United States v. Salti

Citations: 579 F.3d 656; 2009 U.S. App. LEXIS 19093; 2009 WL 2589842Docket: 07-4487

Court: Court of Appeals for the Sixth Circuit; August 25, 2009; Federal Appellate Court

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Mahmoud F. Salti, also known as Mike Salti, Jr., and his uncle Mohammed F. Salti, now known as Mohammed Al Ammouri, along with Al Ammouri's wife Usrah Mary Salti, appealed the district court's dismissal of their claims to a Swiss bank account forfeited following a plea agreement involving Mahmoud. The district court dismissed Al Ammouri's claim based on the fugitive disentitlement statute (28 U.S.C. § 2466) and found that Mary Salti lacked standing. The Court of Appeals reversed and remanded the decision.

The case originated from a 1996 grand jury indictment against Al Ammouri and Mahmoud, charging them with conspiracy related to food stamp fraud and money laundering. They were accused of co-mingling food stamp redemption funds with other funds to conceal their origins. Mahmoud initially pleaded not guilty but later admitted guilt to charges stemming from their scheme, which involved purchasing approximately $7 million in food stamps at less than face value and laundering the proceeds by transporting cash and checks to Al Ammouri in Jordan, where the funds were cashed.

In April 2006, the district court approved an addendum to Mahmoud's plea agreement, mandating the forfeiture of all property related to the money laundering counts. Mahmoud acknowledged his and Al Ammouri's joint involvement in the criminal activities, and the court issued an Order of Forfeiture under 18 U.S.C. § 982(a)(1), allowing for future identification and seizure of any related property.

In November 2006, Mahmoud and the Government entered into an agreement for the forfeiture of approximately $750,000 held in a Swiss account in the name of Mohammed Al Ammouri, as per 18 U.S.C. 982(a)(1). The Government asserted that the funds were involved in Counts 3 and 4 of the indictment. The district court approved an amended forfeiture order, supported by a sealed affidavit from Special Agent Kevin Ganger, determining the property was subject to forfeiture. The court mandated notice be published as per 21 U.S.C. 853(n)(1) and allowed for direct notice to Al Ammouri, identified as a person with potential interest in the property.

On January 17, 2007, Al Ammouri and his wife Mary Salti filed a petition under 21 U.S.C. 853(n), claiming ownership and interest in the Swiss account, asserting their rights were established prior to the alleged offenses. They noted Al Ammouri's health issues and stated that the account was maintained for Mary Salti's future support. The petition claimed that the funds had continuously been held in trust for Mary Salti and were not related to any criminal activity. They requested a hearing to protect their interest from forfeiture.

The Government responded with a motion to dismiss the petition, arguing for Al Ammouri's claim dismissal under the fugitive disentitlement statute and contending that Mary Salti lacked standing due to no legal interest in the property. This argument was supported by a declaration from Special Agent Ganger, involved in the investigation of both Al Ammouri and Mahmoud.

Mary Salti's claim regarding the Swiss Account was challenged by the Government, which contended that she was neither an 'owner' nor did she have a 'legal interest' in the account, even if the funds were legitimate. Petitioners countered that Al Ammouri's claim should not be dismissed based on fugitive disentitlement principles, asserting that such dismissal would infringe on his due process rights, violate the Ex Post Facto Clause, and breach the Eighth Amendment. They maintained that Mary Salti had standing due to her power of attorney for Al Ammouri, her marital property interest, and her status as a beneficiary of a constructive trust concerning the account's funds. Additionally, petitioners sought to strike Ganger's declaration and requested discovery and a hearing. They submitted several documents, including declarations from Al Ammouri and Mary Salti, bank records, medical reports, a power of attorney document under Ohio law, and pertinent legal texts. On November 30, 2007, the district court sided with the Government, dismissing Al Ammouri's claim based on the fugitive disentitlement statute and ruling that Mary Salti lacked standing. The court issued a Final Order of Forfeiture on December 4, 2007, leading to the current appeal. The relevant criminal forfeiture statute mandates forfeiture of property involved in money laundering offenses and allows third parties asserting legal interests in forfeited property to petition the court for a hearing to validate their claims. The petitioner bears the burden of proof to establish their claim by a preponderance of the evidence. If successful, the court may amend the forfeiture order accordingly.

