Third Party Claims Property.

Federal criminal forfeiture can reach any property involved in, derived from, or facilitating the commission of one of the many crimes specified in the United States Code, such as drug trafficking, money laundering, wire fraud, and many others. In these cases, the government generally only needs to prove that the property is subject to forfeiture.

Broadly speaking, third parties cannot intervene in the defendant’s criminal forfeiture case. According to 21 U.S.C. § 853(n)(2), “Any other person who may have any interest in the property may petition the court for ancillary relief.” It is at this point that it becomes important to retain a federal asset-forfeiture lawyer (or civil forfeiture lawyer) to assert your third party’s interest (or rights) to property seized in connection with the criminal prosecution.

Third parties’ rights to intervene are created through the statutory ancillary proceedings of 21 U.S.C. § 853(n). To qualify for an ancillary proceeding, you need (i) a guilty verdict or accepted guilty plea on a forfeiture count, (ii) a preliminary order of forfeiture against the defendant’s interest in the property, and (iii) an ancillary petition that is filed in accordance with 21 U.S.C. § 853(n) and the court’s procedural rules. The preliminary order is the defendant’s last chance to preserve his rights and is final with respect to the defendant, but not with respect to third parties.

To prevail in an ancillary proceeding, a third party generally needs to prove that it is the rightful owner of the property at issue, or at least that it had a legally recognized ownership interest in the property at the time the offense occurred. This is a high bar to meet in many cases. Notably, the right to file an ancillary proceeding is limited only to those who claim an ownership interest in a specific asset; it is not available to creditors of the defendant who seek payment in lieu of the seizure of specific assets. Thus, third parties can seek to protect their interests in federal criminal forfeiture, but only when they meet the stringent requirements of 21 U.S.C. § 853(n).

When must a § 853(n) claimant file, and what must the petition contain?

If you claim to have a legal ownership interest in federal forfeited property, you must meet the applicable filing deadlines and content requirements. According to 21 U.S.C. § 853(n), after entering a judgment for forfeiture, the government must publish a notice of forfeiture in newspapers published in “the judicial district of the United States in which the property is located, the judicial district of the United States in which the defendant was convicted, and any other newspaper of general circulation in the United States that the court determines, in the public interest, may be necessary.” For known third-party claimants, the federal statute also says “may, to the extent practicable, provide direct written notice to any person known to have alleged an interest in the property.” This notification requirement triggers a third party’s right to file an ancillary petition.

Third parties’ ancillary petitions must be timely, and they must comply with the contents and signing requirements established by the federal statute. To be valid, an ancillary petition must:

• (i) be signed “under penalty of perjury”;
• (ii) identify each specific property in which an interest is claimed;
• (iii) describe the nature and extent of the claimed interest in the property; and
• (iv) set forth the claimant’s legal grounds for its interest in the property, including “when and how the alleged interest was acquired”; (v) include any additional facts supporting the claim; and (vi) state the relief sought.

With these requirements in mind, the right to seek relief under 21 U.S.C. § 853(n) depends on a third party’s ability to timely and accurately present its claim in the district court. If a third party fails to properly identify its claim or fails to properly sign its petition, it may lose the opportunity to argue in support of its property rights.

At Spodek Law Group, our federal asset-forfeiture lawyer will take the time to understand the third party’s interest in the seized property and help meet the applicable filing deadlines and content requirements. Third parties may not be able to seek relief if they fail to strictly comply with the statutory requirements. In cases involving government seizure and forfeiture of personal and business property, it is imperative to promptly seek advice from a lawyer familiar with the government’s asset forfeiture litigation team at the U.S. Department of Justice.

Which property interests can defeat forfeiture, and when does a purchaser qualify?

If you seek to claim property subject to federal criminal forfeiture, you must first show that you have a legal interest in a particular asset. To have standing to object to a forfeiture order, a third party must assert an interest in property that is, or includes, the asset at issue. With this property interest established, you will then need to show that your interest qualifies under either 21 U.S.C. § 853(n)(6)(A) or 21 U.S.C. § 853(n)(6)(B).

Interests Vested or Superior to the Defendant’s Interest

Under 21 U.S.C. § 853(n)(6)(A), a third party can defeat the forfeiture of a particular asset if it can show that, “at the time the offense giving rise to the forfeiture occurred, the claimant had, or the claimant’s predecessor in title had, an interest in the property which was vested or superior to the interest of the defendant.”

