THE NEXT STEP IN INTERPRETING CRIMINAL FORFEITURE

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1 THE NEXT STEP IN INTERPRETING CRIMINAL FORFEITURE Avital Blanchard * INTRODUCTION The federal drug forfeiture statutes raise numerous questions regarding how to balance the rights of joint owners of forfeited property with the rights of the government. Where one of the joint owners is innocent of wrongdoing, forfeiture appears to be unjust. For example, in 1987, the government indicted Leonard Bernstein for drug related crimes. 1 He was accused of selling illegal prescription drugs out of his pharmacy. 2 The government sought forfeiture of the pharmacy premises through the federal civil forfeiture statute. 3 Mr. Bernstein owned the property on which the pharmacy was located in tenancy by entirety with his wife, Linda Bernstein. 4 Another example is Ms. Wendling, whose friends transferred a parcel of land to her and her son in Ms. Wendling paid the majority of the price; however her friends assigned the deed as a joint tenancy shared by Ms. Wendling and her son. 6 Because of a disability, * Submissions Editor, Cardozo Law Review. J.D. Candidate (June 2007), Benjamin N. Cardozo School of Law. I would like to thank Professor Stewart Sterk for all of his guidance and infinite patience throughout the many edits. I would also like to thank the editors of the Cardozo Law Review for helping me craft my Note. Most of all, I wish to thank my parents and Jon; without their support this would not have been possible. 1 United States v Lincoln Ave., 949 F.2d 73, 75 (3d Cir. 1991). The court held that the government could take the interest of the criminal spouse in a tenancy by the entirety civil forfeiture action. This would mean that the innocent spouse would maintain a life estate in the property with survivorship rights. 2 Id. Mr. Bernstein was selling prescription drugs without prescriptions and eventually pled guilty to the charges against him. 3 Id.; see also 21 U.S.C. 881 (2000) Lincoln Ave., 949 F.2d at 75. The fact that the Bernsteins held the property in tenancy by the entirety was problematic because unlike joint tenancy, under state law, tenancy by the entirety can only be severed by permission of both parties or by divorce. This tenancy is only allowed for married couples and is usually a marital home. JESSE DUKEMINIER & JAMES E. KRIER, PROPERTY 341 (5th ed. 2002). 5 United States v. Wendling, 359 F. Supp. 2d 850, 853 (D.N.D. 2005). The court held that partial forfeiture is permitted under the criminal forfeiture statute. Mrs. Wendling was permitted to maintain her interest in the property as the innocent owner in a joint tenancy. 6 Id. 1415

2 1416 CARDOZO LAW REVIEW [Vol. 28:3 Ms. Wendling was unable to visit the property more than a couple of times a year. 7 Instead, her son resided on and maintained the property. 8 While living there, he was part of a conspiracy to grow marijuana. 9 Ms. Wendling had no knowledge of her son s illegal activity. 10 The government brought criminal charges with a notice of forfeiture against her son s property generally, including the jointly held property, and she filed a petition for its return. 11 With prosecutors increasingly using asset forfeiture as a crime deterrence tool in America, one question commonly raised regarding the forfeiture statutes relates to the interest of a third party or innocent owner. 12 One might question whether Mrs. Bernstein should lose her interest in the property because of her husband s illegal activities or if Ms. Wendling should lose her interest in the property because of her son s illicit dealings. The courts have tried to balance the government s interest in deterring crime against the property interest of a third party or innocent owner. 13 The way most courts have balanced the two interests is through partial forfeiture. 14 With partial forfeiture, only the offending party forfeits his interest to the government and the innocent third party maintains his interest in the property. 15 There are two federal drug statutes that provide for property forfeiture, a criminal statute and a civil statute. 16 Congress passed both statutes to deter criminal activity, but in certain respects their provisions 7 Id. The fact that she was unable to visit explained why she was unaware of her son s illegal activities. 8 Id. 9 Id. 10 Id. 11 Id. at 853; see also 21 U.S.C. 853 (2000). Ms. Wendling filed for return of the property under the third party interest section of the statute claiming that she had a valid claim to the property and thus it could not be forfeited because of her son s criminal activities. The court found that joint tenancy meant Ms. Wendling had an equal interest in the land and was entitled to half of it. 12 See Wendling, 359 F. Supp. 2d at 853; see also United States v Lincoln Ave., 949 F.2d 73, 77 (3d Cir. 1991) (stating that: [T]he insertion of the innocent owner defense in 21 U.S.C. 881(a)(7) shows that Congress did not want to extinguish the interests of innocent owners, and nothing in the legislative history discloses precisely how Congress wanted to balance the interest in forfeiture and the interest of an innocent owner in the circumstances presented by the case now before us. ) Lincoln Ave., 949 F.2d at 77; see also United States v. 221 Dana Ave., 261 F.3d 65, 73 (1st Cir. 2001) (court held that it does not further the government s aims at crime deterrence to forfeit property of an innocent owner that learned of the illegal activity before the transfer but after the crime). 14 Pacheco v. Serendensky, 393 F.3d 348, (2d Cir. 2004). The court addressed whether a party that was aware of the government lien at the time of purchase could be a bona fide purchaser. The court s finding that partial forfeiture is possible under the criminal forfeiture statute supported a possible bona fide purchaser claim by the third party here Lincoln Ave., 949 F.2d at 75; see also Pacheco, 393 F.3d at While there are a number of other federal and state forfeiture statutes, the drug statutes are the focus of this Note. However, the analysis may apply to the other statutes as well.

