[1] Forfeiture Info from BJA, IA
Keywords: Bureau of Justice Assistance, Forfeiture
Date: Thu May 06 20:05:24 MDT 1993
Organization: Apple Computer Inc.
Lines: 1009


ASSET FORFEITURE

Civil Forfeiture: Tracing the Proceeds of Narcotics Trafficing

Prepared by:
Police Executive Research Forum
Michael Goldsmith

November 1988
Addendum Added January 1992

U.S. Department of Justice
Office of Justice Programs


Bureau of Justice Assistance

U.S. Department of Justice
William P. Barr.........................Attorney General

Office of Justice Programs
Jimmy Gurule............................Assistant Attorney General

Bureau of Justice Assistance
Gerald (Jerry) P. Regier................Acting Director

Elliott A. Brown........................Deputy Director

James C. Swain..........................Director, Policy Development
                                        and Management Division

Curtis H. Straub, II....................Director, State and Local
                                        Assistance Division

Pamela Swain............................Director, Discretionary Grant
                                        Programs Division

William F. Powers       Director..............Special Programs


                                        Division

Bureau of Justice Assistance
633 Indiana Avenue NW., Washington, DC 20531
(202) 514 6278

The Assistant Attorney General, Office of Justice Programs, coordinates 
the activities of the following program Offices and Bureaus: Bureau of 
Justice Assistance, Bureau of Justice Statistics, National Institute of 
Justice, Office of Juvenile Justice and Delinquency Prevention, and the 
Office for Victims of Crime.


                                           U.S. Department of Justice
                                           Office of Justice Programs
                                           Bureau of Justice Assistance

Office of the Director                     Washington DC 25031

Dear Colleague:

Illicit drug traffic continues to flourish in every part of the country. 
The cash received by the traffickers is often converted to assets that 


can be used by drug dealers in ways that suit their individual tastes. 
Since 1981, federal authorities have increased their attack on these 
assets through both criminal and civil forfeiture proceedings with 
remarkable success. The recent passage and use of state asset forfeiture 
laws offers an excellent means for state and local jurisdictions to 
emulate the federal success.

The Bureau of Justice Assistance (BJA), in the Office of Justice 
Programs, has funded a nationally focused technical assistance and 
training program to help state and local jurisdictions facilitate 
broader use of such laws. BJA selected the Police Executive Research 
Forum to develop and administer this program because of its history of 
involvement in practical problem-oriented research to improve police 
operations and the Forum's central role in developing training materials 
for use by police agencies and chief executives.

As part of this project, the Forum has contracted with experts in the 
area of asset forfeiture and financial investigations to prepare a 
series of short manuals dealing with different concerns in the area of 
asset forfeiture. We hope these manuals help meet the rapidly unfolding 
needs of the law enforcement community as more and more agencies apply 
their own forfeiture laws and strive to learn from the successes and 
problems of their peers.



I welcome hearing your comments about this program. We have this project 
so that most requests for information or assistance can be handled 
through the Forum staff in Washington, D.C., by calling 202/466-7820.

                                          Sincerely yours,

                                          Gerald (Jerry) P Regier
                                          Acting Director   


Table of Contents

Civil Forfeiture: Tracing the Proceeds of Narcotics Trafficking
The Advantages of Civil Forfeiture
Standard and Procedures
Common Evidentiary Factors
Close Proximity
Means of Support
Concealment Efforts and Commingled Funds
Pre-Trial Statements
Narcotics Records
Evasive Trial Testimony


Net Worth Analysis
Basic Net Worth Analysis
Tax and Forfeiture Proceedings Distinguished 
Net Worth Forfeiture Cases
Conclusion
Endnotes

1991 Addendum

Proceeds Broadly Defined
The Government's Burden of Proof
General Evidentiary Principles
Common Factors of Circumstantial Proof
Conclusion
Addendum Endnotes


Civil Forfeiture: Tracing The Proceeds Of Narcotics Trafficking

Asset forfeiture has recently become an important weapon in the fight 
against narcotics trafficking. This development was initially spurred by 
enactment of the RICO and CCE statutes statute in 1970.(1) Through this 
law, Congress sought to provide law enforcement with a way to disgorge 


criminal enterprises of their profits.(2) Significantly, by authorizing 
forfeiture as a criminal sanction applied directly against the 
perpetrator, RICO went well beyond traditional forfeiture statutes that 
merely allowed civil proceedings against contraband or property used 
during the commission of a crime.(3)

In 1978, further expansion was achieved when Congress authorized civil 
forfeiture of any proceeds derived from narcotics trafficking in 
violation of federal law. By expanding the type of property subject to 
seizure, 21 U.S.C. Section 881(6) gave prosecutors their first effective 
civil mechanism for striking at the profits of narcotics trafficking.(4) 
State enactment of comparable provisions soon followed.(5) However, 
though federal officials have pursued this remedy aggressively,(6) its 
potential has not yet been realized by the states. Three factors may 
explain this phenomenon. First, federal forfeiture law is more favorable 
to prosecutors than most state statutes. Second, federal resources 
exceed state levels. Third, there is the perception that forfeiture of 
profits is often impractical because, absent a monetary seizure 
contemporaneous with a narcotics transaction, the targeted asset must be 
traced to narcotics trafficking.(7) Tracing is a complex process 
requiring adequate resources and legislative tools, as well as 
investigative creativity and diligence.



Despite these limitations, however, tracing an asset to narcotics 
trafficking is not an insurmountable task. Federal courts have 
identified a number of factors that may be sufficient to achieve the 
required linkage. Though federal law is admittedly highly favorable, the 
factors themselves transcend federal grounds. They are equally 
applicable to state litigation. Moreover, relying upon analyses 
comparable to "net worth" proof used in tax litigation, imaginative 
investigators may be able to develop new avenues for attacking this 
problem. This paper will provide an overview of the legal principles 
that must be considered in achieving successful proceeds forfeitures. It 
consists of four sections. Section I will review the advantages of civil 
forfeiture in a tracing context. Section II will review federal 
standards and procedures, and contrast them with selected state 
statutes. Section III will set forth common evidentiary factors in 
tracing litigation. Finally, Section IV will summarize pertinent 
considerations derived from net worth litigation.

