UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA, : : Plaintiff, : Civil Action No.: 03-1069 (RMU) : v. : Re Document No.: 28 : PROCEEDS OF DRUG TRAFFICKING : TRANSFERRED TO CERTAIN : FOREIGN BANK ACCOUNTS, : : Defendant. :
MEMORANDUM OPINION
GRANTING THE UNITED STATES’S MOTION FOR ENTRY OF DEFAULT JUDGMENT AND DECREE OF FORFEITURE
I. INTRODUCTION
This is a civil forfeiture action brought against funds held in several Colombian bank
accounts. The government seeks to have the money in the defendant accounts forfeited to the
government pursuant to 18 U.S.C. § 981(a)(1)(A) and 21 U.S.C. § 881(a)(6). This matter comes
before the court on the government’s motion for entry of default judgment and decree of
forfeiture in rem. Because the government has met its evidentiary burden, the court grants the
government’s motion.
II. FACTUAL & PROCEDURAL BACKGROUND
In May 1999, the United States Drug Enforcement Agency (“DEA”) began an
undercover investigation of a money laundering organization (“DEA Operation”), which
provided services to drug traffickers. Compl. ¶¶ 7, 8.a. United States Internal Revenue Service
Special Agent Timothy Kunsman worked with the DEA Operation. Id. ¶ 7. Between June 1999
1 and April 2003, conspirators in the money laundering organization delivered U.S. currency to
undercover operatives whom they believed were professional money launderers. Id. ¶ 8.c.
Several of these transactions included the transfer of monies to bank accounts in Colombia,
South America. Id. ¶ 26.
On May 15, 2003, the government filed a verified complaint seeking forfeiture of monies
held in thirty-eight Colombian bank accounts. See generally id. The government alleges that the
funds in the accounts represent drug proceeds and were involved in money laundering. Id. ¶ 1.
On November 3, 2003, Enrique Ramirez Ordonez, the purported owner of the funds in one of the
accounts, filed a reply to the complaint disavowing any knowledge of the defendants named in
the related criminal complaint and asserting that the money in the account was derived from a
legitimate exporting business. Reply to Compl. ¶¶ 1-2. The court subsequently struck his reply
and dismissed his claim pursuant to Federal Rule of Civil Procedure 37 for failure to comply
with court orders and to participate in discovery. See generally Mem. Op. (Sept. 16, 2008).
The government has dismissed all but five of the claims on accounts originally listed in
the complaint after a review of documents provided by the Colombian government revealing that
prior to the execution of a warrant in rem, the funds in most of the specified accounts were
removed or the accounts were closed, thereby preventing the government from bringing the
defendant properties within the jurisdiction of the court. See Notice of Partial Dismissal (Mar.
11, 2008); 2d Notice of Partial Dismissal (July 12, 2004); 3d Notice of Partial Dismissal (Oct.
22, 2004). On April 27, 2010, the Clerk of the Court declared in default claimants with a
potential interest in the five remaining accounts for their failure to plead or otherwise defend
against this action. See Entry of Default (Apr. 29, 2010). The government now seeks a default
judgment and a decree of forfeiture for the funds contained in the remaining defendant accounts.
2 III. ANALYSIS
A. Legal Standard for Default Judgment
A court has the power to enter default judgment when a defendant fails to defend its case
appropriately or otherwise engages in dilatory tactics. Keegel v. Key W. & Caribbean Trading
Co., 627 F.2d 372, 375 n.5 (D.C. Cir. 1980). Rule 55(a) of the Federal Rules of Civil Procedure
provides for entry of default “[w]hen a party against whom a judgment for affirmative relief is
sought has failed to plead or otherwise defend as provided by these rules.” FED. R. CIV. P. 55(a).
Upon request of the party entitled to default, Rule 55(b)(2) authorizes the court to enter against
the defendant a default judgment for the amount claimed and costs. Id. 55(b)(2).
Because courts strongly favor resolution of disputes on their merits, and because “it
seems inherently unfair” to use the court’s power to enter judgment as a penalty for filing delays,
modern courts do not favor default judgments. Jackson v. Beech, 636 F.2d 831, 835 (D.C. Cir.
