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United States v. Nothaus

United States District Court, W.D. North Carolina, Statesville Division

April 17, 2017



          Richard L. Voorhees United States District Judge

         THIS MATTER IS BEFORE THE COURT on the Government's Motion to Dismiss the Amended Claimant Petition (“Amended Petition”) of Mint Holdings, Inc. d/b/a Royal Hawaiian Mint (Doc. 700) for lack of statutory standing/failure to state a claim. (Doc. 804). The matter having been fully briefed (see Docs. 804, 810, 811) and the parties having declined this Court's offer to hold a hearing on the Government's Motion, the matter is ripe for disposition. For the following reasons, the Government's Motion to Dismiss (Doc. 804) is GRANTED IN PART and DENIED IN PART.


         In 1985, Bernard von NotHaus (“von NotHaus”) and Talena J. Presley (“Presley”) established Royal Hawaiian Mint, Inc. (“RHM”) to produce jewelry and medallions commemorating various historical events and Hawaiian leaders. (Doc. 700 at 1-2). Based on the growth of its business, RHM contracted with Sunshine Minting, Inc. (“Sunshine Minting”) to assist in the minting and storage of precious metals. Id. at 2.

         In 1998, von NotHaus began his own currency side project, which originated as a paper instrument entitled “American Patriot Currency” (“Patriot”). Id. at 2-3. The Patriot issued receipts for the purchase of silver, which were redeemable for specified amounts of silver stored in the Sunshine Minting warehouse, thus earning the name “warehouse receipts.” Id. at 2. In April 1998, RHM invested $6, 120.00 in Patriot Silver, providing the original backing for the Patriot.[2] Id. at 3. Later in 1998, von NotHaus, to further his currency project, created the National Organization for the Repeal of the Federal Reserve Act and the Internal Revenue Code (“NORFED”) and Shelter Systems, LLC (“Shelter Systems”). Id. Around the time of the formation of NORFED and Shelter Systems, the Patriot became the “Liberty, ” backed by “Liberty Silver” and issued through “Liberty Certificates.” See id.

         Although von NotHaus initiated the venture involving the Patriot and the Liberty, RHM facilitated the venture by allowing von NotHaus use of RHM's warehouse connection with Sunshine Minting to secure Sunshine Minting's services and by issuing the first editions of the Patriot. Id. at 2. In August 1998, Shelter Systems and Sunshine Minting entered into an Exclusive Manufacturing and Warehouse Agreement (the “Warehouse Agreement”). Id. at 3; (see also Doc. 700-3).[3] Under the Warehouse Agreement, Shelter Systems provided Sunshine Minting unissued Liberty Certificates and Sunshine Minting agreed, for a set fee paid by Shelter Systems, to mint and store Liberty Silver and to issue Liberty Certificates to individuals buying into the currency system. (Doc. 700-3 at 1-2). The Warehouse Agreement further provided that Hawaiian law controlled the interpretation of the agreement, but the metal and certificates were physically located in Sunshine Minting's warehouse in Idaho. Id. at 1, 7.

         The Warehouse Agreement did not mention or account for RHM's $6, 120.00 investment, deposit, and backing in the Patriot/Liberty. (See Doc. 700-3). In March 2000, Shelter Systems and Sunshine Minting amended the Warehouse Agreement to, in part, address RHM's initial investment. (See Doc. 700 at 3-4). The amendment to the Warehouse Agreement granted RHM the rights to all deposited but unclaimed metals remaining in the warehouse after either the expiration of the twenty-year term of the warehouse receipts, or within 180 days of the warehouse closing. Id.; (see also Doc. 700-4 at 3).

         In November 2007, law enforcement seized metals and related assets at various entities associated with von NotHaus, including Sunshine Minting. (Doc. 285 at 2). The Government filed forfeiture complaints against these seized properties in May and June 2008. (Doc. 804 at 3). Following the seizure of the metals and related assets, a grand jury indicted von NotHaus on charges of conspiracy and counterfeiting stemming from the minting and production of the Liberty. (Doc. 3). After von NotHaus's arrest and arraignment, the Court granted von NotHaus's request for release pending trial but imposed a condition precluding von NotHaus from circulating any coins or currency related to the Liberty. (oral order July 6, 2009). The Court subsequently modified von NotHaus's conditions of release to permit him to reside in Hawaii pending trial. (Doc. 60).