The Advantages of Civil Forfeiture

Although tracing is a complex process, prospects for successful 
forfeiture are eased considerably by the procedural benefits of civil 
process. The most obvious feature is the lower burden of proof 
confronting enforcement officials: proof by a preponderance of the 


evidence rather than beyond a reasonable doubt.(8) Furthermore, under 
federal law and some state legislation, the burden of proof is placed on 
the claimant rather than the government.(9) Thus, enforcement officials 
need not achieve certainty in their tracing efforts. They need only 
satisfy a relaxed standard of proof This is an advantage of enormous 
consequence, as many cases turn on the burden of proof. Moreover, even 
if criminal prosecution was precluded by operation of the exclusionary 
rule, civil forfeiture may still be possible. Although the exclusionary 
rule applies to forfeiture proceedings, tainted evidence may still be 
sufficient to meet the lower burden of proof.(10) Indeed, civil 
forfeiture may be a viable option despite an acquittal on criminal 
charges.(11)

The civil context provides other advantages as well. For example, 
prosecutors may resort to the discovery process to obtain information 
pertinent to tracing.(12) The claimant may be deposed and disclosure of 
his records compelled. Perjury and contempt sanctions are potentially 
available against untruthful or recalcitrant witnesses. And, while the 
Fifth Amendment may still be asserted, a civil claimant risks an adverse 
factual finding by doing so.(13) This possibility places the claimant in 
a particular bind if criminal charges against him are still pending. 
Asserting the Fifth Amendment may result in an adverse factual 
determination, while answering questions may have incriminating 


consequences in the criminal proceedings.(14) And, regardless of whether 
criminal charges are pending, discovery is likely to provide useful 
information for impeachment if the claimant testifies at the forfeiture 
proceeding. Such testimony will often be necessary because, once the 
government's evidentiary burden has been sustained, failure to provide 
responsive proof will result in an adverse judgment.(15) Often times, 
however, such testimony proves counterproductive because it is presented 
in an evasive or inconsistent manner.

A civil claimant is also required to establish his standing to contest 
the forfeiture. Frequently, legal title to property will be in someone's 
name other than the real party at interest. Most courts will not permit 
forfeitures to be contested by such so-called straw men. Thus, before 
the prosecution must present its proof, the claimant must establish his 
standing. Normally, this requires proof of dominion and control beyond 
mere legal title.(16) Federal law and some state statutes require that 
this be initially accomplished by filing a verified claim.(17) In 
addition, some United States Attorneys offices routinely make standing a 
central discovery issue.(18) Thus, civil claimants are by no means 
assured automatic access to the courtroom.

For these reasons, the civil claimant is in a very difficult position 
relative to his posture in a criminal trial. Indeed, notwithstanding 


tracing obstacles confronting the government, many cases are uncontested 
by potential claimants or otherwise lost on standing grounds.(19) This 
means that, even when tracing obstacles exist, forfeiture proceedings 
should be considered since the government may never be put to its proof.

Standards and Procedures

Federal standards and procedures are designed to facilitate the civil 
forfeiture of proceeds. 21 U.S.C. Section 881(a)(6) authorizes the 
forfeiture of "all moneys, negotiable instruments, securities, or other 
things of value furnished or intended to be furnished by any person in 
exchange for a controlled substance... [and] all proceeds traceable to 
such an exchange..."(20) The term proceeds extends to interest, 
dividends, income, or property derived from the original trafficking 
profits. This broad scope is a consequence of the relation back theory:

When a statute provides for civil forfeiture, the forfeiture takes place 
at the moment the property is used or generated illegally, unless the 
statute provides otherwise. At that moment, all rights and legal title 
to the property vest in the government and any subsequent transfer is of 
no effect. In the eyes of the law, the subsequent judicial proceedings 
merely confirm or perfect a forfeiture that has, in theory, already 
taken place. This is known [sic] as the "relation back" doctrine and it 


is one of the peculiar legal rules that makes civil forfeiture such an 
effective weapon against crime. Because the government's right to 
proceeds relates back to the time they are generated, it is legally 
entitled to all the gain thereafter accruing from the proceeds.

Once the action has been brought, the government's burden is merely to 
establish probable cause to forfeit the property at issue.(22) Hearsay 
evidence may be used to meet this burden.(23) Moreover, the probable 
cause standard does not require any showing by a preponderance of the 
evidence. Instead, probable cause is flexibly defined as a "reasonable 
ground for belief...[that the property constitutes proceeds of narcotics 
trafficking], supported by less than prima facie proof, but more than 
mere suspicion."(24) There is no need to trace the proceeds to a 
particular narcotics transaction; it is enough if the proceeds can be 
linked to narcotics trafficking generally.(25) Once this initial burden 
has been satisfied, the burden shifts to the claimant who must establish 
his case by a preponderance of the evidence.(26) Should the claimant 
fail to present any evidence, the property will be forfeited.(27)

Given this favorable climate, civil forfeitures have flourished 
federally. Two recent cases demonstrate this point. In the United States 
v. $33,000 United States Currency,(28) probable cause for forfeiture was 
satisfied by the following evidence: l) claimant's guilty plea to 


conspiracy to distribute marijuana and to evade taxes; 2) the seizure of 
$33,000 located in a brown paper bag in claimant's home; 3) the presence 
of drugs on the premises; and 4) claimant's lack of legitimate 
employment. Although claimant presented evidence that he had received 
$21,915.92 from the recent sale of a horse, the court fownd that his 
burden of proof had not been met because of his failure to explain his 
cash transactions at a time when he had no apparent source of 
income.(29)

