united states of america v. $183,106.00

DECLARATION of CHRISTOPHER M. LUH

1, Christopher M. Luh, do hereby declare:

BACKGROUND/EXPERIENCE

I . I am a Special Agent of the Federa l Bureau of Investigation (FBI), and have been

employed in this capacity since 2008. Prior to the FBI. I was a Police Officer with the Austin.

Texas, Police Department. I am currently assigned to the Inter-Agency Narcotics Enforcement

Team (INET). I have received training in the investigation of money laundering violations. 18

U.S.C. 1956 and 1957, as well as controlled substance violations, 21 U.S.C. 841.

PURPOSE OF THIS DECLARATION

2. This declaration is offered in support of a complaint in rem seeking forfeiture of the

following property:

$183.106.00 U.S. Currency; $1 ,538. 18 in Funds; 2000 Customized Motorcycle YIN: I CFLR0400008 12; 2007 Custom Motorcycle YIN: I W9SJ25067P279856; 11 Miscellaneous Firearms. Accessories, and Ammunition (Exhibit I to the Complaint); and Miscellaneous Personal Property (Exhibit 2 to the Complaint).

The above described property was purchased in whole or in part with proceeds

derived from the sale of a controlled substance and money laundering and, as such, is subject to

forfeitu re pursuant to 18 U.S.C 98l(a)(l)(A). Additionally, the property is subject to forfeiture

pursuant to 21 U .S.C. 881 (a)(6) as it constitutes or was derived from proceeds traceable to

violations of21 U.S.C. 84 1 (a)(l).

3. The information contained in this declaration is information known to me from my

training and experience, by personal knowledge, and by wri tten and oral reports of other law

Declaration of Christopher M. Luh EXHIBIT A PAGE I Page 10- Complaint In Rem

FOR FORFEITURE

Case 6:15-cv-01113-MA Document 1-1 Filed 06/19/15 Page 1 of 14

enforcement officers involved in the inves tigation. Since this declaration is being submitted for

the limited purpose of a complaint in rem for forfeiture, I have not included each and every fact

known to me concerning this investigation but only information sufficient to show probable

cause that the property in question is subject to seizure and forfeiture. This declaration involves

an investigation by INET, the FBI and the United States Postal Inspection Service into

individuals named Eric L. Scully, Joan M. Scully, and Krystin M. Livingston.

Applicable Law

4. 21 U.S.C. 841(a)( l ) provides in part:

Except as authorized by this subchapter, it shall be unlawful for any person knowingly or

intentionally to manufacture, distribute, or dispense, or possess with intent to manufacture,

distribute, or dispense. a controlled substance [marijuana].

5. 21 U.S.C. 881 (a) provides, in part:

The fo llowing shall be subject to forfeiture to the United States and no property ri ght

shall exist in them:

a. All moneys, negotiable instruments, securities, or other things of value furnished or

intended to be furn ished by any person in exchange for a controlled substance or listed

chemical in violation of this subchapter. all proceeds traceable to such an exchange, and

all moneys, negotiable instruments, and securities used or intended to be used to facilitate

any violation of this subchapter. 2 1 U.S.C. 841 (a)(6).

6. Title 18, U.S.C., 1956, 1957. Money Laundering, provide, in part:

a. Whoever, knowing that the property involved in a financial transaction represents the

proceeds of some fonn of unlawful activity, conducts or attempts to conduct such a

financial transaction which in fact involves the proceeds of specified unlawful

Declaration of Christopher M. Luh EXHIBIT A PAGE 2 Page 11- Complaint In Rem

FOR FORFEITURE


activity with the intent to promote the unlawful activity knowing that the transaction

is designed to conceal the nature of the proceeds shall be sentenced to a fine of not

more than $500,000 or imprisonment for not more than twenty years, or both. In

addition, whoever knowingly engages in a monetary transaction in criminally derived

property of a value greater than $ 10,000 derived from specific unlawful activity shall

be punished with a fine, imprisonment, or both.

7. 18 U.S.C 98 l(a)( l ) provides, in part, that the fo llowing property is subject to

fo rfe iture to the United States:

(A) Any property, real or personal, involved in a transaction or attempted transaction

in violation of Section 1956, 1957 or 1960, or any property traceable to such

property.

