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United States v. The Real Property

United States District Court, D. New Jersey

April 25, 2017



          MARY L. COOPER, United States District Judge

         This is a civil forfeiture action brought by the United States Government in rem against real property located in New York City. Tomer Yosef is a claimant of the property at issue and has moved to stay these proceedings under the rules applicable to forfeiture actions. For the reasons cited below, we will grant the stay requested by Mr. Yosef. We resolve this motion without oral argument. See L.Civ.R. 78.1(b).

         I. Background

         Plaintiff United States of America filed a criminal complaint in this court in August 2016 against Tomer Yosef, a native and citizen of Israel.[1] The substance of the allegations against Mr. Yosef are recounted in the Complaint in this case. (Dkt. 1.)[2] Briefly, the Government alleges that Mr. Yosef committed wire fraud in violation of 18 U.S.C. § 1343 by defrauding two investors in connection with a technology startup company. (Id. at 3-4.) Mr. Yosef allegedly made various misrepresentations to the investors about the operation and progress of the company while taking much of the “investment” money for himself. (Id. at 4- 17.)

         For the purposes of this action, the key allegation is that Mr. Yosef used these ill-gotten funds to purchase a condominium apartment located at 212 East 47th Street, Apartment 14E, New York, New York (the “Property”). (Id. at 21-24.) The Complaint describes the various bank accounts that Mr. Yosef allegedly used to purchase the Property. (Id. at 18-21.) Technically, the Property was purchased by YG Property Holdings LLC (“YG Holdings”), a New York Limited Liability Company formed by Mr. Yosef. (Id. at 22.) Mr. Yosef is the sole member of YG Holdings. (Id.)

         The Government contends that Mr. Yosef's actions violated the wire fraud statute, 18 U.S.C. § 1343, and brought this case in November 2016 under 18 U.S.C. § 981, which provides that “[a]ny property, real or personal, which constitutes or is derived from proceeds traceable to . . . ‘specified unlawful activity' (as defined in section 1956(c)(7) of this title)” is subject to forfeiture. 18 U.S.C. § 981(a)(1)(C).[3] Mr. Yosef filed a Notice of Claim of his ownership of the Property in December 2016. (Dkt. 5.) Despite receiving several stipulations by the parties extending the deadlines to respond to the Complaint (see dkt. 6; dkt. 7; dkt. 9), Mr. Yosef has not yet filed an answer. Mr. Yosef now moves to stay this case pursuant to 18 U.S.C. § 981(g)(2). (Dkt. 11.)

         II. Legal Standard

         Defendants involved in parallel criminal and civil proceedings may face the “difficult choice between being prejudiced in the civil litigation, if the defendant asserts his or her Fifth Amendment privilege, or from being prejudiced in the criminal litigation if he or she waives that privilege in the civil litigation.” Louis Vuitton Malletier S.A. v. LY USA, Inc., 676 F.3d 83, 97 (2d Cir. 2012). On one hand, asserting the Fifth Amendment in a civil case “may give rise to an adverse inference against the party claiming its benefits.” Adkins v. Sogliuzzo, 625 F. App'x 565, 571 (3d Cir. 2015) (quoting SEC v. Graystone Nash, Inc., 25 F.3d 187, 190 (3d Cir. 1994)); see also McMullen v. Bay Ship Mgmt., 335 F.3d 215, 218 (3d Cir. 2003) (noting judicial discretion to tailor equitable remedy to balance civil litigant's Fifth Amendment rights and potential prejudice to adversary). On the other hand, a civil litigant may face the risk of waiving his Fifth Amendment protections or providing evidence that could be used against him in a criminal case. See Graystone Nash, 25 F.3d at 193 (noting that affidavit filed in civil case “raise[d] serious questions about whether defendants waived their privilege”).

         18 U.S.C. § 981(g)(2) enables a claimant to sidestep that dilemma by moving for a stay in a civil forfeiture action when there are related criminal proceedings. If a claimant so moves, the statute requires us to stay the civil proceeding if we determine that: (1) the claimant is the subject of a related criminal investigation or case; (2) the claimant has standing to assert a claim in the civil forfeiture proceeding; and (3) continuation of the forfeiture proceeding will burden the right of the claimant against self-incrimination in the related investigation or case. 18 U.S.C. § 981(g)(2).