In United States v. Brock,(30) the government sought forfeiture of 
jewelry, valued at $120,000, which was found in a bag in claimant's 
attic. Despite the absence of any direct evidence connecting the jewelry 
with claimant's narcotics activity, the Court of Appeals concluded 
probable cause was present:

The circumstances were sufficient to warrant a conclusion that there was 
no other way Brock could have acquired the jewelry than... by proceeds 
of the alleged narcotics violation. The jewelry was found secreted in 
the same house as the narcotics and paraphernalia for distribution of 
narcotics. In addition, a large quantity of cash and a loaded revolver, 
further suggestive of ongoing narcotics activity, were seized at the 
house. These circumstances fairly lead to an inference that the jewelry 
was the proceeds of narcotics activity... Circumstantial evidence and 


inferences therefrom are good grounds for a finding of probable cause in 
a forfeiture proceeding.

The conclusion to forfeit the property was justified... [especially] 
given the evidence that the claimant had no source of legitimate income 
for several years preceding the seizure.(31)

From these examples, it is apparent that forfeiture of proceeds is 
relatively easy to accomplish under federal law. Though state laws are 
usually not as prosecution oriented, they are still adequate. Three 
generalizations may be drawn from statutes in selected states.(32) 
First, some states have adopted the federal approach to civil 
forfeiture. In Arizona, for example, the law requires prosecutors to 
establish probable cause for forfeiture; once this standard has been 
met, the claimant has the burden of proof.(33) Similar rules may apply 
in Florida, though principally because of judicial interpretation rather 
than explicit statutory mandate.(34) Moreover, even in jurisdictions not 
adopting the federal model, federal cases are still valuable persuasive 
authority.

Second, although the federal probable cause standard is especially 
attractive to prosecutors, the traditional preponderance of the evidence 
burden is not substantially more difficult to meet. Fortunately, state 


courts have not raised the civil forfeiture standard to proof beyond a 
reasonable doubt.(35) In addition, most state laws place the burden of 
proof on the claimant to establish any available statutory 
exemptions.(36) Such exemptions, however, rarely raise tracing issues.

Third, many state statutes estab,ish presumptions providing that money 
or negotiable instruments found in "close proximity" to contro,led 
substances are presumed to be forfeitable.(37) Though rebuttable, this 
presumption places the burden of proof on the claimant. Thus, in close 
proximity cases, state practice does not deviate significantly from 
federal practice. Predictably, most state civil forfeitures of proceeds 
have involved close proximity seizures. Though there have been numerous 
successes,(38) few reported state decisions have involved complex 
tracing efforts.(39) This suggests that state authorities are not 
attempting more difficult forfeitures. If this record is to improve, 
states must develop legally sufficient techniques for tracing proceeds 
in non-proximity situations. Fortunately, common evidentiary factors may 
be gleaned from well established federal jurisprudence.

Common Evidentiary Factors

The common perception is that tracing proceeds to narcotics trafficking 
necessarily involves a complex paper trail. On occasion, of course, that 


is exactly what is required. If so, investigators must be prepared to 
subpoena and analyze documents from a wide variety of institutions. In 
re Maria Familienstiftung v. United States,(40) for example, narcotics 
proceeds used to purchase real estate were traced through various 
domestic and foreign banks. This process involved subpoenaing documents 
from the banks and obtaining testimony from both bank employees and 
couriers used by the narcotics trafficker. In addition, the veil of 
various nominee corporations had to be pierced. Ultimately, the 
forfeiture was successful.(41) Similarly, in United States v. Banco 
Cafetero Panama,(42) extensive bank record analysis was necessary to 
track the flow of $3 million in narcotics proceeds through five bank 
accounts. Moreover, once traced, proceeds co-mingled with legitimate 
funds had to be distinguished.(43) Fortunately, the appellate court 
allowed the government the benefit of a favorable accounting procedure 
to facilitate this task.(44)

The majority of reported proceeds decisions, however, have not required 
complex documents analysis. In large part, this may be explained by the 
judiciary's willingness to allow assets to be traced to narcotics 
trafficking generally rather than to a particular narcotics 
transaction.(45) A review of the cases establishes that tracing usually 
involves a few relatively simple factors. Although these factors are 
usually present in varying combinations, they are best examined in 


isolation. Accordingly, they are set forth separately below:

Close Proximity

Cases in which the targeted proceeds are found in close proximity to 
narcotics provide the easiest forfeiture setting. The Brock and $33, 000 
United States Currency decisions, supra, illustrate this point.(46)

Means of Support

Most cases involve an obvious discrepancy between the claimant's life-
style and his apparent means of support. This category actually consists 
of a number of factors: a) strong evidence of narcotics trafficking; b) 
high expenditures, often in cash; and c) little or no legitimate source 
of income. Thus, for example, it is quite common for courts to stress 
that claimant's cash expenditwes far exceed his available income from 
legitimate employment. For example, in United States v. One 1990 
Chevrolet Blazer,(47) these factors plus evidence of efforts to conceal 
the purchase were sufficient to establish probable cause.(48) In United 
States v. Young(49) and United States v. Murillo,(50) evidence of 
defendants' narcotics trafficking, combined with tax returns, was 
sufficient for forfeiture of substantial assets in a criminal 
proceeding. Therefore, discrepant life-style factors are surely 


pertinent in any civil forfeiture proceeding. Cash expenditures, in 
particular, have proven to be extremely probative.(51) Furthermore, the 
claimant is in an obvious bind when he is unable to provide proof of 
legitimate employment. Note, however, that there must be evidence of 
narcotics trafficking. It obviously is not enough that the claimant was 
involved in criminality generally.

