From: [doctor 1] at [pofbbs.chi.il.us] (Patrick B. Hailey)
Subject: Pat Three: Innocent owners
Date: Sun, 21 Nov 93 3:26:31 CST


Subject: Part Three: Innocent Owners

The Pittsburgh Press, Tuesday, August 13, 1991

          P R E S U M E D   G U I L T Y 
         The Law's Victims in the War on Drugs

     Police profit by seizing homes of innocent

by Andrew Schneider and Mary Pat Flaherty

Part Three: Innocent owners

     The second time police came to the Hawaii home of Joseph and
Frances Lopes, they came to take it. 

     "They were in a car and a van. I was in the garage. They said,
'Mrs. Lopes, let's go into the house, and we will explain things to
you.' They sat in the dining room and told me they were taking the
house. It made my heart beat very fast."

     For the rest of the day, 60-year-old Frances and her
65-year-old husband, Joseph, trailed federal agents as they walked
through every room of the Maui house, the agents recording the
position of every piece of furniture on a video-tape that serves as
the government's inventory.

     Four years after their mentally unstable adult son pleaded
guilty to growing marijuana in their back yard for his own use, the
Lopeses face the loss of their home. A Maui detective trolling for
missed forfeiture opportunities spotted the old case. He recognized
that the law allowed him to take away their property because they knew
their son had committed a crime on it. 

     A forfeiture law intended to strip drug traffickers of
ill-gotten gains often is turned on people, like the Lopeses, who have
not committed a crime. The incentive for police to do that is
financial, since the federal government and most states let the police
departments keep the proceeds from what they take. 

     The law tries to temper money-making temptations with
protection for innocent owners, including lien-holders, landlords
whose tenants misuse property, or people unaware of their spouse's
misdeeds. The protection is supposed to cover anyone with an interest
in a property who can prove he did not know about the alleged illegal
activity, did not consent to it, or took all reasonable steps to
prevent it. 

     But a Pittsburgh Press investigation found that those supposed
safeguards do not come into play until after the government takes an
asset, forcing innocent owners to hire attorneys to get their property
back -- if they ever do. 

     "As if the law weren't bad enough, they just clobber you
financially," says Wayne Davis, an attorney from Little Rock, Ark.

Feared for their son

     In 1987, Thomas Lopes, who was then 28 and living in his
parents' home, pleaded guilty to growing marijuana in their back yard.
Officers spotted it from a helicopter. 

     Because it was his first offense, Thomas received probation
and an order to see a psychologist. From the time he was young, mental
problems tormented Thomas, and though he visited a psychologist as a
teen, he had refused to continue as he grew older, his parents say. 

     Instead, he cloistered himself in his bedroom, leaving only to
tend the garden. 

     "We did ask him to stop, and he would say, 'Don't touch it',
or he would do something to himself," says the elder Lopes, who worked
on a sugar plantation and lived in its rented camp housing for 30
years while he saved to buy his own home.

     Given Thomas' history, and a family history of mental problems
that caused a grandparent and an uncle to be committed to
institutions, the threats stymied his parents. 

     The Lopeses, says their attorney Matthew Metnzer, "were under
duress. Everyone who has been diagnosed in this family ended up being
taken away. They could not conceive of any way of getting rid of the
dope, without getting rid of their son, or losing him forever."

     When police arrived to arrest Thomas, "I was so happy because
I knew he would get care," says his mother. He did, and he continues
weekly doctor visits. His mood is better, Mrs. Lopes says, and he had
never again grown marijuana or been arrested. 

     But his guilty plea haunts his family. 

     Because his parents admitted they knew what he was doing,
their home was vulnerable to forfeiture. 

     Back when Thomas was arrested, police rarely took homes. But
since, agencies have learned how to use the law, and have seen the
financial payoff, says Assistant U.S. Attorney Marshall Silverberg, of
Honolulu. 

     The also carefully review old cases for overlooked forfeiture
possibilities, he says. The detective who uncovered the Lopes case
started a forfeiture action in February -- just under the five-year
deadline for staking such a claim. 

     "I concede the time lapse on this case is longer than most,
but there was a violation of the law, and that makes this appropriate,
not money-grubbing," says Silverberg. "The other way to look at this,
you know, is that the Lopeses could be happy we let them live there
as long as we did."

