Experience has shown, however, that ancillary hearings can involve issues of enormous complexity that require years to resolve. See United States v. BCCI Holdings (Luxembourg) S.A., 833 F. Supp. 9 (D.D.C. 1993) (ancillary proceeding involving over 100 claimants and $451 million); United States v. Porcelli, CR85-00756 (CPS), 1992 U.S. Dist. LEXIS 17928 (E.D.N.Y Nov. 5, 1992) (litigation over third party claim continuing 6 years after RICO conviction). In such cases, procedures akin to those available under the Federal Rules of Civil Procedure should be available to the court and the parties to aid in the efficient resolution of the claims. Because an ancillary hearing is part of a criminal case, it would not be appropriate to make the civil Rules applicable in all respects. The amendment, however, describes several fundamental areas in which procedures analogous to those in the civil Rules may be followed. These include the filing of a motion to dismiss a claim, the conduct of discovery, the disposition of a claim on a motion for summary judgment, and the taking of an appeal from final disposition of a claim. Where applicable, the amendment follows the prevailing case law on the issue. See, e.g., United States v. Lavin, 942 F.2d 177 (3rd Cir. 1991) (ancillary proceeding treated as civil case for purposes of applying Rules of Appellate Procedure); United States v. BCCI (Holdings) Luxembourg S.A., 1993 WL 760232 (D.D.C. 1993) (applying court's inherent powers to permit third party to obtain discovery from defendant in accordance with civil rules). The provision governing appeals in cases where there are multiple claims is derived from Fed. R. Civ.P. 54 (b) The last provision of subsection (a) provides that a district court is not divested of jurisdiction over an ancillary proceeding even if the defendant appeals his or her conviction. This allows the court to proceed with the resolution of third party claims even as the appeal is considered by the appellate court. Otherwise, third parties would have to await the conclusion of the appellate process even to begin to have their claims heard. Subsection (b), however, provides a method to allow a defendant, who has filed an appeal from his conviction and the order of forfeiture, to intervene in the ancillary proceeding for the limited purpose of contesting a third party petitioner's assertion of a legal right, title or interest in the forfeited property. This provision resolves a problem that could otherwise arise if the court were to adjudicate a petitioner's claim and find in favor of the petitioner while an appeal is pending, only to have the defendant prevail on the appeal and seek to reclaim the forfeited property. Under the amendment, if the defendant does not contest the third party's alleged interest by intervening in the ancillary proceeding, he will be considered to have waived any claim to the property even if prevails on appeal. On the other hand, if the defendant does intervene, the court may determine, with finality, either that the third party does have an interest in the property superior to the defendant's (and the government's), or that the defendant has the superior interest which is forfeitable to the government if the conviction is affirmed, and which is returnable to the defendant if the conviction is reversed. This amendment does not alter the general rule, set forth in Sections 1963 (1) (2) and 853 (n) (2), that a defendant has no standing to file a claim of his own. Nor does it alter the rule that the only issue involved in the ancillary hearing is the third party's ownership interest. All issues relating to the forfeitability of the property were resolved at trial; they are of no interest to the third party and may not be re-litigated by an intervening defendant. Subsection (c) clarifies an ambiguity in the present law. It is well-established that in a criminal forfeiture case, the court, in lieu of ordering the forfeiture of specific assets, can enter a personal money judgment against the defendant for an amount of money equal to the amount otherwise subject to forfeiture. United States v. Ginsburg, 773 F.2d 798, 801 (7th Cir. 1985) (en banc), cert. denied, 475 U.S. 1011 (1986); United States v. Conner, 752 F.2d 566, 576 (11th Cir.), cert. denied, 474 U.S. 821 (1985); United States v. Sokolow, 1995 WL 113079 (E.D. Pa. 1995), aff'd F.3d 1996 WL 183816 (3rd Cir. Apr. 18, 1996). In such cases, obviously, no interests of any third parties can be implicated. Therefore, there is no need for any ancillary hearing. The amendment makes this clear. Section 205 Pre-Trial Restraint of Substitute Assets This amendment is necessary to resolve a split