9 Parallel Proceedings

• Library: Asset Forfeiture: Practice and Procedure in State and Federal Courts (ABA) (2014 Ed.)

9 Parallel Proceedings

A. Background "Tale of Two Cases"

1. Criminal Forfeiture

In June 1991, a federal criminal indictment was issued against Charles Arlt and several other defendants for conspiracy to manufacture methamphetamine and for money laundering. Arlt was convicted of those charges, but the conviction subsequently was reversed for failure to allow the defendant to represent himself at trial. See United States v. Arlt, 41 F.3d 516, 524 (9th Cir. 1994). In May 1995, a second indictment was returned, adding a criminal forfeiture allegation for all criminal proceeds related to the conspiracy. Arlt was convicted in April 1997 and received a life term in prison. See United States v. Arlt, 15 Fed. Appx. 431, 438 (9th Cir. 2001). In August 1998, after denying any third-party petitions, final orders of forfeiture were issued granting forfeiture of the criminal proceeds. See United States v. Arlt, 2000 U.S. App. LEXIS 21492 (9th Cir. 2000).

2. Civil Forfeiture

Five days after the criminal indictment was returned in June 1991, the government filed a civil in rem forfeiture action against over $537,000 U.S. currency, an airplane, boat, helicopter, and several vehicles, alleging that they were used to facilitate or represented proceeds of the underlying criminal activity of the methamphetamine manufacturing conspiracy. The parties agreed to stay the civil proceedings until the parallel criminal action was completed. Upon conviction, summary judgment was entered in April 1993 based on the criminal conviction. That judgment was reversed in September 1994 when the appellate court determined that the forfeiture violated the double jeopardy clause. See United States v. $405,089.23 U.S. Currency, 33 F.3d 1210, 1222 (9th Cir. 1994). After the U.S. Supreme Court reversed the decision, holding that the double jeopardy clause was not violated, see United States v. Ursery, 518 U.S. 267, 275 (1996), the Ninth Circuit reversed the civil forfeiture judgment in September 1997 on the basis that there was an insufficient nexus between the property and the criminal activity. See United States v. $405,089.23 U.S. Currency, 122 F.3d 1285, 1290-91 (9th Cir. 1997).¹

In June 1998, the trial court found probable cause and granted summary judgment, see United States v. $405,089.23 U.S. Currency, 1998 U.S. Dist. LEXIS 8692, and the Ninth Circuit once again reversed, finding no probable cause for the nexus. See United States v. $405,089.23 U.S. Currency, 191 F.3d 461 (9th Cir. 1999). Finally, in May 2001 the government dismissed the civil in rem forfeiture case and defeated a request for Equal Access to Justice (EAJA) fees. See United States v. $405,089.23 U.S. Currency, 9 Fed. Appx. 709, 711 (9th Cir. 2001).

This tale demonstrates the hazards and complications that may arise when attempting to litigate contemporaneous criminal and civil actions arising from the same offense, and how legal strategy may change during the proceeding. For example, in the Arlt case it was obvious that the government initially intended to forfeit the property civilly, reasoning that it would have a lower burden of proof, but due to court decisions restricting the evidence available in making the probable cause determination in the civil action, the government was able to procedurally sidestep that problem by resorting to criminal forfeiture to include a review of all of the evidence introduced during the trial.

A review of the various rules, strategies, and pitfalls of parallel criminal and civil cases is the topic of this chapter.

B. Introduction

Parallel proceedings are defined as criminal and civil actions arising from the same transaction that involve a person who may be a party to both actions. There is no constitutional prohibition against parallel criminal and civil cases or investigations because the government has the right to vindicate several interests simultaneously in different forums. See United States v. Kordel, 397 U.S. 1, 11 (1970); Securities & Exchange Commission v. Dresser, 628 F.2d 1368, 1374-75 (D.C. Cir. 1980); Securities & Exchange Commission v. First Financial Group of Texas, 659 F.2d 660, 666-67 (5th Cir. 1981); Cassell v. United States, 348 F. Supp. 2d 602, 606 (M.D.N.C. 2004); United States v. $42,989.76 in U.S. Currency, 2009 WL 3497824, *2 (D. Nev. 2009) (government may use either civil or criminal forfeiture procedures); United States v. 40 Acres of Real Property, 629 F. Supp. 2d 1264, 1268-69 (S.D. Ala. 2009) (civil forfeiture filed against fugitive criminal defendant).

