United States of America v. Josue Santiago

In the
United States Court of Appeals
For the Seventh Circuit
Nos. 99-3909, 99-3910
United States of America,
Plaintiff-Appellee,
v.
Josue Santiago,
Defendant,
Appeals of: Carlos M. Santiago
and Carlos E. Santiago,
Claimants-Appellants.
Appeals from the United States District Court
for the Eastern District of Wisconsin.
No. 96-CR-70--Thomas J. Curran, Judge.
Argued June 2, 2000--Decided September 18, 2000
Before Flaum, Chief Judge, and Evans and Williams,
Circuit Judges.
Williams, Circuit Judge. Carlos E. Santiago and
Carlos M. Santiago seek the return of funds
forfeited to the government following family-
member Josue Santiago’s conviction on charges of
conspiracy to distribute cocaine. They contend
that certain funds included in the district
court’s forfeiture order belong to them and are
not the proceeds of illegal activities. With
limited exceptions, the district court rejected
the Santiagos’ claims. We affirm.
I
On July 9, 1996, a federal grand jury returned
a ten-count superseding indictment against Josue
Santiago and his father, Carlos E. Santiago./1
The indictment charged Josue with conspiracy to
distribute cocaine and possession with the intent
to distribute cocaine, and charged Josue and his
father with laundering the proceeds of cocaine
trafficking and conspiracy to commit that crime.
The indictment also sought the forfeiture of the
proceeds of the defendants’ drug-related

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activities and all property used to facilitate
those activities. In particular, the indictment
identified approximately $530,000 held in
thirteen separate bank accounts in the names of
various Santiago family members including Josue,
Carlos E., and Josue’s brother, Carlos M.
Eventually, Josue agreed to plead guilty to
conspiring to distribute cocaine in exchange for
the dismissal of the remaining charges against
him and the dismissal of all the charges against
his father. Josue also agreed to "forfeit any
right, title and interest in the property
described in the forfeiture provision of the
indictment." The district court accepted Josue’s
plea and sentenced him to 92 months’
imprisonment.
After sentencing, and on the government’s
motion, the district court entered an order
forfeiting to the government Josue’s right to the
property identified in the indictment. Then,
pursuant to 21 U.S.C. sec. 853(n)(1), the
government published notice of its intent to
dispose of the forfeited property. In response,
Carlos E. and Carlos M. filed a joint motion for
return of property, asserting that the funds in
the thirteen bank accounts included in the
forfeiture order belong to one or the other of
them and are not the proceeds of illegal
activities.
In January 1998, the district court held a
series of hearings on the Santiagos’ motion.
Jeffery Doss, an investigator with the Milwaukee
County, Wisconsin, District Attorney’s Office
testified about the evidence that led law
enforcement officials to suspect that the funds
in the various bank accounts at issue were the
proceeds of Josue’s illegal drug trafficking
activities and were simply being held in Carlos
E.’s and Carlos M.’s names to conceal and protect
the funds. He testified that officers searching
Josue’s residence at the time of Josue’s arrest
discovered numerous financial documents, many of
which were addressed to the residence Carlos E.
and Carlos M. shared, not Josue’s residence. Doss
also noted that a subsequent search of Carlos
E.’s residence uncovered documents relating to
the accounts at issue in this case, including a
notebook in which Carlos E. kept track of his
finances and envelopes and bank statements from
a Puerto Rican bank.
Doss further testified that two confidential
informants provided information regarding Josue’s
financial dealings. One informant told police
that Josue told him that he did not keep bank
accounts or property in his name, but rather kept
his assets in the names of relatives and

