IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF NORTH CAROLINA

SOUTHERN DIVISION
No. 7:14-CV-00295-F
UNITED STATES OF AMERICA,
Plaintiff,
v.
$107,702.66 IN U.S. CURRENCY
Defendant.

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PLAINTIFFS REPLY TO
CLAIMANTS RESPONSE TO
PLAINTIFFS MOTION FOR
A CERTIFICATE OF
REASONABLE CAUSE

The United States of America, by the United States Attorney

for the Eastern District of North Carolina, replies to claimants
response

to

its

motion

for

certificate

of

reasonable

cause

(certificate):
In

their

certificate,

response

the

to

claimants

the
argue

plaintiffs
that

the

request
plaintiff

for

lacked

reasonable cause to seize the defendant bank account and, further,

that a certificate may never be issued where there is no judgment
in favor of the claimant.
I.

On both counts, they are incorrect.

THE UNITED STATES HAD PROBABLE, AND THUS REASONABLE, CAUSE

AT THE TIME OF THE SEIZURE.
In

determining

whether

issuance

of

certificate

is

appropriate, the Courts reasonableness inquiry focuses solely on

the time of seizure or arrest.

28 U.S.C. 2465(a)(2).

At that

time plaintiff knew that (1) earlier, on November 9, 2008, Claimant

McLellan was personally read a notification of law summarizing the
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Case 7:14-cv-00295-F Document 29 Filed 07/06/15 Page 1 of 10

U.S. Treasury requirements of filing Currency Transaction Reports

(CTRs) and the illegality of structuring transactions so as to
avoid the filing of such reports, which he read and signed, and
which he indicated to the agent that he understood; and (2) after
being notified of the law and acknowledging his understanding of
it, bank records of L&M Convenient Mart Inc. showed 301 different
cash deposits from 2011 through 2014 totaling over

$2 million,

including 116 deposits that ranged in amount from $9,077 to $9,999,

a pattern indicative of structuring.

These facts knowledge of

the federal law and a continued pattern of structured deposits are sufficient to establish reasonable grounds for the forfeiture.
More importantly, the Court agreed.
Lumbee

Guaranty

Bank

Account

Number

In In re Seizure of

82002495,

No.

714-MJ-1120,

Magistrate Judge Jones found that there was probable cause to seize
the defendant bank account because it was being used in illegal
cash deposit structuring in violation of 31 U.S.C. 5313 on the
basis of the facts set forth above.

The issuance of such a warrant

alone, regardless of what later transpires in a case, is alone a

sufficient basis upon which to issue a certificate.

As one court

noted,
The issuance of a warrant and monition for seizure is
generally enough, standing alone, for a court later to
certify reasonable cause. [T]he issuance of a warrant
for seizure and monition is enough because if such a
warrant has been issued, probable cause for forfeiture
has been determined, and the officials who seize the

Case 7:14-cv-00295-F Document 29 Filed 07/06/15 Page 2 of 10

property must be able to rely on that authorization to

protect them later from liability to an innocent owner.
United States v. Mach. Gun 30.06, et al., 904 F. Supp. 622, 640-41
(N.D. Ohio 1995) (quoting and citing United States v. Parcels of
Real Property, et al., 795 F.Supp. 1225, 1233 (D.Mass.1992), aff'd,
9 F.3d 1000 (1st Cir. 1993).

Indeed, this holding reverberates

with the rationale applicable in the search warrant context. See

United States v. Leon, 468 U.S. 897, 919-22 (1984).

Even if the

underlying warrant granted to seize defendant was later found to be

inadequate, and thus lacking in sufficient indicia of probable
cause, the prosecutor and officers executing the warrant could rely
upon it.

Id.

Inexplicably, Claimants argue that because they knew about the

law against structuring but yet continued to make regular cash
deposits of less than $10,000, the notification could not have been
effective.

Claimants Response at 5 (Even assuming that this

notification

was

responsibilities

effective
under

in

informing

federal

Claimants

banking

of

laws . . . ,

their
the

notification only confirms that Claimants were not in any way

attempting to avoid federal detection.).
Claimants

argue

that

their

knowledge

of

Nonsense.
the

In effect,

anti-structuring

statute is a defense to their structuring cash deposits, because

Case 7:14-cv-00295-F Document 29 Filed 07/06/15 Page 3 of 10

their structuring activity was done so blatantly and repeatedly.1

This stands the venerated legal principle that ignorance of the
law generally is no defense to a criminal charge on its head.
Ratzlaf v. United States, 510 U.S. 135, 135-36, (1994).
Even
suggesting

applying
that

Claimants

Claimants

standard

were

of

attempting

at
to

least

one

avoid

fact

federal

reporting, the plaintiff would still have met the standard of

probable cause.

