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United States v. $734,578.82 in U.S. Currency

(3rd Cir., April 15, 2002)

The Third Circuit, affirming the decision of the district court, upholds the forfeiture to the United States of funds seized from bank accounts, which funds were used in connection with an overseas gambling operation.  The gambling operation was run out of England, where such gambling was legal.  The court held, however, that a New Jersey corporation, which had placed the funds in the bank accounts, and transmitted them to foreign entities that in turn handled the gambling activities, had violated 18 U.S.C. Section 1955(a), which makes it a crime to "conduct[], finance[], manage[], supervise[], direct[], or own[] all or part of an illegal gambling business …".  The statute defines "illegal gambling business" as a gambling business which "is a violation of the law of a state or political subdivision in which it is conducted."  The New Jersey concern in question was operating an illegal gambling business because it was violating applicable New Jersey law, which makes it a crime to "promote gambling" which includes "engag[ing] in conduct which materially aids any form of gambling activity."  N.J.S.A. 2C:37-2.  Because it had transmitted funds it received from bettors to establish betting accounts to the foreign concerns, the New Jersey corporation had "promoted gambling" within the meaning of the statute.  As such, the funds in question were subject to forfeit, even though in bank accounts in the name and/or for the benefit of third parties, under 18 U.S.C. Section 1955(d), which provides that "any property, including money, used in violation of the provisions of [section 1955] may be seized and forfeited to the United States."

Gary Bowman owns and operates American Sports Limited (ASL) and related companies which operate a gambling business in the United Kingdom under valid licenses issued by that government.  Intercash Ltd. I.O.M. (IOM), a corporation operating and organized under the laws of the Isle of Man, and Intercash Financial Services Ltd. (IFS-Canada), a Canadian corporation operating in Canada, were each established with funds provided by Bowman.  Intercash Financial Services (IFS-NJ) is a New Jersey corporation doing business in New Jersey.

Bowman promoted his companies on the Internet in advertisements that informed potential customers of the recreational betting services his companies provided, and how to participate therein.

From the court's decision, it appears that individuals seeking to participate in these gambling activities first had to setup an account by wire transferring funds via Western Union to IFS-NJ.  IFS-NJ then deposited these funds into accounts in the name and/or for the benefit of ASL and/or IFS-Canada/IOM.  IFS-NJ also apprised Bowman of the amount of funds it was receiving.  Once a bettor had established an account, he could then call Bowman's company in England via international toll-free telephone numbers to confirm the deposits and place his wagers.  Funds from one of the accounts into which IFS-NJ deposited monies it received from bettors were paid out to bettors all over the United States on successful wagers.  According to the court, "Bowman claims that most of his customers are from the United States and Canada."

The United States seized approximately $490,000 from bank accounts in the name and/or for the benefit of IOM and ASL.  The government subsequently commenced the instant civil in rem forfeiture action against these funds.

The Government charged IFS-NJ with violation of 18 U.S.C. Section 1955(a), and sought civil forfeiture pursuant to 18 U.S.C. section 1955(d).  IOM and ASL each filed verified claims, asserting rights to the seized funds.

"The government's burden in a 1955(d) civil forfeiture is merely to establish probably cause to believe that the defendant property is subject to forfeiture. … Once the government demonstrates probable cause … the ultimate burden shifts to the claimant to prove by a preponderance of the evidence that the property is not subject to forfeiture."

Section 1955(a) makes it a crime to "conduct[], finance[], manage[], supervise[], direct[], or own[] all or part of an illegal gambling business …".  The statute defines "illegal gambling business" as a gambling business which "is a violation of the law of a state or political subdivision in which it is conducted."  Because the activities in question occurred in New Jersey, the court turned to its laws to determine if IFS-NJ had engaged in activity that violated State law.

N.J.S.A. 2C:37-2 makes it a crime to "promote gambling" which includes "engag[ing] in conduct which materially aids any form of gambling activity."  N.J.S.A. 2C:37-2.  The court held that the Government had established probable cause to believe that IFS-NJ was "promoting gambling" by materially aiding Bowman's gambling activities by, inter alia, receiving funds from bettors and processing them so that bettors could open accounts and place bets with ASL and assisting in the pay-out to winning bettors.  The court also held that the Government had satisfied its burden of proof with regard to establishing probable cause of a violation of Section 1955(a).

As a result, the Government was entitled to forfeiture of the funds in question.  18 U.S.C. section 1955(d) provides that "any property, including money, used in violation of the provisions of [section 1955] may be seized and forfeited to the United States."  The money in question was used to promote gambling activities, as it had been received by IFS-NJ and deposited in the accounts in question to allow bettors to setup wagering accounts.  As such, it was subject to forfeiture under section 1955(d).

The claimants of the funds in question, ASL and IOM, argued that the Government could not seize those funds because they were used in connection with a gambling operation that occurred in England, where the relevant actors were licensed to engage in this activity.  As noted above, the property in question was seized from accounts in the name and/or for the benefit of ASL and/or IFS-Canada or IOM, and not from IFS-NJ, the party accused of violating 18 U.S.C. section 1955(a).  This did not preclude its seizure by the Government, however, because the property in question, to be subject to seizure, does not have to be owned by the party committing the violation of section 1955 that triggers the application of the forfeiture provisions of section 1955(d).  Rather, seizure may occur if the property seized is used in that illegal endeavor.  Said the court:

The language of section 1955 does not condition forfeiture on any suggestions that the [party claiming ownership of the seized funds] itself directed or managed the illegal gambling operation.  Rather, it authorizes the forfeiture of 'any property … used in violation of the provisions of this section.'  Though one of the preceding subsections does make it illegal to 'conduct, finance, supervise, direct, or own all or part of an illegal gambling business … the forfeiture subsection is not limited … to property owned by those who themselves conduct or oversee illegal gambling businesses. … [F]orfeiture is not conditioned upon the culpability of the owner of the defendant property.  We reiterate: the innocence of the owner is irrelevant in a civil forfeiture proceeding.

The court similarly rejected claims that it should overturn the decision of the court below on grounds that the district court lacked jurisdiction, on comity or lenity grounds, or by application of applicable US - UK treaties, as each such argument was premised on the same underlying claim, namely that the gambling activities in question occurred in England where the claimants were appropriately licensed.  The court accordingly affirmed the decision of the district court directing the forfeiture of the assets in question to the United States.

The full text of the court's decision can be found on a web site maintained by Findlaw.

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