Ancillary Proceedings

When the federal government seeks to have property criminally forfeited, third parties with claims to the property cannot intervene in the criminal action against the defendant. Instead, those third parties might be required to wait until the court has entered a preliminary forfeiture order (PFO) based on a criminal conviction before filing pleadings seeking the return of the property.

After the court enters a preliminary forfeiture order for specific assets or substitute assets, two unforgiving deadlines come into play:

• first – the Defendant only has 14 days to file a notice of appeal (or an additional 30 days with a showing of good cause or excusable neglect);
• second – any third party with an interest in the property must file a judicial petition in the underlying criminal case for a hearing to adjudicate their interest in the property within the deadline announced in their notice of seizure.

The rules authorizing the court to enter the preliminary order of forfeiture are described in Rule 32.2(b)(2). The procedures governing the ancillary proceeding for third parties are outlined in 21 U.S.C. § 853(n) and Fed. R. Crim. P. 32.2(c).

The third party must file a valid judicial petition before the deadline announced in the seizure notice. If the third party fails to file the petition, the government takes the property when the court enters a final order.

If the third party files a valid claim, the court will schedule a hearing during which the burden of proof is on the third party to demonstrate that they fall within one of two categories of third-party claimants.

Attorney for a Third Party during Criminal Forfeiture Cases

If your property was seized after the Court entered a preliminary order of forfeiture for specific or substitute assets, contact an attorney at Sammis Law Firm.

The attorneys at Sammis Law Firm represent third parties, including an innocent spouse, lienholder, secured creditor, unsecured creditor, judgment creditors, bailees, lien holders, title owners, shareholders, bailee, and title owners.

We can help you understand your rights during an ancillary hearing.

Call 813-250-0500.

The Burden on the Third Party During the Ancillary Proceeding

To succeed, third parties must prove by a preponderance of the evidence that either:

• they had an interest in the property at the time of the offense that is superior to the government’s interest; or
• they acquired the interest after the offense as a bona fide purchaser for value, which means at the time of the purchase, they didn’t have reasonable cause to believe that the property was subject to forfeiture.

21 U.S.C. § 853(n)(6)(B).

The court in United States v. Reckmeyer, 836 F.2d 200 (4th Cir. 1987) held that it must interpret “‘bona fide purchaser for value’ . . . liberally to include all persons who give value to the defendant in an arms’-length transaction with the expectation that they would receive equivalent value in return.” Id. at 208.

If the third party meets the burden of proof, the court will amend the preliminary order of forfeiture (POF).

Once the third party hearings have been held, or time for filing third party claims has passed, a final order will be issued that gives the government clear title to the property forfeited.

The issues become more complicated when the Court enters a preliminary order of forfeiture (POF) for substitute assets.

Third Party Claims for a Preliminary Forfeiture Order for Substitute Assets

How does Section 853(n)(6)(A) apply to substitute assets? Fed. R. Crim. P. 32.2(e) sets forth the procedure for amending an order for forfeiture to include substitute assets.

If the government demonstrates that the requirements of the substitute assets statute, 21 U.S.C. § 853(p), have been satisfied, the court amends the order of forfeiture to include the substitute asset, subject to the resolution of third party rights in the ancillary proceeding.

Thus, property of the defendant is subject to forfeiture as substitute assets even if it is held in the name of a third party, but third parties have the right to challenge the forfeiture of the substitute asset in the ancillary proceeding.

Section 853(p) requires that the court find that the substitute asset belongs to the defendant before amending the order of forfeiture to include the property as a substitute asset.

Since the government cannot forfeit property owned by a third party, the issue to be resolved in ancillary proceedings revolves around ownership.

Does interpreting § 853(n) to prohibit a third party from challenging the forfeitability of the substitute asset violates the third party’s procedural due process rights under the Fifth Amendment of the U.S. Constitution?

In United States v. Daugerdas, 892 F.3d 545 (2d Cir. 2018), the court dealt with a third party’s due process challenge for a defendant forfeiting “substitute property,” 892 F.3d at 553-58, which involves a distinct set of statutory provisions. See 21 U.S.C. § 853(p).