Concealment Efforts and Commingled Funds

A few courts have suggested that efforts to conceal ownership may be 
pertinent to forfeiture. This makes sense, since any person investing 
narcotics proceeds has a strong incentive to conceal their source. For 
example, in United States v. A Single Family Residence,(52) a probable 
cause factor cited by the Court was the trafficker's acknowledgment of 
having formed fictitious corporations to hide assets.(53) Similarly, 
concealment efforts were also mentioned by the court in Chevrolet 
Blazer, supra.(52) On occasion, concealment is accomplished by 
commingling narcotics proceeds with legitimate funds. Under such 
circumstances, forfeiture may be on a percentage basis.(55) When bank 
accounts are involved, at least one court has applied a different 
analysis. Banco Cafetero Panama, supra, permitted the government to 
maximize the proceeds subject to forfeiture by giving prosecutors the 
option of two accounting procedures: "drugs-in, last out" or "drugs-in, 


first-out."(56) The former may be preferred when the government seeks 
funds remaining in the account, while the latter may be preferred when 
the government seeks to forfeit an asset purchased with funds from the 
account.

Pre-Trial Statements

Many forfeiture decisions place heavy reliance on statements made by the 
claimant before trial. Generally, these are statements made to 
associates or to undercover agents during the investigative stage of the 
case. For example, in United States v. A Single Family Residence,(57) 
testimony from several co-conspirators established that the trafficker 
had told them narcotics proceeds had been used to buy the property.(58) 
Similar statement in United States v. Premises Known as 2639 
Meetinghouse established that narcotics proceeds had been invested in 
several bars.(59) And in United States v. All Funds,(60) the claimant 
confided to an undercover agent, posing as a bank officer, that 60 to 70 
percent of certain corporate deposits were narcotics proceeds. Such 
statements have also been obtained through nonconsensual electronic 
surveillance.(61) Finally, even evasive answers to questions concerning 
ownership of property have been cited as a factor in meeting the 
government's evidentiary burden.(62)



Narcotics Records

Although narcotics records are rarely located, they have provided a 
useful way to establish a trafficker's profits. For example, in United 
States v. Lewis, entries in a drug ledger were persuasively correlated 
with currency deposits and expenditures on various homes.(63) Such 
records are also a valuable source of potential impeachment material.

Evasive Trial Testimony

A major factor in many forfeiture trials has been the weak testimony 
presented by the claimant. As previously stated, burden of proof 
considerations effectively compel claimants to present some proof.(64) 
When they do so, however, the result is often detrimental to their 
interests. Technically, evasive or inconsistent testimony merely serves 
to undercut the defendant's case, but its real impact implicitly 
strengthens the government's position. For example, in United States v. 
Yukon Delta Houseboat,(65) claimant testified that a loan was the source 
of funds used to purchase property. The Court of Appeals, however, 
doubted his credibility because his testimony at trial regarding the 
details of that purported loan were in some respects inconsistent with 
his prior deposition testimony. "Furthermore,... he never listed any... 
Ioan... as a liability on [various credit] application."(66) Similarly, 


in United States v. One Parcel of Real Property, the Court clearly 
regarded claimant's testimony concerning the source of funds for payment 
as a pure fable.(67)

Net Worth Analysis

The cases discussed in Section III demonstrate that forfeiture may be 
accomplished without resort to complex financial analyses. Even so, 
although many of those cases involved substantial proceeds, greater 
success may require more sophisticated approaches. The logical next step 
is a net worth analysis borrowed from criminal tax litigation. In 
essence, this procedure seeks to establish that, an individual's 
reported income from legitimate sources is inconsistent with either his 
expenditures or his increased net worth during a designated time 
period.(68) In criminal tax cases, this contrast establishes nonpayment 
of income taxes. In narcotics cases, this procedure, combined with 
evidence of narcotics trafficking, may be used to establish that assets 
were acquired with trafficking proceeds. To appreciate the impact of 
this analysis, three factors should be considered: l) the basics of net 
worth analysis; 2) significant differences between tax and forfeiture 
cases; and 3) the experience with net worth forfeiture cases.

Basic Net Worth Analysis



The complexities of net worth analysis are beyond the scope of this 
paper. In essence, however, the procedure may be summarized as follows:

The Government makes out a prima facie case... if it establishes the 
defendant's opening net worth... with reasonable certainty and then 
shows increases in his net worth for each year in question which, added 
to his nondeductible expenditures and excluding his known nontaxable 
receipts for the year, exceed his reported taxable income by a 
substantial amount.... The jury may infer that the defendant's excess 
net worth increases represent unreported taxable income if the 
Government either shows a likely source,... or negates all possible 
nontaxable sources.(69)

The Supreme Court has legitimized this practice, provided that three 
requirements are met: a) the opening net worth must be established with 
reasonable certainty; b) reasonable explanations by the taxpayer 
inconsistent with guilt must be negated; and c) the net worth increase 
must be attributable to currently taxable income.(70) These requirements 
cause substantial burdens for the government. For example, to establish 
a defendant's opening net worth, an exhaustive investigation of 
documents and witnesses must be undertaken.(71) In particular, the 
investigation must be sufficiently thorough to negate the possibility of 


a cash hoard defense in which the taxpayer maintains that substantial 
cash reserves account for the appearance of increased net worth. This is 
said to be the "most frequent challenge to the government's 
computations..."(72) Thus, it is not uncommon for investigations to 
consume many agents' time over several years.(73) As a result, this 
procedure is saved for complex tax cases in which direct proof of guilt 
is unavailable.

Tax and Forfeiture Proceedings Distinguished

Tax and forfeiture proceedings are similar in one critical respect. Each 
requires the government to identify an asset or source of income. 
Frequently, this item has been concealed in some manner. Fundamental 
differences, however, make net worth procedure easier to apply in civil 
forfeitures. The principal distinction is the civil nature of the 
forfeiture proceeding. Because forfeitures are civil, the burden of 
proof is not the "beyond a reasonable doubt standard."(74) This means 
that opening net worth may be established with less certainty than in 
criminal prosecutions. It also means that not every hypothesis 
inconsistent with guilt need be negated. Ironically, since civil 
discovery is available in forfeitures, it is also easier to meet the 
requirements of a net worth case. The claimant, for example, may be 
deposed and asked to state his net worth at particular time periods. He 


may be compelled to produce supporting documentation. He may be asked to 
account for any cash hoards, and to explain all sources of income. 
Despite these obvious advantages, however, net worth theory has rarely 
been applied to forfeitures.