3 2006] INTERPRETING CRIMINAL FORFEITURE 1417 are significantly different. Under the civil statute anyone can forfeit property, whereas under the criminal statute only a criminal defendant may forfeit his property. The most recent version of the civil drug forfeiture statute provides for forfeiture of all real property, including right, title and interest... which is used or intended to be used... to commit or to facilitate the commission of a drug crime. 17 The criminal drug forfeiture statute allows for the forfeiture of any property that was part of a drug transaction or any proceeds gained from the crime. Additionally, the criminal forfeits any of the person s property that he used, or intended to use to commit a drug crime. 18 Lastly, where a person is convicted of participating in a continuing criminal enterprise... the person shall forfeit, any of his interest in, claims against, and property... affording a source of control over, the continuing criminal enterprise. 19 The civil forfeiture statute is supplemented by another statute that provides an innocent owner defense. 20 Conversely, the criminal U.S.C. 881(a)(7) (2000). This is the most recent version of the civil drug forfeiture statute and it applies only to crimes related to drug control and enforcement: All real property, including any right, title, and interest (including any leasehold interest) in the whole of any lot or tract of land and any appurtenances or improvements, which is used, or intended to be used, in any manner or part, to commit, or to facilitate the commission of, a violation of this subchapter punishable by more than one year s imprisonment. Id U.S.C. 853(a). This is the most recent version of the criminal forfeiture provision in the statute: (1) any property constituting, or derived from, any proceeds the person obtained, directly or indirectly, as the result of such violation; (2) any of the person s property used, or intended to be used, in any manner or part, to commit, or to facilitate the commission of, such violation; and (3) in the case of a person convicted of engaging in a continuing criminal enterprise in violation of section 848 of this title, the person shall forfeit, in addition to any property described in paragraph (1) or (2), any of his interest in, claims against, and property or contractual rights affording a source of control over, the continuing criminal enterprise. Id. Property subject to criminal forfeiture is defined as (1) real property, including things growing on, affixed to, and found in land; and (2) tangible and intangible personal property, including rights, privileges, interests, claims, and securities. 21 U.S.C. 853(b). 19 Id. 20 This statute is supplementary to a number of federal forfeiture statutes. 18 U.S.C. 983: (d) Innocent owner defense. (1) An innocent owner s interest in property shall not be forfeited under any civil forfeiture statute. The claimant shall have the burden of proving that the claimant is an innocent owner by a preponderance of the evidence. (2)(A) With respect to a property interest in existence at the time the illegal conduct giving rise to forfeiture took place, the term innocent owner means an owner who (i) did not know of the conduct giving rise to forfeiture; or (ii) upon learning of the conduct giving rise to the forfeiture, did all that reasonably could be expected under the circumstances to terminate such use of the property. (B)(i) For the purposes of this paragraph, ways in which a person may show that such person did all that reasonably could be expected may include demonstrating that such person, to the extent permitted by law (I) gave timely notice to an appropriate law enforcement agency of information that led

4 1418 CARDOZO LAW REVIEW [Vol. 28:3 forfeiture statute has no explicit innocent owner defense provision. 21 the person to know the conduct giving rise to a forfeiture would occur or has occurred; and (II) in a timely fashion revoked or made a good faith attempt to revoke permission for those engaging in such conduct to use the property or took reasonable actions in consultation with a law enforcement agency to discourage or prevent the illegal use of the property. (ii) A person is not required by this subparagraph to take steps that the person reasonably believes would be likely to subject any person (other than the person whose conduct gave rise to the forfeiture) to physical danger. (3)(A) With respect to a property interest acquired after the conduct giving rise to the forfeiture has taken place, the term innocent owner means a person who, at the time that person acquired the interest in the property (i) was a bona fide purchaser or seller for value (including a purchaser or seller of goods or services for value); and (ii) did not know and was reasonably without cause to believe that the property was subject to forfeiture. (B) An otherwise valid claim under subparagraph (A) shall not be denied on the ground that the claimant gave nothing of value in exchange for the property if (i) the property is the primary residence of the claimant; (ii) depriving the claimant of the property would deprive the claimant of the means to maintain reasonable shelter in the community for the claimant and all dependents residing with the claimant; (iii) the property is not, and is not traceable to, the proceeds of any criminal offense; and (iv) the claimant acquired his or her interest in the property through marriage, divorce, or legal separation, or the claimant was the spouse or legal dependent of a person whose death resulted in the transfer of the property to the claimant through inheritance or probate, except that the court shall limit the value of any real property interest for which innocent ownership is recognized under this subparagraph to the value necessary to maintain reasonable shelter in the community for such claimant and all dependents residing with the claimant. (4) Notwithstanding any provision of this subsection, no person may assert an ownership interest under this subsection in contraband or other property that it is illegal to possess. (5) If the court determines, in accordance with this section, that an innocent owner has a partial interest in property otherwise subject to forfeiture, or a joint tenancy or tenancy by the entirety in such property, the court may enter an appropriate order (A) severing the property; (B) transferring the property to the Government with a provision that the Government compensate the innocent owner to the extent of his or her ownership interest once a final order of forfeiture has been entered and the property has been reduced to liquid assets; or (C) permitting the innocent owner to retain the property subject to a lien in favor of the Government to the extent of the forfeitable interest in the property. (6) In this subsection, the term owner (A) means a person with an ownership interest in the specific property sought to be forfeited, including a leasehold, lien, mortgage, recorded security interest, or valid assignment of an ownership interest; and (B) does not include (i) a person with only a general unsecured interest in, or claim against, the property or estate of another; (ii) a bailee unless the bailor is identified and the bailee shows a colorable legitimate interest in the property seized; or (iii) a nominee who exercises no dominion or control over the property U.S.C. 853(a).