         Following von NotHaus's return to Hawaii, von NotHaus's son, Random von NotHaus (“Random”), and Presley established Mint Holdings Inc. (“Mint Holdings”), with Random as the sole owner and Presley as the Chief Executive Officer. (Doc. 700 at 5; see also Docs. 700-6, 700- 7). Shortly thereafter, von NotHaus and Presley transferred complete ownership of RHM to Mint Holdings, completing the formation of the corporation presently referred to as Mint Holdings, Inc. d/b/a Royal Hawaiian Mint. (Doc. 700-8).

         A jury convicted von NotHaus of conspiracy to defraud the United States by making, uttering, and passing counterfeit coins in violation of 18 U.S.C. § 371 (2006), falsely making and forging counterfeit coins in violation of 18 U.S.C. §§ 485, 2 (2006), and uttering and making coins of silver intended for use as current money, in violation of 18 U.S.C. §§ 486, 2 (2006). (Doc 287 at 1; Doc. 291). Based on the Superseding Bill of Indictment and the offenses of conviction, this Court determined that certain properties, including coins and bars of precious metals, were subject to forfeiture. (Doc. 297 at 1-2). To protect the rights of third parties with interests in the properties subject to forfeiture, the Court commenced an ancillary proceeding wherein third parties could file petitions instituting claims for the properties. Id. at 2-4. However, the Court determined that some of the seized property, including 1, 000.5 troy Ounces of Silver Coins, 1, 000.5 troy Ounces of Silver Coins, and certain dies for making Liberty silver pieces, were contraband per se and not subject to ancillary forfeiture proceedings under 21 U.S.C. § 853(n) (2012). (Doc. 296 at 2-4).

         Mint Holdings petitioned this court for the remission of items seized from RHM's account at Sunshine Minting. (Doc. 700 at 6-7).[4] In an effort to establish its right over the seized property identified in its Amended Petition, Mint Holdings asserts that, as successor of RHM, it, rather than von NotHaus, has an interest in the property and that von NotHaus did not possess legal title to the property. Id. at 6. The Government filed a Motion to Dismiss Mint Holdings' Amended Petition, arguing that Mint Holdings lacks statutory standing to challenge the forfeiture-i.e., the Amended Petition fails to state a claim upon which relief may be granted. (Doc. 804). Specifically, the Government argues that Mint Holdings' Amended Petition fails to allege a sufficient preexisting, vested interest for purposes of 21 U.S.C. § 853(n)(6)(A) because Mint Holdings did not exist at the time von NotHaus engaged in the conduct giving rise to his conviction and the forfeiture. (Doc. 804 at 8-11). Therefore, the Government urges, Mint Holdings is precluded from establishing a legal interest or right in the property prior to the commission of the offense. Id. Moreover, the Government maintains that the property at issue constitutes contraband per se, precluding Mint Holdings from lawfully possessing the property. Id. at 15-17.[5] In response, Mint Holdings contends its Amended Petition pleads the requisite legal interest required by 21 U.S.C. § 853(n)(6)(A). (Doc. 810 at 4-9). Mint Holdings also argues that the Government fails to establish that all of the property it seeks to recover is contraband per se. Id. at 11. After reviewing the parties' submissions, the Court contacted the parties regarding holding a hearing to permit arguments and the presentation of evidence on the Government's Motion to Dismiss and on Mint Holdings' Amended Petition. Both parties, standing on their pleadings and briefs, declined the opportunity for a hearing.[6]


         A. Procedures & Standard of Review Governing Forfeiture Proceedings

         Federal Rule of Criminal Procedure 32.2 governs criminal forfeiture and sets out the procedures the Government and the Court must follow before the Court may enter a final order of forfeiture. See United States v. Oregon, 671 F.3d 484, 487-88 (4th Cir. 2012). Where a court enters a preliminary order of forfeiture, “any third party who claims an interest in the property to be forfeited may file a petition with the district court contesting the forfeiture.” Id. at 488 (citing Fed. R. Crim. P. 32.2(c)(1)). If a third party comes forward and files a claim petition, a court must conduct an ancillary forfeiture proceeding. Id. The first step in an ancillary forfeiture proceedings is for a court to ...

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