The court in Daugerdas described due process concerns with substitute property (untainted assets) as arising from a “glitch in § 853’s procedural structure.” Id. at 892 F.3d at 550, 554.

21 U.S.C. § 853(n)(1) on Third Party Claims

For interests in property by third parties, 21 U.S.C. § 853(n)(1) provides:

Following the entry of an order of forfeiture under this section, the United States shall publish notice of the order and of its intent to dispose of the property in such manner as the Attorney General may direct.

The Government may also, to the extent practicable, provide direct written notice to any person known to have alleged an interest in the property that is the subject of the order of forfeiture as a substitute for published notice as to those persons so notified.

In other words, a third party may only show it is the “‘rightful owner[]’ of forfeited assets.” Caplin & Drysdale, Chartered v. United States, 491 U.S. 617, 629, 109 S. Ct. 2646, 105 L. Ed. 2d 528 (1989).

Fed. R. Crim. P. 32.2(c) on Third Party Claims

The rules for ancillary proceedings before entering a final order of forfeiture are listed in Fed. R. Crim. P. 32.2(c) which provides:

(1) In General.

If, as prescribed by statute, a third party files a petition asserting an interest in the property to be forfeited, the court must conduct an ancillary proceeding, but no ancillary proceeding is required to the extent that the forfeiture consists of a money judgment.

(A) In the ancillary proceeding, the court may, on motion, dismiss the petition for lack of standing, for failure to state a claim, or for any other lawful reason. For purposes of the motion, the facts set forth in the petition are assumed to be true.

(B) After disposing of any motion filed under Rule 32.2(c)(1)(A) and before conducting a hearing on the petition, the court may permit the parties to conduct discovery in accordance with the Federal Rules of Civil Procedure if the court determines that discovery is necessary or desirable to resolve factual issues.

When discovery ends, a party may move for summary judgment under Federal Rule of Civil Procedure 56.

(2) Entering a Final Order.

When the ancillary proceeding ends, the court must enter a final order of forfeiture by amending the preliminary order as necessary to account for any third-party rights.

If no third party files a timely petition, the preliminary order becomes the final order of forfeiture if the court finds that the defendant (or any combination of defendants convicted in the case) had an interest in the property that is forfeitable under the applicable statute.

The defendant may not object to the entry of the final order on the ground that the property belongs, in whole or in part, to a codefendant or third party; nor may a third party object to the final order on the ground that the third party had an interest in the property.

Sample Petition for Ancillary Proceeding

Below we have provided a sample of a petition for ancillary proceedings, although you should seek out the services of an experienced asset forfeiture attorney before filing a claim.

Petition for Ancillary Proceeding

I, [Petitioner’s name], hereby submit this petition for an ancillary proceeding pursuant to Rule 32.2 of the Federal Rules of Criminal Procedure and 21 U.S.C. § 853(n)(1) claiming an interest in the forfeited property listed in the published notice.

I swear under penalty of perjury that the information provided in this petition is true and correct to the best of my knowledge.

Nature and Extent of Interest in Forfeited Property:

[Provide a detailed description of the petitioner’s interest in the forfeited property, including any legal or equitable interest held by the petitioner.]

Time and Circumstances of Acquisition of Interest:

[Provide information on when and how the petitioner acquired the interest in the forfeited property.]

Additional Facts Supporting Claim:

[Provide any additional facts or evidence that support the petitioner’s claim to the forfeited property.]

Relief Sought:

[Provide a clear statement of the relief being sought, such as a request for the return of the forfeited property or for a monetary judgment.]

I respectfully request that this petition be considered and that the court grant the relief sought.

Signed,

[Petitioner’s name]

[Petitioner’s signature]

[Date]

Petition to Mitigate, Remit, or Restore a Forfeited Property

Although such petitions are rarely successful, third parties may petition the Attorney General for discretionary relief to mitigate, remit, or restore a forfeited property or take “any other action to protect the rights of innocent persons which is in the interest of justice.” 21 U.S.C. § 853(i)(1).

Since such claims are rarely successful, the third party’s priority would be filing a Petition for Ancillary Proceeding by the deadline announced in their notice.

This article was last updated on Friday, September 13, 2024.