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United States v. $6

March 21, 2007

UNITED STATES OF AMERICA PLAINTIFF,
v.
$6,976,934.65 PLUS INTEREST DEPOSITED INTO ROYAL BANK OF SCOTLAND INTERNATIONAL, ACCOUNT NUMBER 2029-56141070, HELD IN THE NAME OF SOULBURY LIMITED, AND PROPERTY TRACEABLE THERETO, DEFENDANT, AND SOULBURY LIMITED, CLAIMANT



The opinion of the court was delivered by: Royce C. Lamberth, United States District Judge

MEMORANDUM OPINION

In this civil in rem action, the United States seeks forfeiture of nearly $7 million in defendant funds traceable to deposits in the Royal Bank of Scotland International ("RBSI"), located on the island of Guernsey.*fn1 The funds were deposited in an RBSI account held by a British Virgin Islands company named Soulbury Limited. On December 15, 2003, the United States filed its Complaint and the Clerk of the Court issued a Warrant of Arrest In Rem for the defendant property. The funds were seized on December 17, 2003 from an interbank account held by RBSI at Harris International in New York under the authority of 18 U.S.C. § 981(k), which under certain circumstances authorizes the seizure of funds held in an interbank account in America if the subject bank has an interbank relationship with an overseas institution in which the defendant funds are held.

Soulbury filed its claim to the funds on March 1, 2004 [4&5], an Answer on March 22, 2004 [8], and an Amended Answer on April 7, 2004 [10]. On May 28, 2004, the Court stayed this matter pending resolution of a grand jury investigation [25], and lifted the stay on March 24, 2006. [46]

I. BACKGROUND

According to the United States, Soulbury Limited "is a foreign shell corporation controlled by, and the alter-ego of," one William Scott. Mot. to Strike [53] at 2. The government contends that Scott, formerly a U.S. citizen, ran a network of offshore Internet gambling sites from the Caribbean island of Antigua. Complaint ¶¶ 7, 9, 11. Chief among these is World Wide Telesports ("WWTS"). According to the government, Scott engaged in money laundering, wire fraud, and other criminal activity related to these gambling enterprises, from at least the latter 1990s to at least 2002. Id. ¶¶ 17-25.

In 1998, a criminal complaint was filed against Scott in the Southern District of New York for conspiracy to violate the Wire Act, 18 U.S.C. § 1084, and other charges related to his gambling enterprises, and a warrant was issued for his arrest. Motion to Strike [53] Ex. B. Also named in the complaint was Jessica Davis, an employee of Scott's at WWTS. In April of 2005, Scott was indicted in the District of Columbia on money laundering and other charges related to the same gambling operations, and a warrant was issued for his arrest. See Motion to Strike [53], Ex. S. The indictment was unsealed and made public on May 17, 2006.*fn2 The D.C. indictment also named Jessica Davis, WWTS, and Soulbury Limited.*fn3 In short, the government asserts that Scott ran a network of illegal internet casinos and sports books that handled bets from the United States, and around which the criminal charges center. The government alleges that the funds deposited in Soulbury's RBSI account were related to the crimes charged in the two indictments and were thus subject to forfeiture to the United States under 18 U.S.C. § 981. Id. ¶¶ 18, 21, 24.

The day after Scott's indictment was unsealed, the government and Soulbury each filed dispositive motions that are now before the Court. Soulbury filed a Motion [52] for Judgment on the Pleadings, arguing for judgment on the grounds, inter alia, that the government had improperly laid venue and had not properly executed the arrest in rem of the defendant funds. Later the same day, the government filed a Motion [53] to Strike the Claim and Answer of Claimant Soulbury Limited Pursuant to 28 U.S.C. § 2466, which contends that the federal fugitive disentitlement statute enables the Court to disallow Soulbury from proceeding with its claim because Soulbury is a company acting on behalf of a fugitive, Scott. Soulbury attacks the government's motion as untimely and unwarranted. If the Court finds fugitive disentitlement to be both applicable and appropriate in this case, it would act to bar claimant from taking any action in pursuit of its claim, including its Motion for Judgment on the Pleadings. For that reason, the Court will address the government's motion first.

II. THE FUGITIVE DISENTITLEMENT DOCTRINE

A. At Common Law

The doctrine of fugitive disentitlement developed at common law, initially as a means of barring fugitives from bringing appeals in their criminal cases. See Ortega-Rodriguez v. United States, 507 U.S. 234 (1993) (collecting cases). The logic went that a fugitive should not be able to avail himself of the courts to secure the benefit of a favorable appellate outcome when he has removed himself from a court's power to enforce an adverse outcome, "for it is clearly within our discretion to refuse to hear a criminal case in error, unless the convicted party . . . is where he can be made to respond to any judgment we may render." Smith v. United States, 94 U.S. 97, 97 (1876).