     They don't see it that way. 

     Neither does their attorney, who says his firm now has about
eight similar forfeiture cases, all of them stemming from small-time
crimes that occurred years ago but were resurrected. "Digging these
cases out now is a business proposition, not law enforcement," Menzer
says. 

     "We thought it was all behind us," says Lopes. Now, "there
isn't a day I don't think about what will happen to us."

     They remain in the house, paying taxes and mortgage, until the
forfeiture case is resolved. Given court backlogs, that won't likely
be until the middle of next year, Menzer says. 

     They've been warned to leave everything as it was when the
videotape was shot. 

     "When they were going out the door," Mrs. Lopes says of the
police, "they told me to take good care of the yard. They said they
would be coming back one day."

'Dumb judgement'


Protection for innocent owners are "a neglected issue in federal and
state forfeiture law," concluded the Police Executive Research Forum
in its March bulletin. 

     But a chief policy maker on forfeiture maintains that the
system is actively interested in protecting the rights of the
innocent. 

     George J. Terwilliger III, associate deputy general in the
Justice Department, admits that there may be instances of 'dumb
judgement.' And says if there's a 'systemic' problem, he'd like to
know about it. 

     But attorneys who battle forfeiture cases say dumb judgement
is the systemic problem. And they point to some of Terwilliger's own
decisions as examples. 

     The forfeiture policy that Terwilliger crafts in the nation's
capital he puts to use in his other federal job: U.S. attorney for
Vermont. 

     A coalition of Vermont residents, outraged by Terwilliger's
forfeitures of homes in which small children live, launched a
grass-roots movement called "Stop Forfeiture of Children's Homes."
Three months old, the group has about 70 members from school
principals to local medical societies. 

     Forfeitures are a particularly sensitive issue in Vermont
where state law forbids taking a person's primary home. That
restriction appears nowhere in federal law, which means Vermont police
departments can circumvent the state constraint by taking forfeiture
cases through federal courts.

     The playmaker for that end-run: Terwilliger.

     "It's government sponsored child abuse that's destroying the
future of children all over this state in the name of fighting the
drug war," says Dr. Kathleen DePierro, a family practitioner who works
at Vermont State Hospital, a psychiatric facility in Waterbury. 

     The children of Karen and Reggie Lavallee, ages 6, 9 and 11,
are precisely the type of victims over which the Vermonters agonize.
Reggie Lavalle is serving a 10-year sentence in a federal prison in
Minnesota for cocaine possession. 

     Because police said he had been involved in drug trafficking,
his conviction cost his family their ranch house on 2 acres in a small
village 20 miles east of Burlington. For the first time, the family is
on welfare, in a rented duplex. 

     "I don't condone what my husband did, but why victimize my
children because of his actions? That house wasn't much, but it was
ours. It was a home for the children, with rabbits, chickens, turkeys
and a vegetable garden. Their friends were their and they liked the
school," says Mrs. Lavallee, 29.

     After the eviction, "every night for months, Amber cried
because she couldn't see her friends. I'd like to see the government
tell this 9-year-old that this isn't cruel and unusual punishment."

     Terwilliger's dual role particularly troubles DePierro. "It's
horrifying to know he's setting policy that could expand this type of
terror and abuse to kids in every state in the nation."

     Terwilliger calls the groups allegations absurd. "If there was
someone to blame, it would be the parents and not the government."

     Lawyers like John MacFadyen, a defense attorney in Providence,
R.I., find it harder to fix blame. 

     "The flaw with the innocent owner thing is that life doesn't
paint itself in black and white. It's oftentimes gray, and there is no
room for gray in these laws," MacFadyen says. As a consequence,
prosecutors presume everyone guilty and leave it to them to show
otherwise. "That's not good judgement. In fact, if defies common
sense."

Proving innocence

Innocent owners who defend their interests expose themselves to
questioning that bores deep into their private affairs. Because the
forfeiture law is civil, they also have no protection against self
incrimination, which means they risk having anything they say used
against them later. 

     The documentation required of innocent owner Loretta Stearns
illustrates how deeply the government plumbs. 

     The Connecticut woman lent her adult son $40,000 in 1988 to
buy a home in Tequesta, Fla., court documents show. 