(C) Any property, real or personal , which constitutes or is derived from proceeds

traceable to any offense constituting "specific un lawful activity" under Section

1956(c)(7), or a conspiracy to commit such offense.

8. Under Oregon law, ORS 475.304 sets fo rth rules governing marijuana Grow Sites.

Section 4 requires that a marijuana grow site registration card must be obtained and be posted

indicating for whom marijuana is being produced. ORS 475.304 section 7 sets parameters for

allowable expenses that may be reimbursed. Specifically, a registry card holder or designated

primary caregiver may reimburse the person responsible for a marijuana grow site for the costs

of supplies and utilities associated with the production of marijuana. No other costs associated

with the production of marijuana for the registry identification card holder (patient), including

the cost of labor, may be reimbursed.


FOR FORFEITURE


SUMMARY OF THE INVESTIGATION

9. In April , 2013, fNET received information from a source who wished to remain

anonymous. The tip reported that the owner of Blac Sheep Coffee, a coffee kiosk located at 795

W. 6th Avenue, Eugene, Oregon, identified by law enforcement as Eric L. Scully, had two to

three warehouse marijuana grow sites that net him about fifty pounds per nine week cycle. The

tip further stated that Scully sells the marijuana at $2,000 per pound and the coffee stand is not

open on a regular basis. The tip reported that Blac Sheep Coffee was a financial front for

laundering illegal drug proceeds.

I 0. INET Detective Keith Seanor was the lead investigator concerning Eric Scully and

the illegal production and sale of marijuana. Based on discussions with Detective Seanor and

other investigators participating in this investigation, I know that Eric Scully' s primary source of

income is believed to be from the sale of marijuana. I know that Joan Scully retired from the

Tucson, Arizona Public School System in May, 2014, and receives a pension in the amount of

approximately $2.700 per month.

11 . On January 6, 20 I 5. Detective Seanor obtained a search warrant for three locations

associated with Eric Scully and the marijuana grow operations: 32683 I-Iidden Meadows Drive,

Eugene, OR; 74920 Conifer Court, Cottage Grove, Oregon; and 2600 Main Street, Units H-1 and

H-2, Springfield, Oregon. Detective Seanor also obtained search warrants for related bank

accounts resulting in the seizure of $1 ,538. 18 in Funds, comprised of: $178.11 from Oregon

Community Cred it Union, account in the name of Joan Scully; $ 1,009.62 from Pacific

Continental Bank, account in the name of Scully Enterprises LLC; and $350.45 from Bank of

America, account in the name of Eric Scully.


FOR FORFEITURE


12. On January 7, 2015, law enforcement executed the three search warrants at the above

described locations. Following is a summary of observations and items seized at each location.

32683 Hidden Meadows, Eugene, OR

13. Eric Scully, Joan Scully, and Krystin Livingston were present at the residence.

Several large black plastic bags full of marijuana were located in a downstairs bedroom.

Numerous items used fo r packaging and shipping marijuana, including cardboard boxes,

shipping labels, vacuum sealers, and latex gloves, were located in a downstairs media room. A

marijuana grow operation, including marijuana plants and a separate drying room, was located in

a storage building next to the residence. Approximately 194.5 pounds of marijuana and 85

marijuana plants were seized. A handwritten note was found at the residence which stated, in

part. "750 pounds every 8 weeks sold @ 2560 = $1.920.000''.

14. A United States Postal Service shipping box was located in the media room. A

shjpping label on the box was addressed to an individual in Tucson, Arizona and the return

address was listed as, "Linda R. Baker, Wholelife Natura l B&B, 3680 W I stAve. , Eugene, OR

97402." The weight of the box was listed as 17.2 pounds. The delivery date was li sted as January

8, 2015, indicating that the box was to be mailed that day in order to arrive in Tucson the next

day. 1 determined that 3680 W 151 Ave. is a fictitious address, and I could find no record of Linda

R. Baker or Wholelife Natural B&B in Eugene, OR. Based on the location of the processed

marijuana and the shipping box and labels in the residence, I believe that these names are a

fict itious business and fictitious identity used to ship the marijuana to out-of-state customers.

