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United States v. All Assets Held at Bank Julius Baer & Co., Ltd.

United States District Court, District of Columbia

April 23, 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. 970] of the United States for clarification or partial reconsideration of the Court's opinion of April 27, 2017, granting in part and denying in part the motion of claimant Pavel Lazarenko for partial judgment on the pleadings. See United States v. All Assets Held at Bank Julius Baer & Co., Ltd., 251 F.Supp.3d 82 (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 grant the 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 Mr. 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, Mr. 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. Overview of Claims and Alleged Criminal Schemes

         The United States alleges that Mr. Lazarenko and his associates amassed the assets subject to forfeiture in this action through four criminal schemes. The present motion for clarification or partial reconsideration concerns two of these alleged schemes: (1) the PMH/GHP scheme, see Am. Compl. ¶¶ 45-49; and (2) the UESU and ITERA Energy schemes, see id. ¶¶ 35-44.

         In its amended complaint, the United States brings eight claims for relief under two general categories. Claims One, Two, Three, and Four allege direct forfeiture of criminal proceeds pursuant to 18 U.S.C. § 981(a)(1)(C), which provides for the direct forfeiture of proceeds from the violation of certain enumerated criminal statutes or “any offense constituting ‘specified unlawful activity'” as defined by 18 U.S.C. § 1956(c)(7). These direct forfeiture claims allege that the defendant properties constitute or are derived from proceeds traceable to violations of four offenses that are considered “specified unlawful activity” under 18 U.S.C. § 1956(c)(7). The three offenses for which a part of the criminal conduct allegedly occurred in the United States are: interstate transportation and receipt of property stolen or taken by fraud, in violation of 18 U.S.C. §§ 2314 and 2315 (Claim One); Hobbs Act extortion, in violation of 18 U.S.C. § 1951 (Claim Two); and wire fraud, including property and honest services fraud, in violation of 18 U.S.C. §§ 1343 and 1346 (Claim Three). The two foreign offenses for which direct forfeiture is alleged and authorized by law are: an offense against a foreign nation involving extortion, and an offense against a foreign nation involving bribery of a public official or the misappropriation, theft, or embezzlement of public funds by or for the benefit of a public official. These offenses are enumerated in 18 U.S.C. §§ 1956(c)(7)(B)(ii) and (iv) (Claim Four).

         Claims Five, Six, Seven, and Eight allege forfeiture of property involved in money laundering violations pursuant to 18 U.S.C. § 981(a)(1)(A), which provides for, among other things, the forfeiture of any real or personal property involved in or traceable to a violation of 18 U.S.C. §§ 1956 and 1957. These money laundering forfeiture claims allege that the defendant properties were involved in or traceable to money laundering transactions or attempted money laundering transactions. The violations of money laundering law alleged in the amended complaint include: conduct designed to conceal the nature, location, source, ownership, or control of proceeds of a specified unlawful activity under 18 U.S.C. § 1956(a)(1)(B)(i) (Claim Five); international transportation, transmission, or transfer of proceeds of a specified unlawful activity under 18 U.S.C. § 1956(a)(2)(B)(i) (Claim Six); engaging in or attempting to engage in monetary transactions affecting interstate or foreign commerce with more than $10, 000 in proceeds of a specified unlawful activity under 18 U.S.C. § 1957 (Claim Seven); and conspiracy to engage in money laundering under 18 U.S.C. § 1956(h) (Claim Eight). The United States alleges the same four predicate offenses occurring in part in the United States and the same foreign extortion predicate as in its direct forfeiture claims as a basis for the money laundering claims. Foreign official bribery, misappropriation, theft, or embezzlement, as enumerated under 18 U.S.C. § 1956(c)(7)(B)(iv), is not alleged as a basis for the money laundering claims.

