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United States of America v. Liquidators of European

January 4, 2011

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
LIQUIDATORS OF EUROPEAN FEDERAL CREDIT BANK, IN LIQUIDATION, CLAIMANTS-APPELLANTS,AND PAVEL IVANOVICH LAZARENKO, DEFENDANT. UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE, LIQUIDATORS OF EUROPEAN FEDERAL CREDIT BANK, IN LIQUIDATION, CLAIMANTS-APPELLANTS,
v.
PAVEL IVANOVICH LAZARENKO, DEFENDANT-APPELLEE. UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE, LIQUIDATORS OF EUROPEAN FEDERAL CREDIT BANK, IN LIQUIDATION, CLAIMANTS-APPELLANTS,
v.
PAVEL IVANOVICH LAZARENKO, DEFENDANT-APPELLEE.



Appeals from the United States District Court for the Northern District of California D.C. No. 3:00-cr-00284-CRB, D.C. No. 3:00-cr-00284-CRB, D.C. No. 3:00-cr-00284-CRB Charles R. Breyer, District Judge, Presiding

The opinion of the court was delivered by: Judge Graber

Argued and Submitted August 10, 2010-San Francisco, California

Before: Susan P. Graber, Consuelo M. Callahan, and

Carlos T. Bea, Circuit Judges.

Opinion by Judge Graber

OPINION

OPINION

GRABER, Circuit Judge:

Defendant Pavel Ivanovich Lazarenko, former prime minister of Ukraine, laundered money from illegal activities through many banks worldwide, including the European Federal Credit Bank ("Eurofed"), located in the sovereign nation of Antigua and Barbuda ("Antigua"). Defendant's activities raised prosecutorial eyebrows in both the United States and Antigua. Antiguan officials ordered the liquidation of Eurofed, and the High Court of Antigua appointed several persons as "Liquidators" of Eurofed to assist in the collection and distribution of Eurofed's assets to its rightful, law-abiding owners. Meanwhile, the United States government indicted Defendant on criminal charges, including money laundering. See United States v. Lazarenko, 564 F.3d 1026 (9th Cir.) (describing case history), cert. denied, 130 S. Ct. 491 (2009).

The United States government discovered that some of Defendant's assets-the assets at issue here-which originally had been deposited with Eurofed, were held in two Eurofed correspondent accounts at Bank of America in San Francisco. The government seized those assets and sought criminal forfeiture. Liquidators asserted ownership of the assets and sought to defeat criminal forfeiture. In an ancillary proceeding pursuant to 21 U.S.C. § 853(n), the district court rejected Liquidators' arguments challenging the criminal forfeiture and entered a final order of forfeiture. Liquidators timely appeal. We reverse and remand with instructions that the district court vacate the forfeiture order and that the district court order the government to return the assets to Liquidators.

FACTUAL AND PROCEDURAL HISTORY

We previously have detailed the factual and procedural history of Defendant's criminal convictions. Lazarenko, 564 F.3d at 1030-33. Relevant here, the final indictment, filed in 2001, contained a criminal forfeiture allegation pursuant to 18 U.S.C. § 982. The indictment alleged that Defendant "shall forfeit to the United States all property, real and personal, involved in such offense, or any property traceable to such property, including but not limited to [certain specified properties not including the assets at issue here]." As part of the substantive allegations, the indictment referred to many different specific bank accounts and specific bank transfers, but the indictment nowhere referred to the assets presently in dispute. Those assets are approximately $2.5 million in funds and Ukrainian bonds on deposit with Bank of America. The government asserts that those assets are connected to Defendant's money laundering.

In 2004, the jury convicted Defendant of money laundering and, about six weeks later, the government filed a motion for criminal forfeiture. The motion sought forfeiture of the bank accounts and funds mentioned in the indictment, but the motion did not name the assets at issue here. Likely because of the complexity of this case, the district court did not rule on the motion immediately.