Net Worth Forfeiture Cases

A review of federal and state decisions reveals only two cases that 
explicitly apply to the net worth theory in this context. Other 
decisions, however, have relied on informal variations of this doctrine 
emphasizing the discrepancy between a claimant's life-style and his 
apparent means of legitimate support. Examples of this approach have 
already been supplied.(75) Another illustration, which comes a step 
closer to using net worth analysis, is United States v. Four Parcels of 
Real Estate.(76) Civil forfeiture was effected through the following 
evidence: a) extensive evidence of claimant's cash expenditures on his 
home; b) a tax return showing gross income in 1980 of $35,650; and c) 
two financial statements, found during a search incident to arrest, 
showing a net worth of $239,000 in 1981 and of $1,079,000 in 1983. 
Apparently, no effort was made to comply with formal net worth 
requirements, but probable cause was still found.

Given the government's probable cause burden in federal cases, it is 


unlikely that complex net worth analysis will have to be used in that 
context. Two criminal forfeiture cases, however, have used this method 
successfully. In United States v. Harvey,(77) the government conducted 
an in-depth analysis of defendant's records. The investigation included 
records from his corporations, banks, real estate holdings, and tax 
returns. Critical statements by the defendant were obtained through 
nonconsensual electronic surveillance.(78) Based on this evidence, 
prosecutors established at trial that the defendant had a zero net worth 
in 1976, earned approximately $120,000 from legitimate sources between 
1976 to 1982, and accumulated a net worth of $4.5 million during that 
time period. This evidence was considered sufficient for a restraining 
order holding the assets for trial. In reaching this decision, the judge 
cited the government's use of net worth analysis which had been approved 
in tax cases.(79) Because defendant Harvey never went to trial, however, 
the net worth analysis was not tested again.

At this writing, United States v. Lewis(80) is the only reported 
decision explicitly addressing the net worth doctrine in a forfeiture 
setting. Although it stands alone, Lewis is very significant because it 
was a criminal forfeiture. Since the government was able to use net 
worth analysis successfully under the reasonable doubt standard, the 
doctrine holds great potential for civil forfeitures operating under the 
preponderance standard and liberal discovery rules. Moreover, Lewis is 


significant because the court applied the net worth doctrine despite the 
government's failure to establish the defendant's opening net worth. The 
Court held that "where the government shows an accumulation of income 
far beyond the defendant's legitimate means, an opening net worth figure 
is not essential."(81)

Although this holding was limited to the "unique facts" involved,(82) 
Lewis is potentially broadly applicable because its circumstances, in 
fact, were hardly unique. Rather, the court stressed factors typical of 
many narcotics investigations. First, consensually recorded tapes 
revealed the defendant's statement refuting "the possibility of a 
preexisting legitimate source for his remarkably high net worth."(83) 
Second, the decision observed that "the government proved the existence 
of a lucrative drug distribution enterprise over several years."(84) 
Third, "the government's financial evidence was thorough; for the period 
in question, the evidence [appeared] to foreclose all leads which might 
have suggested other legitimate sources of income."(85) Accordingly, 
Lewis provides an appropriate benchmark for considering future net worth 
applications.(86)

Conclusion

Asset forfeiture continues to hold great potential for attacking large 


scale narcotics trafficking. Using the benefits of civil discovery and a 
lower burden of proof, law enforcement has an important opportunity to 
strike at the profits generated by such criminality. Thus far, most 
civil forfeitures have been accomplished by federal authorities. 
Although federal law is admittedly preferable to most state statutes, 
the states do have adequate legal tools to achieve comparable success. 
Existing case law demonstrates that forfeitures can be accomplished 
through modes of proof that are relatively straightforward. Beyond that, 
net worth analysis may offer new means for reaching the proceeds of 
complex narcotics enterprises.

Endnotes

1. 18 U.S.C. Section 1961 et seq. (1976); 21 U.S.C. Section 848 (1983).

2. See, e.g., Russello v. United States, 464 U.S. 16, 27-28 (1983); S. 
Rep. No. 617, 91st Cong., 1st Sess. 78 (1969).

For a historical overview of criminal and civil forfeiture doctrine see 
Clark, Civil and Criminal Penalties and Forfeitures: A Framework for 
Constitutional Analysis, 60 Minn. L. Rev. 379 (1976); Maxeiner, Bane of 
American Forfeiture Law Q Banished At Last?. 62 Cornell L. Rev. 768 
(1977).



4. Smith, Prosecution And Defense Of Forfeiture Cases 4-2 (1986) 
[hereinafter cited as Smith, Forfeiture].

5. Citations to some pertinent state statutes are set forth infra notes 
33, 36-37.

6. As recently as 1981, however, federal enforcement efforts were 
severely criticized. See Asset Forfeiture Q a Seldom Used Tool In 
Combatting Drug Trafficking (GAO April 1981).

7. See generally The National Governors' Association, Et Al., State Laws 
And Procedures Affecting Drug Trafficking Control:A National Overview 
73-77

8. See, e.g., United States v. Regan, 232 U.S. 37, 50(1914).

9. See infra notes 22-24, 33-35 and accompanying text.

10. See, e.g., United States v. $31,828,760 F.2d 228, 230 (8th Cir. 
1985); United States v. Monkey, 725 F.2d 1007,1012 (5th Cir. 1984).

