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United States v. All Assets and Equipment of West Side Building Corporation

June 29, 1995









On Appeal from the United States District Court for the Northern District of Illinois, Eastern Division.

No. 89 C 2736--Charles P. Kocoras, Judge.

Before RIPPLE and MANION, Circuit Judges, and SKINNER, District Judge. *fn*

RIPPLE, Circuit Judge.



In this forfeiture action, the district court granted summary judgment to the United States and entered final judgment against the claimants Clara Penny and the West Side Building Corporation (collectively, "claimants" or "Mrs. Penny") on their claims to vehicles, real estate and personal properties. The court ordered that the defendant properties be forfeited to the United States. Mrs. Penny appeals the district court's summary judgment determination and its denial of claimants' motion for reconsideration. For the reasons presented below we affirm in part and remand in part.


A. Verified Complaint and Affidavit

On April 4, 1989, the United States government filed a verified complaint and supporting affidavit to initiate forfeiture proceedings against the defendant real and personal properties located in Illinois. The complaint alleged that Jonathan and Clara Penny, husband and wife, were involved in narcotics distribution activities for the past decade. It also alleged that drug trafficking was a "family business" in which Clara Penny managed the business aspects, setting the prices and investing the proceeds, and in which their son Michael was involved. In fact, according to the complaint, both father and son had been incarcerated on narcotics charges. The defendant properties, worth perhaps $3.5 million, *fn1 were alleged to be the fruits of the large-scale narcotics trafficking operation run by the Pennys. The complaint recited that Clara Penny was employed as a mail handler, and yet she drove a Mercedes Benz. Because the Pennys' modest legitimate reported income could not explain the acquisition of those assets or the Pennys' lavish lifestyle, the complaint alleged that there was probable cause to believe that the assets constituted proceeds of illicit drug transactions and records of those activities that were forfeitable to the government under 21 U.S.C. secs. 881(a)(5) and (6). *fn2

Filed with the complaint was the affidavit of Chicago Police Officer Lawrence Evans, a member of the Drug Enforcement Administration/Chicago Police Department Joint Task Force on Narcotics. Following his investigation of the Pennys' narcotics operation, this forfeiture action and, later, the indictment of Jonathan Penny on federal drug trafficking charges were initiated. In his affidavit, Officer Evans reported, in detail, information con cerning the Pennys' drug trafficking that he had learned from a "reliable informant" who had known the Pennys for years. *fn3 According to that informant, Jonathan Penny told him that, in the drug business, you put everything in your wife's name. Officer Evans' check of the titles to the Pennys' real estate and automobiles revealed that many of their assets were in the name of Clara Penny or West Side Building Corporation ("West Side"). From a second informant, an associate of Jonathan's for almost a decade, Officer Evans learned that Jonathan had been distributing multi-kilo quantities of cocaine since 1980. A third source described to Officer Evans the lavish lifestyle of the Pennys, the elegant furnishings of their home, and the expensive restoration of their other realty. In addition, independent information that corroborated the allegation of a history of drug trafficking included the police records of both Jonathan and Michael Penny.

Officer Evans reviewed the Pennys' bank and stock records, and learned that large deposits of cashiers checks were made into their account in 1985 and 1986, and that checks for $75,000 were written to contractors working on the Pennys' property. After reviewing the Pennys' tax returns, Officer Evans pointed out that Clara's paycheck as a mail handler was the couple's only legitimate income, and that their reported adjusted gross income was far less than their deposits in bank and stock accounts.

B. Course of Proceedings

On April 4, 1989, the district court granted the government's ex parte motion *fn4 for forfeiture of the defendant properties. The court determined there was probable cause to believe the property described in the complaint was subject to forfeiture under secs. 881(a)(6) and (7), *fn5 and executed the warrant of seizure. Mrs. Penny filed a verified claim to the property on behalf of herself and West Side, of which she is the sole director. *fn6 She then sought dismissal of the complaint. Following full briefing on the issues, the district court denied claimants' motion to dismiss. The court found that the allegations were sufficiently detailed to comply with the pleading requirements for forfeiture laid out in Supplemental Rule (E)(2)(a). *fn7 It also declined to disturb the court's initial finding of probable cause.

On July 30, 1991, the government filed an amended complaint and the supporting affidavit of Officer Evans. For the most part, it realleged the allegations of the original complaint. However, it provided additional detailed allegations that the properties were used to facilitate drug trafficking. According to this complaint, Chicago police detectives reported to Officer Evans that Jonathan Penny was a source of narcotics to two major west side dealers. One of those dealers, Andre Jackson, informed Officer Evans that Jonathan Penny had taught him how to run Jackson's father's drug business, and had described the location of secret drug laboratories hidden in two of the Pennys' buildings--labs that United States marshals had found in 1990. Jackson also stated that drug profits were used to restore the buildings.

The district court's opinion of November 23, 1993 *fn8 denied Mrs. Penny's request for a continuance because the claimants had not submitted the required affidavit and because they had been given continuances for the review of documents previously. The court then granted the government's motion for summary judgment on several grounds. First, the court noted that Mrs. Penny had failed to file a 12(n) statement, and was therefore deemed to have admitted the government's 12(m) facts--an admission that would dictate summary judgment. It then awarded the government summary judgment on the merits. It noted that the court had found probable cause twice before, and that the government had thus met its burden. In evaluating whether Mrs. Penny's evidence met the burden that had shifted to her, the court considered her ...

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