Special problems posed by forfeiture legislation
| Author | Robert Hubbard; Daniel Murphy; Fergus O'Donnell; Peter De Freitas |
| Pages | 415-476 |
CHAPTER
SEVEN
SPECIAL
PROBLEMS
POSED
BY
FORFEITURE
LEGISLATION
A.
Introduction
This
chapter explores some
of the
special
issues
raised
by
proceeds-of-crime
legislation
in
respect
of
matters
of
forfeiture
in the
context
of the
American
legislation.
In
some instances,
the
Canadian context
is
also discussed.
While
there
is no
assurance that Canadian judges will handle problems involving
proceeds
issues
in the
same
way or,
indeed, that
the
Canadian legislation
mandates
the
same approach,
the
issues
posed
by the
proceeds-of-crime leg-
islation
in the
United
States
will
undoubtedly appear
in
Canada.
While
the
American
and
Canadian legislation aimed
at
proceeds
of
crime
was
initiated
with
the
same purpose
in
mind—namely,
to
combat crime
by
making
it
less
profitable—it
would
be a
mistake
to
equate
the two
legislative frameworks.
Indeed,
the
language
of the two
legislative schemes
is
completely
different
and the two
countries have taken
different
routes
to
achieve
a
common
end.
Yet,
despite
differences
between
the
American
and
Canadian regimes, lessons
can
be
taken from
the
American experience.
While
refusing
to
learn
from
others' mistakes
is a
very Canadian manifestation
of
independence,
it is
still
folly.
B.The
Problem
of
Commingled
Assets
Several
American courts have grappled
with
whether
forfeiture
should occur
when
dirty
funds,
flowing from proceeds
of
crime,
are
commingled
with
clean
funds.
In
particular,
the
issue
has
often arisen
in
relation
to
section
J957
of
Title
18
of the
American legislation that requires criminally derived
property
in a
monetary transaction have
a
value
in
excess
of
$10,000.00
before
the
section
is
engaged. Thus,
to
avoid triggering
the
liability posed
by
the
section, many accused have argued that they
are not
over
the
$10,000.00
limit.
The
typical argument
is
that
the
funds
subject
to the
charges appear
to
be
over
the
requisite amount because
the
funds
have been augmented
by
clean
funds
not
derived from criminal activity. This problem
of
commingling
of
clean
and
dirty
funds
has
arisen
in a
variety
of
contexts.
[415]
1)
The
Fungible
Nature
of
Money
Exacerbates
the
Commingling
Problem
In
United
States
v.
Davis,1
the
court properly noted that
the
problem
of
com-
mingled
funds
is
exacerbated
by the
fungible
nature
of
money.
The
court
stated:
"Obviously, when tainted money
is
mingled with untainted money
in
a
bank account, there
is no
longer
any way to
distinguish
the
tainted
from
the
untainted because money
is
fungible."2
In
Davis,
the
court avoided
the
issue
of
deciding
how to
resolve
the
issue
of
commingled
funds,
holding:
The
commingling
problem
under
the
money laundering statutes
is the
same
as
under
the
transfer
of
funds
statute,
and so we
apply
our own
precedents, rather
than choosing between
the
commingling
rules applied
in
other circuits,
as the
par-
ties urge
us to do.
Compare
United
States
v.
Sokolow,
91
F.jd
396,
409
(sd
Cir.
1996)
(where
money
commingled, government does
not
have
to
trace proceeds
to
prove
money
tainted
under
section
1957);
Moore,
27
F.jd
at
976—77
(where
clean
and
tainted money
has
been commingled,
any
withdrawal
from
account
is
pre-
sumed
tainted
under
section
1957,
up to
amount
of
tainted
moneys
deposited);
with
United
States
v.
Rutgard,
1270,
1292
(9th Cir.
1997)
(in
case
of
com-
mingling, withdrawal
is
only shown
to be
tainted under section
1957
if it is the
entire balance
of
commingled account).
In
this
case,
the
government
proved
aggregate
withdrawals
of
far
more
than
$10,000
above
the
amount
of
clean
funds
available.
We
therefore reject
Davis's
contention that there
was
insufficient
evidence
to
show that
his
$25,000 check
to
Wright
&
Greenhill
contained
more
than
$10,000
of
tainted
funds.
