Under new management: federal forfeiture statutes to attack the drug trade.

Washington Heights, a neighborhood in upper Manhattan, has a long and colorful history. Heavy fighting took place in the area during the early years of the American Revolution. Throughout the late 19th and early 20th centuries, the expanding city gradually annexed the farms and estates in the region and developed the neighborhood as residential and light commercial property.

Since that time, Washington Heights has become a home to newcomers - in the early 20th century to European immigrants and southern blacks who migrated north. Today, most residents come from Latin American and Caribbean countries.

Unfortunately, in recent years, Washington Heights also has emerged as one of the principal cocaine markets in the northeastern United States. Many customers commute from New York suburbs, but others come from as far away as the South and Midwest to purchase drugs for resale in their hometowns.

While some dealers work on the streets, many more operate out of apartment buildings. Major distributors occasionally commandeer abandoned apartments, others rent under assumed names, and still others pay legitimate tenants several thousand dollars to move out. The dealers then set up shop and simply pay the rent in the legal tenant's name.

The Building

In the center of Washington Heights, across the street from the old Audubon Ballroom where Malcolm X was assassinated, sits a 10-story residential hotel. The aging hotel contains approximately 215 units, each rented separately. The units are grouped into sections of six; each section has a common bathroom and kitchen used by all of the tenants in that section. A family named Hutton (a pseudonym) purchased the building in 1976. Experienced landlords, the Huttons already owned several properties in Manhattan when they purchased the hotel.

Drug dealers began appearing in the building in the mid-1980s. Others started to congregate in front of the hotel. Customers looking for a few grams of cocaine made their purchases on the street; those seeking larger quantities went up to one of the hotel rooms, where the transaction took place. Lookouts posted on the street and in the building kept an eye out for the police.

Despite the lookouts' efforts, precinct patrol officers and Narcotics Division detectives from the New York City Police Department (NYPD) began making large numbers of arrests in the hotel. From 1989 to 1992, officers and detectives executed 78 search warrants and made arrests in rooms, hallways, and the lobby. Investigators determined that by 1992, arrests, seizures, or other drug-related activities had occurred in one-third of the building's rooms.

The Manhattan District Attorney's Office informed the building's owners of each drug arrest and asked them to evict the tenants involved, but the owners took no action. In 1991, police and prosecutors met with the Huttons on two occasions to discuss the escalating drug problem in their hotel, the history of drug activity in the building, the danger it posed to law-abiding residents of the hotel, and the Huttons' responsibility as owners to address the problem. Still, the Huttons never expressed any interest in getting help with the drug problem in their building.

Police officers even provided a number of suggestions to reduce the level of drug sales at the building. These included adopting better screening procedures for prospective tenants, initiating eviction proceedings against tenants who sold drugs in the building, notifying the police of any drug activity in the building, and hiring private security guards to discourage drug dealers and their customers from using the hotel as a drug bazaar.

Police pointed out that other property owners in the neighborhood had used these same means to reduce or eliminate drug dealing in their buildings. However, despite repeated promises, the Huttons made no moves to improve the situation, and drug sales in the hotel continued.

The Investigation

In the spring of 1992, members of the Manhattan North Major Case Unit, part of the police department's Narcotics Division, opened an investigation into a drug ring controlled by two brothers who operated from the hotel. An undercover detective purchased 1 pound of cocaine from the brothers on two separate occasions. Both of these purchases took place in a room the brothers rented on the eighth floor of the hotel. Soon thereafter, the police placed a court-authorized tap on the suspects' telephone. In one 6-week period, detectives counted 1,559 incoming calls and 2,625 outgoing calls over this line. Seventy percent of these calls lasted less than 2 minutes; eight percent of the outgoing calls were to pagers.

Detectives also determined that 400 of these calls were to or from other rooms in the same building; 300 calls were placed to or received from the third floor room used by the ring's lookouts. The volume of calls and their brief duration indicated that the brothers ran a large-scale drug operation.

Detectives from the Major Case Unit calculated that the ring could move 15 to 20 kilograms of cocaine a day. The organization worked every day except Sunday and was open for business from late morning until 9 or 10 p.m. Intelligence revealed that Colombian importers supplied the ring, while most of the brothers' customers were local dealers.

The brothers also owned a restaurant and a travel agency in the neighborhood. They advertised the restaurant on Spanish language television and occasionally used it as a meeting place to discuss drug transactions and as a storage place for cocaine. One of the brothers used the travel agency, managed by his wife, to receive and launder the ring's money.