5 2006] INTERPRETING CRIMINAL FORFEITURE 1419 However, a party who has a valid interest in the property that is being forfeited under the criminal statute can assert his ownership rights under a third party provision in the statute. 22 Notably though, the third party provision differs from the innocent owner provision regarding the time the rights can be asserted. 23 The innocent owner defense of the civil statute is available during the initial forfeiture proceeding prior to any U.S.C. 853: (n) Third party interests (1) Following the entry of an order of forfeiture under this section, the United States shall publish notice of the order and of its intent to dispose of the property in such manner as the Attorney General may direct. The Government may also, to the extent practicable, provide direct written notice to any person known to have alleged an interest in the property that is the subject of the order of forfeiture as a substitute for published notice as to those persons so notified. (2) Any person, other than the defendant, asserting a legal interest in property which has been ordered forfeited to the United States pursuant to this section may, within thirty days of the final publication of notice or his receipt of notice under paragraph (1), whichever is earlier, petition the court for a hearing to adjudicate the validity of his alleged interest in the property. The hearing shall be held before the court alone, without a jury. (3) The petition shall be signed by the petitioner under penalty of perjury and shall set forth the nature and extent of the petitioner s right, title, or interest in the property, the time and circumstances of the petitioner s acquisition of the right, title, or interest in the property, any additional facts supporting the petitioner s claim, and the relief sought. (4) The hearing on the petition shall, to the extent practicable and consistent with the interests of justice, be held within thirty days of the filing of the petition. The court may consolidate the hearing on the petition with a hearing on any other petition filed by a person other than the defendant under this subsection. (5) At the hearing, the petitioner may testify and present evidence and witnesses on his own behalf, and cross-examine witnesses who appear at the hearing. The United States may present evidence and witnesses in rebuttal and in defense of its claim to the property and cross-examine witnesses who appear at the hearing. In addition to testimony and evidence presented at the hearing, the court shall consider the relevant portions of the record of the criminal case which resulted in the order of forfeiture. (6) If, after the hearing, the court determines that the petitioner has established by a preponderance of the evidence that (A) the petitioner has a legal right, title, or interest in the property, and such right, title, or interest renders the order of forfeiture invalid in whole or in part because the right, title, or interest was vested in the petitioner rather than the defendant or was superior to any right, title, or interest of the defendant at the time of the commission of the acts which gave rise to the forfeiture of the property under this section; or (B) the petitioner is a bona fide purchaser for value of the right, title, or interest in the property and was at the time of purchase reasonably without cause to believe that the property was subject to forfeiture under this section; the court shall amend the order of forfeiture in accordance with its determination. (7) Following the court s disposition of all petitions filed under this subsection, or if no such petitions are filed following the expiration of the period provided in paragraph (2) for the filing of such petitions, the United States shall have clear title to property that is the subject of the order of forfeiture and may warrant good title to any subsequent purchaser or transferee. Id.; see also The Civil Asset Forfeiture Reform Act of 2000, Pub. L. No , 114 Stat. 202 (2000). Signed into law by President Clinton in 2000, this reform act outlined partial forfeiture options under the civil forfeiture statute and raised the burden of proof to a preponderance of the evidence U.S.C. 853(n); 18 U.S.C. 983(d).

6 1420 CARDOZO LAW REVIEW [Vol. 28:3 actual forfeiture, whereas the third party provision of the criminal statute allows the party to assert a right to the property only after forfeiture has already taken place. 24 One might infer that because, under the criminal forfeiture statute, the third party can only assert his rights following the actual forfeiture, Congress intended to provide less protection to innocent owners under the criminal forfeiture statute than under the civil forfeiture statute. However, this inference is incorrect. In Pacheco v. Serendensky, 25 the Second Circuit interpreted the criminal statute the same way as the civil forfeiture statute, holding that the criminal statute affords the same protection to the innocent owner as the civil forfeiture statute. 26 The Second Circuit was the first circuit to take a definitive stand concerning interpretation of the criminal statute, leaving the issue unresolved in the other circuits. While the Second Circuit reached the correct result, the court s analysis is incomplete, keeping other circuits from adopting their reasoning. The court does not compare the different language of the statutes, instead presuming that the statutes are sufficiently parallel to be interpreted the same way. 27 This presumption is incorrect because the civil forfeiture statute includes an innocent owner defense provision to protect joint owners, whereas, the criminal forfeiture statute does not provide any similar provision prior to forfeiture. This Note will argue that both a constitutional and statutory analysis of the criminal forfeiture statute shows that the statute protects the innocent owner s property. Because the criminal statute only allows forfeiture of the criminal defendant s property, the differing language of the two statutes can be reconciled, leading to the same statutory application. Additionally, the Second Circuit does not sufficiently analyze the constitutional issues raised by the possible use of total forfeiture under the criminal statute. Under the judicial procedure of the criminal forfeiture statute, total forfeiture of the property would raise due process concerns not raised under the civil forfeiture statute. Therefore, while the result reached by the Second Circuit is compelling and correct, more in-depth analysis is necessary to leave the other circuits with a convincing model to follow U.S.C. 853(n); 18 U.S.C. 983(d). Under the criminal statute forfeiture takes place upon sentencing. It is only after sentencing and forfeiture that a third party is allowed to assert his interest. 25 Pacheco v. Serendensky, 393 F.3d 348 (2d Cir. 2004). 26 Id. at (addressing whether a party that was aware of the government lien at the time of purchase could be a bona fide purchaser.) The court s finding that partial forfeiture is possible under the criminal forfeiture statute supported a possible bona fide purchaser claim by the third party here. Id. 27 Id. at 355 (The court held that while the two statutes are not identical, [i]n light of the constitutional-avoidance canon and the parallel construction of the criminal and civil forfeiture statutes, we agree with those courts that have suggested that the criminal forfeiture statute, 21 U.S.C. 853, permits partial forfeitures of real property. ).

