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United States v. Bushay

United States District Court, N.D. Georgia, Atlanta Division

August 5, 2014

JEROME BUSHAY, et al., Defendants, NUGEN MOTOR SPORTS, INC., Claimant

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[Copyrighted Material Omitted]

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For Nugen Motor Sports, Inc., doing business as Nugen MotorSports, Movant: James Ward Howard, The Howard Law Firm, Tucker, GA.

For USA, Plaintiff: Dahil Dueno Goss, Office of United States Attorney, Northern District of Georgia, Atlanta, GA; George Jeffrey Viscomi, Jeffrey W. Davis, Libby Skye Davis, U.S. Attorneys Office - ATL, Atlanta, GA.

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Timothy C. Batten, Sr., United States District Judge.

I. Background

On October 1, 2010, law-enforcement officers executed a search warrant at the residence of Otis Henry and Sara Scott. Their search uncovered a large quantity of illicit drugs, some of which were in the garage just a few feet from where a white 2007 Audi Q7 was parked. The officers seized both the drugs and the Audi. They later learned tat the Audi was registered to Claimant Nugen Motor Sports, Inc. Even so, the Audi was not returned to Nugen.

In December, a federal grand jury indicted Henry (and others) for numerous drug-related offenses.[1] The indictment listed the Audi among the property to be forfeited. Because he fled the jurisdiction, Henry was not arrested until January 2012.

At first, Henry entered a plea of not guilty. But on July 24, 2013, he changed his plea, pleading guilty to conspiracy to knowingly and willingly possess with intent to distribute a controlled substance. As part of his plea agreement, Henry acknowledged that the Audi was forfeitable and agreed to forfeit any interest in it.

After accepting his plea, the Court entered a consent preliminary order of forfeiture, forfeiting any legal interest that Henry had in the Audi. The Court found that the United States had established the necessary nexus between the Audi and the illegal drug conspiracy to which Henry pleaded guilty. That is, the Court found that the Audi constituted proceeds of the conspiracy or that Henry used or intended to use the Audi to carry out the conspiracy.

On August 1, the United States notified Nugen's attorney about the Audi's forfeiture and Nugen's right to assert a claim in an ancillary proceeding. Nugen timely requested a hearing to adjudicate its interest in the Audi. At the parties' request, the

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Court authorized discovery under the Federal Rules of Civil Procedure. Both the United States and Nugen now move for summary judgment [866, 890].[2]

II. Criminal Forfeiture and Ancillary Proceedings

Criminal forfeiture is a form of punishment that applies to certain federal drug-law offenses and thus is imposed following conviction. Libretti v. United States, 516 U.S. 29, 39, 116 S.Ct. 356, 133 L.Ed.2d 271 (1995). Criminal-forfeiture proceedings are primarily governed by 21 U.S.C. § 853 and Federal Rule of Criminal Procedure 32.2. United States v. Davenport, 668 F.3d 1316, 1320 (11th Cir. 2012). Because criminal forfeiture is an in personam action based on the government's seizure of the defendant, district courts can only enter forfeiture orders against the property, or portion thereof, in which the defendant has an interest. United States v. Gilbert, 244 F.3d 888, 919 (11th Cir. 2001). Put simply, forfeiture helps ensure that crime doesn't pay.

When a person, like Henry, is convicted of a federal drug offense punishable by more than one year of imprisonment, the district court must enter an order forfeiting " (1) any property constituting, or derived from, any proceeds the person obtained, directly or indirectly, as the result of [the] violation; [and] (2) any of the person's property used, or intended to be used, in any manner or part, to commit, or to facilitate the commission of, [the] violation." § 853(a)(1)-(2); see also United States v. Marion, 562 F.3d 1330, 1335 (11th Cir. 2009). This " preliminary forfeiture order does not consider third-party interests," so the district court " must amend the final order of forfeiture to exempt the qualifying interest of third-parties." United States v. Ramunno, 599 F.3d 1269, 1273 (11th Cir. 2010).

Following the entry of a preliminary forfeiture order and notice by the United States, see § 853(n)(1), a third party may claim an interest in forfeited property only by timely petitioning the court for an ancillary proceeding, Davenport, 668 F.3d at 1320. This petition must be verified and " shall set forth the nature and extent of the petitioner's right, title, or interest in the property, the time and circumstances of the petitioner's acquisition of the right, title, or interest in the property, any additional facts supporting the petitioner's claim, and the relief sought." § 853(n)(3).

The sole purpose of an ancillary criminal forfeiture proceeding is to determine the petitioner's legal interests in the forfeited property. Davenport, 668 F.3d at 1321. If the petitioner proves that he has a valid, superior interest in the forfeited property, then the court must exclude it from the final forfeiture order. Id. at 1320.

To prevail in an ancillary proceeding under § 853(n), the petitioner must establish by a preponderance of the evidence that

(A) the petitioner has a legal right, title, or interest in the property . . . [that] renders the order of forfeiture invalid in whole or in part because the right, title, or interest was vested in the petitioner rather than the defendant or was superior to any right, title, or interest of the defendant at the time of the commission of the acts which gave rise to the forfeiture

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of the property under this section; or
(B) the petitioner is a bona fide purchaser for value of the right, title, or interest in the property and was at the time of purchase reasonably without cause to believe that the property was subject to forfeiture under this section.

§ 853(n)(6)(A)-(B). Here, therefore, the Court can exclude the Audi from the final forfeiture order only if Nugen proves that its legal interests in the Audi were superior to Henry's when the United States' interests vested[3] or that Nugen purchased the Audi " without cause to believe that [it] was subject to forfeiture." United States v. Soreide, 461 F.3d 1351, 1354-55 (11th Cir. 2006).

Nugen's petition posits that it has a superior interest in the Audi and that it is a bona fide purchaser for value. To succeed on it superior-interest theory, Nugen must show that it has a legal interest in the Audi that was superior to ...

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