     Unlike many parents who treat such transactions informally,
she had the foresight to record the loan as a mortgage with Palm Beach
County. Her action ultimately protected her interest in the house
after the federal government seized it, claiming her son stored
cocaine there. He has not been charged criminally. 

     The seizure occurred in November, and it took until last May
before Mrs. Stearns convinced the government she had a legitimate
interest in the house. 

     To prove herself an innocent owner, Mrs. Stearns met 14
requests for information, including providing "all documents of any
kind whatsoever pertaining to your mortgage, including but not limited
to, loan application, credit reports, record of mortgage and mortgage
payments, title reports, appraisal reports, closing documents, records
of any liens, attachments on the defendant's property, records of
payments, cancelled checks, internal correspondence or notes
(handwritten or typed) relating to any of the above and opinion letter
from borrower's or lender's counsel relating to any of the above." 

     And that was just question No. 1.

Landlord as cop

     Innocent owners are supposed to be shielded in forfeitures,
but at times they've been expected to become virtual cops in order to
protect their property from seizure. 

     T.T. Masonry Inc. owns a 36-unit apartment building in
Milwaukee, Wis. that's plagued by dope dealing. Between January, 1990,
when it bought the building, and July 1990, when the city formally
warned it about problems, the landlord evicted 10 tenants suspected of
drug use, gave a master key to local beat and vice cops, forwarded
tips to police, and hired two security firms -- including an off-duty
police officer -- to patrol the building. 

     Despite that effort, the city seized the property. 

     Assistant City Attorney David Stanosz says "once a property
develops a reputation as a place to buy drugs, the only way to fix
that is to leave it totally vacant for a number of months. This
landlord doesn't want to do that."

     Correct, says Jerome Buting, attorney for Tom Torp of Masonry.

     "If this building is such a a target for dealers, use that
fact," says Buting. "Let undercover people go in. But when I raised
that, the answer was they were short of officers and resources."

It looks like coke

     Grady McClendon, 53, his wife, two of their adult children and
two grandchildren -- 7 and 8 -- were in a rented car headed to their
Florida home in August 1989. They were returning from a family reunion
in Dublin, Ga.

     In Fitzgerald, Ga., McClendon made a wrong turn on a one-way
street. Local police stopped him, checked his identification, and
asked his permission to search the car. He agreed. 

     Within minutes, police pulled open suitcases and purses,
emptying-out jewelry and about 10 Florida state lottery tickets. They
also found a registered handgun. 

     Then, says McClendon, the police "started waving a little
stick they said was cocaine. They told me to put on my glasses and
take a good look. I told them I'd never seen cocaine for real, but
that didn't look like TV."

     For about six hours, police detained the McClendon family at
the police station where officers seized $2,300 in cash and other
items as "instruments of drug activity and gambling paraphernalia" --
a reference to the lottery tickets. 

     Finally, the gave the McClendon's a traffic ticket and
released them, but kept the family possessions. 

     For 11 months, McClendon's attorney argued with the state,
finally forcing it to produce lab test results on the "cocaine."

     James E. Turk, the prosecutor who handled the case, will say
only "it came back negative."

     "That's because it was bubble gum," says Jerry Froelich,
McClendon's attorney. A judge returned the McClendon's items. 

     Turk considers the search "a good stop. They had no proof of
where they lived beyond drivers' licenses. They had jewelry that could
have been contraband, but we couldn't prove it was stolen. And they
had more cash than I would expect them to carry."

     McClendon says, "I didn't see anything wrong with them asking
to search me. That's their job. But the rest of it was wrong, wrong,
wrong."

Seller, beware

     Owners who press the government for damages are rare. Those
who do are often helped by attorneys who forgo their usual fees
because of their own indignation over the law. 

     For nearly a decade, the lives of Carl and Mary Shelden of
Moraga, Calif., have been intertwined with the life of a convicted
criminal who happened to buy their house. 

     The complex litigation began when the Shelden's sold their
home in 1979, but took back a deed of trust from the buyer -- an
arrangement that made the Shelden's a mortgage holder on the house. 

