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University of Tennessee, Knoxville Trace: Tennessee Research and Creative Exchange Tennessee Department of State, Opinions from the Administrative Procedures Division Law 5-26-2009 DEPARTMENT OF SAFETY vs. $11,165.001 in U.S. Currency, and, One Emerson Television, and, One Bernoulli Watch, Seized From: Katrina Lunsford, Seizure Date: July 10, 2008, Claimant: Katrina Lunsford, Seizing Agency: Springfield P.D. Follow this and additional works at: http://trace.tennessee.edu/utk_lawopinions This Initial Order by the Administrative Judges of the Administrative Procedures Division, Tennessee Department of State, is a public document made available by the College of Law Library, and the Tennessee Department of State, Administrative Procedures Division. For more information about this public document, please contact administrative.procedures@tn.gov

BEFORE COMMISSIONER OF THE TENNESSEE DEPARTMENT OF SAFETY DEPARTMENT OF SAFETY, ] ] vs. ] DOCKET # 19.01-103025J $11,165.00 1 in U.S. Currency, and ] DOS # H5209 One Emerson Television, and ] One Bernoulli Watch ] Seized From: Katrina Lunsford ] Seizure Date: July 10, 2008 ] Claimant: Katrina Lunsford ] Seizing Agency: Springfield P.D. ] INITIAL ORDER This contested administrative case was heard in Nashville, Tennessee, on May 26, 2009, before J. Randall LaFevor, Administrative Judge, assigned by the Secretary of State and sitting for the Commissioner of the Tennessee Department of Safety. Mr. Orvil Orr, Staff Attorney for the Tennessee Department of Safety, represented the Seizing Agency. The Claimant was represented by her legal counsel, Mr. George J. Duzane. This hearing was convened to consider the proposed forfeiture of the seized property, 2 as described above, based on allegations that the Claimant s possession and/or receipt of that property was in violation of the Tennessee Drug Control Act. Upon full consideration of the record in this case, it is determined that the property should be returned to the Claimant. This decision is based on the following Findings of Fact and Conclusions of Law: FINDINGS OF FACT 1. In the early morning hours of July 10, 2008, Officers with the Springfield Police Department executed a search warrant 3 at the home of Katrina Lunsford. They found 9.3 1 Although $11,445 was seized, the Claimant only asserted ownership of $11,165. This hearing did not dispose of the remaining sum of seized currency. 2 A vehicle and other property were also seized on July 10, 2008. Those items belonged to Curtis Dunn, another occupant of the Claimant s home. The Claimant only seeks return of the property identified in the style of this case. 3 The warrant was issued in the name of the Claimant s boyfriend, Curtis Dunn, who was living in her home. It authorized a search for evidence of drug trafficking.

grams of a rock-like substance containing cocaine base, and 1.6 grams of marijuana. The Claimant and Curtis Dunn ( Dunn ) were arrested and charged with violations of the Tennessee Drug Control Act. 2. When the officers searched the premises, they found $11,165.00 of U.S. currency in an HVAC vent; $206.00 was found in Dunn s pocket and $74.00 was found in a dresser drawer. That money was seized by the officers. Also seized were a Bernoulli watch from the Claimant s son s room, and an Emerson television. Other property was seized, but the Claimant asserts no ownership over those items; her claim, as stated at the hearing, only extends to the money found in the vent, the television and her son s watch. 3. The property claimed by the Claimant was apparently seized based on a theory that all household income was tainted by Dunn s drug sales, and that any property purchased with that income was subject to forfeiture. 4. To rebut the State s theory, the Claimant testified that she had purchased the television and watch with legally-acquired money, including child-support and income from her employment as a nurse. She said that the money found in the vent was cash that she was saving for a down-payment on a house. She hid the money in the vent because her house had been broken into twice in the recent past, and she thought it would be safe there from burglars. She did not want to keep her money in a bank. 5. In mid-2008, at the time of the seizure, the Claimant had multiple sources of legitimate income and funds-on-hand. The Claimant s primary source of income was her employment as a full-time nurse, where she earns over forty thousand dollars ($40,000.00) annually. [See Hearing Exhibit #4.] She also receives child support through Juvenile Court Orders totaling eight hundred dollars ($800.00) per month ($9,600.00 annually). [See Hearing Exhibit #6.] In April 2008, she received an Income Tax Refund from the federal government in the amount of $7,092.00. [See Hearing Exhibit #5.] The Claimant saved her Tax Refund and some money from her other income sources to use as a down-payment toward the purchase of a house for herself and 2