15. Items seized during the execution of the search warrant included two custom

motorcycles, an Audemars Piguet wristwatch, $2,28 1.00 in U.S. currency, and a Kahr Arms,

model PM40, .40 Caliber Pistol.


FOR FORFEITURE


74920 Conifer Court, Cottage Grove, OR

16. Items seized and li sted in this complaint included $179,860.00 in U.S. Currency

which was located in a Louis Vuinon bag, a Rolex 18k gold wristwatch, a Patek Philippe

wristwatch, several gold necklaces and rings, including custom made jewelry, miscellaneous

collectible coins and personal items, three rifles including an AK-47 assault rifle. seven

handguns, and a ballistic protection vest.

2600 Main Street, Units H-1 and H-2, Springfield, OR

17. Both warehouse storage units contained marijuana grow rooms. marijuana plants.

chemicals, nutrients, and other items used in the marijuana manufacturing process.

Approximately 134 marijuana plants were seized.

18. INET Detective Curt Newell assisted in the search of the 2600 Main Street warehouse

units. While serving the search warrants, an individual identified as Timothy Courter arrived at

the location. Detective Newell interviewed Courter.

19. In summary, Courter stated that he was Eric Scully ' s employee. Eric and his

girlfriend, Krystin Livingston, live in Cottage Grove. Eric' s mother, Joan Scull y, li ves in a house

on Hidden Meadows. There is a marijuana grow operation in the garage at the 1-fidden Meadows

house. The last time he (Courter) was at the Hidden Meadows location was one week ago. He

worked at that location and helped pop the marijuana buds off the plants which he then placed

onto screens. Eric and Krystin put the marijuana into the twister and totes. (Detective Newell

noted that a twister is a machine used in large commercial marijuana operations to quickly

harvest marijuana buds from marijuana plants.) Courter was asked if Eric and Krystin are the

main people responsible for the marijuana operation and he stated, "They are the bosses that I

answer to.'" Courter was asked if anyone else works for them and he stated. "Just me and Joan:


FOR FORFEITURE


Courter stated that he works between 20 and 30 hours per week and that he's paid $20 per hour

in cash. Detective Newell to ld Courter that he was seen at the warehouse location with a female,

and he (Courter) acknowledged that his girlfriend also works for Eric and Krystin helping to

harvest marijuana. and is also paid $20 per hour. Courter was asked if he knows about Eric or

Krystin shipping marijuana across the country and he said, 'I hea~ them say they gotta get

marijuana packaged and shipped out. I don ' t know where it goes."

20. A search of Lane County Property Tax records revealed that the property located at

32683 Hidden Meadows Drive, Eugene, Oregon, is owned by William Scott and Rebecca Sue

McAlexander.

21 . On January 9, 2015, I interviewed Rebecca McAlexander concerning ownership of

the Hidden Meadows property. In summary, Ms. McAlexander stated she and her husband

entered into a land sale agreement with Eric Scully for the sale of the Hidden Meadows

residence. The contract was reviewed by attorney Matt Cox. (Based on a review of the contract.

detailed below, the date of the purchase was October. 20 12.) Under the terms of the agreement,

the McAlexanders would retain title to the property while Scully made monthly payments to

Cascade Escrow towards ownership of the property. Scully made an initial down payment of

$50,000.00 in 2012 at closing and an additional payment of$50,000 in 20 13. The McAlexanders

received both payments from Cascade Escrow. Scully also paid approximately $3,200.00 per

month on the contract. The monthly payments were made every month.

22. On January 15, 2015, Detective Seanor contacted attorney Matt Cox and obtained a

copy of the Land Sale contract relating to the sale of the Hidden Meadows property to Eric

Scully. The contract was dated October 18. 2012, and was signed by Scott McAlexander,

Rebecca McAlexander, and Eric Scully. The contract states that the purchase price was

Declaration of Christopher M. Luh EX1 ll BIT A PAGE 7 Page 16- Complaint In Rem

FOR FORFEITURE


$579,000.00. A first down payment in the amount of $57,900.00 was due at closing and a second

down payment in the amount of $57,900.00 was due in 12 months. The down payments were in

addition to monthly payments in the amount of $3, 124.26.