On July 29, 1992, a buyer - having made arrangements by telephone the preceding day - came to the travel agency and gave the wife $37,000. Detectives then watched as the man walked from the agency to the hotel. A few moments later, he emerged carrying a shopping bag, being escorted by one of the group's workers. The worker hailed a taxicab, and the buyer got in and left. The surveillance team stopped the cab one-half mile away and arrested the man. On the seat next to him were 2 kilograms of cocaine in a shopping bag.

One week later, detectives from the Major Case Unit executed a search warrant in room 8B6 of the hotel, the same room in which the undercover officer and the buyer had made their purchases. The detectives recovered 16 kilograms of cocaine and arrested two of the brothers' associates, along with the courier who had just delivered the drugs. The two associates posted bail and promptly fled the country. The courier, a Columbian national, pled guilty and is now serving 6 years to life in a state prison.

The brothers then moved the operation to another room in the hotel, and fearing wiretaps, changed their telephone number. Investigators subsequently obtained an eavesdropping order for the new line and continued monitoring the operation.

On September 16, 1992, Major Case Unit detectives arrested one of the brothers, his wife (who operated the travel agency), and six associates. As the group was being arrested, another hapless courier arrived to make a delivery of cocaine. Detectives also placed him in custody. After the arrests, the district attorney seized the restaurant and travel agency. As always, the district attorney's office and the police department notified the Huttons of the arrests. However, nothing changed in the building; drug sales continued unchecked.

The Seizure

Investigators from the Manhattan North Narcotics Division became increasingly frustrated by the Huttons' failure to address the drug trade in their building. After consultations with local prosecutors, the investigators decided that the only way to end drug dealing in the hotel permanently was to seize the building from its owners. Fortunately, the Huttons' refusal to take any action to combat the problem even after repeated requests from police and prosecutors had been well-documented.

Under New York State law, real property used to facilitate a crime can only be seized from an owner who is not a criminal subject if the owner consented to the illegal activity and received a "substantial benefit" for allowing the illegal activity to take place.(1) The Huttons themselves had never been accused of any criminal act, and no proof existed that they received any payments or other benefits for permitting the drug trade to continue.(2)

Under federal law, however, real property can be seized from an owner who is not accused of any crime if the government can show that the owner knew about and consented to the criminal activity.(3) Where the owner knows of the illegal activity, consent is presumed, unless the owner can show that all reasonable steps under the circumstances were taken to combat it.(4) The government does not have to prove that the owner received any benefit for allowing the activity.

Given the limitations of New York State law, local prosecutors contacted the U.S. Attorney's Office for the Southern District of New York to enlist its assistance in pursuing federal indictments against the Huttons. The local prosecutors cited the following reasons for pursuing forfeiture in federal court:

* The Huttons never evicted any tenant whose room had been used for drug sales.

* They never improved the application process for new tenants, even after the two meetings with local prosecutors and police. In fact, the application process became less, not more, comprehensive as time passed.

* The Huttons and their managers knew that drug dealers in the building rented blocks of rooms under assumed names.

* Employees of the hotel never screened visitors entering the building.

* The building manager knew that street dealers hid in the hotel's lobby when officers patrolled the area outside the building.

* The Huttons used private security guards in the building for only a brief period. During that time, the only people the guards were known to have challenged were police officers entering the building to execute a search warrant.

* Except for a few telephone calls of little substance, the Huttons never reached out to the police or the district attorney's office with information or requests for assistance.

* The Huttons never fired any employee involved in drug dealing. Even after officers executing a search warrant found one of the building's managers in the room, the owners refused to believe that he was dealing in drugs and kept him on the payroll.

After extensive discussions with police officials and prosecutors, and a review of the history of illegal activity at the hotel, federal prosecutors agreed to bring forfeiture proceedings against the Huttons.

Federal forfeiture law requires notice and an opportunity for a hearing prior to the seizure of real property except where exigent circumstances are present.(5) In this case, ongoing drug sales and the failure of repeated arrests to end the drug trade at the hotel created the exigent circumstances. Based on this information, in addition to multiple undercover drug purchases and warranted searches of the building by police, federal prosecutors requested a court order authorizing seizure of the hotel.

On October 22, 1992, a U.S. District Court judge issued an ex parte order granting the U.S. Marshals Service permission to seize the hotel without prior notice to the owners. The next day, 150 detectives from the Narcotics Division, backed by uniformed patrol officers, executed search warrants throughout the hotel. They made multiple arrests; seized cocaine, currency, and other contraband from tenants; and shut down the open-air drug market in front of the building. A marshal then formally seized the building, escorting the one member of the Hutton family on the premises to the door.

