United States v. $125,938.62 ( 2008 )

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
AUGUST 6, 2008
No. 07-10380 THOMAS K. KAHN
________________________ CLERK
D. C. Docket No. 03-20526-CV-FAM
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
$125,938.62
Proceeds of certificates of deposit
number 1271734730,
$60,851.73
number 1271736329, et al.,
Defendants,
ARNOLDO JOSE ALEMAN CARDENAL,
ANA EUGENIA FLORES,
JOSE GRULLON,
NORMA L. FLORES,
MARIA ALEJANDRA ALEMAN CARDENAL,
CARLOS MIGUEL ALEMAN CARDENAL,
MARIA DOLORES ALEMAN CARDENAL,
Claimants-Appellants.
________________________
Appeal from the United States District Court
for the Southern District of Florida
_________________________
(August 6, 2008)
Before TJOFLAT and BLACK, Circuit Judges, and RESTANI,* Judge.
BLACK, Circuit Judge:
In this civil forfeiture action brought under the Civil Asset Forfeiture
Reform Act of 2000 (CAFRA), 18 U.S.C. § 983, the district court found seven
certificates of deposit held in the names of Claimant-Appellants Maria Alejandra
Alemán, Norma Flores, José Grullon, and Ana Flores were subject to forfeiture
under 18 U.S.C. § 981(a)(1)(B) because they were derived from funds stolen from
the Nicaraguan treasury during the presidency of Arnoldo Alemán.
On appeal, Appellants contend the Government failed to meet its burden of
linking the certificates of deposit to embezzled funds. Although the Government
now concedes that key evidence on which it relied at trial was inadmissible, it
asserts the properly admitted evidence was sufficient to show, by a preponderance
of the evidence, that the funds are subject to forfeiture. Having reviewed the
*
Honorable Jane A. Restani, Chief Judge, United States Court of International Trade,
sitting by designation.
2
entire record, we affirm the judgment of the district court with respect to
certificates number 1275218528 and 1263604528 because the evidence properly
presented to the court with respect to those funds was minimally sufficient to meet
the Government’s burden of proof. However, because the Government failed as a
matter of law to meet its burden of proving by a preponderance of the evidence
that certificates number 127173430, 1256700028, 1279734728, 1271734729, and
1271737129 were derived from funds embezzled from the Nicaraguan treasury,
we reverse the district court’s order of forfeiture with respect to those certificates.
I. BACKGROUND
A. The Certificates of Deposit
During the late 1990s, while Arnoldo Alemán was President of Nicaragua,
millions of dollars disappeared from the Nicaraguan national treasury. Around the
same time, Byron Jerez, a friend of the Alemán family and a high-ranking official
working in the Nicaraguan Treasury Department, withdrew funds from two
entities, Consultores Corporativos (a company with which he was affiliated) and
the Nicaraguan Democratic Foundation (of which he was a founding member).
Jerez used the money to purchase certificates of deposit from Terrabank in Coral
Gables, Florida, in the name of Alemán and several of his relatives. Alemán and
his wife also opened several certificates of deposit at Terrabank during this period.
3
Some of these certificates of deposit were later assigned to other members of the
Alemán family.
In March 2003, the United States Government filed a civil forfeiture action
in the United States District Court for the Southern District of Florida, contending
that eight of the Terrabank certificates of deposit were subject to forfeiture
because they were derived from funds stolen from the Nicaraguan treasury.1 The
chart below summarizes the relevant details of each certificate at issue in this case:
Certificate No. Amount Opened Original Owner Present Owner Purchased by Funds from
127173430 $100,000 4/17/98 Arnoldo or Maria Byron Jerez Nicaraguan
Maria Alejandra Democratic
Alejandra Alemán Foundation
Alemán
1256700028 $75,000 3/6/98 Arnoldo or Norma Flores Arnoldo and Milerstone
Amelia Amelia Alemán Business
Alemán
1279734728 $100,000 4/17/98 Arnoldo José Grullon Byron Jerez Nicaraguan
Alemán or Democratic
Carlos Foundation
Alemán
1271734729 $100,000 4/17/98 Arnoldo Ana Flores Byron Jerez Nicaraguan
Alemán or Democratic
Arnoldo Foundation
José
Alemán
1271737129 $75,000 5/26/98 Arnoldo José Grullon Arnoldo Milerstone
Alemán or Alemán Business
Carlos
Alemán
1
The Government later abandoned its claim with respect to one of the certificates,
leaving only seven at issue in this action.
