Case3:00-cr-00284-CRB Document1370 Filed07/10/08 Page1 of 5
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`IN THE UNITED STATES DISTRICT COURT
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`FOR THE NORTHERN DISTRICT OF CALIFORNIA
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`UNITED STATES,
`Plaintiff,
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` v.
` PAVEL LAZARENKO,
`Defendant.
` /
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`No. C 00-00284 CRB
`BRIEFING ORDER
`
`The Court orders the parties to file supplemental briefs on or before August 8, 2008
`focusing on the following questions.
`For Liquidators:
`1.
`Cite to the portion of the opening or reply briefs wherein Liquidators briefed the Ninth
`Circuit on the proper scope of an ancillary proceeding. In particular, the Court is
`interested in those portions of the briefs interpreting 21 U.S.C. § 853(n) and Federal
`Rule of Criminal Procedure 32.2.
`Liquidators contend that the Court must address – at some point – whether Lazarenko
`has a right in the seized Bank of America accounts that is forfeitable under 18 U.S.C.
`§ 982. But Federal Rule of Criminal Procedure 32.2(c)(2) provides that such a finding
`must be made only “[i]f no third party files a timely [ancillary] petition. . . .” Does
`Rule 32(c)(2) thus imply that the Court may bypass the question of whether
`Lazarenko has an interest in the Bank of America accounts if the Court eliminates the
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`2.
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`For the Northern District of California
`For the Northern District of California
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`United States District Court
`United States District Court
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`Case3:00-cr-00284-CRB Document1370 Filed07/10/08 Page2 of 5
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`possibility that third parties, such as Liquidators, have a superior interest in the
`accounts? That is to say, can the Court find that Lazarenko has an interest in the
`accounts by process of elimination?
`In DSI Associates LLC v. United States, 496 F.3d 175, 186 (2d Cir. 2007), the
`Second Circuit held that a third party who cannot satisfy the “standing requirements of
`section 853(n)” – by establishing a prior legal right or that he is a bona fide purchaser
`for value – is precluded by § 853(k) from intervening in a trial involving forfeiture.
`Please discuss why the Second Circuit’s interpretation of § 853(n) misreads the
`statute.
`If Eurofed cannot satisfy the requirements of § 853(n), can it seek relief by petitioning
`the Attorney General for mitigation or remission pursuant to § 853(i)? In United
`States v. Lavin, 942 F.2d 177 (3rd Cir. 1991), the Third Circuit concluded that:
`“Congress did not intend section 853(n) to serve as a vehicle by which all innocent
`third parties who are aggrieved by an order of criminal forfeiture can petition for
`judicial relief. Rather, it seems . . . that Congress, in enacting section 853(n)(6)(A)
`and (B), intended to accord standing to only two narrow classes of third parties, and
`intended to require all other third parties to petition the Attorney General for relief.”
`Id. at 185 (citing 18 U.S.C. § 853(i)). If followed, Lavin would suggest that Eurofed
`may be an aggrieved party, but not an aggrieved party that fits with the “two narrow
`classes of third parties” protected by § 853(n). Please discuss.
`Liquidators conceded at oral argument before the Ninth Circuit that it seeks to
`adjudicate issues – such as res judicata and probable cause – that are analytically
`distinct from the issue of superior title. Does Liquidators’ position contradict Rule
`32.2’s admonition that the ancillary proceeding “does not involve relitigation of the
`forfeitability of the property”? Liquidators’ arguments about res judicata, probable
`cause, etc. turn on whether the government has a valid interest in the property, but
`Rule 32.2 provides that the ancillary proceeding’s “only purpose is to determine
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`For the Northern District of California
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`United States District Court
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`Case3:00-cr-00284-CRB Document1370 Filed07/10/08 Page3 of 5
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`whether any third party has a legal interest in the forfeited property.” (Emphasis
`added). What deference must the Court give Rule 32.2 and its advisory notes?
