Judge Orders FBI To Return $57,000 Seized From A US Private Vaults' Customer Since It Apparently Can't Justify Keeping It

from the broad-speculation-isn't-probable-cause dept

The judge, who blocked the FBI from moving forward with forfeiting property from certain US Private Vaults’ customers who haven’t been accused of crimes, is now ordering the FBI to return money to one of the people contesting the seizures.

The FBI raided US Private Vaults in March, claiming customers, if not the owners of the business themselves, were involved in a host of crimes, including drug trafficking and money laundering. It’s now August and no one has been charged. The FBI, however, has millions of dollars in currency and other property in its possession and is refusing to give any of it back.

The FBI’s warrant specifically said agents would only search the content of safety deposit boxes to determine ownership. The contents were to be inventoried but the FBI’s affidavit suggested the agents performing the raid would not be searching the contents for evidence of criminal acts.

That self-imposed restriction was ignored. And the FBI was able to move forward with seizures even without bringing criminal charges because civil asset forfeiture remains a thing in this country: the taking of people’s property using only the unproven assertions that they may be the result of illegal activity. This vagueness didn’t sit well with Judge R. Gary Klausner, who blocked the FBI from moving forward with some forfeitures early last month.

The FBI insists it is right to keep this process in motion. However, as the judge points out in his latest order [PDF], its insistence hasn’t been accompanied by any plausible justifications. (h/t FourthAmendment.com)

The facts of this case raise two questions of constitutional import: first, “Why does the Government have [Joseph] Ruiz’s $57,000?”; and second, “Why won’t the government give it back?”

According to the government, the why is self-explanatory. A grand jury convicted the business of conspiring with customers to launder money, distribute drugs, and structure transactions to hide income from the IRS. The judge says the FBI’s decision to seize the contents of boxes makes sense, given that it had to seize property containing many small boxes of property.

Though the Court makes no ruling as to the constitutionality of the Government’s March 22, 2021 search and seizure, the Government’s story makes practical sense. Assuming the Government was authorized to seize the nests of safety deposit boxes at USPV, then, by necessity, the Government was authorized to seize Ruiz’s nest egg which was locked up in Box 7622.

That answers the first “why,” and that answer largely rests on the assumption the search and seizure was proper, which the court assumes for the sake of argument, but not as a matter of law.

The second “why,” however, has not been answered satisfactorily by the FBI.

The Government goes on at length as to the general difficulties in returning peoples’ property to them, but the upshot of the Government’s argument is that returning property to hundreds of people is a slow bureaucratic process.

As to the justification for continuing to seize the $57,000 found in Box 7622, the Government’s answer falls flatter still. The Government asserts, without further explanation, that it is keeping Ruiz’s $57,000 because “the cash is the subject of [] pending in rem forfeiture proceedings.”

But why? The FBI notice sheds little light on the issue.

The court points out the notice only informs Ruiz his cash has been seized because of suspicion violations of US laws. But the laws referenced cover up to 35 different crimes and the government has yet to state which specific crimes it suspects Ruiz has committed. It’s not enough to say things are the way they are because things are the way they are, as the FBI has done here.

Why has the Government kept the $57,000 now that Ruiz has come forward and sworn under the penalty of perjury that it is his? The Government doesn’t really say. Instead, the Government states that it continues to seize Ruiz’s property because “the cash is the subject of… pending in rem forfeiture proceedings.” This explanation is not a justification. Merely stating that the Government has initiated forfeiture proceedings against the property does not offer any insight into how the Government’s continued retention of the $57,000 complies with the dictates of the Fourth Amendment.

The result is an order for the FBI to justify this seizure or give back the money within seven days. This order follows 106 days of the FBI keeping Ruiz’s cash without justification.

The FBI has chosen to try to justify the seizure. However, the assertions made in its affidavit don’t offer any better explanations for the continued seizure. All the affidavit [PDF] does is declare the FBI can’t say for sure how Ruiz ended up with this money. And, according to the FBI, this uncertainty should be all it needs to maintain permanent control of Ruiz’s cash.

The affidavit claims agents can find no legal records pertaining to insurance/injury settlements that would add up to the $57,000 Ruiz claims came from insurance payouts. It also points out Ruiz hasn’t filed a tax return since 2018, which it assumes means Ruiz has made no legitimate money since that point. Of course, this could simply mean Ruiz has made income he hasn’t paid taxes on, but that’s not included in the statutes listed in the government’s forfeiture notice.