her two children. She and her banker had estimated 4 that she would need a downpayment of $13,885.00 to purchase a home in her price range. On July 10, 2008, her combined savings toward that goal amounted to $11,445.00, the money that was hidden in the vent. 6. The Claimant and Dunn had lived together since 2004. Although the Claimant and Dunn shared a residence, they paid their bills separately. She paid all living expenses for herself and her children from her legitimate income, and Dunn only paid his own expenses, such as his cell phone bill and costs related to operating his car. When they were arrested, Dunn acknowledged that he sold crack cocaine to help pay his bills. The Claimant admitted that she knew Dunn sold drugs, and said that she had tried to get him to stop. None of the currency found in the vent came from Dunn s drug sales, and neither the Emerson television nor the Bernoulli watch was purchased with the proceeds from those sales. 7. The record contains no evidence that the Claimant participated in Dunn s illegal drug activities; nor is there any evidence that she shared in the proceeds of those transactions. CONCLUSIONS OF LAW and ANALYSIS 1. The State bears the burden of proof in this case, and must therefore prove, by a preponderance of the evidence, that the seized currency is subject to forfeiture, pursuant to law. Failure to carry the burden of proof operates as a bar to the proposed forfeiture. TENN. CODE ANN. 53-11-201(d)(2); Rule 1340-2-2-.15, TENN. COMP. R. & REGS., Rules of the Tennessee Department of Safety. 2. Everything of value furnished, or intended to be furnished, in exchange for a controlled substance in violation of the Tennessee Drug Control Act of 1989,... all proceeds traceable to such an exchange, and all moneys... used, or intended to be used, 4 On May 20, 2008, the Claimant and her banker executed a Good Faith Estimate related to the various expenses related to purchasing a home, and setting out the necessary down payment. [See Hearing Exhibit #7.] 3

to facilitate any violation of the Tennessee Drug Control Act... are subject to forfeiture under the law. TENN. CODE ANN. 53-11-451(a)(6)(A). 3. In the instant proceedings, the State contends that the currency seized from the Claimant s home was money received in exchange for controlled substances, or proceeds traceable to the illegal sale of drugs, and that the other seized property was purchased with proceeds received by the Claimant from Dunn s illegal drug sales. While there is no direct proof to support such an assertion, the State may be entitled to benefit from circumstantial evidence, reasonable inferences that may be drawn from facts proven during the hearing, and certain presumptions and inferences that have been established by prior judicial decisions. See, Lettner v. Plummer, 559 S.W.2d 785. (Tenn. 1977). 4. For example, in a forfeiture proceeding such as this one, proof that a Claimant has a substantial criminal record for felony drug sales may legitimately raise an issue concerning the source of the Claimant s income. See, Lettner v. Plummer, supra. In United States v. Edwards, 885 F.2d 377, 390 (7 th Cir. 1989) the court held that, Where a defendant s verifiable income cannot possibly account for the level of wealth displayed and where there is strong evidence that the defendant is a drug trafficker, then there is probable cause to believe that the wealth is either a direct result of the elicit activity or that it is traceable to the activity as proceeds. So, the fact that a person with a history of drug sales convictions has spent money far in excess of his legitimate income is evidence from which it may be concluded that he has derived substantial income from his drug trade. Furthermore, such evidence may support a general finding that the illegal income was the source of property seized under a drug forfeiture statute. See, United States v. Two Parcels of Real Property, 92 F.3d 1123, 1128 (11 th Cir. 1996) (evidence that claimants are generally engaged in the drug business over a period of time, have no visible source of substantial income, use cash for large purchases, and use nominee owners for property is probative of illegal source of funds to acquire seized property). Also, it is not necessary that the Seizing Agency be able to trace the seized currency to a specific drug transaction [Lettner v. Plummer, supra, at 787]. 4