The Trial and Appeals

The Huttons challenged the seizure by contesting the forfeiture action and seeking the building's return. During the trial, they never contested factual evidence about the nature and extent of the drug problem in the hotel. Instead, their lawyers contended that the Huttons had not consented to it, and had, in fact, done everything they could to fight the drug problem.

However, using testimony from investigators, patrol officers, an undercover detective, an informant, and others, prosecutors presented overwhelming evidence establishing that the Huttons had done little or nothing to curtail the drug trade in the hotel. After a 6-day trial, the jury took less than 2 hours to come to a verdict, deciding that the Huttons should forfeit the building permanently.

The Huttons asked a federal appeals court to set aside the jury's verdict. They argued that the seizure without prior notice was improper, that the trial judge had made a number of improper rulings, and that the forfeiture was unreasonable under the excessive fines clause of the eighth amendment.

A panel of the Second Circuit Court of Appeals upheld the rulings of the trial judge and denied the Huttons' application to overthrow the verdict. The Huttons then attempted to appeal the ruling to the U.S. Supreme Court. However, on October 2, 1995, the Court denied their writ of certiorari and refused to hear the case.

Another Successful Seizure

In June 1994, just 6 months after the jury returned its verdict against the Huttons, the NYPD and the U.S. attorney's office used the same federal forfeiture statute to seize an even larger residential hotel in Manhattan. Like the Huttons, the owner of this hotel had never been charged with any criminal wrongdoing. Also like the Huttons, he had permitted a drug problem in his property to go unchecked, refusing all requests from police and prosecutors to take any measures to combat the problem. The courts have upheld this seizure as well.

Forfeiture Documentation

When local and state statutes prove inadequate, police and prosecutors should consider using federal forfeiture laws against owners who permit criminal activity on their property. To do so, investigators must show that the illegal activity is chronic, that the owner knows about the illegal activity, and that the owner failed to take reasonable steps to address the problem. To support such a case, investigators must maintain detailed records of the following:

* The history and extent of criminal activity at the property

* All arrests made on the property and all contraband seized

* All criminal investigations of tenants and guests

* All relevant information from confidential sources

* All documented contacts with and notifications to the owner(s) or their agents

* The owner's action (or inaction) in response to the illegal activity

* The effect of the illegal conduct on the surrounding area

* All complaints from citizens and information from other agencies regarding the criminal activity at the property.

Conclusion

A private management firm under contract to the U.S. Marshals Service now operates the hotel once owned by the Huttons. Drug deals no longer take place in the building, and the crowds of dealers who lined the sidewalks outside the hotel for so many years have disappeared. Law-abiding tenants who once lived in fear of the drug dealers and their customers now feel safer in their surroundings.

Although the Huttons had not been charged with any crime, the courts ultimately held them responsible for their refusal to exercise even minimal controls over the illicit activities occurring in their building. The federal forfeiture statutes that the local police and federal prosecutors pursued against the Huttons could be applied against negligent landlords in jurisdictions across the country. However, investigators must maintain detailed records that prosecutors can use to prove a sustained pattern of neglect on the part of the property owner.

At the very least, the credible threat of forfeiture may encourage inattentive landlords to address crime problems in their buildings. In worst case scenarios, the government can step in where property owners refuse to make buildings safe for tenants. Either way, federal forfeiture statutes represent a viable way for local police and prosecutors to give deteriorating residential properties, and the tenants who live in them, a new lease on life.

Endnotes

1 New York Civil Practice Law and Rules, sec. 1311 3(b)(v) (Mckinney 1995).

2 Unconfirmed reports from tenants and confidential informants alleged that the Huttons were being paid off by drug dealers who used the hotel. However, the police could not develop legally sufficient proof of such payments.

3 21 USC sec. 881 (a)7.

4 United States v. Two Parcels of Property Located at 19 and 25 Castle Street, 31 F.3d 35, 39 (2d Cir. July 18, 1994). An owner who knew that a property was being used for illegal activity must demonstrate lack of consent by proving that he did "all that reasonably could be expected to prevent the illegal activity once he learned of it."

5 The standard for "exigent circumstances" in such cases was established in United States v. James Daniel Good Real Property, 114 S.Ct. 492 (1993). See also, United States v. 141st Street Realty Corporation, 911 F.2d 870 (2d Cir. 1990), cert denied, 498 U.S. 1109 (1991).

Lieutenant Ringwald serves with the New York City Police Department.