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In re Seizure of Approximately $12

United States District Court, District of Columbia

November 9, 2012

In re SEIZURE OF APPROXIMATELY $12,116,153.16 AND ACCRUED INTEREST IN U.S. CURRENCY, et al.

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Donald C. Klawiter, Sheppard Mullen Richter & Hampton LLP, Washington, DC, James G. McCarney, Sheppard Mullin Richter & Hampton LLP, John P. Gleason, Gleason & Koatz, LLP, Pro Hac Vice, Alexis Hunter, Howrey LLP, Pro Hac Vice, New York, NY, for Seizure of Approximately $12,116,153.16 and Accrued Interest in U.S. Currency, et al.

Addy J. De Kluiver, Jean B. Weld, Linda M. Samuel, Jennifer W. Wallis, U.S. Department of Justice, Washington, DC, for Interested Party.

Lisa Lynn Barclay, Zuckerman Spaeder, LLP, Washington, DC, for Movant.

Matthew G. Kaiser, The Kaiser Law Firm, PLLC, Washington, DC, Robert S. Sikorski, Busson & Sikorski, Pro Hac Vice, New York, NY, for Intervenor.

OPINION

ROSEMARY M. COLLYER, District Judge.

The United States Government submits a renewed application to register and enforce restraining orders issued by courts in the Federative Republic of Brazil, to preserve assets of persons being criminally prosecuted in Brazil. The Renewed Application is presented pursuant to

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28 U.S.C. § 2467(d)(3)(A), as amended by the Preserving Foreign Criminal Assets for Forfeiture Act of 2010, P.L. No. 111-342. The restraining orders are intended to preserve assets located in the United States until final forfeiture judgments are issued by Brazilian courts and presented for execution here. As explained below, the restraining orders will be enforced.

I. FACTS

The Government seeks to register and enforce restraining orders issued by Brazilian courts, to preserve $11,372,844.19, plus accrued interest, held in the following eleven accounts:

1. $1,343,746.05 formerly in account 45200483, and known as the Chettair Business, Inc. Account (Chettair Account), held in the name of and for the benefit of Janine Ribiero and Joacyr Reinando;
2. $1,510,379.08 formerly in account 9006863, and known as the Farswiss Asset Management Ltd. Account (Farswiss Account), held in the name of and for the benefit of Ruy Ulhoa Cintra de Araujo;
3. $84,260.01 formerly in account 9004008, and known as the Harborside Corporation Account (Harborside Account), held in the name of and for the benefit of Joao Carlos da Cunha Canto Kneese and Ronaldo Speiss Fernandes Cortez;
4. $285,945.16 formerly in account 9009570, and known as the Safeport Investment Corporation Account (Safeport Account), held in the name of and for the benefit of Joao Carlos da Cunha Canto Kneese and Ronaldo Speiss Fernandes Cortez;
5. $237,829.82 formerly in account 9004681, and known as the Tigrus Corporation Account (Tigrus Account), held in the name of and for the benefit of Pompeu Costa Lima Pinheiro Maia;
6. $86,401.27 formerly in account 9200172, and known as the Pompeu Maia Account (Maia Account), held in the name of and for the benefit of Pompeu Costa Lima Pinheiro Maia;
7. $1,026,455.90 formerly in account 45200491, and known as the Avion Resources Ltd. Account (Avion Account), held in the name of and for the benefit of Gustavo Zerfan Harber and Michael Homci Harber;
8. $2,675,387.73 formerly in account 9008295, and known as the Gatex Corporation Account (Gatex Account), held in the name of and for the benefit of Antonio Pires De Almeida;
9. $1,698,878.23 formerly in account 9006556, and known as the Harber Corporation Account (Harber Account), held in the name of and for the benefit of Antonio Pires De Almeida;
10. $800,968.88 formerly in account 9007663, and known as the Mabon Corporation Account (Mabon Account), held in the name of and for the benefit of Elcio Areias and Antonio Carneiro; and
11. $1,624,717.06 formerly in account 9010133, and known as the Midland Financial, Inc. Account (Midland Account), held in the name of and for the benefit of Henrique Lamberti and Marianel Gandolfo Miranda.

These eleven bank accounts are collectively referred to here as the " Accounts." The individuals, who were signatories on the Accounts, owned or controlled the Accounts and are referred to as the " Beneficial Owners." The corporations named on the Accounts— Chettair, Farswiss, Harborside, Safeport, Tigrus, Avion, Gatex, Harber, Mabon, and Midland— are offshore companies, incorporated in the British Virgin Islands. Application [Dkt. 1] at 10-15. The Accounts were held at the Valley National

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Bank (formerly Merchants Bank) in New York.

The Beneficial Owners [1] of the Accounts are defendants in criminal prosecutions in Brazil. See Reply [Dkt. 80], Ex. 1 (Dallagnol Aff.) [2] ¶ 6 (summarizing the Brazilian criminal proceedings involving the Accounts). Because corporations are not subject to criminal prosecution in Brazil, see Opp. [Dkt. 69], Ex. A (Mottola Aff.) [3] ¶ 17, the corporations named on the Accounts are not defendants in the prosecutions in the Brazilian courts.

As part of those criminal prosecutions, the Accounts are subject to eight restraining orders issued by courts in Brazil. See Renewed App. [Dkt. 59], Exs. A-H (Brazilian Restraining Orders); see also Dallagnol Aff., Att. A (Order of Court of the First Instance in Sao Paulo ratifying restraining order against the Harborside and Safeport Accounts). The Government filed this suit seeking to register and enforce restraining orders issued by the Brazilian courts (including the Brazilian Restraining Orders at issue here), and the Court issued a restraining order. See Restraining Order [Dkt. 2].[4] Due to intervening circumstances described below, the U.S. Government now has filed a Renewed Application for registration and enforcement of the Brazilian Restraining Orders— in essence seeking the continued restraint of the Accounts— based on the alleged involvement of each Account, of the Beneficial Owners, and of the offshore corporations named on the Accounts, in a criminal money laundering scheme.