     Four years later the buyer was arrested and convicted of
running an interstate prostitution ring. His property, including the
home on which the Shelden's held the mortgage, was forfeited. The
criminal, pending his appeal, went to jail, but the government allowed
his family to live in the home rent-free.

     Panicked when they read about the arrest in the newspaper, the
Shelden's discovered they couldn't foreclose against the government and
couldn't collect mortgage payments from the criminal. 

     After tortuous court appearances, the Shelden's got back the
home in 1987, but discovered it was so severely damaged while in
government control that they can now stick their hands between the
bricks near the front door. 

     The home the Shelden's sold in 1979 for $289,000 was valued at
$115,500 in 1987 and now needs nearly $500,000 in repairs, the
Sheldens say, chiefly from uncorrected drainage problems that caused a
retaining wall to let loose and twist apart the main house. 

     Disgusted, they returned to court, saying their Fifth
Amendment rights had been violated. The amendment prohibits the
taking of private property for public use without just compensation.
Their attorney, Brenda Grantland of Washington, D.C., argues that when
the government seized the property but failed to sell it promptly and
pay off the Sheldens, it violated their rights. 

     Between 1983 and today, the Sheldens have defended their
mortgage through every type of court: foreclosures, U.S. District
Court, Bankruptcy, U.S. Claims. 

     In January, 1990, a federal judge issued an opinion agreeing
the Sheldens rights had been violated. The government asked the judge
to reconsider, and he agreed. A final opinion has not been issued. 

     "It's been a roller coaster," says Mrs. Shelden, 46. A
secretary, she is the family's breadwinner. Shelden, 50, was
permanently disabled when he broke his back in 1976  while repairing
his home. Because he was unable to work, the couple couldn't afford
the house, so they sold it -- the act that pitched them into their
decade-long legal quagmire. 

     They've tried to rent the damaged home to a family -- a real
estate agent showed it 27 times with no takers -- then resorted to
renting to college students, then room-by-room boarders. Finally,
they and their children, ages 21 and 16, moved back in.

     "We owe Brenda (Grantland) thousands at this point, but she's
really been a doll," says Shelden. "Without people like her, people
like us wouldn't stand a chance."-- 
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CIVIL FORFEITURES CAN THREATEN A COMPANY'S EXISTENCE

     For businesses, civil forfeitures can be a big, big stick. 
Bad judgement, lack of knowledge, of outright wrongdoing by one
executive can put the company in jeopardy.
     A San Antonio bank faces a $1 million loss and may close
because it didn't know how to handle a huge cash transaction and
got bad advice from government banking authorities, the bank
says.  The government says the bank knowingly laundered money for
an alleged Mexican drug dealer.
     The problems began when Mexican nationals came to Stone Oak
National Bank, about 150 miles north of the border, to buy
certificates of deposits with $300,000 in cash.  The Mexicans
planned to start an American business, they said.  They had
driver's licenses and passports.
     Bank officers, who wanted guidance about the cash, called
the Internal Revenue Service, Secret Service, Office of the
Comptroller of the Currency, the Federal Reserve, and the
Department of Treasury.
     Federal banking regulators require banks to file CTRs -
currency transaction reports - for cash deposits greater than
$10,000.
     That paper trail was created to develop leads about
suspicious cash.  Once the government was alerted, the thinking
went, it could track the cash, put depositors under surveillance
or set up a sting.
     A tape-recorded phone line that Stone Oak, like many banks,
uses for sensitive transactions captured a conversation between a
Treasury official and then-bank president Herbert Pounds. 
According to transcripts, Pounds said:
     "We're a small bank.  I've never had a transaction like
that. . . I talked to several of my banking friends.  They've
never had anybody bring in that much cash, and the guys say
they've got a lot more where that came from."
     Pounds asked for advice and was told to go through with the
transaction.  "That's fine...as long as you send the CTR," the
Treasury official said.  "That's all you're responsible for."
     The bank took the money and filed the form.
     Between that first transaction in March 1987 and the
government's March 1989 seizure of $850,000 in certificates of
deposit, bank officials continued to file reports, according to
photocopies reviewed by the Pittsburgh Press.
     "The government had two years to come in and say, 'Hey,
something smells bad here,' but it never did," says Sam Bayless,
the bank's attorney.
     But the government now charges that the bank customers were
front men for Mario Alberto Salinas Trevino, who was indicted for
drug trafficking in March 1989.  Fourteen months later, the bank
president and vice president were added to the indictment and
charged with money laundering.
     The bank never was criminally charged, and the officer's
indictments were dismissed May 29.
     The U.S. attorney's office in San Antonio said it would not
discuss the case.
     Because the Mexicans used their certificates as collateral
for $1 million in loans from Stone Oak, the bank is worried it
will lose the money.  In addition, according to banking
regulations, it must keep $1 million in reserve to cover that
potential loss.  For those reasons, it has asked the government
for a hearing and has spent nearly $250,000 for lawyer's fees.
     But the bank can't get a hearing because the forfeiture case
is on hold pending the outcome of criminal charges.  And the
criminal case has been indefinitely delayed because Salinas
escapade six weeks after he was arrested.
     Because the bank is so small, the $1 million set-aside puts
it below capital requirements, meaning "regulatory authorities
could well require Stone Oak National Bank to close before ever
having the opportunity for the case to be heard," says its court
brief.

