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A judge’s findings during a criminal sentencing did not preclude the government from subsequently litigating the issue of illegal currency in a civil forfeiture action, the 2nd U.S. Circuit Court of Appeals has ruled. Deciding an issue “rarely considered by this or any other Circuit,” 2nd Circuit Judge Chester J. Straub said the government did not have a “full and fair opportunity to litigate” the issue of whether defendant Cesar Castro should forfeit almost $120,000 he concealed while leaving the country for the Dominican Republic. The decision in United States v. U.S. Currency in the Amount of $119,984, More or Less, 01-6077, was the latest by the court in dealing with the preclusive effect of criminal sentencing findings. The Circuit, in the one prior ruling addressing the question, had said that estopping a party from litigating an issue decided during sentencing should be done with caution, because it “implicates serious concerns of fairness, while appearing to offer little benefit in terms of efficiency.” In 1996, Castro was about to board a flight at John F. Kennedy International Airport when he declared to customs inspectors that he was carrying just $2,000 in cash. He was arrested after the inspectors found more than 50 times that amount in his briefcase and luggage. Castro pleaded guilty to one count of violating the currency reporting law in 1997. In interviews for his presentencing report, Castro told a probation officer that the money was a loan from the mother-in-law of his remarried ex-wife. In calculating Castro’s sentence, Eastern District of New York Judge Charles P. Sifton said, “I don’t have enough evidence here to find that the funds were the proceeds [of] or are to be used for any illegal purpose.” While Sifton said he doubted his finding would have any preclusive effect on a subsequent forfeiture proceeding because “the government’s motivation in the context of sentencing is certainly quite different than its motivations in securing forfeiture of money,” he added he “might be wrong” and “this may be an estoppel of some sort.” ACTION DISMISSED Four years later, Sifton dismissed the government’s forfeiture action as barred because “the issue of the legality of the currency’s source was actually litigated and decided for collateral estoppel purposes in Castro’s sentencing proceeding.” On appeal, Judge Straub said the court, in S.E.C. v. Monarch Funding Corp., 192 F.3d 295 (2d Cir. 1999), considered for the first time the issue of whether findings made in a sentencing proceeding may preclude relitigation of an issue in a later civil case. While “the roles were reversed” in Monarch, with the government and not the former criminal defendant seeking colleratal estoppel, he said, “We did not limit our holding to such circumstances; instead, we stated in broad and emphatic terms that ‘precluding relitigation on the basis of [sentencing] findings should be presumed improper.’” In light of Monarch, he said, Castro’s case should be analyzed in terms of whether it was efficient to apply collateral estoppel, whether the “source and intended use of the currency were ‘actually litigated,’” and whether the government had a “full and fair opportunity” to litigate those issues. LITTLE INCENTIVE After quickly disposing of the efficiency argument, the panel said the government had little incentive to fully litigate at sentencing, in part because of the procedural differences between criminal and civil proceedings such as evidence gathering, the ability to obtain the testimony of Castro and “the limited discovery available in criminal cases.” “In sum, because of the differences in the procedural opportunities available in Castro’s criminal proceedings and in the forfeiture action, the Government lacked a sufficiently fair opportunity to litigate the source and intended use of the currency,” Judge Straub said. Judges Fred I. Parker and Sonia Sotomayor joined in the opinion. Assistant U.S. Attorneys David L. Goldberg, Deborah B. Zwany and Arthur P. Hui represented the government. Steven L. Kessler and Eric M. Wagner represented Castro.

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