The statute mandates a liberal interpretation to fulfill its remedial objectives. Federal Rule of Criminal Procedure 32.2, enacted in 2000, outlines the process for ancillary proceedings when a third party claims an interest in property subject to criminal forfeiture. Specifically, if a petition is filed by a third party, the court must conduct an ancillary proceeding unless the forfeiture is a money judgment. In such proceedings, the court can dismiss a petition based on lack of standing, failure to state a claim, or other lawful reasons, assuming the petition's facts are true for the motion's purpose. Discovery may be permitted if deemed necessary before a hearing, and summary judgment can be sought under Federal Rule of Civil Procedure 56 after discovery concludes. Although the Civil Rules are not fully applicable, certain analogous procedures, such as motions to dismiss and summary judgment, can be followed.

Regarding Al Ammouri's claim, the district court's application of the fugitive disentitlement statute (28 U.S.C. § 2466) to dismiss his third-party claim is scrutinized. The court possesses discretion in determining disentitlement once statutory conditions are met, with the legal applicability of § 2466 reviewed de novo. The court's decision to order disentitlement is evaluated for abuse of discretion. A district court's abuse occurs if it relies on erroneous factual findings, misapplies the law, or uses an incorrect legal standard. Al Ammouri's claim was dismissed under the fugitive disentitlement statute, part of the Civil Asset Forfeiture Reform Act of 2000, which allows a court to deny a person's use of U.S. court resources for claims if they evade jurisdiction after being aware of a warrant for their arrest. The statute specifies that the individual must not be in custody for other criminal conduct in a different jurisdiction.

The Second Circuit established the fugitive disentitlement statute's application, outlining five prerequisites under 2466 for a claimant's disentitlement: (1) issuance of a warrant for the claimant's apprehension; (2) the claimant's notice or knowledge of the warrant; (3) relation of the criminal case to the forfeiture action; (4) the claimant not being confined or held in custody elsewhere; and (5) the claimant deliberately avoiding prosecution by leaving or evading the U.S. jurisdiction. The D.C. Circuit has adopted this five-element test. In the current case, the district court found all elements satisfied and dismissed Al Ammouri's claim. Petitioners argued this dismissal was premature, asserting that the court improperly concluded Al Ammouri was avoiding the U.S. jurisdiction, especially given concerns about his health. The court rejected the argument regarding the necessity of discovery before a motion to dismiss, clarifying that such motions can be brought without prior discovery. However, the court concurred with the petitioners that the district court incorrectly determined Al Ammouri's status as a 'fugitive' as a matter of law. Citing the D.C. Circuit's reversal of a similar case, the court noted that the government must demonstrate that evasion was specifically to avoid prosecution, which was not sufficiently established in this instance. Thus, the district court erred in dismissing the claim based on the fugitive disentitlement statute.

Petitioners argue against the claim that Al Ammouri is deliberately avoiding prosecution, citing his poor health, including heart disease and other conditions, as a factor preventing his return to the United States. Al Ammouri has provided a declaration affirming his ongoing health issues and submitted medical records, including a letter from a doctor stating he is too frail to travel following recent heart surgery. The district court rejected Al Ammouri's challenge to the fugitive disentitlement statute, stating it does not contain a health exception, and deemed his argument about his inability to return to the U.S. irrelevant. However, the court's analysis failed to adequately consider the relevance of Al Ammouri's health to the determination of whether he is deliberately avoiding prosecution. The court's conclusion that prior plea negotiations indicated his ability to return lacks sufficient consideration of the medical documentation provided, particularly the doctor's note dated after those negotiations. The district court's premature assessment of the evidence surrounding Al Ammouri's intent to evade prosecution suggests a misapplication of the legal standards governing the fugitive disentitlement statute.