23 . A search of Lane County Property Tax records revealed that property located at

74920 Conifer Court, Cottage Grove, OR, is owned by Christopher C. and Jennifer Arbogast.

24. On January 8, 2015, I interviewed Christopher Arbogast concerning ownership of the

Coni fer Court property. In summary, Mr. Arbogast stated that in May 20 14, he reached an

agreement to sell the property in a wraparound mortgage to Joan Marie Scully, who was moving

to Eugene from Tucson, Arizona. He met Joan Scully once, in June 2014, before closing on the

loan. Scully had a son who was li ving in a residence off Dillard Road. Joan Scully was going to

move into that property and her son was going to live in the Conifer Court residence.

25. Arbogast stated that the mortgage is managed by Evergreen Land Company in

Eugene. Under the terms of the agreement, Joan Scully made a payment of approximately

$200,000.00 shortly after closing, and Arbogast received approximately $168,000 from

Evergreen after closing costs. Each month Arbogast received a payment of $2,410.70 from Joan

Scully through direct deposits from Evergreen. Arbogast also received a check from Joan Scull y

in the amount of $4,430.00 for payment of property taxes.

26. I have reviewed records relating to the purchase of the Conifer Cour1 property. On

May 8, 20 14, Eric Scully wrote a check in the amount of $2,500.00 on his account at Bank of

America payable to Cascade Title and Escrow as earnest money for the purchase of Conifer

Court. On June 23,2014, Joan Scully deposited a cashier' s check in the amount of$188,173.34

into her account at Oregon Communi ty Credit Union. This check represents a disbursement from

Joan Scully's inheritance from her mother' s estate. On June 24, 2014, Eric Scully deposited a


FOR FORFEITURE


$9,500.00 cashier's check purchased with funds from his account at Bank of America into Joan

Scully's account at Oregon Community Credit Union, and an additional $ 1,500.00 cash was also

deposited into Joan Scully 's account. On June 26,2014, Joan Scully purchased a cashier's check

in the amount of$197.500.00 with funds from her Oregon Community Credit Union account

payable to Evergreen Land Title for the down payment on Conifer Court. Based on the above.

Joan Scully used funds from her inheritance and funds provided by Eric Scully to make the down

payment on the Conifer Court property.

27. I have reviewed records relating to Joan Scully's inheritance from her mother's

estate. The estate was valued at $827,953.29. Between December 2013 and May 2014, the estate

was liquidated. Joan Scully received $233,173.34 and Eric Scully received $8,333.51. The

majority of the proceeds were used for the down payment on the Conifer Court residence. The

remaining proceeds were insufficient to pay the substantial ongoing expenses paid by Eric and

Joan Scully detailed below.

28. Following the purchase of the Coni fer Court property, $2,500.00 cash was deposited

into Joan Scully 's account at Oregon Community Credit Union each month, and a cashier's

check in the amount of $2,420.70 was purchased payable to Evergreen Land Title for the

monthly payment. On November 26, 2014, $4.43 1.00 cash was deposited into Joan Scully's

account, and on the same day a cashier's check in the amount of $4.430.20 was purchased with

funds in the account and made payable to Christopher Arbogast for '"Conifer Property Tax.'

Given that Joan Scully's pension is approximately $2,700.00 per month and Eric Scully has no

known legitimate income, r believe that proceeds from the marijuana grow operation provided

the cash necessary for the monthly payments and property taxes.


FOR FORFEITURE


29. I have conducted a preliminary financial analysis in order to determine the estimated

monthly expenses paid by Eric and/or Joan Scully. Estimated expenses are as follows:

Hidden Meadows monthly payment: Hidden Meadows monthly utilities: Conifer Court monthly payment: Springfield warehouse monthly payment: Springfield warehouse monthly utilities: Tesla monthly payment: Toyota Tundra monthly payment: Marijauna trimmers' monthly wages: Total:

$3,100.00 $2,100.00 $2,400.00 $4,000.00 $1,200.00 $ 1,600.00 $1 ,378.00 $3,200.00

$18,978.00

30. The above listed expenses do not include normal monthly living expenses, including

food and entertainment, vehicle insurance, gas and maintenance, and do not include other

expenses associated with operating a large commercial marijuana grow operation, including

chemicals, lights, equipment, and shipping costs.