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girlfriends. This same informant also told police
that Josue told him that he had money in Puerto
Rican bank accounts. The other confidential
informant told police that Josue had several
hundred thousand dollars at a pair of area banks
in his father’s name and in his brother’s or
sister’s name. The information provided by these
confidential informants was later confirmed by
the existence of accounts at the banks
identified, in the names of Carlos E., Carlos M.,
and Neida Collazo (Josue’s sister). Investigation
of these accounts eventually led police to the
rest of the accounts the government seeks to have
forfeited, all of which were in the names of
various Santiago family members.
Doss finally testified that while investigating
Josue’s illegal activities in Milwaukee, the
police learned that Josue had a prior arrest for
a drug-related offense in California. Police
investigating that crime had discovered several
bank accounts in the names of Josue, Carlos E.,
and Carlos (no middle initial) Santiago, which
Josue admitted held the proceeds of his crimes.
Police also discovered that someone identifying
himself as Carlos Santiago attempted to close
these accounts shortly after Josue’s arrest.
The government also elicited testimony from, and
submitted exhibits prepared by, Jeff Mesarich, an
Auditor with the U.S. Attorney’s Office, who had
conducted an analysis of the accounts at issue
and had examined the Santiagos’ financial
circumstances. With respect to each account at
issue, Mesarich described the history of the
account, including the names on the account, the
likely sources of deposits, and other evidence
relating to the account. For instance, he
explained how the money in many accounts moved
through a tortured history of successive accounts
and the name or names on certain accounts changed
several times. In addition, he pointed to
documentary evidence establishing that Carlos E.
himself recognized that several of the accounts
in his name contained Josue’s funds.
Mesarich further testified about the income
Carlos E. and Carlos M. declared on their tax
returns over the years prior to Josue’s arrest.
Before his retirement in the early 1980s, Carlos
E.’s reported wages ranged between approximately
$8,600 and $22,800. After his retirement, Carlos
E.’s reported pension and retirement income
varied between approximately $12,200 and $18,300
(with the exception of one year in which his
income was approximately $3,000). Carlos E. also
enjoyed substantial interest income beginning in
the early to mid-1980s (when Josue purportedly
began his illegal activities), which at one point
exceeded $27,000 dollars. The evidence regarding

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Carlos M.’s reported income is restricted to the
1990s, but reveals that his combined income from
wages and unemployment benefits ranged between
approximately $8,600 and $13,200 and that he
reported virtually no interest income.
Carlos E. and Carlos M. also testified in
support of their motion, offering details
regarding their income. Carlos E. testified that
both he and his wife (before her 1991 death) had
been wage-earners most their lives, that they
received income from certain rental properties,
that one rental property was sold for $20,000 in
the late 1970s, and that he had inherited $10,000
from his father. Carlos M. testified that he had
worked nearly thirty years at three successive
jobs, earning between five and eight dollars per
hour. Neither Carlos E. nor Carlos M., however,
offered any documentary support for their
assertions regarding their income or otherwise
accounting for how they accumulated so much
money. Both simply asserted that the money in the
accounts they claim derived from income they
saved over the years.
In cross-examining the Santiagos, the government
elicited testimony regarding the Santiagos’
expenses. Carlos E. admitted that he paid
property taxes, utility bills, health insurance
premiums, and thousands of dollars on health care
not covered by insurance. Carlos M. conceded that
he paid child support for two children and paid
many of the bills he and his father accumulated.
Moreover, the government successfully impeached
Carlos E. with evidence that he himself had
previously recognized (in the notebook detailing
his financial matters and in a passbook for one
of the accounts at issue) that certain funds he
claims actually belonged to Josue. Likewise, the
government successfully impeached Carlos M. with
his grand jury testimony, which omitted any
mention of the funds he claims despite questions
regarding what bank accounts he had.
After considering all the evidence presented at
the hearing and reviewing post-hearing briefs,
the district court issued a thorough, written
decision finding for the government. The district
court first reaffirmed its earlier oral ruling
that the government had discharged its initial
burden of establishing probable cause to believe
a nexus exists between the funds the Santiagos
claim and illegal drug activity. The court then
carefully examined the evidence in the record
regarding each account at issue. Based on this
review of the evidence, the district court
concluded that the Santiagos had met their burden
of establishing that they are the legitimate and
rightful owners of the claimed funds in five of
the accounts (one of the four Carlos M. claims,