The court reverses the district court's dismissal of Al Ammouri's third-party claim based on the fugitive disentitlement statute, indicating that future application of this statute remains possible on remand. Regarding Mary Salti's claim, the court reviews the district court's dismissal for lack of standing under federal forfeiture laws de novo. It confirms that the standard for reviewing the district court’s factual findings is "clearly erroneous," and legal determinations of standing are also reviewed de novo. A third-party petition may be dismissed for lack of standing, following a standard akin to a motion to dismiss under Federal Rule of Civil Procedure 12(b). 

Salti argues she has a legitimate interest in the Swiss Account due to her power of attorney over Al Ammouri, a marital interest, and previous ownership of funds in her name. She asserts that she should be recognized as a beneficiary of a constructive trust. The district court previously ruled that Salti could not act on Ammouri's behalf due to his fugitive status. However, since the court reverses the dismissal of Ammouri's claim, it also overturns the dismissal of Salti's claim related to her power of attorney. Furthermore, Salti contends she has standing to assert her own claim based on her marital interest, disputing the district court's application of Ohio law and arguing for the relevance of Swiss law regarding her standing in this matter.

Federal practice in forfeiture cases relies on the law of the jurisdiction that created the property right to assess the petitioner's legal interest. In this instance, Swiss law is applicable to determine whether Mary Salti has a marital interest in a bank account in Switzerland. The court rejects the district court's conclusion that the law of the jurisdiction where the claimant resides governs the matter. The government has not agreed that Salti holds a sufficient interest under Swiss law, and Swiss banking law may also be relevant in assessing her legal interest, particularly if the account is solely in her husband's name.

Mary Salti claims standing on the basis that the funds in question were once held in her name. However, this assertion alone does not establish a recognized interest in the account, as it may only qualify her as a general creditor of Al Ammouri. To have standing under the relevant statute, she must demonstrate a vested or superior interest in the property, which she has not done merely by stating the funds were previously in her name.

Salti also argues that she is the beneficiary of a constructive trust regarding the Swiss Account, a point the district court acknowledged but found she did not substantiate with evidence beyond her bare allegation. The court will review the district court's decision regarding her alleged lack of a colorable interest, while also addressing the government's claim that she lacks a legal interest due to the nature of constructive trusts as equitable remedies, especially given her alleged misrepresentations on U.S. tax returns.

The court rejects the Government's argument that a constructive trust cannot qualify as a cognizable 'legal interest' under 21 U.S.C. § 853(n)(2). It notes that only one circuit denies that equitable interests, such as constructive trusts, can be considered legal interests. The court previously recognized constructive trusts as 'superior' interests akin to liens or valid assignments under 21 U.S.C. § 853(n)(6)(A). Furthermore, the court dismisses the Government's claim that Mary Salti's 'unclean hands' preclude her from asserting an interest in the Swiss Account due to her failure to disclose it on tax returns. The district court found that Salti's omission could be attributed to negligence or ignorance. However, it concluded that Salti did not provide adequate evidence to support her status as the beneficiary of the constructive trust, aside from mere allegations. 

The petition asserts that Al Ammouri is the account’s owner, but claims the funds trace back to an account previously in Salti's name. It argues that Salti has continuously held the funds for her own support due to Al Ammouri's health issues. The petition clarifies that although the Swiss Account is under Al Ammouri's name, Salti retains access via his power of attorney. Supporting declarations and bank documents were submitted, detailing the funds' history and the legal context of the account. These submissions substantiate Salti's claim of a prior interest in the account, which predates any alleged criminal activity and is acknowledged by Al Ammouri as superior to his own. Thus, the court concludes that Salti has established a facially colorable claim to be recognized as the beneficiary of a constructive trust in the Swiss Account, granting her standing in these proceedings.