7 2006] INTERPRETING CRIMINAL FORFEITURE 1421 Part I of this Note discusses the history and statutory architecture of the forfeiture statutes. Part II provides statutory analysis of the civil and criminal statutes by first examining the innocent owner defense in the civil forfeiture statute and then providing explanation for the lack of a counterpart in the criminal statute. Additionally the Note will show that, even without an innocent owner defense, the criminal forfeiture statute protects the innocent owner. Part III discusses the possible constitutional issues raised by not allowing for partial forfeiture under the criminal statute. Lastly, Part IV analyzes one possible remedy providing for partial forfeiture and how to implement it. I. FORFEITURE: THE REASON THERE ARE TWO STATUTES A. History of Drug Forfeiture Law Dating back to before the English Common Law, the government used property forfeiture to deter crime. 28 Until 1970, there were no criminal forfeiture provisions in the United States Code. 29 The dislike of forfeiture is highlighted by the property protection afforded by the Due Process Clause of the Fifth Amendment, 30 which is often asserted to protect against forfeiture. The most recent criminal and civil forfeiture cases stem from the Comprehensive Drug Abuse Prevention and Control Act of 1970 and its later amendments. 31 Concerned that the existing drug statutes were not 28 REP. HENRY HYDE, FORFEITING OUR PROPERTY RIGHTS (1995) (discussing the effect of forfeiture laws on property rights and how to hold the government accountable for property it seizes); see also Eric G. Zajac, Tenancies by the Entirety and Federal Civil Forfeiture Under the Crime Abuse Prevention and Control Act: A Clash of Titans, 54 U. PITT. L. REV. 553, 555 (1993): [T]he common law and statutes provided for the forfeiture of property under certain circumstances. For example, if an inanimate object directly or indirectly caused the death of one of the King s subjects, a common law rule required the value of that object to be forfeited to the Crown. The practice, known as deodand, eventually became justified as a penalty for carelessness. A more severe common law rule required a convicted felon or traitor to forfeit all of his personal belongings and his entire estate to the government. Id. 29 Zajac, supra note 28, at 555. There were negative feelings toward criminal forfeiture because of its overuse under the English common law. 30 U.S. CONST. amend. V ( No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation. ). 31 Pacheco, 393 F.3d 348; see also Zajac, supra note 28, at 558. Additionally, it can be

8 1422 CARDOZO LAW REVIEW [Vol. 28:3 effective, Congress passed the Comprehensive Drug Abuse Prevention and Control Act of 1970, creating both civil and criminal forfeiture provisions. 32 The original purpose of the 1970 statute was to give teeth to the existing drug control measures by allowing the government to cut off the funding and support of drug cartels through the forfeiture of instrumentalities of crime Congressional Intent in Amending the Two Statutes: Providing Stronger Crime Deterrence Tools Concerned about criminals concealing or transferring their assets to evade the government s grip, Congress revised both the civil and criminal forfeiture statutes allowing more property to be forfeited. 34 Congress revised the civil statute earlier than the criminal statute. 35 Initially, under the 1970 civil forfeiture statute, the government could only reach very specific property, such as cars and boats related to the drug crime. 36 In 1978, Congress amended the civil statute to include more types of drug crimes, thus allowing the government to reach a broader range of criminal activities. 37 Unsatisfied with the overall argued that the reason there are so many drug forfeiture cases is because drug enterprise has a lot of revenue and it is more worthwhile for the government to go after that than after a person whose crime does not generate a lot of money. Marc B. Stahl, Asset Forfeiture, Burdens of Proof and the War on Drugs, 83 J. CRIM. L. & CRIMINOLOGY 274, 276 (1992) U.S.C. 853, 881. These two provisions would become the present day civil drug forfeiture statute and the criminal drug forfeiture statute. The basis for the forfeiture statutes is to punish, deter and disempower criminals. Pacheco, 393 F.3d at 355; see also United States v. Morgan, 224 F.3d 339, 343 (4th Cir. 2000) ( The intent of Congress in enacting the forfeiture provisions of 853 was to strip these offenders [racketeers and drug dealers] and organizations of their economic power. ) (internal citations omitted); Organized Crime Control Act of 1970, Pub. L. No , 84 Stat. 922, (1970) ( Congress finds that... organized crime derives a major portion of its power through money obtained from such illegal endeavors as... the importation and distribution of narcotics and other dangerous drugs.... ). 33 S. REP. NO , at 3374 (1983), as reprinted in 1984 U.S.C.C.A.N. 3182; see also Sandra Guerra, Family Values?: The Family As an Innocent Victim of Civil Drug Asset Forfeiture, 81 CORNELL L. REV. 343, 360 (1996). 34 S. REP. NO , at The assumption was that if the economics of the drug trade were seized the entire operation would fall apart. See also Guerra, supra note 33, at 360. Because under the prior forfeiture statutes property was not seized initially, criminals would try and transfer their property to other people in an attempt to evade the government s grip. The civil statute was amended in 1978 and again in The criminal statute was amended in Guerra, supra note 33, at 360. It is unclear why the government chose to improve the civil statute first or why having both a civil and criminal forfeiture provision was necessary. One answer might be that the government can reach property under the lower standard of proof necessary under the civil provision if they are unable to convict someone of a crime beyond a reasonable doubt under the criminal provision. The criminal provision is still necessary because if a person is convicted under the criminal statute it allows the government to not file a separate forfeiture proceeding to reach the property U.S.C. 881; S. REP. NO , at 3376; see also Zajac, supra note 28, at U.S.C. 881; S. REP. NO , at 3376; see also Zajac, supra note 28, at 558. After