The
problem
of
intermingled
funds
does
not
arise,
therefore, when
the
dirty
money exceeds
the
amount
at
issue.
An
application
of the
Davis
rule, howev-
er, can
lead
to
acquittals.
In
United
States
v.
Loe,4
for
instance,
the
court
stated:
As
this
Court
has
noted, money
is
fungible.
The
commingling
of
assets
has
placed
courts
in the
difficult
position
of
separating
"clean"
from
"dirty"
funds.
Although
any
account-
ing
method employed
to
this
end
inevitably exhibits certain "arbitrary" character-
istics,
a
rule
of
decision
is
necessary.
In
United
States
v.
Davis,
we
stated
the
following
rule
for
section
1957
cases
involving
commingled
accounts:
"[Wjhen
the
aggregate
amount
withdrawn
from
an
account
containing
commingled
funds
exceeds
the
clean
funds,
individual
withdrawals
may be
said
to be of
tainted
money,
even
if a
particular
withdrawal
was
less
than
1
(5th Cir. 2000)
[Davis].
2
Ibid,
at
357.
3
Ibid,
[emphasis
added].
4
(5th Cir.
2001).
SEVEN: SPECIAL PROBLEMS POSTED BY FORFEITURE LEGISLATION
{416]
the
amount
of
clean
money
in the
account"
Davis
also
implies
the
converse—that
where
an
account
contains
clean
funds
sufficient
to
cover
a
withdrawal,
the
Government
can not
prove
beyond
a
reasonable
doubt
that
the
withdrawal
contained
dirty
money.
In
this
case,
counts
22—24
were based
on
transactions originating
in a
$776,742
transfer
from
an
account containing $2,205,000 paid
by
Lexington
to the
Loes.
Of
the
$2,205,000, only $470,790.22
was
fraudulently obtained. Since there
was
enough clean money
in the
account
to
cover
the
$776,742
transfer,
the
rule
of
Davis
mandates reversal
of
counts 22-24.
No
reasonable juror could conclude that
these
money laundering convictions were warranted beyond
a
reasonable doubt.
Moreover,
the
jury instructions were
also
plainly inconsistent
with
Davis.
As
Babo
Loe
adopts
LHI's
arguments
with
respect
to
counts
22—24,
her
convictions under
these
counts must
also
be
reversed.
In
Davis,
because
the
government could demonstrate that more than
US$i
0,000.00
of
tainted
funds
was
involved,
the
court
saw the
issue
of
commingling
of
funds
as
moot.
As the
above quote
from
Davis
indicates,
however, other courts have approached
the
problem
in a
variety
of
ways.
In
United
States
v.
Sokolow,6
the
court held that there
was no
onus
on the
government
to
distinguish between clean
and
dirty
funds
if
they were com-
mingled.
The
court rejected
the
complaint
of the
accused regarding
the
trial
judge's charge
to the
jury:
Sokolow alleges that
the
instruction "allowed
the
jury
to
convict simply
on a
showing that even
$i
of the
proceeds
of
fraud
were deposited into
a
Sokolow
account
and
later used
to
pay,
in
part,
for the
items charged
[in the
counts]
of the
indictment."
We
find
this contention
is
without
merit.
It
is
clear from
the
full
context
of the
district judge's explanation
of the
concept
of
proceeds
that
he is
addressing
the
absence
of a
legal
requirement
that
the
government
trace
the
funds
constituting
criminal
proceeds
when
they
are
commingled
with
funds
obtained
from
legitimate
sources.
See
United
States
v.
Johnson,
97;
F.2d
at 570
(noting
that
there
is
no
requirement
that
government
"show
that
funds
withdrawn
from
the
defendant's
account
could
not
possibly
have
come
from
any
source
other
than
the
unlawful
activity").
We
find
no
error
in the
district
court's
jury
instructions
in
this
regard?
In
United
States
v.
Wilkinson?
the
court held that, when money
is
drawn
on a
commingled account,
it may be
presumed that
the
full
amount
of the
tainted
funds
were involved
in the
transaction.
In
other words,
if
transactions
5
Ibid,
at
466—67
[emphasis
added].
6
(3rd Cir.
1996).
7
Ibid,
at 409
[emphasis
added].
8
(4th Cir.
1998).
MONEY
LAUNDERING
AND
PROCEEDS
OF
CRIME
[417]
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