds used to acquire the cashier s checks came from direct deposits of black lung or social security benefits which belonged were received over time by Claimant. to Claimant and Nor is there evidence which, in the Court s mind, establishes by a preponderance that Claimant knew or should have known of his son s fraudulent activities. Certainly, no one disputes that Claimant lived near his son on the same or a contiguous tract of land, that his son had an office on that property, or that Target s mail was received at Claimant s address for a period of time. That said, without more, this is not evidence that Claimant was aware or necessarily should have been aware of the misrepresentations visited on investors and potential investors in the Target oil and gas scheme or the losses suffered as a result of the fraud adjudicated in United States v. Smith, Frankfort Criminal Action No. 08-31-JMH. The only direct evidence of Claimant s knowledge is his sworn testimony [Target] in no that way. he did [DE not 28-3 know at one pp. thing about 17 18.] The circumstantial evidence presented by the government simply is not enough to persuade a trier of fact by a preponderance of the evidence that Claimant had knowledge or should have had knowledge sufficient to participate in a money laundering offense such that his own funds would be forfeitable. Under the forfeiture statute, where legitimate and illegitimate funds are comingled, the funds are forfeitable only to the extent that the funds can be traced to an illegal transaction. United States v. Conner, No. 90- 3470, 1991 WL 213756, at *4 (6th Cir. 1991) (citing United States v. Banco Cafetero Panama, 797 F.2d 1154, 1159 (2nd Cir 1986)); see United States v. Coffman, 859 F.Supp.2d 871, 875 (E.D. Ky. 2012) (Caldwell, D.J.) (addressing the forfeitability of a criminal defendant s interest in funds involved in money laundering and stating that [m]oney laundering forfeiture pursuant to § 982(a)(1) applies to a larger class of property than proceeds forfeiture under § 981(a)(1)(C) because it applies to more than just the laundered property or proceeds from the laundered property. Money laundering forfeiture is required for all property involved legitimate in the money crime, that is which can comingled include with clean tainted or money derived from illicit sources. ); see also United States v. Premises Known as 7725 Unity Ave. North, Brooklyn Park, Minn., 294 F.3d 954, 958 59 (8th Cir. 2002) (citing United States v. 92 Buena Vista Avenue, 507 U.S. 111, 123 (1993); United States v. One 1980 Rolls Royce, 905 F.2d 89, 90 (5th Cir. 1990); United States v. 1980 Lear Jet, Model 35A, 38 F.3d 398, 401 (9th Cir. 1994) ( This notion of an innocent lienholder constitutes an exception to the rule that property used to facilitate a felony drug transaction will be forfeited in toto to the federal government. ); United States v. 15603 85th Avenue North, 933 F.2d 976, 982 (11th Cir. 1991)) (construing 21 U.S.C. §881(a)(6) and concluding that loan proceeds commingled with illegal drug proceeds and claimed by lender were not traceable to illegal drug money and were not forfeitable where there was no evidence that lender had knowledge of borrower s drug activities). Here, the difference between the identity of the claimant in the present case and that in Huber or, for that matter, the situation addressed Coffman is of real import. by Judge Caldwell in The present case involves a claim to innocent funds commingled with tainted funds by someone who was without knowledge of the fraud or the fact that proceeds of fraud were being laundered using his account and his money so as to permit the lawful forfeiture of otherwise legitimate but commingled funds. Certainly, he has no claim to the tainted funds for the reasons described in this Court s earlier Memorandum Opinion and Order [DE 43] of April 3, 2013, but the Court concludes that he has adequately argued that the value of the cashier s checks traceable to his own innocent funds is not subject to forfeiture. In other words, the Court reiterates its earlier conclusion that the United States has demonstrated by a preponderance of the evidence that a portion of the value of the cashier s checks $47,000 of the $60,649.64 value of cashier s check #062629 and $75,000 of the $100,000 value of cashier s check #022175 are proceeds traceable to a scheme U.S.C. §§ opinion or 1341 of artifice and April 1343 3, 2013 to defraud for the [DE in violation reasons stated 43]. However, of 18 in its since the evidence does not demonstrate by a preponderance of the evidence that the remainder of the value $13,649.64 of check #062629 and $25,000 of check #022175 for a total of $38,649.64 represents proceeds traceable to fraud, those funds are not subject to forfeiture simply by virtue of the commingling of funds in those amounts with funds tainted by fraud. Further, the $38,649.64 belong Court to concludes Vernon Smith. that Thus, those those funds funds should be returned to him in keeping with 28 U.S.C. ' 2465. See Fed. R. Civ. P. 56(a). Accordingly, IT IS ORDERED: (1) that Claimant Vernon Smith s Motion to Correct Mistake Pursuant to Fed. R. Civ. P. 60(b)(1) [DE 46] is GRANTED IN PART and DENIED IN PART; (2) that the Claimant s Motion hearing [DE 50] is DENIED. This the 8th day of August, 2013. for an evidentiary
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