1980). Accordingly, default judgment usually is available “only when the adversary process has
been halted because of an essentially unresponsive party . . . [as] the diligent party must be
protected lest he be faced with interminable delay and continued uncertainty as to his rights.” Id.
at 836 (quoting H. F. Livermore Corp. v. Aktiengesellschaft Gebruder Loepfe, 432 F.2d 689, 691
(D.C. Cir. 1970)).
Default establishes the defaulting party’s liability for the well-pleaded allegations of the
complaint. Adkins v. Teseo, 180 F. Supp. 2d 15, 17 (D.D.C. 2001); Avianca, Inc. v. Corriea,
1992 WL 102999, at *1 (D.D.C. Apr. 13, 1992); see also Brock v. Unique Racquetball & Health
Clubs, Inc., 786 F.2d 61, 65 (2d Cir. 1986) (noting that “default concludes the liability phase of
the trial”). Default does not, however, establish liability for the amount of damage that the
plaintiff claims. Shepherd v. Am. Broad. Cos., Inc., 862 F. Supp. 486, 491 (D.D.C. 1994),
3 vacated on other grounds, 62 F.3d 1469 (D.C. Cir. 1995). Instead, “unless the amount of
damages is certain, the court is required to make an independent determination of the sum to be
awarded.” Adkins, 180 F. Supp. 2d at 17; see also Credit Lyonnais Secs. (USA), Inc. v.
Alcantara, 183 F.3d 151, 155 (2d Cir. 1999) (stating that the court must conduct an inquiry to
ascertain the amount of damages with reasonable certainty).
B. Legal Standard for Civil Forfeiture
Congress has set forth several types of property that are subject to civil forfeiture, two of
which are proceeds from money laundering and illegal drug transactions. 18 U.S.C. § 981; 21
U.S.C. § 881. Pursuant to 18 U.S.C. § 981(a)(1)(A), the government may obtain a decree for
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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA, : : Plaintiff, : Civil Action No.: 03-1069 (RMU) : v. : Re Document No.: 28 : PROCEEDS OF DRUG TRAFFICKING : TRANSFERRED TO CERTAIN : FOREIGN BANK ACCOUNTS, : : Defendant. :
MEMORANDUM OPINION
GRANTING THE UNITED STATES’S MOTION FOR ENTRY OF DEFAULT JUDGMENT AND DECREE OF FORFEITURE
I. INTRODUCTION
This is a civil forfeiture action brought against funds held in several Colombian bank
accounts. The government seeks to have the money in the defendant accounts forfeited to the
government pursuant to 18 U.S.C. § 981(a)(1)(A) and 21 U.S.C. § 881(a)(6). This matter comes
before the court on the government’s motion for entry of default judgment and decree of
forfeiture in rem. Because the government has met its evidentiary burden, the court grants the
government’s motion.
II. FACTUAL & PROCEDURAL BACKGROUND
In May 1999, the United States Drug Enforcement Agency (“DEA”) began an
undercover investigation of a money laundering organization (“DEA Operation”), which
provided services to drug traffickers. Compl. ¶¶ 7, 8.a. United States Internal Revenue Service
Special Agent Timothy Kunsman worked with the DEA Operation. Id. ¶ 7. Between June 1999
1 and April 2003, conspirators in the money laundering organization delivered U.S. currency to
undercover operatives whom they believed were professional money launderers. Id. ¶ 8.c.
Several of these transactions included the transfer of monies to bank accounts in Colombia,
South America. Id. ¶ 26.
On May 15, 2003, the government filed a verified complaint seeking forfeiture of monies
held in thirty-eight Colombian bank accounts. See generally id. The government alleges that the
funds in the accounts represent drug proceeds and were involved in money laundering. Id. ¶ 1.
On November 3, 2003, Enrique Ramirez Ordonez, the purported owner of the funds in one of the
accounts, filed a reply to the complaint disavowing any knowledge of the defendants named in
the related criminal complaint and asserting that the money in the account was derived from a
legitimate exporting business. Reply to Compl. ¶¶ 1-2. The court subsequently struck his reply
and dismissed his claim pursuant to Federal Rule of Civil Procedure 37 for failure to comply
with court orders and to participate in discovery. See generally Mem. Op. (Sept. 16, 2008).