Claimants Response 5 (emphasis original).

In the

first amended complaint, the United States plead that:

employee Mary Floyd admitted that she frequently made
cash deposits for the claimant, and that when a deposit
would be more than $10,000, she took some cash out to
keep the deposit under $10,000 so that no bank filing
would be required.
She said that McClellan [sic] was
aware of this.
Plaintiffs First Amended Complaint, 9 at *3.

This more than

suggests that Claimants were avoiding federal reporting.

It

implies McLellan sent Floyd (who did not sign the notification of
law acknowledging CTR requirement), rather than himself (who had),

If this were true, then any person who desired to launder money
could: sign a notification of law; demonstrate their commanding
knowledge of anti-structuring statutes and CTR requirements; and as
long as they deposited brazenly in broad daylight, they could never
be prosecuted for a structuring crime.
Thankfully, the case
Claimants cite for this proposition also states that such blatantly
violative conduct would permit the inference that [such Claimants]
knew of the requirements and were trying to evade them.
United
States v. Leak, 123 F.3d 787, 794 (4th Cir. 1997). Here, we need
not so infer because Claimant McLellan acknowledged the antistructuring law, then repeatedly acted in blatant violation of it.
He merely contests his intent to evade, which may be implied from
blatant, repetitive, violative conduct.
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Case 7:14-cv-00295-F Document 29 Filed 07/06/15 Page 4 of 10

as a straw person to deposit the cash, so that later Claimants

could claim ignorance of the CTR requirements.

Later is now, and

these facts clearly suggest the presence of even Claimants element

of intent to evade CTR requirements specifically, not just bank
paperwork. Claimants knew that the bank paperwork they were
attempting to avoid was in fact the federally-imposed CTR filing
requirement.

Regardless of how the trier of fact may ultimately

have viewed this matter, these facts are sufficient to establish

probable or reasonable cause such as to entitle government agents
to immunity from personal liability.2
II.

UPON SEIZING DEFENDANT, PLAINTIFF HAD PROBABLE, AND THUS

REASONABLE, CAUSE THAT DEFENDANT WAS FORFEITABLE.

Claimants argue Plaintiffs somehow lost probable cause due to

an

internal,

executive

branch,

Department

of

Justice

directive, or a similar IRS policy regarding seizures.

policy
However,

they cannot use the policies in such an offensive manner or,

indeed, at all.
DOJ Policy Directive 15-3 does state that a prosecutor shall
not move to seize structured funds unless there is probable cause
that the structured funds were generated by unlawful activity or
that the structured funds were intended for use in, or to conceal
or promote, ongoing or anticipated unlawful activity.
2

Policy

Notably, the cases cited by claimants, Response at 3-4, all

arose on summary judgment. That standard need not be met here.
The plaintiff need not win the case to demonstrate merely that
its agents acted reasonably in initiating the case.
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Case 7:14-cv-00295-F Document 29 Filed 07/06/15 Page 5 of 10

Directive 15-3 at *2.

Yet this is not the end of the directive.

It also states that it becomes effective on March 31, 2015, and

that [f]or any case in which seizure was effected prior to the
issuance of this memorandum, the forfeiture may continue . . . .
Id.3

Seizure of the defendant occurred in July 2014, prior to the

directive.

Thus, the plaintiff is not barred, even by its internal

policy (which Claimants may not assert affirmatively or rely upon),

from pursuing forfeiture.

Yet, in accordance the spirit of the

directive, the United States seeks a voluntary dismissal without

prejudice.
More

importantly,

this

policy

cannot

be

relied

upon

by

Claimants:
This memorandum is intended solely as a guide to the
exercise of investigative and prosecutorial discretion,
and does not alter in any way the Departments authority
to enforce federal law. Neither the guidance herein nor
any state or local law provides a legal defense to a
violation of federal law, including any civil or criminal
violation of 31 U.S.C. 5324(a). This memorandum is not
intended to, does not, and may not be relied upon to
create any rights, substantive or procedural, enforceable
at law by any party in any matter civil or criminal.
Directive 15-3 at *4.