     To brace for the loss, Stone Oak closed one of its branches. 
"For the life of me," says Bayless, "I can't understand why the
government would want to sink a bank.  And, to boot, why would
the government want another Texas bank?"
     Bayless, who says, "I'm very conservative, I'm a bank
lawyer, for heaven's sake," derides the federal action as
"narco-McCarthyism."
     Problems with paperwork also led to seizures of $227,000
from a Colombian computer company.
     The saga started in January 1990 when Ricardo Alberto
Camacho arrived in Miami with about $296,000 in cash to pay for
an order of computers.
     Camacho is a representative of Tandem Limitada, the
authorized dealer in Columbia and Venezuela for VeriFone
products, sas VeriFone spokesman Todd Bottari.  The cash covered
a previously placed order for about 1,600 terminals.
     Both the government and Camacho agree that when he arrived
in Miami, he declared the amount he was carrying with Customs. 
They also agree that the breakdown of the amount - cash vs. other
monetary instruments, such as checks - was incorrect on his
declaration form.
     Camacho and the government disagree about whether the
incorrect entry was intentional - the government's position - or
a mistake made by an airport employee.
     The airport employee, in a deposition, said he had filed out
the form and handed in to Camacho for him to initial, which he
did.  "Mr. Camacho assumed the agent had correctly written down
the information provided to him," says Chamaco's court filings
over the subsequent seizure of the money.  The government says
Camacho deliberately misstated the facts to hide the cash made
from drug sales.
     Camacho brought in the suitcase full of U.S. cash, which he
had purchased at a Bogota bank, because he thought it would speed
delivery of his order, he told federal agents.
     VeriFone's lawyers directed Camacho to deposit the money in
their account in Marietta, GA., says Bottari.  The final bill for
the computers was $227,000.
     VeriFone arranged for an employee to meet Camacho at the
bank and told the bank he was coming, Bottari says.  The bank
notified U.S. Customs agents that it was expecting a large
deposit.  When Camacho arrived, federal agents were waiting with
a drug sniffing dog.
     The agents asked Camacho if would answer "a few questions
about the currency."  Camacho agreed.
     The handler walked the dog past a row of boxes, including
one containing some of Camacho's money.  The dog reacted to that
box.
     At that point, the agents said they were taking the money to
the local Customs office, where they retrieved information from
the report Camacho had filed in Miami.
     The reporting discrepancy, and the dog's reaction, prompted
the government to take the cash.
     Although the computer deal went through several weeks later
when Tandem wired another $227,000, that wasn't enough to
convince Albert L. Kemp Jr., the assistant U.S. attorney on the
case, that the first order was real.
     After the seizure, Kemp says, the government checked
Camacho's background.  He is a naturalized American citizen who
went to business school in California and then returned to help
run several family businesses in Columbia.
     He travels to the United States "four or five times a year"
says Kemp.  "He has filled out the currency reports correctly in
the past, but now he says there was a mistake and he didn't know
about it."
     "C'mon," says Kemp.  "In total, his whole story doesn't wash
with me.
     "We believe the money is traceable to drugs, but we don't
have the evidence.  So instead of taking it for drugs, we're
using a currency reporting violation to grab it."
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