Don Mellein is a retired civil servant living in Los Angeles. To safeguard his financial security, Don invested in precious metals, including gold coins. And to keep these savings safe, he rented a safe deposit box at US Private Vaults, a business in Beverly Hills. Don certainly didn’t expect that his precious property would be seized by the government.
In March 2021, the FBI raided US Private Vaults. The warrant authorizing the raid directed officers to focus on US Private Vaults, the business, and specifically stated that it did not authorize a criminal search or seizure of the contents of the individual safe deposit boxes. When it came to the boxholders, the FBI promised the judge that it would “preserve the property for safekeeping” until it could be safely returned to the rightful owners.
But the FBI did not actually intend to return the boxholders’ property. Instead, the FBI’s plan from the beginning was to use civil forfeiture to keep everything in the boxes worth over $5,000. In the rush to process all those boxes, the FBI abandoned its initial plan to carefully videotape the process. Instead, agents completed inventory paperwork that described the contents of the boxes with vague terms like “miscellaneous coins” or even “miscellaneous general items.” In all, the FBI sought to forfeit over $85 million in cash and untold millions more in precious metals and other valuable property, including the contents of Don’s box.
In the end, the FBI was forced to abandon many forfeiture attempts—in part because of a separate lawsuit filed by the Institute for Justice. But when the FBI began returning property, boxholders began to report that some of it was missing. A retired doctor reported the loss of coins worth at least $75,000. Two of the plaintiffs in IJ’s initial case challenging the raid, Jeni Pearsons and Michael Storc, reported the loss of $2,000 in cash. And when Don went to the FBI’s offices to retrieve his box—which, again, had contained coins worth hundreds of thousands of dollars—no coins were returned. After months of fighting, the FBI somehow “found” 47 of Don’s coins, but it has never returned Don’s other 63 coins, which are worth over $100,000.
Now, Don is teaming up with the Institute for Justice (IJ) to file a lawsuit against the government demanding that it either return the coins or compensate him for his loss. At the same time, Jeni and Michael are filing a similar lawsuit over the cash that was not returned to them. When the FBI took possession of Don’s box and Jeni and Michael’s box, it promised to safeguard the contents. It failed. If normal people are held accountable for stealing or losing your property, then the government should be, too.
Don Mellein Complaint
Jeni Pearsons and Michael Storc Complaint
Don Mellein Invests in Precious Metals and Protects His Investment at US Private Vaults
In 2002, after the birth of his son, Don Mellein and his wife sold their home in Malibu and invested some of the proceeds in precious metals, including American and Canadian gold coins. In 2017, Don moved this property into a box at US Private Vaults. He accessed the box a few times a year and kept the coins there along with cash and other property.
Two months after the FBI’s raid of the company, Don received a forfeiture notice saying that the government intended to take his property. But the notice did not list all of Don’s property—specifically, his 110 coins. Don hired an attorney who reached out to the FBI to ask for the government to drop its attempt at forfeiture and to inquire about the coins. An FBI agent speculated that perhaps the coins were separated from the rest of the contents of the box as not subject to forfeiture.
After the FBI determined that it would not pursue forfeiture, Don went to the agency’s L.A. office to claim his property, expecting to receive all his coins back. But the coins were not returned, and the property receipt did not list them as having been in the box.
Don’s attorney continued seeking the return of the coins. At one point the Assistant U.S. Attorney in charge of the US Private Vaults case called Don’s attorney and noted that the FBI’s search and seizure of the company was “not their finest moment.”
Getting nowhere fast, Don sued the government to force the return of his 110 coins in August 2021. Once he did that, the FBI conveniently “found” 47 of the coins and returned them in December 2021. But it then said Don’s case had to be dismissed until Don filed an administrative claim with the FBI for the coins it couldn’t find. So Don did just that and filed a claim with the FBI for the missing coins. But in March 2023, the FBI said it had investigated itself and that there was no evidence that it had done anything wrong or careless.
Jeni Pearsons and Michael Storc Safeguard Their Precious Metals at US Private Vaults
Jeni Pearsons and her husband Michael Storc also began renting a safe deposit box at US Private Vaults in 2017. They placed approximately $20,000 in silver in the box and put $2,000 in cash below a foam liner in a cardboard box:
Jeni and Michael also received a forfeiture notice from the government after the raid. They joined IJ’s class action lawsuit in June 2021. A week later, a federal court granted a temporary restraining order keeping the government from moving forward with forfeiture. Eventually, the government dropped its effort to forfeit the contents of their box.
As with Don’s box, the $2,000 in Jeni and Michael’s box was not catalogued by the FBI and was not returned when they got their silver back. With the assistance of IJ, Jeni and Michael submitted an administrative claim to the FBI, asking for their money to be located and returned. But, in March 2023, the FBI responded that it investigated itself and found no evidence that it had done anything wrong.
How the FBI’s Goal of a Big Payday Outweighed Its Duty to Safeguard Property
Don, Jeni, and Michael are not the only US Private Vaults customers whose property was not returned. Facts established in IJ’s earlier class action suit over the unconstitutional seizures demonstrate that the FBI’s priority was taking property for forfeiture and searching for evidence to support those forfeiture efforts. This priority far outweighed its duty to safeguard property.