The United States and Brazil are parties to a Mutual Legal Assistance Treaty (MLAT), whereby the United States is obligated, inter alia, to assist Brazil in forfeiture matters. See Treaty on Mutual Legal Assistance in Criminal Matters, U.S.— Brazil, Oct. 14, 1997, S. Treaty Doc. No. 105-42 (ratified by U.S. Sept. 28, 1998). On February 12, 2008, Brazil sent a formal MLAT request to the United States, seeking enforcement of its courts' restraining orders on the Accounts, including the Brazilian Restraining Orders at issue here.

The MLAT request arose from the Brazilian prosecution of numerous individuals including the Beneficial Owners. The individuals

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were known as " doleiros," meaning dollar dealers, and were named in the MLAT. An investigation conducted by the " Banestado Task Force" had found that certain doleiros that had accounts at Merchants Bank were receiving funds from known drug organizations operating in South and North America. The doleiros accepted cash from customers in Brazil and transmitted the funds to Maria Carolina Nolasco, a former assistant vice president at Merchants Bank. From time to time, the doleiros directed Ms. Nolasco to transfer funds to other accounts, attempting to create the appearance of legitimate business activity. Brazil alleges that the corporations that are named on the Accounts had no legitimate business activities.

Ms. Nolasco was indicted in the United States and, on October 4, 2004, pleaded guilty to charges of operating an unlicensed money remitter business in violation of 18 U.S.C. § 1960 and to charges of tax evasion. See United States v. Nolasco, Crim. No. 04-617 (D.N.J.). In her plea agreement, Ms. Nolasco admitted that all of the Accounts were involved in an offense in violation of 18 U.S.C. § 1960 or are traceable to such property, and thus are subject to forfeiture. Id., Plea Agreement [Dkt. 26] at 4. In the course of the criminal prosecution of Ms. Nolasco, the U.S. District Court for the District of New Jersey issued seizure warrants for more than $21 million located in U.S. bank accounts, including the Accounts at issue here. In December 2004, a consent judgment of forfeiture was entered, but account holders filed claims for the return of the funds. The District of New Jersey granted summary judgment to the account holders, finding that the funds were not properly forfeited because Ms. Nolasco had no legal interest in them. See id., Order [Dkt. 153], Am. Order [Dkt. 154], Order Releasing property [Dkt. 157]. Before the funds were released, however, the New York County Attorney's Office initiated a state civil forfeiture action and obtained a writ of attachment on the Accounts. See Mot. to Intervene [Dkt. 7] at 7-8. Litigation ensued, but eventually the New York forfeiture case was dismissed as moot because the funds were transferred out of New York's jurisdiction to the United States pursuant to the MLAT request. Id.

The Beneficial Owners allegedly operated the Accounts and effectively controlled the offshore corporations in whose name the Accounts were opened. The Brazilian government asserts that the corporations were shell corporations, mere fronts for illegal activity by the Beneficial Owners. Dallagnol Aff. ¶ 5(19). In Brazil, the Beneficial Owners are charged with violations of Brazilian criminal laws against the operation of illegal or unlicensed financial institutions, conspiracy to commit criminal financial activity, and the laundering of proceeds of crime. See generally Dallagnol Aff. ¶ 6; Brazilian Restraining Orders. Specifically, the Beneficial Owners are charged with the following crimes: Brazilian Law 7492/86, Art. 4 (prohibiting fraudulent operation of a financial institution); Art. 16 (prohibiting operation of an unauthorized financial institution); Art. 22, (prohibiting unauthorized money exchange operations); Brazilian Law 9613/98, Art. 1 (prohibiting concealment and disguise of the true nature, origin, location, disposition, movement, or ownership of assets that result from acts against the Brazilian financial system); and Brazilian Penal Code § 288 (criminal conspiracy). See, e.g., Renewed App., Ex. B at 1.

The Brazilian authorities allege that the Accounts are subject to forfeiture because Brazilian law provides that property involved in money laundering is subject to prejudgment restraint and later forfeiture.

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See Gov't Opp. [Dkt. 10], Ex. 3 (Aras Aff.) [5] ¶¶ 62, 64. If the Beneficial Owners are convicted of the crimes charged, the Brazilian courts may order the Beneficial Owners to forfeit an amount equal to the sum of all the offenses committed and all funds used to commit the offenses charged. Id. ¶ 66. Under Brazilian law, a court can order the provisional restraint of assets owned by an accused where a forfeiture order is likely. Id. ¶¶ 64-65. Brazilian Prosecutor Dallagnol further explains:

(10) According to Article 91 (item II, letter b) of the Brazilian Criminal Code, the forfeiture of the economic products and profits produced by the crime is an effect of the criminal conviction. Likewise, under Article 7 (item I) of the Money Laundering Act (Law # 9.613/98), goods, rights, and values that are the object of money laundering must be forfeited, as a result of the criminal conviction. Both acts, however, protect the right of victims and owners of property who have acted in good-faith.
(11) One of the means granted by the Brazilian Law to seize assets that can be object of future forfeiture is the sequestration. Pursuant to Article 126 of the Brazilian Code of Criminal Procedure, the requisite of the sequestration consists of vehement indicia of the illegal origin of the assets. Under Article 4 of the Money Laundering Act, the requisite of the apprehension consists of enough indicia that the assets are object ...

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