31. Following the execution of the above described search warrants, I have conducted

additional investigation including reviewing documentary evidence seized in the search warrants,

reviewing bank records relating to Eric and Joan Scully, interviewing witnesses, and reviewing

witness interview reports conducted by other investigators assisti ng in this investigation. This

investigation has revealed significant cash expenditures made by Eric and Joan Scully in addition

to the monthly expenditures detailed above.

32. Detective Seanor contacted the Oregon Department of Motor Vehicles (DMV) and

determined that Eric Scully has two motorcycles registered to him, a 2000 "Assembled"

motorcycle and a 2007 West Coast Chopper motorcycle. Both were purchased in July 2014. A

"Bill of Sale'' identified Eric Scully as the purchaser of the 2007 motorcycle for $26,000.00.

There are no lienholders, indicating that Scully paid cash for the motorcycle. These motorcycles

were seized during the search warrant and are contained in the property listed in the complaint.


FOR FORFEITURE


33. Detective Seanor interviewed the seller of the 2000 Assembled motorcycle who

resides in Fresno, California. The seller told him that he placed an ad on Craigslist and Eric

Scully called him and asked a few questions. The next day Eric Scully showed up with aU-Haul

and a Bank of America bag with $15,000 cash. Eric Scully gave the seller the cash, loaded the

motorcycle on the U-Haul , and drove away without even driving the motorcycle.

34. In August 2014, Eric Scully purchased a new Toyota Tundra pickup truck from

Kendall Ford. He paid approximately $10,000.00 down and is making monthly payments in the

amount of$1 ,378.00.

35. In September 2014, Joan Scully purchased a new Tesla S automobile from Tesla

Motors of Portland, Oregon. The purchase price was approximately $ 118,020.00. Joan Scully

paid over $12,000.00 down and financed $106,2 18.00 from Wells Fargo Dealer Services. The

down payment included a cashier's check, dated September 29, 2014, in the amount of$9,575.00

purchased from funds in her account at Oregon Community Credit Union. On that same day,

cash in the amount of$9,700.00 had been deposited into her Oregon Community Credit Union

account which provided the funds for the down payment. Monthly payments in the amount of

approximately $1,600.00 are paid to Wells Fargo in a similar manner with a cash deposit

fo llowed by a cashier' s check withdrawal. Specifically, after a cash deposit of $1 ,620.00 is made

into Joan Scul ly's account, on the same day a cashier's check payable to Wells Fargo in the

amount of$1 ,615.38 is withdrawn from the account. Eric Scully has been observed driving this

vehicle and has been cited for speeding in this vehicle.

36. On Apri l 3, 2015, United States Postal Inspector Will iam Melvin interviewed a

witness who told Melvin that he sold two watches to Eric Scully. Based on a review of evidence,

including financial records and text messages between Eric Scully and the witness, 1 believe that


FOR FORFEITURE


in April 2014, Eric Scully purchased an Audemars Piguet watch for over $20,000 cash and that

in December 2014, Eric Scully paid $29,000.00 cash for a Patek Philippe wristwatch. Both

watches were seized during the execution of the search warrants and arc contained in the

complaint.

37. During the execution of the search warrants. numerous receipts relating to payments

for goods and services were seized. I have reviewed a spreadsheet summarizing the receipts

which revealed that between May 201 1 and January 20 15, Eric Scully spent at least $197,000.00

in addition to the monthly living expenses and the vehicles and motorcycles detailed above.

Expenditures include $54.437.00 paid to Louis Yuitton. $19,200.00 to Tom Ford clothing,

$17,453.00 to Mario Mcns clothing, $16,961.00 to First American Title for the down payment

on a building located in Cottage Grove, Oregon, and $10,224.00 to Christian Louboutin men 's

clothing.

38. I have reviewed tax returns reporting income and expenses for Scully Enterprises

LLC and Eric Scully. individually, for the years 2011 through 2013. Eric Scully's sole source of

reportable income for each of the three years was from Scully Enterprises LLC. An Internal

Revenue Service form I 120S, reporting income and expenses for Scully Enterprises LLC, li sts

the nature of the business as "coffee shop.'