9 2006] INTERPRETING CRIMINAL FORFEITURE 1423 statute, Congress revised the statute again six years later, adding the forfeiture of all real property clause that appears in the present statute. 38 The addition of this clause broadened the scope of the statute, allowing federal officials to reach a larger spectrum of illegally gained assets, including homes. 39 This new real property provision also included an innocent owner s defense clause. 40 Congress amended the statute again in 2000, taking out the innocent owner language from the statute and enacting a statute allowing for a slightly more extensive innocent owner defense to civil forfeiture Modern Civil Forfeiture Reforms In 2000, Congress passed the Civil Asset Forfeiture Reform Act (CAFRA), further amending the civil forfeiture statute by adding a statutory definition of the concept of partial forfeiture. 42 Congress allowed for partial forfeiture in the statute and it specified three remedies the courts may apply to achieve partial forfeiture. 43 The court can either: order a severance of the property, transfer the property to the government with compensation of the innocent owner to the extent of his ownership interest, or allow the innocent owner to retain the property with a government lien to the extent of the forfeitable interest in the property. 44 Additionally, Congress shifted the burden of proof the statute was amended, the government could also reach the proceeds from criminal drug transactions U.S.C. 881(a)(7); see also Pub. L. No , 98 Stat (1984) (amendments to the Comprehensive Drug Abuse Prevention and Control Act of 1970)). 39 Id U.S.C. 881 (a) (7) ( All real property, including any right, title, and interest in the whole of any lot or tract of land and any appurtenances or improvements, which is used, or intended to be used, in any manner or part, to commit, or to facilitate the commission of, a violation of this title punishable by more than one year s imprisonment, except that no property shall be forfeited under this paragraph, to the extent of an interest of an owner, by reason of any act or omission established by that owner to have been committed or omitted without the knowledge or consent of that owner. ). 41 Civil Asset Forfeiture Reform Act of 2000, Pub. L. No , 2(c)(2), 114 Stat. 202, (codified at 18 U.S.C.A. 983(c)(2) (2006)). In 2000, Congress passed a general innocent owner defense provision to apply to all civil forfeiture statutes, not only to the drug statutes. Therefore, the drug statute was amended taking out the innocent owner defense provision. 42 Civil Asset Forfeiture Reform Act; see also Sandra Guerra Thompson, Congressional Reform of Civil Forfeiture: Punishing Criminals Yet Protecting Property Owners, 14 FED. SENT G REP. 71 (2001). Prior to CAFRA each circuit created its own remedies for partial forfeiture. The creation of CAFRA helped create some uniformity in the law because each court had the same remedies to choose from. However, because the choice of remedy is left to the discretion of the court, the outcomes are still not completely uniform. 43 Civil Asset Forfeiture Reform Act (the statute allows the court to choose which remedy to apply). 44 Id. These options give the government the chance to tailor a solution to the specific