Claimants clearly attempt in their response

to assert that this case should have never been filed because

Likewise, IRS Criminal Investigations policy, dated October 17,

2014 (three months after the seizure in the instant case),
suggests that it is not retroactive: IRS-CI will no longer pursue
the seizure and forfeiture of funds associated solely with legal
source structuring cases . . . . Rebecca A. Sparkman, Director,
Operations Policy and Support, Criminal Investigation SE:CI:OPS,
Memorandum: IRS Structuring Investigation Policy Changes at *1.
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Case 7:14-cv-00295-F Document 29 Filed 07/06/15 Page 6 of 10

the United States filed this case without a single allegation that
Claimants money was derived from an illegal source.
Response at 6.

It need not.

Claimants

In enacting 31 U.S.C. 5324,

Congress required no such allegation, and while such a finding is

now required by policy, neither statute nor policy precluded this
seizure.

Claimants argument is anticipated by the directive and

specifically disclaimed, and it has no relevance to the Courts

inquiry here.
III. THE COURT MAY GRANT A CERTIFICATE OF REASONABLE CAUSE EVEN
IF, AS THE PLAINTIFF REQUESTS, IT DISMISSES THE CASE
WITHOUT PREJUDICE.
Claimants

link

three

concepts

which

precedent

reading of the statute suggest are independent.

and

plain

First, Claimants

argue dismissal with prejudice would equate to a judgment for the

claimant, while a dismissal without prejudice would not.

Second,

Claimants argue a certificate can only be considered by the court

where there has been a judgment for the claimant.
Claimants

argue

that

where

case

has

been

Thirdly,

dismissed

without

prejudice, a certificate cannot be issued.

Claimants
they

assert

unnecessarily
that

[t]he

constrict
government

judicial

discretion

is

entitled

only

when
to

certificate of reasonable cause upon entry of judgment for the

claimant[.]

Claimants

Response

at

(adding

to,

quoting 28 U.S.C. 2465(a)(2), in part)(emphasis added).

but

also

The full

context of this statute reads only that [u]pon entry of judgment

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Case 7:14-cv-00295-F Document 29 Filed 07/06/15 Page 7 of 10

for the claimant . . . if it appears that there was reasonable

cause for the seizure or arrest, the court shall cause a proper
certificate thereof to be entered.

28 U.S.C. 2465(a)(2).

This

provision only provides that in the particular instance where a

judgment for the claimant is entered, the court shall cause a
proper certificate to be entered if it finds such cause.
(emphasis added).

Id.

The instance of a judgment for the claimant is

an instance, but not the only instance, where a court must or may
issue a certificate.

Mach. Gun 30.06, 904 F. Supp. 622, 639 (N.D.

Ohio 1995) (citing United States v. Property Identified as 1300

Florida Ave., N.E. Washington, D.C., No. Civ. A. 883409LFO, 1989
WL 315184 (D.D.C. Sept. 19, 1989)).

As the court held in Mach. Gun

30.06,
Although 28 U.S.C. 2465, on its face, applies only to
actions in which judgment has been entered for the
claimant, it has been applied to actions where the
government has been granted an order dismissing the
forfeiture action pursuant to Rule 41(a)(2) of the
Federal Rules of Civil Procedure.
Id.

See also United States v. Property Identified as 1300 Florida

Ave., N.E. Washington, D.C., 1989 WL 315184, at *2 (D.D.C. Sept.

19, 1989 (Although [28 U.S.C. 2465] on its face applies only to
actions

in

which

judgment

has

been

entered

for

the

claimant,

principles limiting liability in forfeiture actions would apply

even more strongly in cases such as this, in which the claimants
have not demonstrated that the action was so meritless that they

Case 7:14-cv-00295-F Document 29 Filed 07/06/15 Page 8 of 10

were entitled to judgment.

On its face, this section states that

an award of costs may be entered against the government only in

cases in which no reasonable cause for the seizure of the property
existed.)

Thus, even if, as the plaintiff requests, the Court

dismisses

this

exercise

its

case

without

discretion

prejudice,

to

issue

it

the

should

appropriately

certificate,

thereby

protecting governmental agents acting under color of a warrant

immunity from personal liability.
CONCLUSION
For the foregoing reasons, the United States requests that
this Court order the instant case be DISMISSED WITHOUT PREJUDICE
and

that

upon

such

dismissal,

or

upon

any

dismissal,

find

reasonable cause for the seizure of the defendant and issue a

CERTIFICATE OF REASONABLE CAUSE.
Respectfully submitted this 6th day of July, 2015.
THOMAS G. WALKER
United States Attorney

BY: /s/ Stephen A. West

STEPHEN A. WEST
Attorney for Plaintiff
Assistant United States Attorney
Civil Division
3l0 New Bern Avenue
Suite 800 Federal Building
Raleigh, NC 2760l-l46l
Telephone: (9l9) 856-4530
Facsimile: (919)856-4821
Email: steve.west@usdoj.gov
N. C. Bar No. 12586