5. Once the State proves that the Claimant has a substantial history of trafficking in drugs, these cases, and many others, 5 stand for the proposition that, under limited circumstances, it may be concluded that currency and other property found in the possession of that person was derived from illegal drug transactions, if those assets are valued far in excess of his legitimate income. In the present case, however, the State failed to prove the required elements of the two-prong foundation that must exist in support of such a conclusion: (1) that the Claimant has a substantial history of drug trafficking, and (2) that the value of the assets seized was far in excess of her legitimate income and assets. 6. Until the State first proves the Claimant s substantial involvement in prior drug transactions, it is not entitled to an inference that the money and other property in her possession was derived from the sale of drugs. 6 The State proved that Dunn sold small amounts of crack cocaine to help pay his bills. The Agency s search turned up fairly minor amounts of controlled substances [9.3 grams of a rock-like substance containing cocaine base, and 1.6 grams of marijuana]. The State did not offer any evidence of prior drug-related convictions or direct proof of multiple sales by Dunn. While the State may argue that it proved Dunn s substantial involvement in prior drug transactions, one thing is clear from the record: Evidence of any link between the Claimant and Dunn s illegal activities is absent. The State failed to prove the Claimant s participation in even one drug transaction, failed to prove that the Claimant and Dunn commingled their money, and failed to prove any connection between the proceeds of Dunn s drug sales and the property seized from the Claimant. In short, the State failed to prove the 5 See generally: United States v. All Assets and Equipment, 58 F.3d 1181, 1189 (7 th Cir. 1995); cert. Den. 516 U.S. 1042 (evidence of couple s past known drug activity and convictions, great discrepancy between couple s legitimate income and value of assets acquired prove sufficient nexus between seized property and narcotics activity to justify forfeiture); United States v. One Mercedes 560 SEL, 919 F.2d 327, 331-332 (5 th Cir. 1990) (government met burden for forfeiture from Defendants with significant drug involvement, by showing deposit of substantial funds into checking account, purchase of luxury automobile, expenditure of large sums of money, and when compared with tax return, income was substantially less); United States v. Thomas, 913 F.2d 1111, 1114-1115 (4 th Cir. 1990) (reversing dismissal of forfeiture complaint where cash expenditures of Claimant far exceeded his legitimate source of income coupled with evidence of Claimant s narcotics criminal record). 6 See generally, Fullenwider v. Lawson, 1992 WL 319464 (Tenn. Ct. App.) (forfeiture of large sum of currency found in car disallowed where State failed to prove that unemployed claimants were drug traffickers.) 5

Claimant s substantial involvement in prior drug transactions. The State is therefore not entitled to an inference that the money and other property in her possession was derived from the sale of drugs. 7. Additionally, the State failed to prove that the value of the seized assets far exceeds the Claimant s legitimate income. As previously set out, in mid-2008, at the time of the seizure, the Claimant had multiple sources of legitimate income and funds-onhand. Her income, including salary from her full-time job as a nurse (over $40,000.00 annually) and her child support checks ($9,600.00 annually) yielded over $50,000.00 per year. Additionally, she had recently received, and saved, her Income Tax Refund of more than $7,000.00. Between her Tax Refund and other income, she had saved over $11,000.00, which she planned to use toward a down-payment on a home for herself and her children. She hid that money in her HVAC vent because her house had been broken into twice in the recent past, and she thought it would be safe there from burglars. While somewhat unusual, and certainly unwise, there is nothing illegal about hiding a large amount of cash in a home. In any event, the evidence supports her claim that the money was derived from legitimate sources. Likewise, the Emerson television and Bernoulli watch were purchased from her income, which was easily enough to support such purchases. Thus, the State has failed to prove that the value of the seized assets far exceeds the Claimant s legitimate income, and on that basis, the State is not entitled to an inference that the money and other property in her possession was derived from the sale of drugs. 8. In summary, the State offered no direct evidence proving that the seized money and/or property was acquired from the sale of drugs. And, having failed to prove (1) that the Claimant has a substantial history of drug trafficking, and (2) that the value of the assets seized was far in excess of her legitimate income and assets, the State is not entitled to the benefit of any presumptions or inferences with respect to the origins of the seized currency or property. Without direct or circumstantial evidence of the Claimant s involvement in illegal drug transactions, or a valid inference upon which to rely, it is not possible to conclude that the seized property was rendered subject to forfeiture pursuant to the Tennessee Drug Control Act. Having failed to prove a nexus between illegal drug 6

transactions and the money and property seized from the Claimant, the State has simply failed to carry its burden of proof. Failure to carry the burden of proof operates as a bar to the proposed forfeiture. TENN. CODE ANN. 53-11-201(d)(2); Rule 1340-2-2-.15, TENN. COMP. R. & REGS., Rules of the Tennessee Department of Safety. Accordingly, it is hereby concluded that the State failed to prove, by a preponderance of the evidence, that the currency and property seized from the Claimant in this case were the proceeds of illegal drug transactions, or derived from the proceeds of such transactions, as alleged in the Drug Asset Forfeiture Warrant. It is therefore ORDERED that the property seized from the Claimant on July 10, 2008, including $11,165.00 in U.S. Currency, one Emerson television and one Bernoulli watch, shall be returned to the Claimant. Entered and effective this 2nd day of June, 2009. J. Randall LaFevor, Administrative Judge Filed in the Administrative Procedures Division, Office of the Secretary of State, this 2nd day of June, 2009. Thomas G. Stovall, Director Administrative Procedures Division 7