As with other issues, timing is critical. The third party’s interest in the specific asset must have existed at the time of the underlying criminal act(s). A property interest that arose after the commission of the criminal act(s) will not qualify for protection under subsection (A). A later-created property interest that is subject to later-vesting forfeiture proceedings will not be sufficient to defeat the forfeiture either.

Bona Fide Purchasers for Value

A later-created property interest in the subject asset may qualify for protection under 21 U.S.C. § 853(n)(6)(B) as a bona fide purchaser. To qualify for protection as a bona fide purchaser, the claimant will need to show that, “before the defendant’s interest in the property was subject to forfeiture, the claimant acquired the property for value and without knowledge of the conduct giving rise to the forfeiture.”

If you are facing forfeiture proceedings, reach out to Spodek Law Group today. We provide aggressive and thorough defense of third party interests in federal criminal asset forfeiture cases.

Families retain Spodek Law Group on behalf of someone they love every week of the year.

What evidence and court process decide a timely ancillary claim?

The ancillary proceeding for a timely § 853(n) petition is a civil proceeding and an adversarial one. As such, the ancillary claimant bears the burden of proving its legal interest and entitlement to protect the asset from forfeiture. Its burden of proof is a preponderance of evidence, and the only evidence that can be used to meet this burden is evidence that specifically supports the claim.

Pursuant to Rule 32.2(c) of the Federal Rules of Criminal Procedure, if a third party files a timely and otherwise compliant petition, the district court is required to conduct an ancillary proceeding to determine whether the claimant is entitled to legal protection. 21 U.S.C. § 853(n)(2) and (5) requires that the proceeding “be held before the court without a jury,” and, just as at trial in other civil proceedings, the claimant has the right to testify, present evidence, call witnesses, and cross-examine opposing witnesses. While each case will have its unique evidentiary issues, ancillary claimants in federal criminal forfeiture cases can present evidence like financial records, bank records, business agreements, proofs of purchase, and evidence of the third party’s relationship to the defendant.

With this in mind, Spodek Law Group has structured our ancillary proceeding practice to be as persuasive as possible. We make sure to take maximum advantage of the opportunities available for claimants to present their case and fight the government’s effort to seize and forfeit the property in question.

Despite its clear mandate, however, Rule 32.2(c) does not allow a third-party claimant to have the ancillary proceeding “regardless of the circumstances in which the petition is filed.” The rule requires that a petition be filed and compliant with all procedural and substantive requirements, and, under Rule 32.2(c), only then does the third party have a right to the ancillary proceeding. This gives district courts the discretion to dismiss the petition without holding an evidentiary hearing if the petition is not based on a valid legal theory or does not allege sufficient evidence of the claimant’s standing. If the petition appears to lack standing or is otherwise legally insufficient, the petition may be dismissed without an evidentiary hearing.

How do money judgments and substitute assets change the claim?

If a third party files an ancillary petition and is successful, the court must amend the preliminary order to reflect the third party’s rights. Pursuant to Rule 32.2(c), the court’s preliminary order is subject to amendment if necessary “to reflect any third party rights adjudicated.” If no timely petitions are filed, the preliminary order can become final. When the preliminary order becomes final, the United States shall have clear title to the property and may warrant good title to any subsequent purchaser or transferee.

Rule 32.2(c) also provides a clear exception to third parties’ right to an ancillary proceeding. According to Rule 32.2(c), “the district court is not required to conduct an ancillary proceeding if the forfeiture consists solely of a money judgment.” Similarly, 21 U.S.C. § 853(p) permits substitute-asset forfeiture when, as a result of the defendant’s act or omission, the forfeitable property cannot be located after due diligence, has been transferred or sold to or deposited with a third party, has been placed beyond the court’s jurisdiction, has been substantially diminished in value, or has been commingled with other property that cannot be divided without difficulty; if a third party claims an interest in the substitute property, Rule 32.2(c) governs the ancillary proceeding.

If the government is not able to seize and forfeit the property that is specifically identified, then the government will instead be able to go after any other property that the defendant owns or will come into ownership of. These are substitute assets, and they can be forfeited under 21 U.S.C. § 853(p) if the defendant’s criminal conduct has rendered these substitute assets subject to forfeiture. If the government targets the defendant’s substitute assets for forfeiture, a third party can only file an ancillary petition if it asserts a legal interest in the substitute assets.

Where to Go From Here

If any of this describes your situation, the next step is a conversation rather than more reading. Spodek Law Group runs a fully online client portal and represents clients coast to coast, with offices in New York, Brooklyn, Queens and Los Angeles. The number is 888 348 8028.