10 1424 CARDOZO LAW REVIEW [Vol. 28:3 concerning criminal use of the property onto the government, thereby raising the standard of proof the government must meet. 45 Prior to CAFRA, the government only had to show probable cause that the property was subject to forfeiture. 46 Once that burden had been met, the burden would shift to the property owner to show that by a preponderance of the evidence the property should not be subject to forfeiture. 47 Since CAFRA, the burden no longer shifts to the property owner, instead, the government must prove by a preponderance of the evidence that the property is subject to forfeiture Modern Criminal Forfeiture Reforms Following the revision of the civil statute, Congress revised the criminal portion of the statute for the first time in conjunction with the Racketeering Influenced and Corrupt Organizations Act (RICO). 49 Congress revised the statute after finding that the government was not utilizing the RICO and the federal drug criminal forfeiture statutes sufficiently because of statutory limitations and ambiguities that did circumstances of the case. If the property being forfeited is a family home, the needs of the innocent owner are different than if it was a commercial property. See Thompson, supra note 42; see also infra Part IV. 45 H.R. REP. NO , at 12 (1999) ( [T]he current allocation of burdens and standards of proof requires that the [owner] prove a negative, that the property was not used in order to facilitate illegal activity, while the government must prove almost nothing. ) (alteration in original). 46 Id.; see also Stahl, supra note 31, at 284; David Pimentel, Forfeiture Procedure in Federal Court: An Overview, 183 FED. RULES DECISIONS 1, 15 (1999) ( In the court proceedings for a civil forfeiture, the government need only establish probable cause to believe that the property is subject to forfeiture. The government need not prove even that a crime was committed; probable cause will suffice for civil forfeiture purposes. Once the government has met this burden, the burden shifts to the claimant to prove by a preponderance of the evidence that his or her interest in the property is not subject to a declaration of forfeiture. ). 47 H.R. REP. NO , at 12; see also Civil Asset Forfeiture Reform Act; Pimentel, supra note 46. By placing the burden on the owner, the government created a precarious situation. Normally a person is innocent until proven guilty in the criminal justice system, but prior to CAFRA barely any government showing of evidence of a crime was required before the burden to disprove shifted to the owner. This can be a high burden for the joint owner to meet. For example, where the owners are married, a wife would not question her husband s use of a jointly owned car. However, in Property Clerk of the Police Depepartment of New York v. Harris, the government claimed that Mrs. Harris had knowledge that her husband was using their jointly owned car to sell drugs merely because he had a prior conviction for drug related crimes. No. 05/400677, 2005 WL (N.Y. Sup. Ct. May 9, 2005). 48 H.R. REP. NO , at 12; see also Thompson, supra note 42, at 2. CAFRA provides more protection to property owners by shifting the burden of proof back to the government to prove that forfeiture should take place. 49 S. REP. NO ; see also United States v. Dunn, 802 F.2d 646, 647 (2d Cir. 1986) (court held that in enacting 21 U.S.C. 853 it was not Congress s intent to preclude both the civil and criminal provisions from being used in the same case).

11 2006] INTERPRETING CRIMINAL FORFEITURE 1425 not allow the government to reach a broad enough range of property. 50 RICO also provides for criminal forfeiture. 51 The criminal forfeiture provisions in RICO are identical to those found in the most recent criminal drug forfeiture statute and the courts held that the legislative history and congressional intent under RICO is the same for the criminal forfeiture statute, stemming from the Comprehensive Drug Abuse Prevention and Control Act of Congress has not reformed the criminal forfeiture statute since the 1984 amendment. 53 While the criminal forfeiture statute does not explicitly provide for partial forfeiture as the civil statute does, the Second Circuit in Pacheco v. Serendensky chose to construe the criminal provision in the same way as the civil provision. 54 Prior to Pacheco, the courts had grappled with whether or not partial forfeiture is allowed under the criminal forfeiture statute. 55 For a number of years prior to CAFRA, the courts held that the civil forfeiture statute allowed for partial forfeiture. 56 Prior to Pacheco, a number of courts had suggested that partial forfeiture was permitted in criminal forfeiture 50 S. REP. NO , at : Today, few in the Congress or the law enforcement community fail to recognize that the traditional criminal sanctions of fine and imprisonment are inadequate to deter or punish the enormously profitable trade in dangerous drugs... The GAO concluded that the major reasons for the failure of the forfeiture statutes Which in 1970 were proclaimed to be the ideal weapon for breaking the backs of sophisticated narcotics operations were (1) that federal law enforcement agencies has not aggressively pursued forfeiture and (2) that the current forfeiture statutes contain numerous limitations and ambiguities that have significantly impeded the full realization of forfeiture s potential as a powerful law enforcement weapon... This bill is intended to eliminate the statutory limitation and ambiguities that have frustrated active pursuit of forfeiture. Id. 51 Racketeering Influenced and Corrupt Organizations (RICO) Act, 18 U.S.C (2000). RICO reaches drug related as well as non-drug related crimes and has both a civil and a criminal provision. 52 S. REP. NO , at 3392; see also 21 U.S.C When construing a statute its legislative history is often considered. Here RICO s legislative history would also be used for the criminal drug statute. 53 Pacheco v. Serendensky, 393 F.3d 348, 355 (2d Cir. 2004). 54 Id. 55 Id. 56 While the courts initially interpreted the civil statute as allowing for partial forfeiture, CAFRA made partial forfeiture a statutory requirement for the civil statute. Additionally, the existence of the innocent owner provision makes partial forfeiture the logical step for the courts to take. Without partial forfeiture, it is unclear how to protect the innocent owner s interest while still forfeiting any other interest in the property. See United States v. One Lincoln Navigator 1998, 328 F.3d 1011, 1015 (8th Cir. 2003) (grandmother and mother sought to stop forfeiture of a vehicle used for drug distribution by their relative. Court held that if their interest could be proved then the government would need to fashion a partial forfeiture remedy.); see also United States v Lincoln Ave., 949 F.2d 73, 78 (3d Cir. 1991) (court found that partial forfeiture is necessary to protect the interest of an innocent owner wife where the property was held in tenancy by the entirety).