Case 7:14-cv-00295-F Document 29 Filed 07/06/15 Page 9 of 10

CERTIFICATE OF SERVICE

This is to certify that on July 6, 2015, a copy of the

foregoing PLAINTIFFS REPLY TO CLAIMANTS RESPONSE TO
PLAINTIFFS MOTION FOR A CERTIFICATE OF REASONABLE CAUSE was
provided to the below-listed counsel electronically via ECF:
James R. Lawrence, III
Attorney at Law
1400 Crescent Green, Suite 300
Cary, NC 27518
Robert E. Johnson
Scott Bullock
Attorneys at Law
901 North Glebe Road, Suite 900
Arlington, VA 22203
Wesley Hottot
Attorney at Law
10500 NE 8th Street, Suite 1760
Bellevue, WA 98004-4309

THOMAS G. WALKER
United States Attorney

BY: /s/ Stephen A. West

STEPHEN A. WEST
Attorney for Plaintiff
Assistant United States Attorney
Civil Division
3l0 New Bern Avenue
Suite 800 Federal Building
Raleigh, NC 2760l-l46l
Telephone: (9l9) 856-4530
Facsimile: (919)856-4821
Email: steve.west@usdoj.gov
N. C. Bar No. 12586

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Case 7:14-cv-00295-F Document 29 Filed 07/06/15 Page 10 of 10

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF NORTH CAROLINA
SOUTHERN DIVISION
Case No. 7:14-CV-00295-F
UNITED STATES OF AMERICA,
Plaintiff,
v.
$107,702.66 IN UNITED STATES
CURRENCY SEIZED FROM LUMBEE
GUARANTY BANK ACCOUNT NUMBER
82002495,
Defendant,
And concerning
LYNDON B. MCLELLAN and L&M
CONVIENT MART, INC.,
Claimants.

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NOTICE

Claimants Lyndon B. McLellan and L&M Convient Mart, Inc. hereby give notice that, on
June 29, 2015, the government deposited $107,702.66 in the bank account for L&M.
Actions speak louder than words. At the same time that the government has continued to
slander Lyndon as a criminal in its filings in this Court, the government has returned the money
that it seized from Lyndons business. There could be no clearer indication that this forfeiture
proceeding has drawn to a closewith Lyndon the prevailing party and thus entitled to attorney
fees, costs, and interest under governing federal law.

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Case 7:14-cv-00295-F Document 30 Filed 07/07/15 Page 1 of 3

Respectfully submitted, this 7th day of July, 2015.

COATS & BENNETT, PLLC

INSTITUTE FOR JUSTICE

By: /s/ James R. Lawrence, III

James R. Lawrence, III
NC State Bar No. 44,560
1400 Crescent Green, Suite 300
Cary, North Carolina 27518
Telephone: (919) 854-1844
Facsimile: (919) 854-2084
Email: jlawrence@coatsandbennett.com

By: /s/ Robert Everett Johnson

Robert Everett Johnson
VA State Bar No. 83,219*
Scott Bullock
DC Bar No. 442,379*
901 North Glebe Rd., Suite 900
Arlington, VA 22203
Telephone: (703) 682-9320
Facsimile: (703) 682-9321
Email: sbullock@ij.org
rjohnson@ij.org

Local Civil Rule 83.1 Counsel for

Claimants

Wesley Hottot
WA State Bar No. 47,539*
10500 NE 8th Street, Suite 1760
Bellevue, WA 98004-4309
Telephone: (425) 646-9300
Facsimile: (425) 990-6500
Email: whottot@ij.org
* Admitted Pro Hac Vice
Attorneys for Claimants
Lyndon B. McLellan and L&M Convient Mart, Inc.

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Case 7:14-cv-00295-F Document 30 Filed 07/07/15 Page 2 of 3

CERTIFICATE OF SERVICE
I hereby certify that on this the 7th day of July 2015, the foregoing NOTICE was filed
with the Clerk of Court using the CM/ECF system which will send notification to counsel at the
following address:
Stephen A. West
United States Attorneys Office
310 New Bern Avenue
Federal Building, Suite 800
Raleigh, North Carolina 27601-1461
Email: steve.west@usdoj.gov

/s/ Robert Everett Johnson

Robert Everett Johnson
901 North Glebe Rd., Suite 900
Arlington, VA 22203
Telephone: (703) 682-9320
Facsimile: (703) 682-9321
Email: rjohnson@ij.org
Attorney for Claimants

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