4
1275218528 $75,999 4/22/99 Arnoldo José Grullon Byron Jerez Consultores
Alemán or Corporativos
Carlos
Alemán
1263604528 $75,000 4/22/99 Arnoldo Ana Flores Byron Jerez Consultores
Alemán Corporativos
(Dist. Ct. Findings of Fact & Conclusions of Law, at 2-3.)
After a few procedural false starts (including an appeal to and remand from
this Court), the case proceeded to a bench trial.
B. The Government’s Case
At trial, the Government attempted to present several summary witnesses,
including Francisco Saavedra, a member of the U.S. Customs Asset Forfeiture
Group, and Ivan Lara, the Nicaraguan lawyer who had prosecuted Alemán and
Jerez on charges of embezzlement, money laundering, and other fraud. (Alemán
was convicted of the charges against him; Jerez was acquitted.)
Unfortunately, many of the Government’s key witnesses, including
Saavedra and Lara had minimal non-hearsay testimony to offer; therefore, the
Government’s case turned primarily on the adequacy of the documentary evidence
admitted at trial. Among that evidence was an audit conducted by the Nicaraguan
Government and prepared by witness José Calderón. According to Calderón’s
testimony and portions of the audit, which were translated into English and
admitted into evidence, millions of dollars were illegally removed from the
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Nicaraguan treasury between 1997 and 2002, and were diverted to unauthorized,
“extra-budgetary” funds controlled by the Ministry of the Presidency. Calderón
testified that the audit did not trace any pilfered funds to the Terrabank accounts.
In addition to the audit evidence, the Government introduced through Lara
numerous authenticated checks and other financial documents which Lara had
obtained from Nicaraguan banks. The checks and their accompanying notations
were not translated into English, and the district court did not permit the
prosecutor to provide testimony regarding the meaning or relevance of the
financial documents on the ground that such testimony would be hearsay coming
from someone other than the records custodian. The Government argued the
documents revealed money had been routed from presidential funds to a changing
house and from the changing house to Consultores Corporativos, a business with
which Jerez was affiliated. The Government produced no financial documents
linking embezzled money to either Milerstone Business or the Nicaraguan
Democratic Foundation.
Of central importance to the Government’s case was Exhibit 67, a copy of
the final judgment of criminal conviction in Jerez and Alemán’s Nicaraguan
prosecution. Over the Claimants’ strong objection, and after extensive discussion
regarding the admissibility of the evidence, the district judge admitted two small
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portions of the judgment under the public records exception to the hearsay rule.
Specifically, the court admitted the fact of Alemán’s conviction for “laundering of
money and/or assets proceeding from illegal activities, fraud, embezzlement of
public monies, peculation, and association and instigation to commit crimes and
electoral crime.” (See generally Trial Trans. at 54:3-21, 80:19-81:9; see also
Certified Translation of Final Decision of the Nicaraguan First Criminal Court of
the District, penultimate page.) The court also admitted a portion of the judgment
acquitting Jerez, but suggesting he was guilty in fact of aiding and abetting the
crimes of which Alemán had been convicted and that Jerez had done so in
furtherance of Alemán’s financial interests.
To bolster its claim that the money in the certificates of deposit could not
have come from Alemán’s personal holdings, the Government admitted financial
disclosure statements filed by Alemán in 1997 and 2000, which list modest real
property holdings and income.