Thus, the government may file a civil forfeiture action while a criminal action is pending, see United States v. One Parcel of Real Property (Lot 41, Berryhill Farm), 128 F.3d 1386, 1390 (10th Cir. 1997), or dismissed, United States v. Crutcher, 689 F. Supp. 2d 994, 1003 (M.D. Tenn. 2010); seize property with a civil seizure order or initiate an administrative forfeiture and when contested proceed with criminal forfeiture, see United States v. Candelaria-Silva, 166 F.3d 19, 43 (1st Cir. 1999); United States v. Lugo, 63 F. Supp. 2d 896, 897 n. 2 (N.D. Ill. 1999); or obtain a criminal forfeiture judgment and then revive a parallel civil forfeiture action. See United States v. One 1978 Piper Cherokee Aircraft, 91 F.3d 1204, 1206 (9th Cir. 1996). Even in the Arlt litigation, it was not vindictive for the government to amend the criminal indictment to add a criminal forfeiture allegation after receiving an adverse appellate decision on the parallel civil in rem action. See United States v. Arlt, 15 Fed. Appx. 431, 437 (9th Cir. 2001).

The issues that are raised by parallel proceedings include:

1) Use of grand jury information;
2) Civil discovery and the Fifth Amendment privilege against self-incrimination;
3) Stay of the civil case;
4) Application of the Fifth Amendment double jeopardy clause; and
5) Res judicata and collateral estoppel.

C. Grand Jury Information

Under prior versions of the Federal Rules of Criminal Procedure 6(e) pertaining to grand jury testimony, a court order was required before grand jury information could be disclosed to another party, including government attorneys. See United States v. Sells Engineering, 463 U.S. 418, 420 (1983); Illinois v. Abbott & Associates, Inc. 460 U.S. 557, 568 (1983). Thus, a civil forfeiture order that was based on grand jury information obtained without a disclosure order could be reversed. See United States v. Coughlan, 842 F.2d 737, 740 (4th Cir. 1988).

This dilemma was resolved with the Civil Asset Forfeiture Reform Act (CAFRA) Section 10,106 P.L. 185, 114 Stat. 202, 217 by amending 18 U.S.C. § 3322(a) to allow that any grand jury information received as a government attorney may be disclosed to another government attorney for use in connection with any civil forfeiture provision of federal law. United States v. Warshak, 2007 WL 4410237, *13 (S.D. Ohio 2007).

D. Civil Discovery and the Fifth Amendment Privilege Against Self-Incrimination

Because civil discovery rules are very broad, there is a concern that they may be used in the criminal trial to give an unfair advantage to either the defense or prosecution. Thus, the government may not act in bad faith and bring a civil case solely to obtain evidence for a criminal prosecution, see United States v. Kordel, 397 U.S. 1, 11-12 (1970), and the defense should not be allowed to make use of the liberal civil discovery procedures to avoid the restrictions on criminal discovery. See Campbell v. Eastland, 307 F.2d 478, 487 (5th Cir. 1962); Founding Church of Scientology v. Kelley, 77 F.R.D. 378, 380 (D.D.C. 1977).

There is an inherent tension between the purposes of civil discovery and the Fifth Amendment privilege against self-incrimination. The Fifth Amendment privilege covers responses that furnish a link in the chain of evidence needed to prosecute the claimant, see Hoffman v. United States, 341 U.S. 479, 486 (1951), and may be asserted in "any proceeding civil or criminal, administrative or judicial, investigatory or adjudicatory...." See Kastigar v. United States, 406 U.S. 441, 444 (1972).

There are, however, limitations to invoking the Fifth Amendment in forfeiture actions. First, it does not prevent the government from requiring a claimant to establish standing by...