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four of the nine Carlos E. claims, containing
just under $25,000 together), but had failed to
meet their burden with respect to the remaining
eight accounts. Accordingly, the district court
released to the Santiagos the funds in the former
accounts and divested the Santiagos of their
interests in the funds in the latter accounts.
The Santiagos now appeal the district court’s
rulings with respect to the funds not released to
them.
II
Despite the fact that this case is a criminal
drug forfeiture proceeding, the district court
and the parties have employed the legal standards
applicable to civil drug forfeitures./2 We have
doubts about whether this is correct, but neither
party makes anything of this issue nor have we
discovered any cases addressing the topic. Thus,
we will analyze the Santiagos’ appeals using the
same civil drug forfeiture standards the district
court used./3
Under these standards, a court adjudicating a
forfeiture claim employs a burden-shifting method
of proof. 21 U.S.C. sec. 881(d), incorporating 19
U.S.C. sec. 1615; United States v. All Assets &
Equip. of West Side Bldg. Corp., 58 F.3d 1181,
1188 (7th Cir. 1995). The government has the
initial burden of establishing probable cause to
believe that the property at issue has a
connection with illegal drug activity and is
therefore subject to forfeiture. United States v.
$87,118.00 in United States Currency, 95 F.3d
511, 518 (7th Cir. 1996); All Assets, 58 F.3d at
1188. Probable cause exists if the government has
established that the totality of the
circumstances demonstrates a nexus between the
property and illegal drug activity. $87,118.00,
95 F.3d at 518; All Assets, 58 F.3d at 1188-89.
Once the government has met its burden, the
ultimate burden shifts to the claimant to prove
by a preponderance of the evidence that the
property at issue has no connection with illegal
drug activity and is therefore not subject to
forfeiture. $87,118.00, 95 F.3d at 518; All
Assets, 58 F.3d at 1189. If the claimant fails to
satisfy this burden, the government’s initial
showing will suffice to support a forfeiture
order. $87,118.00, 95 F.3d at 518; All Assets, 58
F.3d at 1189.
The Santiagos claim that (1) the government did
not establish probable cause to believe that any
of the funds to be forfeited had a connection to
Josue’s illegal drug activity and (2) they proved
by a preponderance of the evidence that the funds
belonged to them and had no connection to Josue’s
illegal drug activity./4 The Santiagos’

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arguments are unpersuasive, however.
A. Probable Cause
As our recitation of the facts of this case
demonstrates, there is considerable evidence
establishing a nexus between the money the
government seeks to have forfeited and Josue’s
illegal drug activity. This evidence includes:
(1) bank records and family financial records
linking Josue to many of the bank accounts at
issue; (2) drug dealing by Josue in California
during the 1980s and in Milwaukee during the
1990s that coincided with large infusions of cash
into bank accounts held by family members; (3)
information from two confidential informants that
Josue used family members as nominees to hold
drug money in various bank accounts; (4) Josue’s
and Carlos E.’s history of attempting to hide and
launder drug proceeds in California during the
1980s; (5) the constant transfer and movement of
funds between various family bank accounts and
the repeated changing of names on those accounts;
and (6) the discrepancy between legitimate income
earned by Carlos M. and Carlos E. and the amount
of money in the bank accounts each claims.
Contrary to the Santiagos’ protests, this
evidence is not simply evidence regarding the
unexplained existence of large amounts of money
held in a suspicious manner. Contrast United
States v. $506,231 in United States Currency, 125
F.3d 442, 451-54 (7th Cir. 1997). Rather, taken
as a whole, the evidence connects Josue’s known
and admitted illegal drug activity to the money
the Santiagos claim. Especially damning is the
evidence establishing Josue’s practice of hiding
his drug proceeds in bank accounts held by family
members. As the evidence demonstrates a nexus
between the funds at issue and Josue’s illegal
drug activity, probable cause to believe the
funds are subject to forfeiture exists.
Therefore, the district court did not err in
concluding that the government had discharged its
initial burden of proof.
B. Preponderance of the Evidence
The Santiagos’ effort to challenge the district
court’s preponderance of the evidence ruling
fares no better than their probable cause
challenge. To begin with, the Santiagos proceed
as if the government shouldered the ultimate
burden of proof and its failure to indisputably
establish that each dollar in each account
derived from Josue’s illegal drug activity
requires judgment in their favor. Of course, the
opposite is true; the burden was on the Santiagos
to establish that they own the funds at issue and
that the funds derive from legitimate sources.