C. The Claimants’ Case
After the Government rested, the district court heard testimony from each of
the claimants and from a friend of the Alemán family, who argued the money in
the certificates of deposit had come from legitimate family business endeavors and
from legitimate expenditures from the Nicaraguan Democratic Foundation. Maria
7
Alejandra Alemán testified that her family had been in the coffee and cattle
business for more than a century; she could not, however, provide any details
regarding the family business. The other claimants and the remaining witnesses
provided similarly vague testimony regarding the origin of the funds used to open
the certificates of deposit.
D. The District Court Order
On December 21, 2006, the district court issued an opinion holding the
Government had met its burden of proving funds from the Nicaraguan Democratic
Foundation, Milerstone Business, and Consultores Corporativos (the monetary
sources for the certificates of deposit) were “traced to illicit activities by President
Aleman and Byron Jerez.” (See Dist. Ct. Findings of Fact & Conclusions of Law,
dkt. #165, at 3.) Specifically, the district court found:
[With respect to the five certificates of deposit purchased by Jerez],
there was clear commingling of illicit funds with stolen money in the
accounts of “Consultores Corporativos” and the Nicaraguan
Democratic Foundation. The United States established that the
certificates of deposit were purchased shortly after President
Aleman’s assumption of the Presidency of Nicaragua and millions of
dollars were removed from Presidency accounts by his subordinates,
specifically Byron Jerez, the actual purchaser of the certificates. The
evidence showed that funds moved from the office of the Nicaraguan
Presidency to a money exchange house, Multicombrios [sic], and then
to Jerez’s corporations, including Consultores Corporativos. Until
then, Aleman’s financial transactions in the United States had been
modest. The Government also proved that the majority of the
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certificates of deposit were not purchased by the Alemán family and
that Aleman’s financial disclosure did not reflect the existence of a
large amount of cash.
In addition, the Government introduced the December 6, 2003
conviction and twenty year sentence of President Alemán for money
laundering and embezzlement. Byron Jerez was “acquitted,” but the
Nicaraguan Court found that he did participate in the crime of fraud
and used his “resourcefulness” to execute the illicit complex financial
transactions. His “acquittal” was based upon a [sic] “principles of
Proportionality and Opportunity.” This evidence is clearly sufficient
for the Government to meet its burden.
(Id. at 4-5.) Additionally, the district court found the testimony of the claimants
not credible, and determined none had succeeded in proving he or she was an
innocent owner of the funds in question. (Id. at 7.) Consequently, the court
ordered all seven certificates forfeited to the Government. (Id. at 8.)
II. DISCUSSION
On appeal, Appellants raise several challenges to the district court’s
forfeiture decision. Two require discussion: Appellants’ contention that (1) the
district court erred by admitting facts contained in the Nicaraguan judgment of
conviction; and (2) the Government failed to adduce sufficient evidence to meet
its burden of connecting the certificates of deposit to embezzled money.
A. Admissibility of Foreign Judgment of Conviction
We begin with the question whether the district court erred by admitting the
9
Nicaraguan judgment of conviction and facts found in it and by relying on those
facts to find Byron Jerez embezzled funds for the purpose of advancing Alemán’s
financial interests. We review evidentiary rulings for an abuse of discretion;
“[h]owever, basing an evidentiary ruling on an erroneous view of the law
constitutes an abuse of discretion per se.” United States v. Henderson, 409 F.3d
1293, 1297 (11th Cir. 2005).
The district court admitted the foreign judgment and facts found in it under
the hearsay exception permitting courts to consider “factual findings resulting
from an investigation made pursuant to authority granted by law . . . .” Fed. R.
Civ. P. 803(8)(C). Before oral argument, we invited the parties to address the
applicability of this Court’s decision in United States v. Jones, 29 F.3d 1549 (11th
Cir. 1994), which holds that Rule 803(8)(C), by its plain language, does not apply
to judicial findings of fact. Id. at 1554.