         B. The Court's Prior Opinions

         In 2005, Mr. Lazarenko moved to dismiss the amended complaint for lack of subject matter jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil Procedure and for failure to state a claim under Rule 12(b)(6). He argued, inter alia, that the United States was improperly attempting to reach foreign conduct in a manner not contemplated by the forfeiture statutes. See Mot. to Dismiss at 6-10, 11-16. The Court denied Mr. Lazarenko's motion to dismiss in an order dated March 29, 2007, see Order Denying Motion 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 9-14, 17. Noting that the amended complaint “sets forth very detailed allegations, ” the Court held, inter alia, that each of the eight claims met the pleading standard for in rem civil forfeiture actions. Id. at 17.

         In 2015, Mr. Lazarenko moved for partial judgment on the pleadings and partial summary judgment. He argued in part that the claims constituted an impermissible application of U.S. law to foreign conduct based on Morrison v. National Australia Bank Ltd., 561 U.S. 247 (2010), which announced a new framework for determining whether a federal statute applies extraterritorially. See Mot. for Partial J. on the Pleadings Mem. at 1-2. On April 27, 2017, the Court granted Mr. Lazarenko's motion in part and denied it in part. See United States v. All Assets Held at Bank Julius Baer & Co., Ltd., 251 F.Supp.3d 82 (D.D.C. 2017). The Court first construed Mr. Lazarenko's motion as a motion for partial judgment on the pleadings under Rule 12(c) of the Federal Rules of Civil Procedure. See id. at 87-89. It then set the stage by describing the proper methodology for determining the extraterritorial reach of 18 U.S.C. §§ 981(a)(1)(A) and (C) after the Supreme Court's decision in Morrison v. National Australia Bank Ltd. See id. at 89-92. Next, it discussed the extraterritorial reach of each of the eight claims brought by the United States. Id. at 92-104. Finally, the Court applied its extraterritoriality analysis to each of the four alleged schemes. See id. at 104-09.

         With respect to the PMH/GHP scheme, the Court held that the United States had failed to establish a domestic claim for wire fraud, in violation of 18 U.S.C. § 1343 (Claim Three), and had not argued that “any of the claims for relief other than wire fraud” apply to that scheme. See United States v. All Assets Held at Bank Julius Baer & Co., Ltd., 251 F.Supp.3d at 109. With respect to the UESU and ITERA Energy schemes, the Court held that the United States had failed to allege valid claims for Hobbs Act extortion, in violation of 18 U.S.C. § 1951 (Claim Two), and wire fraud, in violation of 18 U.S.C. § 1343 (Claim Three). See id. at 108. The Court found, however, that the United States had sufficiently alleged claims for interstate transportation and receipt of property stolen or taken by fraud, in violation of 18 U.S.C. §§ 2314 and 2315 (Claim One), as well as the money laundering claims, in violation of 18 U.S.C. §§ 1956 and 1957 (Claims Five through Eight). See id. at 107-09. As to Claim Four, the Court held that the United States had sufficiently alleged a claim for foreign bribery, in violation of 18 U.S.C. § 1956(c)(7)(B)(iv). See id. at 107-09. The Court did not specifically address the other predicate offense alleged as a basis for Claim Four - foreign extortion under 18 U.S.C. § 1956(c)(7)(B)(ii).

         In May 2017, the United States filed the instant motion for clarification or partial reconsideration of the Court's April 2017 opinion. The United States does not dispute the Court's legal analysis regarding which federal statutes apply extraterritorially. Rather, the United States raises two narrow objections to the Court's characterization of the claims asserted in relation to two of the schemes it has alleged in the amended complaint. First, it argues that the Court erred by dismissing the PMH/GHP scheme in its entirety because the United States did in fact assert Claims One and Four through Eight in connection with that scheme. See Mot. for Recons. Mem. at 4-7. Second, it asks the Court to clarify that foreign extortion, as set forth in 18 U.S.C. ยง 1956(c)(7)(B)(ii), constitutes a basis for forfeiture in Claims Four through Eight with respect to the ...


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