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

(a)(1)(A) and

(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.

. 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.

.c.

Several of these transactions included the transfer of monies to bank accounts in Colombia,

South America.

.

On May 15, 2003, the government filed a verified complaint seeking forfeiture of monies

held in thirty-eight Colombian bank accounts. See generally

The government alleges that the

funds in the accounts represent drug proceeds and were involved in money laundering.

.

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.,

, 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,

(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.”

at 836 (quoting H. F. Livermore Corp. v. Aktiengesellschaft Gebruder Loepfe,

(D.C. Cir. 1970)).

Default establishes the defaulting party’s liability for the well-pleaded allegations of the

complaint. Adkins v. Teseo,

(D.D.C. 2001); Avianca, Inc. v. Corriea,

, at *1 (D.D.C. Apr. 13, 1992); see also Brock v. Unique Racquetball & Health

Clubs, Inc.,

(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.,

(D.D.C. 1994),

3 vacated on other grounds,

(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,

; see also Credit Lyonnais Secs. (USA), Inc. v.

Alcantara,

(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.

;

. Pursuant to

(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

.

(a)(1)(A).

(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.

(a).

Like property involved in money laundering, proceeds from illegal drug transactions are

subject to forfeiture.

(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,

(D.C. Cir. 1984); United States v. $174,206.00,

(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

because those funds can be verifiably traced to

illegal sales of narcotics, Brock,

, and/or were laundered through U.S. bank

accounts, see

. 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.

(c); see also 1998 Tractor, 288 F. Supp. 2d at 711; United States v.

$21,510 in U.S. Currency,

(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

6