11. See United States v. One Assortment of 89 Firearms, 465 U.S. 354, 


360 (1983); United States v. Fifty Thousand Dollars, 757 F.2d 103,104 
(6th Cir. 1985); United States v. Premises Known as 2639 Meetinghouse, 
633 F. Supp. 979, 983 (E.D. Pa. 1986) (one of forfeiture claimants had 
never been prosecuted).

12. SMITH, Forfeiture, supra note 4, at 10-3.

13. See Baxter v. Palmigiano, 425 U.S. 308, 318 (1976). In United States 
v. A Single Family Residence, 803 F.2d 625, 629 n.4 (11th Cir. 1986), 
Baxter was cited as permitting an adverse inference when a witness 
asserted the Fifth Amendment in a civil deposition.

14. For this reason, claimants customarily request that civil 
proceedings be stayed pending resolution of the criminal case. This 
issue is discussed in Smith, Forfeiture, supra note 4, at 10-2.

15. See, e.g., United States v. A Single Family Residence, 803 F.2d 625, 
629-30 (11th Cir. 1986).

16. See id., at 630; re Maria Familienstiftung v. United States, 643 F. 
Supp. 139, 145 (S.D. Fla. 1986) (citing other authority).

17. See, e.g., Smith, Forfeiture, supra note 4, at 9-62; N.J. STAT. ANN. 


Section 2C:64-3(d) (West 1982).

18. Smith, Forfeiture, supra note 4, at 9-54.2. A further benefit of 
civil forfeiture is the government's right to appeal. See id., at 11-26.

19. This is especially so when couriers have been intercepted. Under 
such circumstances, the courier may not have the necessary legal 
interest in the proceeds, and his employer is rarely inclined to risk 
discovery by contesting the forfeiture. Id., at 420. In many instances, 
all concerned deny ownership. Id., at 4-23. Consequently, default 
judgments are quite common. Id., at 4-28.

20. The full text of section 881 is set forth in the appendix.

21. Smith, Forfeiture, supra note 4, at 434 to 4-35.

22. See, e.g., Unites States v. $41,305 in Currency, 802 F.2d 1339,1343 
n.6 (11th Cir. 1986); Unites States v. $5,644,540 in Currency, 799 F.2d 
1357,1362 (9th Cir. 1986).

23. See, e.g., United States v. One 56 Foot Motor Yacht, 702 F.2d 
1276,1282 (9th Cir. 1983); United States v. One 1964 Beechcraft, 691 
F.2d 725, 728 (5th Cir. 1982).



24. United States v. $250,000 in Currency, 808 F.2d 895, 897 (1st Cir. 
1987); United States v. A Single Family Residence, 803 F.2d 625, 628 
(11th Cir. 1986).

25. See, e.g., United States v. $4,255,625.39 in Currency, 762 F.2d 895, 
904 (11th Cir. 1985); Unites States v. $13,000 in Currency, 733 F.2d 
581, 585 (8th Cir. 1984).

26. See, e.g., United States v. Banco Cafetero Panama, 797 F.2d 
1154,1160 (2d Cir. 1986); United States v. $4,265,000 in Currency, 762 
F.2d 895, 904 (11th Cir. 1985) (citing extensive authority).

27. See, e.g., United States v. $250, 000 in Currency, 808 F.2d 895, 900 
(1st Cir. 1987); United States v. A Single Family Residence, 803 F.2d 
625, 629-30 (11th Cir. 1986).

28. 640 F. Supp. 899-900 (D. Md. 1986).

29. Id., at 900.

30. 747 F.2d 761, 762-63 (D.C. Cir. 1984).



31. Id.

32. This project involved a survey of cases and statutes in the 
following states: Arizona, Colorado, Florida, Georgia, Illinois, 
Michigan, New Jersey, New Mexico, and Pennsylvania. In addition, every 
state was surveyed for cases involving net worth analysis or explicit 
analysis focusing on the tracing concept. No traditional net worth case 
was located. Pertinent state decisions are cited in the footnotes below.

33. ARIZ. REV. STAT. ANN. Section 13-4305, 4311(H)(Supp. 1986).

34. In re Forfeiture of Approximately $48,900, 432 So. 2d 1382,1385 
(Fla, Dist. Ct. App. 1983)(noting legislative intent to conform to 
federal law). This decision is potentially very important because 
prosecutors won a favorable interpretation despite statutory language 
which did not reflect the federal model. See also People v. Lot 23,Q
Colo.QP.2dQ(April 13,1987)(forfeiture under public nuisance statute; 
holding that once the government establishes a prima facie case, burden 
shifts to claimant and that claimant's failure to present evidence 
mandates forfeiture).

35. See People v. Lot 23, 735 P.2d 184,188 (Colo. 1987); Commonwealth v. 
$15,836.85QCash, 511 A.2d 871, 873 (Pa. Super. Ct. 1986); ILL. ANN. STAT 


ch. 56 v2 para. 1655(3)(b)(Smith-Hurd, Supp. 1986).

36. See FLA. STAT. ANN. Section 893.10 (West 1976, Supp. 1987); GA. CODE 
ANN. Section 16-13-50 (Supp. 1986); MICH. STAT. ANN. Section 14.15(7531) 
(1987 Supp.).

37. See ILL. STAT. ANN. ch. 561/2 para. 1505(5) (Smith-Hurd, Supp. 
1986); MICH STAT. ANN. Section 14.15(7521)(f)(Supp. 1987); PA. STAT. 
ANN. tit. 35, Section 780-128(1)(iii)(Supp. 1986).

38. See, e.g., People v. Lot 23, 735 P.2d 184,189-91 (Colo. 1987) 
(judicial inference). See also People v. Strong, 502 N.E.2d 744, 748-49 
(Ill. App. 3rd Dist. 1986); Commonwealth v. $15,836.85QCash, 511 A.2d 
871 (Pa. Super. Ct. 1986).

