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United States v. $1

United States District Court, D. New Jersey

March 22, 2017

UNITED STATES OF AMERICA, Plaintiff,
v.
$1, 879, 991.64 PREVIOUSLY CONTAINED IN SBERBANK OF RUSSIA'S INTERBANK OR CORRESPONDENT BANK ACCOUNT NUMBERS 0004403077 AND 0004169401, HELD AT DEUTSCHE BANK TRUST COMPANY AMERICAS, Defendant in rem.

          OPINION

          WILLIAM J. MARTINI, U.S.D.J.

         The United States of America (the “Government”) brings this action against Sberbank of Russia (“Sberbank”), seeking forfeiture of $1, 879, 991.64, in connection with the criminal conviction of Alexander Brazhnikov, Jr. This matter comes before the Court on Sberbank's motion for reconsideration of the Court's January 30 Opinion and Order (the “Opinion”), under the District of New Jersey Local Civil Rule 7.1(i). There was no oral argument. Fed.R.Civ.P. 78(b). For the reasons set forth below, Sberbank's motion is DENIED.

         I. BACKGROUND

         This forfeiture proceeding arises out of Alexander Brazhnikov, Jr.'s criminal proceeding, in which he pleaded guilty to three conspiracy charges related to the smuggling of restricted items from the United States to Russia. The Court assumes the parties' familiarity with the facts. Sberbank now seeks reconsideration of the Court's Opinion and Order issued on January 30, 2017. See ECF Nos. 51 & 52.

         A. The Court's January 30 Opinion

         In its Opinion, the Court granted, in part, and denied, in part, the Government's motion to strike Sberbank's claim of ownership to $1, 879, 991.64 that was seized by the Government in connection with Brazhnikov's criminal conviction. At the time of seizure, the funds were being held in Sberbank's interbank account located at Deutsche Bank Trust Company of Americas and, as a result, were subject to the Government's seizure pursuant to 18 U.S.C. § 981(k) and Supplemental Admiralty and Maritime Claims Rule G(8)(c). See Op. at 3.

         The Court acknowledged the “dearth of case law interpreting § 981(k), ” but considered precedent from the First Circuit and the District Court for the District of Columbia that established opposing views concerning the reach § 981(k) to assets held in foreign bank accounts. The Court recognized that both courts agreed “that Congress intended to treat foreign deposits as domestic deposits under § 981(k), ” with which this Court also agreed. Id. at 5. The Court then underscored a critical factual distinction from the precedent cases to the instant case in its analysis of § 981(k): neither precedent case concerned the forfeiture of property by a defendant convicted of a federal crime. Id.

         In light of the Congressional intent to put foreign and domestic deposits on equal footing, and in light of the unique facts before it, the Court considered what type of forfeiture the funds would be subject to if they were deposited in a domestic account. It concluded that “if Brazhnikov had originally deposited the funds into a domestic bank account but subsequently moved them beyond the reach of this Court prior to seizure, the Government would have been entitled to the equivalent amount of money located in any other domestic bank account or accounts owned by Brazhnikov, regardless of its nexus to the predicate criminality.” In other words, the Government would have been entitled to the same amount of money held in any other account under the legal construct of “substitute property” as set forth in 21 U.S.C. § 853(p). See id. at 6.

         The Court then applied § 981(k) to the facts before it in the manner that Congress intended-i.e., it put the funds held in a foreign account on equal footing to those held in a domestic account. In so doing, the Court expressly joined the First Circuit's conclusion “that a foreign financial institution must show beyond a preponderance of the evidence that it has discharged its entire obligation to the prior owner of funds in establishing statutory standing under § 981(k)(4)(B)(ii)(II).” Id. (citing United States v. Union Bank for Sav. & Inv. (Jordan), 487 F.3d 8, 17-22 (1st Cir. 2007)). Put another way, § 981(k) does not require that the Government prove beyond a preponderance that the seized funds were directly tied to the criminality warranting forfeiture; the statute only requires that the Government show that Brazhnikov held funds equal to the forfeiture amount in any Sberbank account. Consequently, the Government was entitled to $808, 661.28 of the funds because it was indisputable that Sberbank had not discharged this portion of its obligation to Brazhnikov on the date of seizure. See id. at 6-7. Genuine disputes of material fact existed concerning the remaining forfeiture amount and the Court, therefore, denied the Government's motion with respect to those funds. See id. at 7-9. The Court also granted Sberbank's motion to amend its answer.

         B. Sberbank's Arguments

         Sberbank argues that the Court erroneously applied § 853(p) to the instant case in concluding that the funds in question were subject to forfeiture as “substitute property.” Sberbank first argues that the Court reached the issue sua sponte, without the benefit of further development of its “novel” argument by the parties. See Mot. for Reconsideration (“Sberbank's Mot.”) 3-4, ECF No. 53. Sberbank next argues that the Court ignored the due process protections afforded to third-parties by 18 U.S.C. § 983 and Supplemental Rule G, requiring that notice be given at the outset of forfeiture in rem proceedings. See id. at 7. Sberbank claims that the Government's failure to follow the proper procedure-i.e., notice to third-parties-for the forfeiture of substitute assets is fatal to its seizure of the funds. Id.

         The Government responds that Sberbank's motion should be denied because it “fails to demonstrate that the Court committed clear error when it held that the Government is entitled to the forfeiture of substitute property where the funds subject to forfeiture under 18 U.S.C. § 981(k) are unavailable by the act or omission of the convicted defendant.” Gov't Resp. 2, ECF No. 54. The Government also claims that Sberbank has not shown that the Court's holding would create a manifest injustice because Sberbank “has been aware since the beginning that the Government is seeking forfeiture of $1, 879, 991.64 in relation to funds held by Alexander Brazhnikov and his father at Sberbank.” Id.

         II. LEGAL STANDARD

         “Local Civil Rule 7.1(i) allows a party to seek a motion for reconsideration within 14 days after entry of the judgment, and directs the party seeking reconsideration to submit ‘[a] brief setting forth concisely the matter or controlling decisions which the party believes the Judge . . . has overlooked.'” Valcom, Inc. v. Vellardita, No. 13-cv-3025, 2014 WL 2965708, at *1 (D.N.J. July 1, 2014) (quoting L. Civ. R. 7.1(i)). “Reconsideration motions will only be granted (1) where an intervening change in the law has occurred, (2) where new evidence not previously available has emerged, or (3) to correct a clear error of law or fact or prevent manifest injustice.” Id. (citing Max's Seafood Cafe ex rel. LouAnn, Inc. v. Quinteros, 176 F.3d 669, 677 (3d Cir. 1999)). Under the clear error or manifest injustice rationale, “reconsideration is proper if the contested holding (1) was ‘without support' in the case law or (2) would create ‘manifest injustice' if not ...


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