In response, the Government concedes that the factual findings in the
Nicaraguan judgment were improperly admitted. The fact of Alemán’s conviction
and the sentence he received remain admissible pursuant to Fed. R. Evid. 803(22);
however, none of the relevant facts found in the judgment of conviction were
admissible in the district court. Consequently, when evaluating Appellants’
challenge to the sufficiency of the evidence, we may not consider facts drawn from
10
the Nicaraguan judgment of conviction.
B. Sufficiency of the Evidence
Property located in the United States is subject to civil forfeiture when it is
“derived from, or traceable to, any proceeds obtained directly or indirectly from an
offense against a foreign nation,” 18 U.S.C. § 1956(c)(7)(B), so long as the
offense against the foreign nation (1) involved “embezzlement of public funds by
or for the benefit of a public official,” id. § 1956(c)(7)(B)(iv); (2) would be
punishable within the jurisdiction of the foreign nation by death or imprisonment
for more than one year; and (3) would be punishable under the laws of the United
States by imprisonment for more than one year if the act or activity constituting
the offense had occurred within the jurisdiction of the United States. 18 U.S.C. §
981(a)(1)(B)(i)-(iii).
At trial, the Government contended Alemán, assisted by his friend and
former internal revenue secretary Byron Jerez, embezzled money from the
Nicaraguan treasury, and after laundering it, purchased the seven certificates of
deposit which are the subject of this forfeiture action. Embezzlement is an offense
that is punishable by more than one year’s imprisonment in both Nicaragua and
the United States, see Ex. 67 (Alemán’s judgment of conviction for 20 years’
imprisonment) and 18 U.S.C. § 641 (embezzlement of more than $1,000 in federal
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funds or property punishable by up to ten years’ imprisonment); therefore, if the
money used to fund the certificates of deposit was embezzled, the certificates are
forfeitable to the United States Government.
Before the Civil Asset Forfeiture Reform Act took effect, in order to prevail
at a forfeiture hearing, the Government was required to establish only probable
cause to believe the property in question was connected to a crime. United States
v. Bowman, 341 F.3d 1228, 1233-34 (11th Cir. 2003). The burden then shifted to
the claimant to establish by a preponderance of the evidence that the property was
not connected. Id. CAFRA was “designed to rectify an unfairness to the
individual vis-a-vis the government” by “forcing the Government to prove that
property is subject to forfeiture as opposed to forcing the property owner to prove
his property is not subject to forfeiture.” United States v. Bowman, 341 F.3d 1228,
1236 (11th Cir. 2003) (citing United States v. Real Property in Section 9, Town 29
North, 241 F.3d 796, 799 (6th Cir. 2001)). Under CAFRA the Government bears
a heavier burden: it must now prove by a preponderance of the evidence that
property is subject to civil forfeiture. 18 U.S.C. § 983(c)(1).2
2
When the government claims that property is subject to forfeiture because it “was used
to commit or facilitate the commission of a criminal offense,” the Government must “establish
that there was a substantial connection between the property and the offense.” 18 U.S.C.
§ 983(c)(3). Claimants contend § 983(c)(3) is relevant to this case; however, the Government
does not contend the certificates of deposit were “used to commit or facilitate” embezzlement: it
argues the certificates were purchased with the fruits of the embezzlement. Consequently, the
12
In an appeal from an in rem civil forfeiture, we review the district judge’s
factual findings for clear error, and his conclusions of law de novo. See United
States v. Carrell, 252 F.3d 1193, 1198 (11th Cir. 2001). At oral argument, we
asked the Government to submit to us what should have been provided to the
district court: a chart showing the evidentiary connection between money stolen
from the Nicaraguan treasury and the money used to fund the certificates of
deposit at issue in this case. Appellee’s submission clarifies the relevance of the
financial documents submitted at trial relating to payments made from the
presidential treasury, through Multicambios, to foreign businesses and ultimately
to Consultores Corporativos. From Consultores Corporativos, Jerez drew the
funds used to purchase certificates of deposit numbers 1275218528 and
1263604528. The district court did not clearly err by finding this evidence was
sufficient to meet the Government’s burden of proof with respect to those
certificates.3
Government was required to demonstrate only that the funds were derived from or were traceable
to, any proceeds obtained directly or indirectly from the embezzlement of public funds from the
Nicaraguan treasury.