39. Two Pennsylvania decisions stand out as significant in this respect. 
See Lappas v. Brown, 483 A.2d 979, 983-84 (Pa. Super. Ct. 1984) (some 
evaluation of bank records and claimant's reported source of legitimate 
income); MI Grossman v. Commissioner of Police, 465 A.2d 1007,1009 (Pa. 
Super. Ct. 1983) (detailed analysis of marijuana sales operation; issue 
not addressed on appeal).

40. 643 F. Supp. 139 (S.D. Fla. 1986).



41. Id., at 142-48.

42. 797 F.2d 1154 (2d Cir. 1986).

43. Id., at 1157-59.

44. Id., at 1159-62.

45. See supra note 25 and accompanying text.

46. See supra notes 28-31, and 37-38 and accompanying text.

47. 572 F. Supp. 994 (E.D.N.Y. 1983).

48. Id., at 995-96.

49. 745 F.2d 733, 745-46, 762-63 (2d Cir. 1984).

50. 709 F.2d 1298,1298-99 (9th Cir. 1983).

51. See generally United States v. Four Parcels of Real Estate, 647 F. 
Supp. 1440 (N.D. Ala. 1986); United States v. One Plymouth Colt Vista, 


644 F. Supp. 1546, 1549-50 (N.D. Ill. 1986); United States v. One Chevy 
Blazer, 572 F. Supp. 994, 995 (E.D.N.Y. 1983).

52. 803 F.2d 625 (11th Cir. 1986).

53. Id., at 629.

54. 572 F. Supp. at 996. See also United States v. One 1980 Red Ferrari, 
827 F.2d 477 (9th Cir. 1987) (fictitious name).

55. See United States v. Premises Known as 2639 Meetinghouse, 633 F. 
Supp. g79, 990 (E.D. Pa. 1986).

56. 797 F.2d at 1159.

57. 803 F.2d 625 (11th Cir. 1986).

58. Id., at 629.

59. 633 F. Supp. 979, 983-85 (E.D. PA. 1986).

60. QF. Supp.Q (S.D.N.Y. 1986) (Lexis Genfed Library).
61. See United States v. Harvey, 560 F. Supp. 1040,1090-91 (S.D. Fla. 


1983).

62. See United States v. Certain Real Property, 568 F. Supp. 434, 436 
(W.D. Ark. 1983).

63. 759 F.2d 1316,1330 (8th Cir. 1985).

64. See supra note 15 and accompanying text.

65. 774 F.2d 1432 (9th Cir. 1985).

66. Id., at 1435.

67. 648 F. Supp. 436, 437-38 (D. Mass. 1986).

68. For an excellent review of net worth analysis, see U.S. Department 
of Justice, Criminal Tax Manual Section 31 et seq. (1985) [hereinafter 
cited as Criminal Tax Manual].

69. United States v. Sorentino, 726 F.2d 876, 879-80 (1st Cir. 1984).

70. Holland v. United States, 348 U.S. 121,132-37 (1954).



71. Criminal Tax Manual, supra note 68, at 31-17.

72. Id., at 31-26.

73. Id., at 31-19 et seq. (citing numerous examples).

74. See supra note 8 and accompanying text.

75. See supra notes 47-51 and accompanying text. In addition, a 
substantial number of criminal casesQnot involving forfeitureQhave used 
this method to corroborate criminality. See Nossen, "One-on one" 
Uncorroborated Testimony: the Dilemma of Prosecutors, Defense Attorneys 
and the Courts in Fraud, Waste, and Abuse, Cases, 58 NOTRE DAME L. REV. 
1019 (1983) (containing numerous citations); R. Nossen, The Detection, 
Investigation And Prosecution Of Financial Crimes (1982).

76. 647 F. Supp. 1440 (N.D. Ala. 1986); see also In re Coastal Seafood 
Enterprises, 648 F. Supp 79 (D.S.C), aff'd without opinion, 823 F.2d 546 
(4th Cir. 1987) (emphasizing discrepant expenditures); United States v. 
Miscellaneous Jewelry, 667 F. Supp. 232 (D. Md. 1987) (same); Lappas v. 
Brown, 483 A.2d 979, 984 (Pa. Super, Ct. 1984).

77. 560 F. Supp. 1040,1090 (S.D. Fla. 1983).



78. Id., at 1090-91.

79. Id.

80. 759 F.2d 1316 (8th Cir. 1985).

81. Id., at 1327-28.

82. Id.

83. Id.

84. Id., at 1328.

85. Id.

86. Lewis also contains a useful review of the admissibility of 
financial records to rebut net worth defenses. Id., at 1328-30.

ADDENDUM

Addendum Contents



I. Proceeds Broadly Defined
II. The Government's Burden of Proof
III. General Evidentiary Principles
IV. Common Factors of Circumstantial Proof
"Close Proximity"
Cash Hordes
Concealment Efforts and Commingled Funds
Extensive Cash Expenditures
Informal Net-Worth Analysis
Formal Net-Worth Analysis
Failure to Account for Income; Inherently Incredible Testimony and 
Affirmative Misrepresentations
Proof of Narcotics Trafficking
Statements by Informants
Expert Opinions
Conclusion
Endnotes

