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United States v. $396

United States District Court, District of Columbia

October 4, 2018

UNITED STATES OF AMERICA, Plaintiff,
v.
$396, 589 IN U.S. FUNDS ASSOCIATED WITH ROYAL PEARLS GENERAL TRADING, Defendant.

          MEMORANDUM OPINION

          REGGIE B. WALTON UNITED STATES DISTRICT JUDGE

         The government brings this civil forfeiture action in rem against the defendant property, $396, 589 in U.S. funds (the “defendant funds”), arising out of an investigation of Royal Pearls General Trading (“Royal Pearls”) and several other entities. See Verified Complaint for Forfeiture In Rem (“Compl.”) at 1. Currently pending before the Court is the Plaintiff's Motion for Entry of Default Judgment and Order of Forfeiture (“Gov't's Mot.”). Upon careful consideration of the relevant submissions, [1] the Court concludes that it must grant the government's motion and order the forfeiture of the defendant funds to the government.

         I. BACKGROUND

         The following allegations are taken from the government's Complaint, which “arises out of an investigation by the Federal Bureau of Investigation (‘FBI') into a scheme operated by Premium Technology Petroleum Services (‘PT Petro'), Royal Pearls . . ., MKS International Group (‘MKS'), Kambiz Rostamian [ ], and [other] co-conspirators to obtain specialized petroleum parts from a U.S. manufacturer and illegally export those parts . . . to end users in the Republic of Iran.” Compl. ¶ 1. “PT Petro claims to be a petroleum service company based in Egypt, ” id. ¶ 25; “Royal Pearls claims to be a laboratory equipment trading company based in Dubai, UAE, ” id. ¶ 39; “MKS claims to be a trading company based in Tehran, Iran, ” id. ¶ 47; and Rostamian claims to be the owner and CEO of both Royal Pearls and MKS, id. ¶¶ 42, 45, 52-53.

         “On March 6, 2014, PT Petro issued Purchase Order 40008 to U.S. Company 1 to purchase . . . [certain] coiled tubing products, ” which “are highly specialized pieces of equipment used by large scale petroleum operations.” Id. ¶ 27. “The total purchase price of these parts was $1, 112, 885.00 in U.S. funds.” Id. “According to the payment terms of Purchase Order 40008, PT Petro was required to pay [thirty percent] of the total purchase price in advance and the full amount of each item prior to shipment.” Id. ¶ 28. “On July 15, 2014, PT Petro wired $333, 662.50 in U.S. dollars from a bank in Egypt, to U.S. Company 1's bank account in the United States as advance payment for Purchase Order 40008.” Id. ¶ 29. Then, “[o]n or about April 1, 2015, U.S. Company 1 and PT Petro coordinated a partial shipment of some of the items from Purchase Order 40008, ” and, “[o]n April 7, 2015, PT Petro wired an additional $62, 926.50 in U.S. funds from a bank in Qatar to U.S. Company 1's bank account in the United States.” Id. ¶ 30. The funds wired by PT Petro to U.S. Company 1 on July 15, 2014, and April 7, 2015, “which were subsequently seized by law enforcement pursuant to a seizure warrant, represent the . . . [d]efendant [f]unds.” Id.; see also id. ¶ 29.

         “In early 2015, PT Petro submitted a U.S. Export Control Law Compliance form in preparation to receive the shipment of the above identified parts, ” which “stated that the destination country for the items was Egypt.” Id. ¶ 32. “However, PT Petro subsequently requested that U.S. Company 1 ship [certain parts] . . . to Royal Pearls at a P.O. Box in Dubai, UAE.” Id. ¶ 33. The government alleges that, ultimately, “MKS [wa]s the [e]nd [u]ser for the [p]etroleum [p]arts [o]rder, ” id. at 10, and that “PT Petro and Royal Pearls falsified shipper export documents when stating the end user of the petroleum parts, ” id. ¶ 52.

         “On February 3, 2017, the Department of Treasury Office of Foreign Assets Control [(‘OFAC')] designated Royal Pearls, MKS [ ], and Rostamian as ‘Specially Designated Nationals' . . . of Iran.” Id. ¶ 46. OFAC reported that “MKS . . . is . . . involved in procuring controlled and other technology and materials to support Iran's ballistic missile programs” and has “utilized multiple front companies in order to circumvent export laws and sanctions.” Id. It further reported that “Royal Pearl[s] . . . is a front company for MKS [ ] that has worked . . . to procure components for Iran's ballistic missile program, ” and “Rostamian . . . act[ed] for or on behalf of MKS [ ] and Royal Pearl[s], ” including by “act[ing] as a direct intermediary to purchase parts through MKS.” Id.