         Regarding the first inquiry, the statute defines “related criminal investigation or case” as “an actual prosecution or investigation in progress at the time at which the request for the stay, or any subsequent motion to lift the stay is made.” Id. § 981(g)(4). Moreover, “[i]n determining whether a criminal case or investigation is ‘related' to a civil forfeiture proceeding, the court shall consider the degree of similarity between the parties, witnesses, facts, and circumstances involved in the two proceedings, without requiring an identity with respect to any one or more factors.” Id.

         The second inquiry, standing, is designed to ensure that a claimant is properly before the court. To contest a forfeiture, a claimant must have both Article III and statutory standing. United States v. $8, 221, 877.16 in U.S. Currency, 330 F.3d 141, 150 n. 9 (3d Cir. 2003). “Article III standing requires the claimant to show an interest in the property sufficient to create a ‘case or controversy, ' while statutory standing requires claimants to comply with certain procedures.” Id. (quoting United States v. Contents of Accounts Numbers 3034504504 & 144-07143 at Merrill Lynch, Pierce, Fenner & Smith, Inc., 971 F.2d 974, 984 (3d Cir. 1992). To establish statutory standing, claimants must comply with the requirements of 18 U.S.C. § 983(a)(4)(A). United States v. $487, 825.000 in U.S. Currency, 484 F.3d 662, 664 (3d Cir. 2007), as amended (May 14, 2007). That statute in turn requires would-be claimants to file a claim asserting interest in the property in accordance with the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions (“Supplemental Rules”).[4] 18 U.S.C. § 983(a)(4)(A). Supplemental Rule G(5)(a)(i) governs the filing of a claim, and requires that the claim: (1) identify the specific property claimed; (2) identify the claimant and state the claimant's interest in the property; (3) be signed by the claimant under penalty of perjury; and (4) be served on the applicable government attorney. Supplemental Rule G(5)(a)(ii) sets out certain deadlines for the filing of the verified claim. Supplemental Rule G(5)(b) requires claimants to serve and file an answer to the complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure within 21 days after the filing of the claim.

         The Third Circuit has explained that the “most significant requirement” is that the claimant file a verified claim. See $487, 825.000, 484 F.3d at 664.[5] Requiring a timely claim ensures that claimants “come forward as quickly as possible after the initiation of forfeiture proceedings, so that the court may hear all interested parties and resolve the dispute without delay.” Id. (quoting $8, 221, 877.16, 330 F.3d at 150 n. 9). And requiring a verified claim “minimize[s] the danger of false claims by requiring claims to be verified or solemnly affirmed.” Id. Consequently, a “claimant who fails to file a verified statement has no standing to contest a forfeiture.” Id.; see also United States v. 8136 S. Dobson Street, 125 F.3d 1076, 1082 (7th Cir. 1997) (“If no claim is filed, a putative claimant lacks standing to contest a forfeiture.”).

         Although the Third Circuit has emphasized that claimants must carefully adhere to the procedural requirements for filing a claim, it has also cautioned against overly-rigid application of the rules when assessing standing. Consequently, we are mindful that our analysis of a claimant's compliance with procedural requirements “should not be so strict in interpreting those requirements that the outcome defies ‘old-fashioned common sense.'” See United States v. $263, 327.95, 936 F.Supp.2d 468, 472 (D.N.J. 2013) (quoting United States v. Various Computers & Computer Equip., 82 F.3d 582, 585 (3d Cir.1996)). Indeed, to assert statutory standing, the “burden is minimal and does not require that defendants explain in any detail the nature of their interest.” United States v. $410, 000.00 In U.S. Currency, No. 07-0598, 2007 WL 4557647, at *5 (D.N.J. Dec. 21, 2007).

         The final inquiry in connection with securing a stay under Section 981(g)(2) is whether continuation of the forfeiture proceeding will burden the right of the claimant against self-incrimination in the related investigation or case. See 18 U.S.C. § 981(g)(2).

         III. Parties' Arguments

         Mr. Yosef contends that a stay in this case is appropriate because each of the required conditions in Section 981(g)(2) is present here. First, he asserts the existence of an open criminal investigation against him. (Dkt. 11-1 at 9-10.) Second, he claims to have the requisite Article III and statutory standing by means of filing a timely verified claim and his allegedly undisputed ownership interest in the Property. (Id. at 12.) Finally, he submits that his Fifth Amendment right against self-incrimination in the related criminal case would be burdened absent a stay. (Id. at 13-14.) Mr. Yosef observes that the allegations in the civil forfeiture complaint here “reads like a criminal prosecution” and “explicitly alleges that [Mr. Yosef] committed wire fraud. (Id. at 13.) Consequently, he ...

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