`Under Eurofed’s view, are there any limits on the kinds of arguments that can be
`forwarded in an ancillary proceeding?
`Because Eurofed did not argue or explain how it satisfies the requirements of §
`853(n), please do so in the supplemental briefing.
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`6.
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`7.
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`///
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`2.
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`For United States:
`1.
`At oral argument before the Ninth Circuit, the government conceded that the
`Liquidators could raise arguments based on res judicata, statute of limitations, and the
`Act of State doctrine “[t]o the extent [those arguments] relate[] to their superior right.”
`What did the government mean? Can Liquidators raise arguments based on res
`judicata or probable cause because prevailing on such arguments would, in the words
`of Judge Tallman, “bar . . . the government’s ability to assert that it has superior
`title”?
`At oral argument, Liquidators requested that the Ninth Circuit “at least make it clear
`that [the government has] got to let” Liquidators raise arguments other than superior
`title. Is footnote two of the Ninth Circuit’s opinion a binding holding that Liquidators
`may, at the least, challenge the underlying forfeitability of the seized accounts on the
`ground that “the affidavits submitted to support the government’s seizure lack[ed]
`probable cause” or is it dicta? To what extent should the Court take into account the
`degree to which the parties adequately briefed the issue of the scope of § 853(n) to the
`Ninth Circuit?
`What is the scope of § 853(i)(1)? Could a third party that believes property was
`unlawfully seized challenge the underlying forfeitability through a petition for
`mitigation or remission of forfeiture? See 28 C.F.R. § 9.5(a)(4) (“The Ruling Official
`shall presume a valid forfeiture and shall not consider whether the evidence is
`sufficient to support the forfeiture.”). Or is the mitigation or remission process limited
`to claims based on “mere equitable grounds”? S. Rep. 98-225, 1984 U.S.C.C.A.N.
`3182, 3391 (1984).
`Even if Lazarenko used Eurofed, as an entity, to facilitate his criminal transactions,
`the government bears the burden of proving specifically that Bank of America account
`#W71-223433 was used to make “the prohibited conduct less difficult or more or less
`free from obstruction or hindrance.” United States v. Bornfield, 145 F.3d 1123, 1135
`(10th Cir. 1998). To be forthright, the Court believes that it is not enough to merely
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`3.
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`For the Northern District of California
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`5.
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`demonstrate that #W71-223433 was opened with monies from other Eurofed
`accounts, which may or may not have been funded by Lazarenko’s proceeds. What is
`the evidence that proves that Lazarenko’s proceeds – rather than assets owned by
`innocent Eurofed investors – formed the predicate for the account’s holdings?
`If Eurofed is correct that Lazarenko has no interest in the seized funds, then
`Lazarenko has no incentive to appeal Judge Jenkins’ nexus determination. If the
`Court precludes Eurofed from challenging the forfeitability of the funds, then there
`may be no review of Judge Jenkins’ decision. Did Congress intend for that scenario
`to occur?
`When Congress amended 18 U.S.C. § 1963 by adding an ancillary proceeding,
`Congress appeared to endorse the Department of Justice’s position that the ancillary
`proceeding should provide third parties with the opportunity to “assert claims . . .
`which, in essence, are challenges to the validity of the order of forfeiture. . . .” S. Rep.
`98-225, 1984 U.S.C.C.A.N. 3182, 3391 (1984) (emphasis added). Does § 1963’s
`legislative history support Eurofed’s position that Congress intended – when drafting
`the virtually-identical ancillary proceeding provision in § 853 – to provide third
`parties with an opportunity to challenge the underlying forfeiture?
`IT IS SO ORDERED.
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`6.
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`Dated: July 10, 2008
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`
`CHARLES R. BREYER
`UNITED STATES DISTRICT JUDGE
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`G:\CRBALL\2000\0284cr\Briefing Order.wpd
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`For the Northern District of California
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