In addition to enforceability concerns, the doctrine also rested on the ground that a fugitive should not be able to exploit judicial processes to his advantage in one matter while scoffing at them in another.*fn4 Courts ruled that the fugitive waived or was stripped of the right to use the courts because his escape "disentitles the defendant to call upon the resources of the Court for determination of his claims." Molinaro v. New Jersey, 396 U.S. 365, 366 (1970). Many cases also applied the doctrine to bar fugitives from seeking relief as plaintiffs in civil suits, concluding that the rule of fugitive disentitlement in criminal cases "should apply with greater force in civil cases where an individual's liberty is not at stake." Conforte v. Commissioner of Internal Revenue, 692 F.2d 587, 590 (9th Cir. 1982) (disallowing fugitive from appealing tax court ruling); see also Broadway v. City of Montgomery, 530 F.2d 657 (5th Cir. 1976) (court refused to hear appeal from fugitive seeking damages and injunctive relief from alleged illegal wire tap); Doyle v. Department of Justice, 494 F.Supp. 842 (D.D.C. 1980), aff'd., 668 F.2d 1365 (D.C. Cir. 1981) (disallowing FOIA case brought by fugitive); United States v. Commanding Officer, 496 F.2d 324, 326 (1st Cir. 1974) (court refused to hear habeas petition seeking relief from a specific Army regulation where petitioner was at large); Brin v. Marsh, 596 F.Supp. 1007 (D.D.C. 1984) (Richey, J.) (court-martialed soldier who went AWOL and remained at large not allowed to call on court's resources to hear his claim for discharge and restoration of retirement benefits).

By the mid-1990s, "courts routinely held that a fugitive in a criminal case could not avail himself of the court to contest a civil forfeiture action directed against his property." Stefan D. Cassella, The Civil Asset Forfeiture Reform Act of 2000: Expanded Government Forfeiture Authority and Strict Deadlines Imposed on All Parties, 27 J. Legis. 97, 115 (2001) (hereinafter "Cassella"); see also United States v. Collazos, 368 F.3d 190, 197 (2d Cir. 2004) (collecting forfeiture cases). At the same time, the Supreme Court had not directly considered the doctrine's application to civil matters. Cf. Conforte v. Commissioner of Internal Revenue, 459 U.S. 1309 (1983) (Rehnquist, J., in chambers) (denying stay in civil case where court below had disentitled fugitive from appealing tax court ruling).

That changed in Degen v. United States, 517 U.S. 820 (1996), where the Supreme Court held that the "harsh sanction of absolute disentitlement" could not be imposed on fugitives in civil forfeiture actions solely under the courts' "inherent authority to protect their proceedings and judgments." Id. at 823, 827. While noting its "disquiet at the spectacle of a criminal defendant reposing [overseas], beyond the reach of our criminal courts, while at the same time mailing papers to the court in a related civil action and expecting them to be honored," id. at 828, the Court was more concerned about the "danger of overreaching when one branch of the Government, without benefit of cooperation or correction from the others, undertakes to define its own authority." Id. at 823. In short, the invocation of disentitlement was too severe in that case and not justified by recourse to the court's inherent authority alone. The Supreme Court specifically reserved passing on the propriety of "enforcement of a disentitlement rule under proper authority." Id. at 828.

B. The Fugitive Disentitlement Statute

Congress responded to this invitation in 2000 by passing a discretionary version of the fugitive disentitlement doctrine for civil forfeiture cases, as part of a large-scale revision of civil asset forfeiture laws, the Civil Asset Forfeiture Reform Act ("CAFRA"). Pub. L. 106-185, 114 Stat. 202 (2000). CAFRA was "the most comprehensive revision of the civil asset forfeiture laws to be passed by Congress since the first forfeiture statutes were enacted in 1789." Rohlsen v. DEA Atlanta Airport Task Force, 2005 U.S. Dist. LEXIS 25163 at *10 (N.D. Ga. 2005).

The disentitlement provision, codified at 28 U.S.C. § 2466, sought to deal with the "unseemly spectacle" of "a criminal defendant who, facing both incarceration and forfeiture for his misdeeds, attempts to invoke from a safe distance only so much of a United States court's jurisdiction as might secure him the return of alleged criminal proceeds while carefully shielding himself from the possibility of a penal sanction." United States v. Collazos, 368 F.3d 190, 200 (2d Cir. 2004). The disentitlement statute, which is titled "Fugitive disentitlement," reads as follows:

(a) A judicial officer may disallow a person from using the resources of the courts of the United States in furtherance of a claim in any related civil forfeiture action or a claim in third party proceedings in any related criminal forfeiture action upon a finding that such person --

(1) after notice or knowledge of the fact that a warrant or process has been issued for his apprehension, in order to avoid criminal prosecution --

(A) purposely leaves the jurisdiction of the United States;

(B) declines to enter or re-enter the United States to submit to its jurisdiction; or

(C) otherwise evades the jurisdiction of the court in which a criminal case is pending against the person; and

(2) is not confined or held in custody in any other jurisdiction for commission of criminal conduct in that jurisdiction.

(b) Subsection (a) may be applied to a claim filed by a corporation if any majority shareholder, or individual filing the claim on behalf of the corporation is a person to whom subsection (a) applies.

Subsection (a) originally constituted the entirety of the statute. Subsection (b) was added in 2001, and the rest of the statute was retitled as subsection (a). Pub. L. 109-162, 119 Stat. 3123. The statute had the effect of reviving the pre-existing fugitive disentitlement doctrine, such that pre-Degen case law applies insofar as it is consistent with the ...


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