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United States of America v. All Assets Held At Bank Julius Baer & Company

March 25, 2011


The opinion of the court was delivered by: Paul L. Friedman United States District Judge


On March 1, 2010, the United States, acting as plaintiff in this civil forfeiture action, moved for judgment on the pleadings against Universal Trading & Investment Company, Inc. ("UTICo"), which claims an interest in the assets named as defendants in the complaint. UTICO quickly moved on March 24, 2010, for leave to file an amended claim and answer, a motion that, if granted, would render moot the plaintiff's motion for judgment on the pleadings. The Court heard oral argument on the motion to amend and related matters on May 14, 2010.

After the hearing, UTICo filed a barrage of additional related motions in which it requested (1) permission to "supplement evidence" to be considered in connection with the plaintiff's motion for judgment on the pleadings; (2) a round of briefing by the parties addressing the law of Guernsey; (3) judicial notice of various documents; and (4) leave to file a surreply regarding the motion for judgment on the pleadings. Upon consideration of the parties' arguments, the relevant legal authorities, and the entire extensive record in this matter, the Court will deny UTICo's various motions and grant the plaintiff's motion for judgment on the pleadings against UTICo.*fn1


A. Nature of the Forfeiture Action

The United States initiated this litigation in order to seek the forfeiture of more than $250 million scattered throughout bank accounts located in Guernsey, Antigua and Barbuda, Switzerland, Lithuania, and Liechtenstein. Am. Compl. ¶ 1. The money in those accounts is allegedly "traceable to a series of" acts of "criminal fraud, extortion, bribery, misappropration, and money laundering" carried out by, among others, Pavlo Ivanovich Lazarenko, a Ukrainian politician who, with the aid of various associates, was "able to acquire hundreds of millions of United States dollars through a variety of acts of fraud, extortion, bribery, misappropriation and/or embezzlement" committed during the 1990s. Id. ¶ 10. According to the United States, those illegal acts, and subsequent attempts to launder the resulting criminal proceeds, involved the transfer of large sums of U.S. dollars into and out of United States financial institutions. Id. ¶¶ 11-13. The plaintiff seeks to claim ownership of those sums of money pursuant to federal statutes that provide for the forfeiture to the United States government of funds traceable or otherwise related to criminal activity that occurred at least in part in the United States. See id.¶ 1.

The funds at issue in this action allegedly derive in part from what the United States terms "the UESU energy scheme." See Am. Compl. at 16. According to the amended complaint, Mr. Lazarenko served in 1995 and 1996 as the First Vice Prime Minister of Ukraine. Id. ¶ 35. During that time Mr. Lazarenko "was in charge of the energy sector of the Ukrainian economy and presided over a re-organization of the natural gas importation and distribution system." Id. He used that position to award highly lucrative energy contracts to certain companies. See id. ¶ 36. In particular, Mr. Lazarenko conferred upon United Energy Systems of Ukraine ("UESU"), a corporation "controlled by Lazarenko associate Yulia Tymoshenko and others," the exclusive right "to distribute natural gas to the Dnepropetrovsk region of Ukraine." Id. ¶ 36. In return for his patronage, Mr. Lazarenko and affiliated individuals and entities received large sums of money from UESU. Id. ¶¶ 36-38. Because large portions of that unlawfully obtained money were allegedly laundered through United States financial institutions on their way to Mr. Lazarenko and his associates, the United States asserts that those assets are subject to forfeiture. See id. ¶¶ 39, 123, 128,134, 139, 143, 147, 151, 155.

B. Allegations of UTICo's

First Amended Claim and Answer UTICo has intervened in this action to assert and defend a claimed interest in some of the defendant assets allegedly paid to Mr. Lazarenko and associates by UESU. See 1st Am. Cl. ¶¶ 14-20. In support of its claim, UTICo alleges the following: In 1994 UTICo, a Massachusetts corporation "engage[d] in domestic and international business and consulting," id.¶ 2, entered into a contract with Cube Ltd., the "corporate predecessor" of UESU. Id. ¶ 14. In 1997, UESU filed a lawsuit against UTICo in Massachusetts federal district court. Id. ¶ 15. UTICo filed counterclaims against UESU and, in 2005, after UESU stopped participating in the litigation, received a default judgment against UESU ("the UESU judgment") in the amount of $18,344,480. Id. ¶ 17.

