United States v. All Assets Held at Bank Julius
251 F. Supp. 3d 82
| D.D.C. | 2017Background
- This is an in rem civil forfeiture action seeking forfeiture of >$250 million in foreign bank accounts allegedly derived from corruption, fraud, extortion, and money‑laundering tied to former Ukrainian official Pavlo (Pavel) Lazarenko.
- The United States pleaded eight forfeiture claims under 18 U.S.C. § 981(a)(1)(C) (direct forfeiture of proceeds) and § 981(a)(1)(A) (forfeiture for money‑laundering involvement), with predicates including wire fraud, Hobbs Act extortion, §§ 2314/2315 interstate transportation of stolen property, and § 1956/1957 money‑laundering offenses.
- Lazarenko moved for partial judgment on the pleadings (alternatively partial summary judgment) arguing Morrison/Skilling/RJR Nabisco changed the extraterritorial analysis and require dismissal or narrowing of many claims.
- The Court treated the motion under Rule 12(c) (not summary judgment), applied the Supreme Court’s two‑step extraterritorial framework (Morrison/RJR Nabisco), and analyzed § 981(a)(1)(A) and (C) separately because they incorporate other statutes.
- Key factual allegation relevant to jurisdiction: many transfers were either to/from U.S. accounts or were electronic funds transfers (EFTs) routed through U.S. correspondent banks; some payments involved U.S. entities.
Issues
| Issue | Plaintiff's Argument (United States) | Defendant's Argument (Lazarenko) | Held |
|---|---|---|---|
| Whether §981(a)(1)(A) and §981(a)(1)(C) rebut presumption against extraterritoriality | §981’s structure parallels RICO and, because it incorporates statutes (including §1956/§1957), it applies extraterritorially to the extent predicates do | §981 is a civil remedy like §1964(c) and provides no clear affirmative extraterritorial intent; therefore it should be limited | Court: §981(a)(1)(C) and §981(a)(1)(A) can apply extraterritorially to the extent the incorporated predicate statutes do; analyze each predicate statute’s reach individually (RJR Nabisco framework) |
| Whether EFTs that pass through U.S. correspondent banks "occur in part in the United States" under §1956(f) and thus confer extraterritorial jurisdiction for money‑laundering claims | EFTs that pass through U.S. financial institutions are transactions "by, through, or to a financial institution" and fit §1956(c)(3) and §1956(f)’s terms; Congress intended to protect U.S. banks used as clearinghouses | EFTs are single foreign‑to‑foreign transactions that merely ‘‘momentarily’’ traverse the U.S. banking system and should not be treated as occurring in the United States | Court: EFTs that pass through U.S. financial institutions constitute conduct occurring "in part in the United States" for §§1956 and 1957; denies Lazarenko’s challenge to money‑laundering claims (Fifth, Sixth, Seventh, Eighth Claims) |
| Whether wire fraud (§1343, including honest‑services per §1346) applies domestically to the alleged schemes | Wire communications using U.S. wires can support domestic application where conduct relevant to the statute’s focus occurred in the U.S.; some schemes involve U.S. wires/payments | The focus is the scheme to defraud, which occurred abroad; U.S. wire usage alone is insufficient under Morrison—dismiss or narrow the wire fraud claims | Court: §1343 does not rebut the presumption; a domestic application requires (i) substantial conduct in U.S., (ii) conduct integral to the scheme, and (iii) some use of U.S. wires. Applying that test, the Complaint fails to allege sufficient domestic conduct for the Third Claim (wire/honest‑services fraud) and that claim is dismissed on the pleadings |
| Whether Hobbs Act extortion (§1951) applies here (extraterritorially or domestically) | Broad statutory language referring to commerce and effect on U.S. commerce supports domestic application because transfers affected commerce through U.S. banks | Extortion occurred abroad; Hobbs Act does not apply extraterritorially absent stronger indicia; U.S. effects alone are not the statute’s "focus" | Court: §1951 does not rebut presumption and the focus is the extortion itself. The Complaint alleges extortion abroad and no sufficient U.S. extortion conduct; Second Claim (Hobbs Act) is dismissed |
Key Cases Cited
- Morrison v. National Australian Bank Ltd., 561 U.S. 247 (establishes two‑step extraterritoriality framework and presumption against extraterritoriality)
- RJR Nabisco, Inc. v. European Community, 136 S. Ct. 2090 (statutory structure can rebut presumption; distinguish substantive criminal provisions from civil remedies)
- Skilling v. United States, 561 U.S. 358 (defines honest‑services fraud to cover bribery/kickbacks, not mere conflicts)
- United States v. Daccarett, 6 F.3d 37 (EFTs can represent separate transactions into and out of U.S. accounts for jurisdictional/forfeiture analysis)
- Dowling v. United States, 473 U.S. 207 (statute returning to interpretation of "stolen" property and limits re: intangible property)