Several months later, in January 2005, the government obtained a civil warrant to seize the assets at issue here. See United States v. Lazarenko (Liquidators), 476 F.3d 642, 646 (9th Cir. 2007) (describing history of civil forfeiture action); United States v. $1,379,879.09 Seized from Bank of Am., 374 F. App'x 709, 710 (9th Cir. 2010) (unpublished decision) (same). In March 2005, the government filed a civil complaint against the assets. Liquidators moved for summary judgment on statute of limitations grounds. Because the government learned of the underlying money-laundering offenses by 1999 at the latest, the five-year statute of limitations barred the 2005 civil forfeiture complaint. Eventually, the government conceded that the statute of limitations barred its civil forfeiture action. On October 26, 2005, the district court therefore granted Liquidators' motion for summary judgment in the civil action.*fn1

That same day, at the government's request, the district court also issued a criminal seizure warrant over the same assets. The government retained possession of the assets. In January 2006, Liquidators filed a "motion for return of the illegally seized funds." Additionally:

In March 2006, Liquidators applied ex parte to Judge Jenkins for an immediate hearing on their motion for return of the illegally seized funds. Liquidators claimed that United States v. Crozier, 777 F.2d 1376 (9th Cir. 1985), afforded them the right to a constitutionally mandated and immediate hearing. They reasoned that waiting to commence the ancillary proceedings contemplated by 21 U.S.C. § 853(n) until the district court sentenced Lazarenko would not sufficiently protect their due process rights to a reasonably prompt opportunity to contest the seized property to which they claim ownership. . . .

After holding a telephonic conference with all interested parties, the district court denied Liquidators' ex parte application. The district court found that setting a hearing on Liquidators' motion after sentencing Lazarenko comported with due process, as Congress has provided for ancillary proceedings on the heels of a sentence imposed upon conviction of a particular crime, 21 U.S.C. § 853(n). Soon thereafter, the district court granted the United States' application for a preliminary order of forfeiture under 18 U.S.C. § 982(a)(1) and Federal Rule of Criminal Procedure 32.2(b).

Liquidators, 476 F.3d at 646-47 (some citations omitted). Liquidators thereafter appealed from both orders and, alternatively, asked us to grant a writ of mandamus compelling the district court to order the government to return the assets to Liquidators immediately.

In that interlocutory appeal, Liquidators argued, among other things, that three legal doctrines independently barred this criminal forfeiture action: (1) the statute of limitations, (2) res judicata, and (3) the act of state doctrine. The government argued that we lacked jurisdiction to reach the merits of those arguments because of the procedural posture of the appeals. Specifically, the government asserted that there were no due process concerns because Liquidators could raise their legal challenges to the criminal forfeiture action in a soon-tobe-commenced ancillary proceeding under § 853(n).

We dismissed the appeals and the mandamus petition for lack of jurisdiction. We summarized in the conclusion:

We hold that Liquidators may adequately protect their interest in the funds and bonds in the ancillary proceeding under § 853(n). Congress designated no other means for third parties to vindicate their interest in forfeited property. Because Liquidators may present all legal arguments that might bar the government's forfeiture in the proceedings below, and because the district court is prepared to undertake the ancillary proceedings promptly, we further hold that Liquidators fail to satisfy the constitutional and prudential components of standing and ripeness.

Id. at 653 (emphasis added). In our reasoning, we clarified that, during the ancillary proceeding, Liquidators could present its legal arguments concerning, among other theories, the statute of limitations, res judicata, and the act of state doctrine. Id. at 650 & n.2.

On remand, the district court initiated the ancillary proceeding under 21 U.S.C. ยง 853(n). During that proceeding, the government argued-contrary to the earlier position that it had asserted to us-that the relevant statutes and rules of criminal procedure barred Liquidators from raising their legal challenges to the forfeiture. The district court agreed with the government but also held, in the alternative, that the three legal ...


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