UTICo further alleges that it has never been able to collect on its 2005 judgment against UESU, at least in part because Mr. Lazarenko, "who secretly held a 50% interest" in UESU, conspired with other UESU principals "to dissipate UESU's assets and to defraud creditors." 1st Am. Cl. ¶ 15. In particular, a large amount of UESU's assets, including some of the assets named as defendants in this forfeiture action, "were converted by or placed under control of Lazarenko" in the late 1990s in order to "avoid[] creditors." Id. ¶ 19; see id. ¶ ¶ 26-74 (detailing the movement of alleged "UESU proceeds" into and out of various accounts from 1996 through 1998). More than $100 million in money deriving from UESU is currently being held for Mr. Lazarenko's benefit at Credit Suisse (Guernsey), in an account opened in the name of "Samante as Trustees for the Balford Trust" ("the Balford Trust account"). Id. ¶ 40-41. The contents of that account are named as defendants in rem by the United States' complaint in this matter. See Am. Compl. ¶ 5(b). UESU itself is currently "inoperative." 1st Am. Cl. ¶ 18.

In 2008, UTICo registered the UESU judgment granted by the Massachusetts federal district court by filing a certified copy of it in this Court pursuant to 28 U.S.C. § 1963. 1st Am. Cl. ¶ 1.

C. Allegations of Proposed Second Amended Claim and Answer

The United States has twice filed motions for judgment on the pleadings against UTICo. The first motion, filed on December 9, 2008, was directed at the claim and answer originally submitted by UTICo on October 11, 2005, and was rendered moot when the Court allowed UTICo to file an amended claim and answer on August 17, 2009. After the United States again moved for judgment on the pleadings on March 1, 2010, UTICo sought leave to file a second set of amended pleadings. The second amended claim and answer that UTICo now proposes to file differ from the first set of amended pleadings mainly in that the newer pleadings recount actions allegedly taken by UTICo after March 1, 2010 - after the filing of the United States' second motion for judgment on the pleadings against UTICo, and long after the initiation of this litigation.

According to the second set of amended pleadings that UTICo seeks to file, after registering the UESU judgment in this Court in 2008, UTICo also filed that judgment in the Superior Court of the District of Columbia, seeking to "g[i]ve that judgment the force and effect of a local judgment." Prop. 2d Am. Cl. ¶ 3. Upon application by UTICo, the Superior Court issued on March 17, 2010, a writ of attachment "directed at garnishee Credit Suisse AG Bank," allegedly the same entity as or the parent entity of Credit Suisse (Guernsey), the financial institution in Guernsey that holds an account in the name of the Balford Trust whose contents are named as defendants in rem in this litigation. Id. ¶ 4. The writ of attachment, which purported to attach the contents of the Balford Trust account, was served "on the authorized officer of the Credit Suisse AG bank in Washington, D.C." on March 19, 2010. Id. ¶ 6.

On March 18, 2010, UTICo recorded the UESU judgment by filing a certified copy of it with the Recorder's Office for the District of Columbia. Prop. 2d Am. Cl. ¶ 9.

D. Subsequent Allegations

Since submitting its motion for leave to file a second amended claim and answer, UTICo has filed a flurry of additional motions, some seeking, on the pretense of requesting other relief, to supplement UTICo's pleadings - that is, to amend further its proposed second set of amended pleadings - with further factual allegations concerning actions taken by UTICo after March 24, 2010. UTICo's Motion to Supplement Evidence in Support of Its Motion for Leave to File Amended and Supplemental Claim and Answer, filed on May 25, 2010, alleges that in April and May of 2010, UTICo submitted in the District of Columbia, Massachusetts, Texas, and Connecticut a "National UCC-1 Form" claiming a security interest in the Balford Trust account based on the UESU judgment. See Mot. Supp. at 2-3. In a motion entitled "Request for Judicial Notice of Governmental Public Records," filed on June 28, 2010, UTICo repeats its allegations concerning the UCC-1 forms filed in the District of Columbia, Massachusetts, Texas, and Connecticut, and further alleges that in late May and June of 2010, it filed similar UCC-1 forms in Georgia, Alabama, and Florida. JN Mot. at 1-2.

E. Other Motions

In addition to its so-called motions to "supplement evidence" and for judicial notice, UTICo has responded to the plaintiff's motion for judgment on the pleadings by filing a Motion for Order to Schedule Rule 44.1 Briefing for Determination of Foreign Law. The "foreign law" in question is that of Guernsey - a set of islands in the English Channel, a British Crown ...

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