3
Certificates number 1275218528 was owned by José Grullon, while certificate number
1263604528 was owned by Ana Flores. At trial, both claimants raised an innocent owner
defense under 18 U.S.C. § 983(d)(1). Innocent ownership is an affirmative defense defined
narrowly by the statute. Under the statutory definition, an innocent owner must be either an
owner whose interest in the property exists at the time the conduct giving rise to the forfeiture
takes place, id. § 983(d)(2)(A), or one who acquired a property interest after the conduct giving
rise to the forfeiture has taken place, id. § 983(d)(3)(A). With respect to this second class, the
13
The same cannot be said with respect to the evidentiary support for
forfeiture of the remaining certificates of deposit. As the Government’s charts
themselves reveal, there is no direct evidence connecting certificates of deposit
numbers 127173430, 1256700028, 1279734728, 1271734729, and 1271737129 to
money embezzled from the Nicaraguan treasury.
The Government contends their case with respect to these certificates was
circumstantial, and points to the following evidence: the audit which showed
money was stolen from the Nicaraguan treasury during Alemán’s presidency;
Alemán’s financial statements, which showed he had modest personal holdings at
the time the certificates of deposit were purchased; evidence that other certificates
purchased by Jerez were derived from embezzled funds and that some of Jerez’s
personal assets were forfeited to the United States in an unrelated forfeiture action;
documents from Terrabank showing Jerez purchased three of the five certificates
statute defines an innocent owner as one 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.
Id. § 983(d)(3)(A) (emphasis added). Neither Grullon nor Flores testified that he or she was a
“bona fide purchaser or seller for value” of the certificates of deposit. Under the plain language
of the statute, then, they would not have been entitled to raise an innocent ownership defense
even if the district court had credited their testimony.
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at issue; and the fact Jerez had a connection to the Nicaraguan Democratic
Foundation.
Circumstantial evidence is one thing; speculation another. The
Government’s case with respect to funds derived from the Nicaraguan Democratic
Foundation amounted to little more than an invitation for the district court to
conclude that because Jerez used embezzled funds to purchase certificates of
deposit 1275218528 and 1263604528, he must have done the same when he
purchased certificates 127173430, 1279734728, and 1271734729, with funds from
the Nicaraguan Democratic Foundation, an organization which, according to the
uncontroverted testimony presented at trial, had no restrictions on the use of its
funds. The evidence was insufficient as a matter of law to meet the Government’s
burden with respect to these three certificates.
With respect to certificates 1256700028 and 1271737129—purchased by
Arnoldo and Amelia Alemán in the amount of $75,000 each—the Government
places considerable emphasis on Appellants’ failure to produce business records
proving the certificates were funded with proceeds from the Alemán family’s
coffee or livestock business, rather than with embezzled funds. Appellants,
however, were under no obligation to come forward with evidence of their rightful
ownership. Rather, it was the Government’s burden to show the money used to
15
purchase the certificates of deposit was derived from embezzled funds—and that it
did not do. Consequently, we hold the evidence was insufficient as a matter of
law to support the district court’s forfeiture order with respect to these two
certificates, as well.
III. CONCLUSION
Given the evidence adduced at trial, the district court did not clearly err in
finding the Government met its burden of proving certificates of deposit
1275218528 and 1263604528 were subject to forfeiture because they were derived
from funds stolen from the Nicaraguan treasury. We affirm the court’s order of
forfeiture with respect to those two certificates. With respect to certificate
numbers 127173430, 1256700028, 1279734728, 1271734729, and 1271737129 ,
however, the Government failed to meet its burden to present evidence of a
connection between those funds and funds stolen from the Nicaraguan treasury.
Therefore, we reverse the denial of the district court with respect to those five
certificates.
AFFIRMED IN PART and REVERSED IN PART.
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