12 1426 CARDOZO LAW REVIEW [Vol. 28:3 cases, however, none of the courts officially decided this issue. 57 In fact, at least one of the cases cited by the Second Circuit in Pacheco did not concern the criminal forfeiture statute, 58 rather it concerned the RICO statute whose statutory language the courts have construed similarly. 59 In Pacheco, the government sought total forfeiture under the criminal drug forfeiture statute of jointly owned property, where only one party was convicted of a crime. 60 The court held that construing the criminal forfeiture statute as allowing for total forfeiture and not for partial forfeiture would raise serious constitutional questions concerning a third party interest. 61 Instead of addressing the constitutional concern, the court purposely avoided these concerns and interpreted the statute as allowing partial forfeiture. 62 More importantly, the court held that the civil statute and the criminal statute were sufficiently similar to warrant similar interpretation. 63 Thus, the present state of the law is that, at least in the Second Circuit, the criminal forfeiture statute allows for partial forfeiture. 64 However, how to interpret partial forfeiture is unclear, as the court did not address whether the remedies would be limited to the same three options CAFRA outlines, or whether other judicially created options would be permissible. 65 B. Statutory Architecture Although both the civil and criminal forfeiture statutes provide for 57 United States v. Totaro, 345 F.3d 989 (8th Cir. 2003); see also United States v. O Dell, 247 F.3d 655, 680 (6th Cir. 2001) (defendant was indicted for marijuana distribution and his property was forfeited. The court also addressed how much of the property could be forfeited.) U.S.C. 853 (2000). The criminal forfeiture statute and the RICO criminal forfeiture statutes were amended together by Congress and because they are nearly identical, are construed in the same way. Pacheco, 393 F.3d at Totaro, 345 F.3d at Pacheco, 393 F.3d at 350, 354. The property in Pacheco was initially forfeited because of a drug crime. The government put a lien on the property but at the same time the mortgage company forclosed and auctioned off the property. Pacheco purchased the property after the mortgage was foreclosed. At the time a government lien was already attached to the property and Pacheco was on notice of it. She claims that the lien only reached the husband s interest in the property. Thus, when she purchased the property, she was purchasing the wife s unforfeited portion. 61 Id. at 354. The court discusses a possible Fifth Amendment problem if partial forfeiture is not allowed under the criminal statute. 62 Id. at 355. The court cited the traditional canon of interpreting statutes to avoid constitutional conflicts. 63 Id. 64 Id.; see also United States v. Wendling, 359 F. Supp. 2d 850, 853 (D.N.D. 2005). Currently the issue is unresolved in the other circuits. 65 Pacheco, 393 F.3d at 355.

13 2006] INTERPRETING CRIMINAL FORFEITURE 1427 forfeiture, the statutes differ in the following four respects: 1) whose property may be forfeited under the statute; 2) the type of provisions protecting interested parties; 3) at what point in the proceeding the property is forfeited; and 4) the type of forfeiture proceeding. 66 Because the statutes are so different, the presumption that they are parallel and should be construed the same way is suspect. The first difference between the two statutes is that under the criminal forfeiture statute, only someone convicted of a crime is subject to forfeiture. 67 The criminal statute provides that any person convicted of a violation of this chapter punishable by imprisonment for more than one year shall forfeit [his property] to the United States. 68 Additionally, when identifying what and whose property may be forfeited, the statute always says the person, specifying that only the convict s property may be forfeited. 69 Conversely, the civil statute does not have such a requirement, allowing for the forfeiture of property used in a crime, even if the owner is not convicted of the crime. 70 The civil statute merely specifies that all property criminally used may be forfeited. 71 In fact, because the burden of proof under the civil statute is lower than the beyond a reasonable doubt burden of the criminal statute, a person acquitted of a crime may still forfeit his property for the very same crime in a civil suit. 72 The second textual difference between the civil drug forfeiture statute and the criminal forfeiture statute is that the civil forfeiture statute contains an innocent owner 73 defense to protect an innocent U.S.C. 853, 881 (2000) U.S.C Id. The statute is very specific that only the person convicted can forfeit his property. Thus, if property is jointly owned, it would not make sense that the joint owner would lose his interest in the property just because the other party is convicted of a crime. 69 Id U.S.C. 881; see also United States v. Parcel R, 287 F. Supp. 2d 45, (2003) (government sought forfeiture of property it claimed was acquired by unlawful means. The court held that criminal conviction did not preclude forfeiture under the civil statute) U.S.C. 881(a)(7). 72 Civil Asset Forfeiture Reform Act. Signed into law by President Clinton is 2000, this reform act outlined partial forfeiture options under the civil forfeiture statute and raised the burden of proof to a preponderance of the evidence. Use of the statute is not mutually exclusive. Because the burden of proof under the criminal statute is beyond a reasonable doubt, even if the district attorney fails to get a conviction, the property can be forfeited under the lower burden of proof of the civil statute. See also Parcel R, 287 F. Supp. 2d 45 (government sought forfeiture of property it claimed was acquired by unlawful means. The court held that criminal conviction did not preclude forfeiture under the civil statute) U.S.C. 881 (1996), amended by Pub. L. No , 114 Stat. 202 (2000) ( omission established by that owner to have been committed or omitted without the knowledge, consent, or willful blindness of the owner. ). This is the original innocent owner provision. It was deleted in 2000 and replaced by a more extensive provision. No conveyance shall be forfeited under this paragraph to the extent of an interest of an owner, by reason of any act. 18 U.S.C. 983 (2000). According to the statute: (2)(A)... the term innocent owner means an owner who