         On March 31, 2017, the government filed this civil forfeiture action against the defendant funds. See Compl. at 1. On April 3, 2017, the Clerk of the Court issued a warrant for arrest in rem of the defendant funds. See Warrant for Arrest In Rem (Apr. 3, 2017), ECF No. 2. Then, beginning on April 20, 2017, the government published notice of this action on its public forfeiture website, www.forfeiture.com, for thirty consecutive days. See Publication Decl., Attachment (“Att.”) 1 (Notice of Forfeiture Action). Additionally, “[o]n or about April 20, 2017, the government served notice [of this action] via email and package delivery to Royal Pearls . . ., []PT Petro[], and National Oilwell Varco[, ]”[2] Default Aff. ¶ 5, and via email to MKS, see Gov't's Mem. at 5. “On June 30, 2017, the government again served notice on . . . Royal Pearls via international package delivery.” Id. Thereafter, on September 7, 2017, the government moved for “ent[ry] [of a] [d]efault against the defendant property and all parties that might have an interest in it, ” Default Aff. ¶ 9, which the Clerk of the Court granted on September 8, 2017, see Default at 1 (Sept. 8, 2017), ECF No. 11. The government then filed its motion for a default judgment on September 22, 2017. See Gov't's Mot. at 1.

         II. STANDARD OF REVIEW

         Rule 55 sets forth a two-step process for a party seeking a default judgment. Fed.R.Civ.P. 55. First, “[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default.” Fed.R.Civ.P. 55(a). Second, “the party must apply to the court for a default judgment.” Fed.R.Civ.P. 55(b)(2). Despite a plaintiff's ability to acquire a judgment by default, there are “strong policies favoring the resolution of genuine disputes on their merits.” Jackson v. Beech, 636 F.2d 831, 835 (D.C. Cir. 1980); see Peak v. District of Columbia, 236 F.R.D. 13, 15 (D.D.C. 2006) (acknowledging the inherent unfairness of awarding a judgment against a party for mere filing delays). Therefore, a “default judgment must normally be viewed as available only when the adversary process has been halted because of an essentially unresponsive party.” Jackson, 636 F.2d at 836 (quoting H. F. Livermore Corp. v. Aktiengesellschaft Gebruder Loepfe, 432 F.2d 689, 691 (D.C. Cir. 1970)); see Teamsters Local 639-Emp'rs Health Tr. v. Boiler & Furnace Cleaners, Inc., 571 F.Supp.2d 101, 107 (D.D.C. 2008) (Walton, J.) (“[W]hen the adversary process has been halted because of an essentially unresponsive party[, ] the diligent party must be protected lest he be faced with interminable delay and continued uncertainty as to his rights.” (second alteration in original) (quoting Peak, 236 F.R.D. at 15)).

         “The determination of whether [a] default judgment is appropriate is committed to the discretion of the trial court.” Int'l Painters & Allied Trades Indus. Pension Fund v. Auxier Drywall, LLC, 531 F.Supp.2d 56, 57 (D.D.C. 2008). “Default establishes the defaulting party's liability for the well-pleaded allegations of the complaint.” Boland v. Elite Terrazzo Flooring, Inc., 763 F.Supp.2d 64, 67 (D.D.C. 2011); see Adkins v. Teseo, 180 F.Supp.2d 15, 17 (D.D.C. 2001) (“A defaulting defendant is deemed to admit every well-pleaded allegation in the complaint.”). However, “the Court must ‘make an independent determination of the sum to be awarded' pursuant to the judgment ‘unless the amount of damages is certain.'” Boland v. Yoccabel Constr. Co., 293 F.R.D. 13, 17 (D.D.C. 2013) (Walton, J.) (quoting Adkins, 180 F.Supp.2d at 17). “‘[P]laintiff[s] must prove [their] entitlement to the amount of monetary damages requested' using ‘detailed affidavits or documentary evidence' on which the court may rely.” Boland v. Providence Constr. Corp., 304 F.R.D. 31, 36 (D.D.C. 2014) (quoting Fanning v. Permanent Sol. Indus., Inc., 257 F.R.D. 4, 7 (D.D.C. 2009)).

         III. ANALYSIS

         The government argues that it is entitled to a default judgment against the defendant funds because “[a]ll process that was due was fully issued in this action and [ ] returned according to law, ” as “notice by publication and notice to all known potential claimants was properly given, as required by . . . Supplemental Rule” for Admiralty or Maritime Claims and Asset Forfeiture Actions G (“Rule G”), Gov't's Mem. at 8; “[n]o individual or entity . . . has filed a [verified] claim or pleading to challenge the forfeiture of the defendant [funds], ” id. at 9; and “the time for filing a claim has expired, ” id. The government further argues that it is entitled to civil forfeiture in rem of the defendant funds “pursuant to 18 U.S.C. § 981(a)(1)(C) [(2012)], as property that constitutes or is derived from proceeds traceable to violations of the International Emergency Economic Powers Act (‘IEEPA'), ” and “18 U.S.C. § 981(a)(1)(A)[, ] as property involved in money laundering transactions and attempted money laundering transactions.” Id. at 1. For the following reasons, the Court agrees that the government is entitled to a default judgment against the defendant funds and that the defendant funds are subject to forfeiture to the government under § 981.

         A. Procedural Prerequisites ...


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