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United States v. All Assets Held at Bank Julius

United States District Court, District of Columbia

April 4, 2018

UNITED STATES OF AMERICA, Plaintiff,
v.
ALL ASSETS HELD AT BANK JULIUS, Baer & Company, Ltd., Guernsey Branch, account number 121128, in the Name of Pavlo Lazarenko et al., Defendants In Rem.

          OPINION

          PAUL L. FRIEDMAN United States District Judge

         This matter is before the Court on the motion [Dkt. No. 997] of claimants Alexander, Ekaterina, and Lecia Lazarenko (collectively, “claimants”) to reconsider the portion of the Court's opinion of August 3, 2017, denying them leave to plead an Eighth Amendment excessive fines affirmative defense. See United States v. All Assets Held at Bank Julius Baer & Co., Ltd., 268 F.Supp.3d 135 (D.D.C. 2017). Upon careful consideration of the parties' written submissions, the relevant legal authorities, and the entire record in this case, the Court will deny claimants' motion.[1]

         I. FACTUAL AND PROCEDURAL BACKGROUND

         The Court's prior opinions summarize the factual and procedural history of this case, starting with the criminal prosecution of claimants' father, Pavel Lazarenko, and continuing through this long-running in rem civil forfeiture proceeding. See, e.g., United States v. All Assets Held at Bank Julius Baer & Co., Ltd., 307 F.R.D. 249, 250-51 (D.D.C. 2014); United States v. All Assets Held at Bank Julius Baer & Co., Ltd., 959 F.Supp.2d 81, 84-94 (D.D.C. 2013); United States v. All Assets Held at Bank Julius Baer & Co., Ltd., 772 F.Supp.2d 205, 207-08 (D.D.C. 2011); United States v. All Assets Held at Bank Julius Baer & Co., Ltd., 571 F.Supp.2d 1, 3-6 (D.D.C. 2008). In brief, Pavel Lazarenko was a prominent 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. United States v. All Assets Held at Bank Julius Baer & Co., Ltd., 959 F.Supp.2d at 85 (quoting Am. Compl. ¶¶ 1, 10).

         A. The Samante Assets

         As relevant to the present motion for reconsideration, the United States filed its original complaint in 2004 seeking forfeiture of, inter alia, “[a]ll funds on deposit at Credit Suisse (Guernsey) Limited, in account number 41610 in the name of Samante Limited as Trustees of the Balford Trust.” Compl. ¶ 5(b). The Court will refer to the funds that the United States identified in paragraph 5(b) of the original complaint - as well as the additional funds associated with another account number identified in the amended complaint - as the “Samante assets.”

         Claimants filed a claim in June 2004 asserting their beneficial or ownership interest solely in the Samante assets. See First Claim. In August 2004, claimants filed an answer to the original complaint asserting five affirmative defenses, including an “Innocent Interest-Due Process” affirmative defense under the Fifth Amendment:

As a fifth affirmative defense to the Complaint, [claimants], and each of them, assert that their interests in the defendant trust res are innocent, in that claimants have at no time had any knowledge of any of the acts or omissions alleged in the Complaint for Forfeiture. Accordingly, their interests in defendant property and currency are not subject to forfeiture under the provisions of Title 18, United States Code, § 981, and forfeiture is prohibited by the Due Process Clause of the Fifth Amendment to the United States Constitution.

2004 Answer ¶ 131. Claimants did not plead or otherwise mention an Eighth Amendment excessive fines affirmative defense in their 2004 answer.

         After the United States filed an amended complaint in 2005, claimants filed a second claim asserting an interest solely in the Samante assets, see Second Claim, as well as a motion to dismiss the amended complaint, see Mot. to Dismiss Am. Compl. The Court denied the motion to dismiss in an order dated March 29, 2007, see Order Den. Mot. to Dismiss, and an opinion dated July 9, 2008, see United States v. All Assets Held at Bank Julius Baer & Co., Ltd., 571 F.Supp.2d at 17. Following the denial of their motion to dismiss and a subsequent motion for reconsideration on September 5, 2008, see Mem. Op. & Order Den. Mot. for Recons., claimants did not file an answer to the amended complaint.

         In October 2011, the United States wrote to claimants' attorney and stated that “if your clients do not file an appropriate Answer to the First Amended Complaint by November 14, 2011, the United States will move to strike their Claims.” Mot. to Strike Ex. B at 2. Claimants' attorney thanked the United States for its “courtesy in permitting” the late filing, Mot. to Strike Ex. C at 1, but did not file an answer to the amended complaint.

         B. The United States' Motion to Strike Claimants' Claim

         In April 2015, the United States moved to strike claimants' claim to the Samante assets for, inter alia, failure to file an answer to the amended complaint. See Mot. to Strike Mem. at 3-4.[2] In response to the United States' motion to strike, claimants admitted that they had failed to file an answer to the amended complaint “as a result of an oversight by their counsel.” See Opp'n to Mot. to Strike at 4. They attached a declaration from their attorney in which the attorney averred that he remembered the October 2011 letter from the United States inviting him to file claimants' untimely answer, but “failed to follow up or to insure that the Answer was filed.” Weinberg Decl. at 4.

         On January 6, 2017, the Court denied the United States' motion to strike. United States v. All Assets Held at Bank Julius Baer & Co., Ltd., 228 F.Supp.3d 118 (D.D.C. 2017). The Court excused claimants' failure to file an answer to the amended complaint because “that failure has not at all prejudiced the United States, ” given that the allegations in the amended complaint did not substantially vary from the original complaint with respect to the Samante assets. Id. at 126. Finding no prejudice to the United States by claimants' failure to file a timely answer to the amended complaint, the Court denied the United States' motion to strike and permitted claimants to seek leave to file an answer. See id. The Court cautioned claimants, however, as follows: “The United States is free to again raise the issue of prejudice in its opposition to claimants' motion for leave to file if, for example, claimants' answer . . . varies the responses claimants made in their answer to the original complaint for paragraphs that are identical in the amended complaint . . . .” Id. at 126 n.2.

         C. Claimants' Motion for Leave to File ...


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