Al Ammouri and Mary Salti argue that their due process rights were violated due to the Government's prolonged delay in initiating a forfeiture action regarding a Swiss Account, which the Government has known about since 1996. They cite the "Consent Judgment and Settlement Agreement" with Mary Salti as a basis for their claim of "prima facie prejudicial" delay. The legal framework from Barker v. Wingo, 407 U.S. 514, is applied to assess whether the delay violates Fifth Amendment protections. This framework includes four factors: length of delay, reason for delay, claimant's assertion of rights, and prejudice to the claimant. The court found that there was no presumptively prejudicial delay, noting that the forfeiture action was initiated after Mahmoud, a fugitive and key figure in the case, changed his plea to guilty in February 2006. Subsequently, an agreement was reached regarding the forfeiture of the Swiss Account, which was linked to criminal charges against Mahmoud. The court concluded that the delay did not infringe upon Al Ammouri or Mary Salti's constitutional rights. Consequently, the court reversed the district court's dismissal of their third-party petition and remanded for further proceedings. Additionally, the petition mentioned a prior civil action and a settlement agreement involving Mary Salti, which the district court did not address in its dismissal.

The petition must be signed by the petitioner under penalty of perjury and must detail the nature and extent of the petitioner's interest in the property, including how and when this interest was acquired, any supporting facts for the claim, and the relief sought. The petitioners in this case are proceeding under a specific subparagraph of the relevant statute. This procedural rule was created to address the complexities of third-party claims, allowing for more efficient resolution akin to the Federal Rules of Civil Procedure. The district court's dismissal of a claim based on fugitive disentitlement is considered a lawful reason for dismissal. Historically, courts have been permitted to dismiss claims without a hearing, and in this instance, the district court found that the claimants did not sufficiently demonstrate any legal right to the forfeited property, thus no hearing was required. The court clarified that the argument regarding Al Ammouri's status as a non-fugitive at the time of departure is incorrect, as the fugitive disentitlement statute applies to individuals who avoid returning to the U.S. despite knowing of outstanding warrants. The statute's language extends to those who, aware of their legal troubles, choose not to enter the United States. Al Ammouri’s prior departure from the U.S. before any warrant was issued does not automatically exempt him from being classified as a fugitive under this statute. The court also did not consider a video presented by the Government that purportedly demonstrates Al Ammouri's health status.

The video referenced was not part of the district court's record during its consideration of the Government's motion to dismiss. The Government argued that a brief video showing a man, allegedly Al Ammouri, with a pink umbrella, black overcoat, and white tie, demonstrated Al Ammouri's good health, contradicting his claims of poor health; however, this argument was deemed tenuous. Al Ammouri's claims regarding constitutional violations from the disentitlement statute were not considered. The district court had previously indicated it was contemplating disallowing a claim in a forfeiture action but opted to convert the Government's motion into one for partial summary judgment, allowing 90 days for limited discovery focused on the disentitlement statute. The court warned the petitioner of potential sanctions for non-compliance with discovery requests. Although the district court's subsequent grant of summary judgment was reversed, the court's approach after rejecting outright dismissal was noted as instructive. Each element of Article III standing must be substantiated with the required evidence at different litigation stages; at the pleading stage, general allegations might suffice, while conclusory allegations are not assumed true. The factual allegations in a petition are to be taken as true when considering a motion to dismiss. Lastly, the document specifies that questions regarding its validity and construction are to be determined under Ohio law.

Without prejudice to future actions regarding Al Ammouri's disentitlement or the Government's arguments against his interest in the Account, the Government claims that Ohio law applies, asserting that Mary Salti lacks a marital interest in the Swiss Account unless she initiates divorce proceedings. Salti contests the applicability of Ohio law, arguing that she would maintain a marital interest regardless. A constructive trust is defined in the Restatement as arising when a property titleholder has an equitable duty to convey the property to another to prevent unjust enrichment. Judicial interpretations emphasize that "legal interest" refers only to legally protected rights, excluding equitable rights. The D.C. Circuit has aligned with other circuits in rejecting a distinction between legal and equitable claims in forfeiture cases but disagrees with courts that allow constructive trusts to take precedence over government forfeiture claims. This position has faced criticism for suggesting that a constructive trust's existence is contingent upon judicial declaration rather than the underlying equities.