The agent in charge of forfeitures testified that the FBI planned to try to take any box with property worth more than $5,000 even before it sought a warrant for the raid. All told, the FBI sought forfeiture of more than $85 million in cash and tens of millions of dollars worth of precious metals, jewelry, and poker chips. To build evidence for forfeiture, agents were instructed to focus on connecting property to criminal activity. With cash, for instance, agents were told to observe whether the money smelled of drugs, how it was bundled, and to run it past drug dogs.
The lead agent testified that the process of searching boxes took longer than anticipated. Hundreds of agents from multiple federal agencies, as well as local police with drug dogs, crammed into the US Private Vaults facility and the nearby parking lot. Agents removed the doors from hundreds of safe deposit boxes, all there on site, and sifted through the contents.
While agents initially video recorded their searches, “reality got in the way” and only about half of the boxes that were opened were recorded. Other agents testified that they put a premium on “processing boxes quickly.” The FBI justified opening the boxes by saying it needed to create an “inventory” of the contents to protect them. But after searching the boxes for evidence of criminal wrongdoing, there often wasn’t time to create meaningful inventories. As a result, the inventories were essentially useless, as they used vague, general terms, like “miscellaneous coins” or “assorted jewelry” or “miscellaneous general items.”
To reiterate, the FBI’s warrant did not even permit agents to open boxes except to identify box renters and to safeguard the contents. Neither Don, Jeni, nor Michael, like hundreds of other US Private Vaults customers, were ever charged with a crime. When the FBI chose to open individual boxes of possibly innocent people, it took on itself the responsibility to safeguard the property.
Unfortunately, civil forfeiture creates a powerful incentive for law enforcement to seize money since the proceeds flow into accounts that are controlled by the agencies, not Congress. Law enforcement also does not have to convict or even charge someone with a crime to take property. Most federal forfeitures are concluded administratively, with bureaucrats making final decisions rather than judges. It’s a flawed system that turns citizens into ATM machines.
To make matters worse, when people do fight back and stop the forfeiture, they are often surprised to learn that some of their property has gone missing. That’s what happened to Don, Jeni, Michael, and other USPV customers. IJ’s in-depth study of civil forfeiture in Philadelphia also found that poor record keeping made it especially difficult for victims to get back cash. Nearly 60% of survey respondents did not get a receipt. And all too often, those property owners lack a clear path to a remedy for their lost or stolen property.
Despite the hurdles, Don and Jeni successfully fought the forfeiture of their property, but they were not made whole. The legal pathway to getting back their missing coins and cash is filled with procedural obstacles, and there is little doubt that the government will use every tool it can to have their legal claims dismissed without legal discovery or a hearing. Don, Jeni, and Michael have therefore brought several claims under different legal avenues, which together involve four separate theories of liability:
First, the government is responsible for the negligent or wrongful acts of its agents. When it took custody of over a thousand safe-deposit boxes, the government assumed responsibility for keeping them safe. The government’s rushed, slapdash search for evidence to use in forfeiture proceedings fell utterly short of that responsibility and allowed boxholders’ property to be lost or stolen. The individual agents who searched Don, Jeni, and Michael’s boxes are therefore liable for breaching their duties under state law (such as negligence), and the government is responsible under the Federal Tort Claims Act for its agents’ conduct.
Second, even if it can’t be shown that any specific agent did something wrong, when the government takes your stuff, it has to give it back unless it can give some good reason not to. This is the standard ordinary people are held to under a legal arrangement called a “bailment,” and it should apply here to the individual agents who searched Don, Jeni, and Michael’s box, and to the government under the Federal Tort Claims Act and the Tucker Act. And the government is separately liable under the Fifth Amendment’s Takings Clause, because it intentionally took Don, Jeni, and Michael’s property while pursuing its law enforcement goals (for example, to look for evidence). The government must therefore either give them their property back or pay them “just compensation.”
Third, the Fourth Amendment protects your right to be secure against unreasonable searches and seizures of our personal effects. It was unreasonable here to search hundreds of boxes without evidence of wrongdoing, to seize everything worth $5,000 for civil forfeiture, and to fail to safeguard the seized property. The individual agents responsible are therefore liable for the property that went missing due to their unconstitutional searches and seizures of Don, Jeni, and Michael’s property.
Fourth, to the extent the government invokes various immunity doctrines to deprive Don, Jeni, and Michael of any remedy, then that deprivation violates the literal text of the Due Process Clause, which states that the government cannot take your property without “due process of law.”
Underlying all these legal pathways are the U.S. Constitution’s guarantees of due process and for the government to compensate takings. When the government loses your property, you should have a remedy.
The Litigation Team
Don and Jeni are represented by IJ Attorney Joe Gay and IJ Senior Attorneys Rob Frommer and Rob Johnson. Nilay Vora and Jeff Atteberry of the Vora Law Firm PC are serving as local counsel for the case.
The Institute for Justice
The Institute for Justice protects property rights nationwide and this case is the latest in IJ’s nationwide initiative to secure property owners’ rights against unconstitutional searches, seizures, abusive fines and civil forfeiture. IJ currently has two class action lawsuits stemming from the raid on US Private Vaults. The first is challenging the unconstitutionality of the search and the FBI’s continued retention of records. The second is challenging the FBI’s unconstitutional and confusing forfeiture notices.