The government has dismissed all but five of the claims on accounts originally listed in
the complaint after a review of documents provided by the Colombian government revealing that
prior to the execution of a warrant in rem, the funds in most of the specified accounts were
removed or the accounts were closed, thereby preventing the government from bringing the
defendant properties within the jurisdiction of the court. See Notice of Partial Dismissal (Mar.
11, 2008); 2d Notice of Partial Dismissal (July 12, 2004); 3d Notice of Partial Dismissal (Oct.
22, 2004). On April 27, 2010, the Clerk of the Court declared in default claimants with a
potential interest in the five remaining accounts for their failure to plead or otherwise defend
against this action. See Entry of Default (Apr. 29, 2010). The government now seeks a default
judgment and a decree of forfeiture for the funds contained in the remaining defendant accounts.
2 III. ANALYSIS
A. Legal Standard for Default Judgment
A court has the power to enter default judgment when a defendant fails to defend its case
appropriately or otherwise engages in dilatory tactics. Keegel v. Key W. & Caribbean Trading
Co., 627 F.2d 372, 375 n.5 (D.C. Cir. 1980). Rule 55(a) of the Federal Rules of Civil Procedure
provides for entry of default “[w]hen a party against whom a judgment for affirmative relief is
sought has failed to plead or otherwise defend as provided by these rules.” FED. R. CIV. P. 55(a).
Upon request of the party entitled to default, Rule 55(b)(2) authorizes the court to enter against
the defendant a default judgment for the amount claimed and costs. Id. 55(b)(2).
Because courts strongly favor resolution of disputes on their merits, and because “it
seems inherently unfair” to use the court’s power to enter judgment as a penalty for filing delays,
modern courts do not favor default judgments. Jackson v. Beech, 636 F.2d 831, 835 (D.C. Cir.
1980). Accordingly, default judgment usually is available “only when the adversary process has
been halted because of an essentially unresponsive party . . . [as] the diligent party must be
protected lest he be faced with interminable delay and continued uncertainty as to his rights.” Id.
at 836 (quoting H. F. Livermore Corp. v. Aktiengesellschaft Gebruder Loepfe, 432 F.2d 689, 691
(D.C. Cir. 1970)).
Default establishes the defaulting party’s liability for the well-pleaded allegations of the
complaint. Adkins v. Teseo, 180 F. Supp. 2d 15, 17 (D.D.C. 2001); Avianca, Inc. v. Corriea,
1992 WL 102999, at *1 (D.D.C. Apr. 13, 1992); see also Brock v. Unique Racquetball & Health
Clubs, Inc., 786 F.2d 61, 65 (2d Cir. 1986) (noting that “default concludes the liability phase of
the trial”). Default does not, however, establish liability for the amount of damage that the
plaintiff claims. Shepherd v. Am. Broad. Cos., Inc., 862 F. Supp. 486, 491 (D.D.C. 1994),
3 vacated on other grounds, 62 F.3d 1469 (D.C. Cir. 1995). Instead, “unless the amount of
damages is certain, the court is required to make an independent determination of the sum to be
awarded.” Adkins, 180 F. Supp. 2d at 17; see also Credit Lyonnais Secs. (USA), Inc. v.
Alcantara, 183 F.3d 151, 155 (2d Cir. 1999) (stating that the court must conduct an inquiry to
ascertain the amount of damages with reasonable certainty).