14 1428 CARDOZO LAW REVIEW [Vol. 28:3 owner s interest in forfeited property. 74 The statute provides that, an innocent owner s interest in property shall not be forfeited under any civil forfeiture statute. 75 Conversely, the criminal forfeiture statute does not include an innocent owner defense. 76 Instead, the rights of interested parties are dealt with under the third party interest section. 77 Under the third party interest provision, following forfeiture, any interested party may assert his right to the property over the forfeiting party s interest. 78 A third difference between the statutes is that under the criminal (i) did not know of the conduct giving rise to forfeiture; or (ii) upon learning of the conduct giving rise to the forfeiture, did all that reasonably could be expected under the circumstances to terminate such use of the property. (B)(i) For the purposes of this paragraph, ways in which a person may show that such person did all that reasonably could be expected may include demonstrating that such person, to the extent permitted by law (I) gave timely notice to an appropriate law enforcement agency of information that led the person to know the conduct giving rise to a forfeiture would occur or has occurred; and (II) in a timely fashion revoked or made a good faith attempt to revoke permission for those engaging in such conduct to use the property or took reasonable actions in consultation with a law enforcement agency to discourage or prevent the illegal use of the property. (ii) A person is not required by this subparagraph to take steps that the person reasonably believes would be likely to subject any person (other than the person whose conduct gave rise to the forfeiture) to physical danger. (3)(A) With respect to a property interest acquired after the conduct giving rise to the forfeiture has taken place, the term innocent owner means a person who, at the time that person acquired the interest in the property (i) was a bona fide purchaser or seller for value (including a purchaser or seller of goods or services for value); and (ii) did not know and was reasonably without cause to believe that the property was subject to forfeiture. (B) An otherwise valid claim under subparagraph (A) shall not be denied on the ground that the claimant gave nothing of value in exchange for the property if (i) the property is the primary residence of the claimant; (ii) depriving the claimant of the property would deprive the claimant of the means to maintain reasonable shelter in the community for the claimant and all dependents residing with the claimant; (iii) the property is not, and is not traceable to, the proceeds of any criminal offense; and (iv) the claimant acquired his or her interest in the property through marriage, divorce, or legal separation, or the claimant was the spouse or legal dependent of a person whose death resulted in the transfer of the property to the claimant through inheritance or probate, except that the court shall limit the value of any real property interest for which innocent ownership is recognized under this subparagraph to the value necessary to maintain reasonable shelter in the community for such claimant and all dependents residing with the claimant. Id. 74 Id. 75 Id. This statute is a general innocent owner defense that applies to all federal civil forfeiture proceedings U.S.C U.S.C. 853(n). 78 Id.

15 2006] INTERPRETING CRIMINAL FORFEITURE 1429 statute, forfeiture takes place after conviction and during sentencing. 79 No notice of forfeiture is afforded to anyone besides the convicted party until after forfeiture has already taken place. 80 Once the property is forfeited, notice is published and any interested third party is entitled to a hearing to present a stronger claim to the forfeited property. 81 Conversely, under the civil statute, all parties interested in the property receive notice of an impending forfeiture and have the opportunity to contest it. 82 Lastly, the two statutes are considered different types of proceedings. Civil forfeiture is considered to be an in rem proceeding, 83 meaning the property is essentially the defendant. 84 A criminal forfeiture proceeding is considered to be in personam, 85 where the defendant is someone accused of a crime and therefore might forfeit his property. 86 In a criminal proceeding, if the accused is not convicted of a crime, the property cannot be forfeited. 87 The civil proceeding differs from the criminal proceeding because the property used is at issue, rather than the individual who used it. 88 Under the civil statute, 79 S. REP. NO , at Under the criminal forfeiture statute when a defendant is found guilty his property is forfeited at the time of sentencing U.S.C. 853(n). 81 Id U.S.C. 881; 18 U.S.C The second statute here provides the general method of how civil forfeiture takes place. Under this general civil forfeiture statute there is an exception for the initial seizure of real property providing that: (a) Notwithstanding any other provision of law, all civil forfeitures of real property and interests in real property shall proceed as judicial forfeitures. (b)(1) Except as provided in this section (A) real property that is the subject of a civil forfeiture action shall not be seized before entry of an order of forfeiture; and (B) the owners or occupants of the real property shall not be evicted from, or otherwise deprived of the use and enjoyment of, real property that is the subject of a pending forfeiture action. Id. 83 United States v. Sandini, 816 F.2d 869, 872 (3d Cir. 1987). Defendant was convicted for drug-related crimes and his property was forfeited under the criminal forfeiture statute, 21 U.S.C See also United States v. 8 Curtis Avenue, No. Civ. A RWZ, 2003 WL , at *1 (D. Mass. Feb. 25, 2003) (husband was convicted of distributing marijuana and the government instituted a civil forfeiture proceeding against property owned by him and his wife as tenants by the entirety) Curtis Ave., 2003 WL , at *1. 85 The initial criminal forfeiture statute was provided for in the Comprehensive Drug Abuse Prevention and Control Act of This created an in personam proceeding. United States v. Totaro, 345 F.3d 989, (8th Cir. 2003). The court found that RICO is an in personam action and therefore only touches the interest of the defendant. The courts and Senate have drawn a comparison between RICO, which is a criminal proceeding, and 21 U.S.C. 853, which is also an in personam criminal proceeding. See also United States v. Wendling, 359 F. Supp. 2d 850, 853 (D.N.D. 2005). Discussing 21 U.S.C. 853, the court quoted the language of Totaro, finding that this criminal proceeding was also an in personam action. Id. In personam is defined as [i]nvolving or determining the personal rights and interests of the parties. BLACK S LAW DICTIONARY 352 (2d Pocket ed. 2001). 86 Totaro, 345 F.3d at Id U.S.C. 881(a).