Bill Wallace, Chronicle Staff Writer
SAN FRANCISCO

A federal appellate court ruled yesterday that U.S.
agents unlawfully seized more than a half million
dollars in cash, two aircraft, two boats and 11 cars
from two men convicted of drug charges.

Under the ruling from the U.S. Court of Appeals in San
Francisco, unless the government can produce more
evidence linking the cash and property to drug deals, it
will have to give it all back.

The ruling came in the appeal of an asset forfeiture
suit against two Los Angeles men, James Wren and Charles
Arlt, who were convicted in 1992 of a multistate scheme
to manufacture amphetamines and launder their drug
profits.

Shortly after the two were indicted, federal prosecutors
filed a civil lawsuit seeking forfeiture of $537,029.16
in cash, a shrimp boat, a helicopter and a private
airplane. The suit also laid claim to a power boat and
11 automobiles including four luxury cars that the
two men had purchased at auction.

Both Wren and Arlt were convicted of the drug and money
laundering charges in 1992. They appealed the asset
seizure, saying that government agents had not
demonstrated that the money and property confiscated was
connected to any criminal activity.

In the ruling issued yesterday, Judges Stephen
Reinhardt, Thomas G. Nelson and Michael Daly Hawkins
agreed. The judges ruled that an affidavit by IRS agent
Phillip Mullins, which the government had used as the
basis for the seizure, did not present sufficient
evidence to document a connection between the property
seized and the two men's criminal activity.

Mullins' affidavit quoted a confidential informant as
saying that Arlt had arranged a transfer of $400,000 in
illegal profits from a Luxembourg bank account, but
agents were unable to determine what the original source
of the money had been.

``The evidence demonstrates a transfer of a large sum of
money with original ties to cash, but there is no
evidence of a connection between this particular money
and drug activity,'' Nelson wrote on behalf of the
panel. The suspicion that the cash or property was
linked to some illegal activity did not constitute legal
proof of such a connection, he added.

David M. Michael, the attorney who filed the appeal,
said he had not had an opportunity to read the entire
ruling yesterday, but added that from what he knew about
it, the decision ``really represents a total victory for
my client.''

Janet Hudson, the assistant U.S. attorney in Los Angeles
who prosecuted the asset forfeiture suit against Wren
and Arlt, was out of her office yesterday and could not
be reached for comment.

The Chronicle Publishing Company