Background
In August 2014, the FBI seized $585,000 in cash from Lionel Cannon’s safe during a federal drug trafficking investigation. Shortly after seizing the cash, FBI Special Agent Scott Bowman stole $218,200 from the seized funds, leaving only $366,800 in the official government inventory. In April 2015, the FBI discovered Bowman’s theft. Bowman was indicted and pleaded guilty in September 2016 to conversion of property by a federal officer, receiving a money judgment of $136,462 in criminal forfeiture, of which at least $120,880 was traceable to Cannon’s safe.
In April 2017, Cannon pleaded guilty to drug trafficking charges and agreed to forfeit $366,800—the amount the government’s inventory showed, not the full amount actually seized. Cannon’s plea agreement, issued indictment, and forfeiture order all reflected the $366,800 figure, even though both parties understood that an additional $218,200 had been taken by Bowman. The government never initiated forfeiture proceedings for the missing $218,200.
After his guilty plea and forfeiture, Cannon filed a motion under Federal Rule of Criminal Procedure 41(g) seeking return of the $218,200 that Agent Bowman had stolen and that had never been subject to forfeiture. The district court granted summary judgment for the government, finding Cannon had agreed to forfeit all seized property and that his evidence regarding lawful sources for the cash was insufficient. Cannon appealed.
The Court’s Holding
The Ninth Circuit reversed, holding that sovereign immunity does not bar Cannon’s Rule 41(g) claim for recovery of the cash the government has recovered or will recover from Agent Bowman. The court distinguished between money damages (compensation for lost property) and the return of specific property itself. Because Cannon sought the return of the actual funds seized—not compensation for their loss—his claim is equitable in nature and falls within Rule 41(g)’s narrow waiver of sovereign immunity.
The court emphasized that money is fundamentally fungible property distinguished by its exchange value, not the physical identity of individual bills. The government’s contention that Cannon cannot recover because the government no longer possesses the exact bills stolen by Bowman reflects a hyperformalistic misunderstanding of money’s nature. The court noted that federal regulations require seized cash to be deposited electronically into the Seized Asset Deposit Fund, not stored as physical currency, and that tax refunds, bankruptcy payments, and bail returns routinely involve different currency than originally seized. When the government recovers money traceable to funds it lost, the person from whom property was seized may seek its return under Rule 41(g).
On the merits, the court held that the government bears the burden of demonstrating a legitimate reason to retain seized property. The government can satisfy this burden in three ways: by establishing the property is contraband, subject to forfeiture, or that the claimant is not entitled to lawful possession. The government failed on all three counts. The cash is not contraband under Ninth Circuit precedent; the statute of limitations for forfeiture has expired; and the government provided no concrete evidence that Cannon was not lawfully possessed of the funds, relying instead on inference from silence after Cannon submitted sworn statements detailing lawful sources including employment income, vehicle sales, tax returns, and gifts.
Key Takeaways
- Rule 41(g) waives sovereign immunity to permit recovery of specific property seized by the government, including cash, even when the exact physical bills have been transformed through electronic deposit or other means, because money is fungible.
- When the government loses seized property but later recovers it through restitution or criminal forfeiture proceedings, the original claimant may seek return of the recovered funds under Rule 41(g)—a novel holding not addressed in prior Ninth Circuit precedent.
- Currency is not contraband and cannot be characterized as such to justify government retention under Rule 41(g).
- The government bears the burden of proving either that seized property is subject to valid forfeiture, is contraband, or that the claimant lacks lawful entitlement to it; a defendant’s lawful possession is presumed absent government proof otherwise.
- A defendant’s guilty plea to drug trafficking and agreement to forfeit one amount does not constitute an implicit agreement to forfeit a separate, undisclosed amount of seized funds of which the government had notice.
Why It Matters
This decision significantly narrows the government’s ability to invoke sovereign immunity to retain seized cash, particularly in cases involving government misappropriation or loss. By recognizing that money is fungible and that possession of traceable proceeds satisfies Rule 41(g)’s requirement that property be returned, the court created an important remedy for defendants whose seized funds are lost or stolen by government agents—a situation the government had previously escaped through sovereign immunity. The decision establishes that the government cannot exploit the fungible nature of money to argue it has lost property that has merely changed form through electronic deposit or been recovered through forfeiture of a corrupt officer’s assets.
The ruling also has implications for asset forfeiture generally, placing the burden squarely on the government to affirmatively prove unlawful possession or valid forfeiture grounds. By rejecting the government’s “inferences from silence” and requiring concrete evidence that seized funds represent drug proceeds, the court elevated the evidentiary standard necessary for the government to overcome the presumption that a defendant retains rights to seized property, particularly where the defendant has provided specific, detailed explanations of lawful sources.