in the circuits regarding the proper interpretation of the pre-trial restraining order provisions of the criminal forfeiture statutes. Under 18 U.S.C. § 1963 (d) (1) and 21 U.S.C. § 853 (e) (1), a court may enter a pre-trial restraining order to preserve the availability of forfeitable property pending trial. Until recently, the courts were unanimous in their view that the restraining order provisions applied both to property directly traceable to the offense and to property forfeitable as substitute assets. See Assets of Tom J. Billman, 915 F.2d 916 (4th Cir. 1990); United States v. Regan, 858 F.2d 115 (2d Cir. 1988); United States v. O'Brien, 836 F. Supp. 438 (S.D. Ohio 1993); United States v. Swank Corp., 797 F. Supp. 497 (E.D. Va. 1992). The Third, Fifth and Ninth Circuits have now held, however, that because Congress did not specifically reference the substitute assets provisions in the restraining order statutes, pre-trial restraint of substitute assets is not permitted. United States v. Floyd, 992 F.2d 498 (5th Cir. 1993); In Re Assets of Martin, 1 F.3d 1351 (3rd Cir. 1993); United States v. Ripinsky, 20 F.3d 359 (9th Cir. 1994). At least one of the recent cases was based on an erroneous reading of the legislative history. Martin relies on a footnote in a 1982 Senate Report that states that the restraining order provision in Section 1963 would not apply to substitute assets. Slip op. at 17, citing S. Rep. 97-520, 97th Cong., 2d Sess. (1982) at 10 n.18. The appellate court was apparently unaware that before the restraining order provision was finally enacted in 1984, the footnote in question was dropped from the Senate Report, thus negating any suggestion that Congress did not intend for the new statute to apply to substitute assets. See S. Rep. 98-225, 98th Cong., 1st Sess. (1983) at 201-05. The amendment cures this problem of statutory interpretation by including specific cross-references to 18 U.S.C. § 1963 (m) and 21 U.S.C. § 853 (p) at the appropriate places. Section 206 Defenses Applicable to Ancillary Proceedings in This provision conforms the statutes governing the rights of third parties who assert interests in property subject to forfeiture in a criminal case to the uniform innocent owner defense applicable to civil forfeitures. The intent is to make it possible to adjudicate fully the interests of all third parties in property subject to criminal forfeiture so that it is no longer necessary to file a parallel civil forfeiture action to resolve such matters. Most civil forfeiture statutes require a party asserting an interest in the property to prove that he or she was at all times an "innocent owner" of the property. See, e.g., 21 U.S.C. $881 (a) (4) (requiring proof by third party claimant that he or she was without knowledge of, did not consent to, and was not wilfully blind to the illegal acts giving rise to the forfeiture). Presently, the criminal forfeiture statutes contain essentially the same provision for third parties asserting an interest in the property acquired after the commission of the offense. See 21 U.S.C. §853 (n) (6) (B); 18 U.S.C. §1963 (1) (6) (B) (requiring proof by third party claimant that he was a bona fide purchaser for value without reason to know that the property was subject to forfeiture). The criminal statutes, however, contain no innocent owner requirement for persons claiming to have been the owners of the property at the time the offense giving rise to forfeiture was committed. This allows a claimant to recover the property even if he was aware of or consented to the illegal acts committed by the defendant. This loophole exists because under current law, a criminal forfeiture proceeding is limited to adjudicating the interests of the defendant; interests of third parties have to be litigated in parallel civil proceedings. The amendment closes this loophole by requiring would-be claimants to the subject property in a criminal forfeiture case to meet the same standards that they would be required to meet if the forfeiture were prosecuted as a civil in rem action. Making the civil definition of "innocent owner" applicable - to criminal cases also resolves a conflict in the circuits regarding the type of legal interest that Congress intended to allow a third party to assert in a forfeiture proceeding under 21 U.S.C. § 853 (n) (6) or 18 U.S.C. § 1963 (1) (6). The issue is whether only persons with an ownership interest in the specific property subject to forfeiture such as a mortgage lender with an interest in forfeitable real property are covered by the statute, or whether the procedure is open to any person with a general unsecured claim against the property or