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Government Misses Civil Forfeiture Deadline and Must Release Seized Funds, Says Eastern District of Pennsylvania

November 20, 2018

By: Carolyn H. Kendall

On November 14, 2018, the District Court for the Eastern District of Pennsylvania in United States v. Goodchild, No. 17-549-1, 2018 U.S. Dist. LEXIS 193804 (E.D.Pa. Nov. 14, 2018), held that the government cannot retain funds that were seized by civil seizure warrant when the civil case was untimely, even if the government has also noticed the property as subject to criminal forfeiture. The court held that this result was compelled by the plain language of the Civil Asset Forfeiture Reform Act of 2000 (“CAFRA”). The decision serves a reminder to the government of the harsh consequences that can attend failure to meet deadlines and potentially complicates the government’s calculus regarding pre-indictment civil forfeiture.

In an October 2017 indictment, the defendant was charged with wire fraud and aggravated identity theft. This conduct also served as the basis of a pre-indictment civil seizure warrant issued in February 2017, pursuant to which the FBI seized $67,600. The defendant timely filed a claim to the funds pursuant to 18 U.S.C. § 983(a)(2), which gives the government a 90-day window to file a complaint in forfeiture, return the property, or obtain a criminal indictment alleging that the property is subject to forfeiture. 18 U.S.C. § 983(a)(3)(A), (B). This deadline can be extended by court order on a showing of good cause or agreement of the parties.

On the 91st day, the government sought and obtained an extension and then filed a civil forfeiture complaint, which the defendant sought to dismiss as untimely. The court agreed that the complaint was time-barred as the government’s extension request was untimely and dismissed the complaint. After the government sought its extension but before it filed its civil complaint – both outside the 90-day window – the government also obtained an indictment that contained a forfeiture notice, alleging that the previously-seized funds were subject to forfeiture. When the civil forfeiture complaint was dismissed, the government sought the criminal court’s permission to retain the seized funds.

The government sought an order pursuant to 21 U.S.C. § 853(e), which authorizes the court to enter “a restraining order or injunction, require the execution of a satisfactory performance bond, or take any other action to preserve the availability of property” identified as subject to forfeiture by indictment. The court refused, ruling that the government’s possession of the funds pursuant to a civil seizure warrant was governed by CAFRA, not by the criminal forfeiture provisions. Under the civil forfeiture rules, if the government fails to file a civil forfeiture complaint, return the funds, or secure an indictment alleging that the funds were subject to forfeiture within the 90-day window, “the Government shall promptly release the property . . ., and may not take any further action to effect the civil forfeiture of such property in connection with the underlying offense.” 18 U.S.C. § 983(a)(3)(B). The court held that this provision controlled, and ordered the government to release the funds.

The court explained that the criminal forfeiture rules (like § 853) did not apply, as CAFRA provides that the “Government’s right to continued possession of the property shall be governed by the applicable criminal forfeiture statute” only “[i]f criminal forfeiture is the only forfeiture proceeding commenced by the Government.” 18 U.S.C. § 983(a)(3)(C). Here, the government had not “only” commenced a criminal forfeiture proceeding; it also commenced, albeit in an untimely fashion, a civil forfeiture proceeding.

However, although the dismissal of the civil forfeiture complaint prohibits the government from “tak[ing] any further action to effect the civil forfeiture of such property in connection with the underlying offense,” 18 U.S.C. § 983(a)(3)(B), the court stressed that the government’s ability to pursue criminal forfeiture was not affected – only its ability to retain funds previously seized pursuant to a civil seizure warrant was affected.

Takeaways

  • Defense counsel should track the government’s compliance with Section 983’s 90-day window and seek return of the seized funds if the government does not act within it.
  • Goodchild left open the question of whether after an untimely civil forfeiture action has been dismissed, the Government retains the ability to pursue a pre-trial seizure or whether seizure must await a conviction. Goodchild does not affect the government’s ability to seize “dirty” assets or substitute assets after conviction.
  • This case may be part of an emerging trend in the Eastern District of Pennsylvania of judicial disapproval of the government’s disregard of civil litigation deadlines. See my earlier post regarding the District Court’s refusal to grant the government an eleventh extension to make an intervention in a False Claims Act qui tam action.


Disclaimer: This post does not offer specific legal advice, nor does it create an attorney-client relationship. You should not reach any legal conclusions based on the information contained in this post without first seeking the advice of counsel.

About the Author:

Carolyn Kendall

Carolyn H. Kendall conducts internal investigations and defends corporations, officers and other individuals facing criminal and civil investigation. Her practice includes matters relating to potential criminal tax and money laundering violations, as well as allegations involving securities violations, mortgage, and financial institution fraud, the Federal Anti-Kickback Statute and Stark Law, and other fraud and regulatory statutes. She also assists clients in offshore account disclosure and compliance via IRS disclosure programs (OVDP and Streamlined Procedures). Learn More.