39. In 2011, Scully Enterprises LLC reported a net operating loss in the amount of

$11,068.00. In 2012, Scully Enterprises LLC reported net income in the amount of$53,437.00.

Eric Scully reported this amount as his sole source of income in 2012, less a deduction in the

amount of $11,068.00 from the prior year's loss canyover, which resulted in an Adjusted Gross

Income of $42,369.00. This resulted in a federal tax liability in the amount of $4,459.00, which

was paid by Eric Scully. In 2013, Scully Enterprises LLC reported net income in the amount of

Declaration of Christopher M. Luh EXHlBIT A PAGE 12 Page 21- Complaint In Rem

FOR FORFEITURE


$72.231.00. Eric Scully reported this amount as his sole source of income in 20 13. resulting in a

federal tax liability in the amount of $1 1,574.00, which was paid by Eric Scully. A note included

with Eric Scully's 2013 tax return work papers indicates that he informed hi s accountants that he

was "working to transition out of coffee biz" and that he closed the business on December 15,

2013. The note further indicates that Eric Scully's new business in 2014 involved glass and .. aura

stones" .

40. Based on the above, the income reported by Eric Scully during the years 2011

through 2013, and the lack of any legitimate business income during 2014, establishes that his

income was wholly insufficient to afford the monthly living expenses and the extravagant

purchases including the vehicles, watches, jewelry. and high end clothing detailed above and

contained in the complaint.

CONCLUSION

41. I know from my training and experience that individuals engaged in the

manufacturing, distribution, and sale of controlled substances such as marijuana are often found

to possess large quantities of cash, marijuana, and grow equipment.

42. Persons involved in possession, manufacture, or distribution of controlled substances

such as marijuana often come into large amounts of unexplained income from their drug dealings

and will frequent ly have expenditures which far exceed their reported legitimate income. They

frequently pay in cash, cashier's checks, or money orders for most of their large purchases so as

to conceal the source of their illegitimate income and launder the illegal proceeds.

43. I also know that individuals engaged in the manufacture, distribution, and sale of

marijuana will sometimes use the Oregon Medical Marijuana Program as cover for their illegal

activities. These individuals will often grow and/or possess more than their allotted amounts of


FOR FORFEITURE


marijuana and offer the excess for sale for profit in violation of the law. They will then use the

profits for personal expenditures such as the purchase of real estate. vehicles, jewelry, firearms

for personal protection, and other items. Detective Seanor told me that Eric Scully is a medical

marijuana patient who is authorized to grow marijuana at 2600 Main St. , Unit H-2, Springfield,

Oregon. As a medical marijuana patient, Scully's authorization to grow marijuana is limited to 6

adu lt plants at the 2600 Main Street location. 32683 Hidden Meadows is not an authorized

marijuana grow location.

44. Based on the facts set forth herein, as well as my training and experience, l believe

probable cause exists to show that the property listed below. which was seized during the search

warrants and contained in the complaint, was purchased in whole or in part with proceeds

derived from the sale of a controlled substance and money laundering and. as such, is subject to

forfeiture pursuant to 18 U.S.C 981 (a)(! )(A) and (C). Additionally, the property is subject to

forfeiture pursuant to 2 1 U.S.C. 881 (a)(6) as it constitutes or was derived from proceeds

traceable to violations of21 U.S.C. 841(a)(l).

$ 183, I 06.00 U.S. Currency; $ 1,538. 18 in Funds; 2000 Customized Motorcycle YIN: 1 CFLR040000812; 2007 Custom Motorcycle YIN: 1 W9SJ25067P279856; I I Miscellaneous Firearms, Accessories, and Ammunition (Exhibit 1 to the Complaint); and Miscellaneous Personal Property (Exhibit 2 to the Complaint).

I declare under penalty of perjury that the fo regoing is true and correct pursuant to 28

u.s.c. 1746.

Executed this ;g day of June~

Christopher M. Luh, Special Agent Federal Bureau of Investigation


FOR FORFEITURE


united states of america v. $183,106.00

Documents

forfeiture pursuant

law declaration of christopher

following property

forfeiture case

described property

controlled substance

property ri ght

bureau of investigation