It also claims Ruiz is connected to unlicensed distribution of marijuana paraphernalia. But it also points out this potentially illegal business does NOT generate much cash flow, so by its own admission, the FBI is stating that the money seized could not have come from this.

On USPV Executor/Conservator paperwork, which Joseph RUIZ (“RUIZ”) left in the box, he listed his email address as holysmokescrafts@yahoo.com. Holysmokescrafts@yahoo is an on-line marijuana paraphernalia business, specializing in turning liquor bottles into marijuana smoking devices. On-line businesses do not typically generate cash, but this business suggests RUIZ may be involved in the cannabis industry in other ways. According to the California Department of Cannabis Control, RUIZ is not licensed in California to participate in the cannabis industry in any way.

The FBI also absurdly suggests that the mere existence of a bank account in Ruiz’s name means he has a way to pay for living and medical expenses even without the $57,000 the FBI took from him.

Finally, the February 26, 2021 CTR by J.P. Morgan Chase, referenced above, demonstrates that RUIZ had an active bank account at J.P. Morgan Chase within weeks of the execution of the USPV seizure warrant, suggesting that he had a readily available avenue to pay for rent, groceries and other expenses.

I’m not sure if the Special Agent is aware of this, but the bank does not pay for these expenses. The bank merely holds a person’s money and gives them a convenient way to pay for these using their own money, not the bank’s. The FBI has Ruiz’s money at the moment, not the bank. And I have no doubt that if there were any significant amount of money in that account, the FBI would be trying to seize that too.

This is going to be a tough sell in front of this judge. The FBI is saying the absence of evidence backing Ruiz’s claims about the money’s origin is the same thing as evidence of criminal wrongdoing. The FBI obviously doesn’t know where the money came from but it wants to use a list of 35 federal crimes as probable cause for keeping it. The judge has already smacked the FBI twice for its vague justifications. Presenting a lack of evidence as culpatory evidence of criminal acts likely isn’t going to fly.

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Companies: us private vaults

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Comments on “Judge Orders FBI To Return $57,000 Seized From A US Private Vaults' Customer Since It Apparently Can't Justify Keeping It”

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Anonymous Coward says:

They seem to have no case against anyone at this point, including the business itself. How they got a warrant to seize everything and sit on it while filing CAF against box contents is beyond me.

If they really had a case, they should have seized the entire business, arrested anyone actually suspected of a thing, and then operated the the location after notifying box renters so they could come and get their stuff. (I mean legit, not as a way to threaten customers on whom they have absolutely nothing.)

Also, why wasn’t it the IRS involved if so much of this is supposedly tax fraud/evasion?

Here’s hoping a judge starts questioning the original warrant as well as the entire scheme.

RyanNerd (profile) says:

I can only read Techdirt for a limited time because...

nonsense like this going on in the US just depresses me. Little by little, line upon line, pretense upon pretense the freedoms expressed by the Constitution and moral law are being usurped by those sworn to uphold these ideals. It just makes me sad and angry. More so since there isn’t anything that anyone anywhere has power to effect change; so all we do is complain about it and watch the cycle repeat.

Although it’s nice to see someone in the court system with a brain stem not letting the FBI get away with this nonsense.

Ragnarredbeard says:

FBI will still play games with the guy

The scene: FBI office with agent, owner, and a box full money.

Agent: all you have to do to get your money back is identify it.
Owner: great. thank you for making this so easy.
Agent: opens box, pulls out a 20 and says "can you identify this bill"
Owner: thats a 20 dollar bill. Its mine.
Agent: do you know the serial number? If you can confirm the serial number, you can claim it.
Owner: what?
Agent; gestures to box and says "only 2849 bills to go"

Wyrm (profile) says:

The scam of asset forfeiture

People have rights.
Objects don’t.
So we sue the cash, not the people. Cash is guilty until proven innocent. If you want your money back, sue us. At a heavy cost. And be ready to prove that you never committed crime. Good luck with that.

Seriously, one would think there is a high-level legal document that prevents, for example, unjustified seizure of property by the government. But apparently one would be wrong.

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