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See $87,118.00, 95 F.3d at 519-20; All Assets, 58
F.3d at 1190.
The evidence offered by the Santiagos to
establish these propositions is far from
overwhelming, however. Their evidence consists
entirely of their own self-serving statements as
to the source of the funds at issue. They offered
no independent verification of their claims.
Moreover, the district court specifically found
that neither Carlos E. nor Carlos M. testified
credibly. In light of these facts, it is
difficult to give the Santiagos’ evidence much
weight at all.
Still, the Santiagos’ evidence convinced the
district court that the funds in five of the
accounts at issue should not be forfeited. On the
other eight, however, the district court
concluded otherwise. In making these
determinations, the district court thoroughly
examined each of the accounts at issue and
carefully weighed the evidence presented by the
parties. We see no need to rehash this analysis,
as the Santiagos have brought nothing to our
attention that causes us to question the district
court’s conclusions. Suffice it to say that there
is sufficient evidence to allow a fact-finder to
conclude that the money in each of the accounts
claimed by the Santiagos on appeal derived from
Josue’s illegal drug activities. Cf. $87,118.00,
95 F.3d at 519-20 (rejecting challenge to
forfeiture where claimant failed to provide
credible explanation for large amounts of money
that could be linked to illegal drug activities).
Accordingly, we conclude that the district court
did not commit reversible error in ruling that
the Santiagos had not established by a
preponderance of the evidence that the funds at
issue on appeal are not subject to forfeiture.
III
The Santiagos’ challenges to the district
court’s forfeiture ruling are without merit.
Therefore, we Affirm the judgment of the district
court.
/1 Because the defendant and the claimants all share
the same last name, we will refer to them by
their first names.
/2 In particular, instead of using the standards for
contesting a forfeiture set out in 21 U.S.C. sec.
853(n), which governs third-party challenges to
criminal forfeiture proceedings, the district
court and the parties have used the standards for
defending against a forfeiture action identified
in 21 U.S.C. sec. 881, which governs challenges

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to civil forfeiture proceedings. Contrast United
States v. Messino, 122 F.3d 427, 427-28 (7th Cir.
1997) (criminal forfeiture), and United States v.
De Ortiz, 910 F.2d 376, 380-81 (7th Cir. 1990)
(criminal forfeiture), with United States v.
$87,118.00 in United States Currency, 95 F.3d
511, 518 (7th Cir. 1996) (civil forfeiture), and
United States v. All Assets & Equip. of West Side
Bldg. Corp., 58 F.3d 1181, 1188-89 (7th Cir.
1995) (civil forfeiture).
/3 It is worth noting that while the Santiagos’
appeals were pending, Congress enacted the Civil
Asset Forfeiture Reform Act of 2000, Pub. L. No.
106-185, 114 Stat. 202 (2000), which
significantly altered the standards and
procedures applicable to civil forfeiture
proceedings. This enactment, however, has no
effect on the present appeals since, with one
exception not relevant here, it applies only to
forfeiture proceedings commenced on or after
August 23, 2000. Id. sec. 21, 114 Stat. at 225.
/4 It is not entirely clear from the Santiagos’
brief whether they contest the district court’s
preponderance of the evidence ruling on each of
the accounts or only on certain ones. To be on
the safe side, we assume the Santiagos challenge
the district court’s ruling on each account.

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