The opinion of the court was delivered by: SHAPIRO
FINDINGS OF FACT and CONCLUSIONS OF LAW
This is an action in rem by the United States to forfeit certain business and real property alleged to have been acquired with the proceeds of illegal drug transactions and therefore subject to forfeiture under the provisions of 21 U.S.C. § 881(a)(6). The properties were originally seized pursuant to a warrant issued by a United States Magistrate on April 19, 1983. On June 8, 1983, the warrant of seizure was quashed for lack of probable cause and return of the property seized was ordered. (Reconsideration denied September 16, 1983). The matter then proceeded on the Government's civil complaint in forfeiture, filed simultaneously with the attempted seizure on April 19, 1983, in accordance with the Supplemental Rules for Certain Admiralty and Maritime Claims (Rule E).
The properties the subject of the complaint in forfeiture are:
1. Premises known as 2639 Meetinghouse Road, Jamison, Pennsylvania.
2. Liquor License No. R-19233 owned by Abby's Bar, Inc.
3. Liquor License No. R-19229 owned by Jamill, Inc.
4. Premises and Business known as McNally's.
No criminal charges have been brought against George Leiby to date. By consent of all the individual claimants filed October 23, 1984, the claim of George Leiby to a one-third interest in three of the four defendant properties
was severed for this separate trial; the individual claimants also agreed to the determination of the constitutional issues at this trial.
From January, 1978 to December, 1982, Robert Sebzda and Glenn Leiby admittedly manufactured and distributed methamphetamine in substantial quantities.
Robert Sebzda and Glenn Leiby admittedly invested in businesses, including bars known as Warminster Abbey, McNally's and Spanky's, to hide proceeds earned from the manufacture and distribution of methamphetamine. There is no substantial evidence that George Leiby was involved in that manufacture or distribution of methamphetamine.
George Leiby was President and bookkeeper of each of the three corporations and spent a substantial amount of time at Warminster Abbey, Spanky's and McNally's; claimant testified to working at each of the bars sometimes as many as eighty hours per week in addition to his full-time position as controller of another company. (Tr. 2.178-187).
Because of his official position, his demeanor, and the credibility of the evidence in its entirety, claimant George Leiby has not established that he did not know of the illegal drug transactions or of the investment of the proceeds of illegal drug transactions in those businesses.
Abby's Bar, Inc. was incorporated in June, 1980. Robert Sebzda, Glenn Leiby and George Leiby each held a one-third interest therein until January, 1984, when George Leiby acquired a two-thirds' interest and Bernard Sebzda a one-third interest.
Glenn Leiby, George Leiby and Robert Sebzda purchased the Warminster Abbey business and liquor license on April 28, 1980 from William H. McCreary. Shortly thereafter, Leiby, Leiby and Sebzda assigned their respective interests in Warminster Abbey to Abby's Bar, Inc.
Abby's Bar, Inc. acquired Warminster Abbey for $65,000, paid by a purchase money mortgage from the seller in the amount of $50,000 and $15,000 received from Penn Vending Company; there is no evidence or contention that either the mortgage money or the money received from Penn Vending Co. was the illicit proceeds of drug transactions.
The $65,000 purchase price included the business, liquor license, fixtures and equipment but only the liquor license is a subject of this action.
There is no evidence from which the actual cash value of the Abby's Bar, Inc. liquor license at time of purchase can be determined; the value on the books on August 31, 1980 and at all relevant times thereafter was $10,000 (Ex. G-15-G-21).
The Government has not established that the purchase price for Warminster Abbey was not $65,000 but approximately $115,000 because there was a $50,000 "under-the-table" cash payment.
Abby's Bar, Inc. had no legitimate income other than receipts from the operation of Warminster Abbey.
Jamill, Inc. was incorporated in November, 1980. Glenn Leiby, George Leiby and Robert Sebzda each held a one-third interest in the corporation until January, 1984 when George Leiby acquired a two-thirds' interest and Bernard Sebzda a one-third interest.
Robert Sebzda, George Leiby and Glenn Leiby purchased Spanky's business and liquor license from Ronray, Inc. on September 2, 1980 for $31,000. Shortly thereafter, Sebzda, Leiby and Leiby assigned their respective interests in Spanky's to Jamill, Inc.
The $31,000 purchase price included the business, liquor license, fixtures and equipment but only the liquor license is the subject of this action.
There is no evidence from which the actual cash value of the Jamill, Inc. liquor license at time of purchase can be determined; the value on the books at all relevant times was $10,000 (Ex. G-26, 12/31/80; G-27, 1/31/81).
To pay for Spanky's, $10,000 was borrowed from Robert Sebzda's father, Bernard Sebzda; there is no evidence that the $10,000 borrowed from Bernard Sebzda was drug proceeds. Ten Thousand Dollars was also borrowed from Abby's Bar, Inc.; it is more likely than not that this $10,000 borrowed from Abby's was received from exchanges for controlled substances because it cannot be accounted for by earnings (profits) from the bar's legitimate business operations or anything else. The remaining $11,000 was paid in cash: $5,000 as a deposit and $6,000 at settlement. It is more likely than not that this $11,000 was also cash received from exchanges of controlled substances for the same reason.
There is no evidence from which the actual cash value of the liquor license at the time this action was initiated can be determined (April, 1983). To the extent that drug money was used for business improvements or investment, there might have been a corresponding increase in the value of the liquor license. But the Government presented no evidence on the increase in value, if any, and traced no such increase to the investment of drug proceeds.
Jamill, Inc. had no legitimate income other than receipts from the operation of Spanky's.
Glemic, Inc. was incorporated in August, 1981. Robert Sebzda, Glenn Leiby and George Leiby each held a one-third interest in the corporation until January, 1984 when George Leiby acquired a two-thirds' interest and Bernard Sebzda a one-third interest.
Glenn Leiby, George Leiby and Robert Sebzda agreed to purchase the premises at which McNally's was operated from Marguerite Eliades on March 12, 1981 for $198,000. Shortly thereafter, Sebzda, Leiby and Leiby assigned their respective interests in McNally's to Glemic, Inc.
The $198,000 purchase price was paid by an $89,000 purchase money mortgage to Marguerite Eliades from Glemic, Inc., a $59,000 mortgage debt of Eliades to John McNally assumed by Glemic, Inc. and $50,000 paid in cash to the seller: $20,000 as a deposit and $30,000 at settlement. It is more likely than not that the $50,000 in cash was received from an exchange of controlled substances but there is no evidence or contention that the mortgages were connected with drug proceeds.
McNally's was sold on February 10, 1984 for $535,000, $35,000 of which was allocated to the liquor license and amusement permits. By agreement of the parties approved by the court, the proceeds of the sale, less certain payments to trade creditors and $35,000 allocated to the licenses, were deposited with the court in an interest-bearing account pending the outcome of this litigation. The Government presented no evidence of the value of McNally's at the time it commenced this action.
Glemic, Inc. had no legitimate income other than receipts from the operation of McNally's.
Special Agent Vincent Crovetti of the Drug Enforcement Agency ("DEA") was assigned to investigate Robert Sebzda early in 1982. Crovetti had been employed by the DEA for approximately 13-1/2 years, and was experienced in ...