B. Legal Standard for Civil Forfeiture
Congress has set forth several types of property that are subject to civil forfeiture, two of
which are proceeds from money laundering and illegal drug transactions. 18 U.S.C. § 981; 21
U.S.C. § 881. Pursuant to 18 U.S.C. § 981(a)(1)(A), the government may obtain a decree for
forfeiture of property that it demonstrates was involved in a money laundering transaction or
attempted money laundering transaction in violation of 18 U.S.C. § 1956. 18 U.S.C. §
981(a)(1)(A). 18 U.S.C. § 1956(a) sets forth three definitions of money laundering: (1)
conducting or attempting to conduct a financial transaction knowing that the funds are proceeds
of unlawful activity with the intent to further the unlawful activity or commit some other crime,
or knowing that the transaction is designed to conceal the criminal nature of the money involved;
(2) attempted or successful transporting, transmitting or transfering of a monetary instrument or
funds between a foreign location and the United States with the intent to further unlawful activity
or with the knowledge that the monetary instrument or funds are proceeds of unlawful activity
and that the transfer is intended to conceal the criminal nature of the funds or to perpetuate some
other crime; (3) conducting or attempting to conduct a financial transaction, or facilitating a
crime with property represented to be proceeds of unlawful activity, with the intent of furthering
a crime, concealing the nature, location, source, ownership or control of the property believed to
4 be proceeds of unlawful activity, or avoiding any statutory reporting requirement. 18 U.S.C. §
1956(a).
Like property involved in money laundering, proceeds from illegal drug transactions are
subject to forfeiture. 21 U.S.C. § 881(a)(6). To obtain forfeiture under § 881(a)(6), the
government must demonstrate that the defendant property is traceable to illicit drug offenses.
United States v. Brock, 747 F.2d 761, 762 (D.C. Cir. 1984); United States v. $174,206.00, 320
F.3d 658, 662 (6th Cir. 2003) (stating that the plaintiff in a civil forfeiture case must show by a
preponderance of the evidence that the defendant property is traceable to illicit drug offenses).
C. The Court Grants the Government’s Motion for Default Judgment
The government alleges that the money in the remaining accounts is the product of drug
trafficking and money laundering. See generally Compl. As the court dismissed the only claim
timely submitted, see Mem. Op. (Sept. 16, 2008), and the Clerk of the Court has entered a
default against all other possible claimants, see Entry of Default (Apr. 27, 2010), the court
accepts this well-pleaded allegation as true, see FED R. CIV. P. 55(a). Moreover, the government
has demonstrated a clear path from proceeds from the sale of narcotics in the United States to the
funds held in the Colombian accounts through the transactions witnessed and recorded by the
DEA Operation. See Compl. ¶¶ 3-26. 1 Because the DEA Operation directly facilitated specific
transfers of drug proceeds into U.S. bank accounts which were wired to the defendant accounts
at the direction of the criminal defendants, the path of the money is well documented and has
been verified by the IRS’s Criminal Investigations unit. Id. ¶¶ 8(c), 26. For instance, on at least
sixty-four occasions undercover operatives of the DEA Operation were directed by the criminal
defendants to pick up large sums of drug proceeds, deposit them into U.S. bank accounts and
1 The detailed allegations in the complaint are verified by the sworn statement of IRS Special Agent Timothy Kunsman. See Compl., Verification.
5 wire the deposited money to U.S. or foreign bank accounts. Id. ¶¶ 19-20. Thus, the government
has demonstrated by a preponderance of the evidence that the money in the defendant accounts is
subject to forfeiture pursuant 21 U.S.C. § 881 because those funds can be verifiably traced to
illegal sales of narcotics, Brock, 747 F.2d at 762, and/or were laundered through U.S. bank
accounts, see 18 U.S.C. § 1956. Moreover, the connection between the sale of narcotics in the
United States and the money contained in the defendant accounts is substantial, since each step
in the receipt and laundering process was documented by the DEA Operation and verified by
Special Agent Kunsman. See Compl. ¶¶ 3-26.
Because the government has demonstrated that the money contained in the defendant
accounts is subject to forfeiture and the connection between that laundered money and sale of
narcotics in the United States is substantial, the government has met its burden for a default
judgment. 18 U.S.C. § 983(c); see also 1998 Tractor, 288 F. Supp. 2d at 711; United States v.
$21,510 in U.S. Currency, 292 F. Supp. 2d 318, 320 (D.P.R. 2003). Accordingly, the funds in
the remaining defendant accounts shall be forfeited to the government.
IV. CONCLUSION
For the foregoing reasons, the court grants the government’s motion for default judgment
and issues a decree of forfeiture. An Order consistent with this Memorandum Opinion is
separately and contemporaneously issued this 30th day of December, 2010.
RICARDO M. URBINA United States District Judge