Civil Forfeiture: Tracing the Proceeds of Narcotics Trafficking

In 1987, the Bureau of Justice Assistance (BJA) commissioned the Police 
Executive Research Forum to prepare a monograph on an important aspect 


of asset forfeiture: establishing the evidentiary link between narcotics 
trafficking and the illicit proceeds generated by such activity. 
Although Congress had authorized civil forfeiture of narcotics proceeds 
almost a decade earlier, 21 U.S.C. $881(6) (1978), relatively few court 
decisions had addressed the process by which the evidentiary connection 
between narcotics trafficking and forfeitable proceeds could be 
established. Nevertheless, the few available cases did suggest certain 
principles as possible guidelines for law enforcement. The original 
version of this monograph, published in 1988, set forth those guiding 
principles.(1)
Since 1988, both federal and state authorities have intensified their 
efforts to combat narcotics trafficking through civil forfeiture. As a 
result, the case law on this subject has increased substantially. Recent 
decisions have both confirmed the evidentiary principles identified in 
the original monograph and articulated in more detail the standards for 
tracing narcotics proceeds. Accordingly, it is appropriate to supplement 
the original monograph with updated authority.
Because this monograph is designed as a supplement, it does not provide 
general background on civil forfeiture. Instead, it summarizes the most 
pertinent background materials. The reader is directed to the original 
monograph for the remainder.
This monograph is organized in four sections. Section I addresses the 
concept of "proceeds" within the meaning of the federal narcotics law on 


civil forfeiture. Section II explains the operation and significance of 
the burden of proof under the federal statute. Section III sets forth 
general evidentiary principles, and section IV addresses common 
evidentiary factors of circumstantial proof. Although the monograph 
focuses on federal law, both the "proceeds" concept and the evidentiary 
principles discussed readily apply to state forfeiture actions as well.

I. Proceeds Broadly Defined

21 U.S.C. $881(6) authorizes forfeiture of "all moneys, negotiable 
instruments, securities, or other things of value furnished or intended 
to be furnished by any person in exchange for a controlled substance . . 
. [and] all proceeds traceable to such an exchange . . ." [emphasis 
added] Under the "relation back" doctrine, the government's interest in 
these proceeds vests at the time of the illegal act; the forfeiture 
proceeding merely perfects this interest. Consequently, courts interpret 
the term "proceeds" to include derivative proceeds, such as interest, 
dividends, income, or property derived from the original trafficking 
activity.(2)
For example, in United States v. One Parcel of Real Estate,(3) narcotics 
violators initially used their profits to buy property in North 
Carolina. Later, they sold the property and used the proceeds to buy 
real estate in Florida. The government obtained forfeiture of the 


Florida property as derivative proceeds, thereby benefiting from 
appreciation of the original investment.(4) Other decisions have 
likewise taken an expansive view of the term "proceeds."(5) Moreover, 
adding insult to injury, the Fifth Circuit has ruled that unsuccessful 
claimants (property owners) may not deduct forfeiture losses on their 
income tax returns.(6)

II. The Government's Burden of Proof

In $881 forfeiture cases, the government faces a minimal burden of 
proof. It need establish only probable cause that the targeted property 
is subject to forfeiture. Moreover, probable cause is defined flexibly 
in this context; the evidence need furnish only a "reasonable ground for 
belief . . . [that the property constitutes narcotics proceeds], 
supported by less than prima facie proof, but more than mere 
suspicion."(7) This burden may be met with hearsay evidence.(8) In 
addition, the proceeds need not be linked to a particular narcotics 
transaction, but only to narcotics trafficking generally.(9)
Once the government meets its burden of proof and goes forward, the 
burden shifts to the claimant, who must establish his or her case by a 
preponderance of the evidence.(10) Failure by the claimant to make out a 
prima facie case will result in summary judgment for the government (at 
the pretrial motion stage) or in a directed verdict (at the trial 


stage). Most cases are decided by summary judgment because most 
claimants are unable to present enough evidence even to raise a serious 
factual issue. Thus, "a showing of probable cause alone will support a 
judgment of forfeiture."(11)

III. General Evidentiary Principles

In general, the courts have allowed law enforcement considerable leeway 
in making the connection between narcotics trafficking and illicit 
proceeds. Perhaps the most significant factor in decisions granting 
forfeiture has been the judiciary's repeated emphasis that 
circumstantial evidence may provide an adequate basis for finding that 
targeted assets represent narcotics proceeds. Thus, a "direct connection 
between the property subject to seizure and the illegal activity that 
renders the items forfeitable need not be shown in order to establish 
probable cause.''(12) Given some prosecutors' initial reluctance to 
apply forfeiture statutes aggressivelyQbecause of concern that illicit 
assets could not be accurately identifiedQthe judiciary should be given 
credit for applying evidentiary principles that do not make the tracing 
process unduly rigid.
Recently, the courts have also stressed that determination of probable 
cause should be made under a "totality of the circumstances" standard. 
For example, in United States v. Thomas,(13) the Fourth Circuit reversed 


a district court which, in denying forfeiture, had "consider[ed] . . 
[the] evidence piecemeal rather than as parts of a total picture."(14) 
For this reason, the Fourth Circuit observed: The government fairly 
complains that the court engaged in a "divide and conquer" approach to 
its case, one that required each item of evidence to establish probable 
cause independently or be altogether disregarded. Parsing evidence in 
isolation for a fatal flaw threatens to transform the standard of 
"probable cause" into a steep threshold requirement that would impede 
the operation of the forfeiture statutes.(15)

Similarly, in United States v. Parcels of Land (Laliberte),(16) the 
First Circuit stated that "all that is required is that a court be able 
to look at the 'aggregate' of the facts and find reasonable grounds to 
believe that the property probably was derived from drug 
transactions."(17)
In addition to indicating that evidence should be evaluated under a 
"totality of the circumstances" test, the judiciary has identified 
certain types of circumstantial evidence as especially probative in 
forfeiture cases. The most convincing evidence generally reflects the 
following factors: l) "close proximity" between asset and drugs; 2) 
"cash hordes"; 3) concealment efforts and commingled funds; 4) extensive 
cash expenditures; 5) informal net worth analysis; 6) formal net worth 
analysis; 7) the claimant's failure to account for income; 8) proof of 


narcotics trafficking 9) informant statements; and 10) expert opinions.
This evidence, which may appear in a wide variety of combinations 
depending on the facts of the case, provides a viable basis for 
establishing that targeted assets constitute narcotics proceeds. The 
evidentiary factors are discussed in the next section.
End of article 19 (of 37)--what next? [npq] 