estate of the criminal defendant. To date, four circuits have denied standing to general creditors while one has granted it. Compare United States v. BCCI Holdings (Luxembourg) S.A., 46 F.3d 1185 (D.C. Cir. 1995), cert. denied, 115 S. Ct. 2613 (1995); United States v. Schwimmer, 968 F.2d 1570, 1581 (2d Cir. 1992) (general creditors may not file claims); United States v. Campos, 859 F.2d 1233 (6th Cir. 1988) (same); and United States v. Lavin, 942 F.2d 177 (3rd Cir. 1991) (tort victims may not file claims) with United States v. Reckmeyer, 836 F.2d 200 (4th Cir. 1987) (general creditors have a legal interest in forfeited property). The ancillary hearing procedure set forth in §§ 1963 (1) and 853 (n) was designed to ensure a speedy judicial resolution of specific claims to the property being forfeited, not to resolve the claims of general unsecured creditors and other persons with claims arising in contract or in tort against the criminal defendant. To allow every victim of a tort or breach of contract committed by the defendant to intervene in the criminal forfeiture proceeding to attempt to assert a claim to the forfeited property would pervert the criminal process beyond its intended scope. By cross-referencing the uniform innocent owner statute and the definition of "owner" at 18 U.S.C. § 983 (c) (1), the amendment preserves the original intent of Congress and codifies the leading court decisions on this issue such as United States v. BCCI Holdings (Luxembourg) S.A., 833 F. Supp. 9 (D.D.C. 1993), by providing that only persons with the equivalent of a secured interest in the specific property subject to forfeiture may petition for disposition of that property under §§ 1963 (1) and 853 (n). Victims of the crimes giving rise to the forfeiture will be protected by the restitution provisions of the criminal forfeiture statutes that permit the use of forfeited funds to restore property to victims. Section 207 Uniform Procedures for Criminal Forfeiture Section 982 does not contain its own set of definitions and procedures. Rather, all such matters are incorporated by reference to the definitions and procedures set forth in 21 U.S.C. § 853. This has been true since § 982 was enacted in 1986. The cross-reference to § 853, however, has become very complicated as § 982 has been amended and expanded in every Congress since 1986. Currently, different subsections of S 853 are incorporated into § 982 depending upon the nature of the offense giving rise to the forfeiture. The differences, however, are not very great. With respect to forfeitures under §§ 982 (a) (1) and (2), the only substantive differences are 1) the definition of "property" in § 853 (b) is incorporated for FIRREA, counterfeiting, explosives and other forfeitures under § 982 (a) (2) but not for money laundering under § 982(a) (1); 2) the reverse is true for the seizure warrant authority in § 853 (f), which is incorporated for § 982 (a) (1) forfeitures but not for those brought under § 982 (a) (2); and 3) the provision in $ 853 (a) giving federal forfeiture law precedence over State law is omitted from § 982 entirely. More important, Congress failed to incorporate any procedures for forfeitures pursuant to § 982 (a) (3), (4) and (5), the provisions added in 1990 and 1992, leaving it unclear what procedures should apply in those cases. This convoluted cross-referencing system no longer makes any sense and should be abandoned in favor of a simplified statute that incorporates all provisions of § 833 for all § 982 forfeitures. The section dealing with rebuttable presumptions in drug cases (subsection (d)) is the only provision omitted because it has no application outside of the context of narcotics violations and because rebuttable presumptions applicable to § 982 offenses are enacted by other provisions of this Act. The amended version of § 982 (b) (2) is drafted in such a way that it need not be amended again each time Congress adds a new forfeiture provision to subsection (a). Section 208 Seizure Warrant Authority This amendment is intended to encourage greater use of the criminal forfeiture statutes. In all civil forfeiture cases governed by 18 U.S.C. § 981 and 21 U.S.C. § 881, the government may seek the issuance of a warrant from a judge or magistrate to seize property subject to forfeiture. 18 U.S.C. § 981 (b); 21 U.S.C. § 881 (b). Under the amendments made by this Act, property seized under those statutes may be forfeited either civilly or criminally. See 18 U.S.C. § 987. This amendment underscores that point by amending the criminal forfeiture statues themselves to provide that property may be seized for criminal forfeiture pursuant to § 981 (b). |