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United States v. Bangiyev

United States District Court, E.D. Virginia, Alexandria Division

October 28, 2015


Page 590

          For City Of Alexandria, Interested Party: George McAndrews, LEAD ATTORNEY, Office of the City Attorney, Alexandria, VA.

         For USA, Plaintiff: Kimberly Riley Pedersen, LEAD ATTORNEY, Gordon D. Kromberg, Karen Ledbetter Taylor, United States Attorney's Office, Alexandria, VA; Allison Ickovic, U.S. Attorney's Office (Alexandria-NA), Alexandria, VA.

Page 591


         Liam O'Grady, United States District Judge.

         This matter comes before the Court on the Government's Motion for Preliminary Order of Forfeiture. Dkt. 601. The Government moves to have the individual defendant Arkadiy Bangiyev (" Arkadiy" ) forfeit

Page 592

at least $20,000,000.00 and several specific assets. Dkts. 683, 694-9-10. For the reasons set forth below, the Motion as to Arkadiy is GRANTED in part.

         I. Background

         From 2004 until 2014, a criminal organization manufactured counterfeit United States currency representing tens of millions of dollars. The United States Secret Service (" USSS" ) identified defendant Arkadiy Bangiyev (" Arkadiy" ) as a member of this enterprise after conducting a lengthy investigation that included approximately nine months of court authorized phone wiretaps. On August 7, 2014, a grand jury returned a two count indictment against Arkadiy and others whom the USSS had also identified as being involved in the criminal organization. Dkt. 203. Count One of the Superseding Indictment charged Arkadiy with participating in a Racketeer Influenced and Corrupt Organization (RICO) conspiracy in violation of 18 U.S.C. § 1962(d). Id. Count Two charged Arkadiy with participating in a conspiracy to commit counterfeiting offenses in violation of 18 U.S.C. § § 371, 471, 472, 473, and 474. Id. Also included in the Superseding Indictment was a forfeiture allegation advising the defendants that if they were convicted of Count One the Government would seek the forfeiture of various property the defendants acquired or maintained in violation of 18 U.S.C. § 1962. Id. at 22.

         On January 15, 2015, Arkadiy pled guilty to Count One of the Superseding Indictment. Dkt. 505. A written plea agreement was entered in which Arkadiy agreed to " forfeit all interests in any asset derived from counterfeiting or racketeering that the defendant owns or over which the defendant exercises control, directly or indirectly, as well as any property that is traceable to, derived from, fungible with, or a substitute for property that constitutes the proceeds of his offense." Id. at 9. On April 20, 2015, the Government moved for a Preliminary Order of Forfeiture against each of the defendants, Itzhak Loz, Ronen Fakiro, Boaz Borohov, Ofra Borohov, Arkadiy Bangiyev, Eduard Bangiyev and Johnny Lee, seeking the entry of money judgments up to $70,474,250 with joint and several liability against each of the defendants. Dkt. 601. The Government contends that this sum represents the illegal proceeds that these defendants obtained during the course of the RICO conspiracy. Id. The Government argues that Arkadiy reasonably knew about $20,000,000 of the proceeds and, accordingly, moves now for a money judgment against him in that amount. In addition, the Government moves for the forfeiture of several specific assets.

         II. The Applicable Criminal Forfeiture Law

         The procedure for forfeiture of assets in a criminal case is governed by Federal Rule of Criminal Procedure 32.2. Under this Rule, in order for a court to enter a judgment of forfeiture following a finding of guilt or a guilty plea, the Government must first have notified the defendant, either through the indictment or the information, of its intent to seek forfeiture as part of any sentence. Fed. R. Crim Pro. 32.2(a). If this notice requirement is satisfied, the government may then pursue a forfeiture order by demanding either specific property, a money judgment, or substitute property. See Fed. R. Crim Pro. 32.2(b)(1)(A) & (b)(2)(A). In cases where the government seeks specific property, " the court must determine whether the government has established the requisite nexus between the property and the offense." Fed. R. Crim Pro. 32.2(b)(1)(A). When the government seeks a money judgment, " the court must determine the amount of money that the defendant will be ordered to pay." Id.

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          Whether property is subject to forfeiture in a particular case is governed by " the applicable statute." Fed. R. Crim. Pro. 32.2(b)(1)(A). Title 18 U.S.C. § 1963 is the applicable forfeiture statute for RICO violations. The RICO forfeiture statute is mandatory, Alexander v. United States, 509 U.S. 544, 562, 113 S.Ct. 2766, 125 L.Ed.2d 441 (1993), and broad, United States v. Cherry, 330 F.3d 658, 669 n.18 (4th Cir. 2003). The Fourth Circuit has observed that the RICO statute contains what is " by far the most far reaching forfeiture provision, sweeping far more broadly than the substantive RICO offense itself." Id. In addition, a judgment of forfeiture in a RICO case is not a separate conviction; rather, it constitutes part of a defendant's sentence. 18 U.S.C. § 1963 (forfeiture is imposed " in addition to any other sentence" for a violation of the RICO Act); see also Libretti v. United States, 516 U.S. 29, 39, 116 S.Ct. 356, 133 L.Ed.2d 271 (1995).

         Under 18 U.S.C. § 1963, a defendant who has been found guilty or who has pled guilty to a RICO violation must forfeit to the United States:

(1) any interest the [RICO violator] has acquired or maintained in violation of section 1962;
(2) any--
(A) interest in;
(B) security of;
(C) claim against; or
(D) property or contractual right of any kind affording a source of influence over;
any enterprise which the [RICO violator] has established, operated, controlled, conducted, or participated in the conduct of, in violation of section 1962; and
(3) any property constituting, or derived from, any proceeds which the [RICO violator] obtained, directly or indirectly, from racketeering activity or unlawful debt collection in violation of section 1962.

18 U.S.C. § 1963(a). Section (m) of this statute also provides for the forfeiture of substitute assets:

(m) If any of the property described in subsection (a), as a result of any act or omission of the defendant--
(1) cannot be located upon the exercise of due diligence;
(2) has been transferred or sold to, or deposited with, a third party;
(3) has been placed beyond the jurisdiction of the court;
(4) has been substantially diminished in value; or
(5) has been commingled with other property which cannot be divided without difficulty;
the court shall order the forfeiture of any other property of the defendant up to the value of any property described in paragraphs (1) through (5).

Id. § 1963(m). In essence, under § 1963, a court may order the forfeiture of four categories of assets: (1) assets the defendant acquired or maintained in violation of the RICO Act; § 1963(a)(1); (2) any interest in and all property of any kind affording the defendant a source of influence over the RICO enterprise, id. § 1963(a)(2); (3) all property constituting or derived from proceeds of the racketeering activity, Id. § 1963(a)(3); and (4) substitute assets up to a certain amount, id. § 1963(m). However, the analysis does not stop there. " Any interests in an enterprise, including the enterprise itself, are subject to forfeiture in their entirety, regardless of whether some portion of the enterprise is not tainted by the racketeering activity." United States v. Angiulo, 897 F.2d 1169, 1211 (1st Cir. 1990). In contrast, the forfeiture of interests outside the enterprise, including " property that affords a source

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of influence over an enterprise," is subject to a rule of proportionality. Id.; see also United States v. Porcelli, 865 F.2d 1352, 1362-65 (2d Cir. 1989), United States v. Horak, 833 F.2d 1235, 1242-43 (7th Cir. 1987). Under this rule, interests outside the enterprise " are only subject to forfeiture to the extent they are tainted by the racketeering activity." 897 F.2d at 1211.

         Forfeiture in a RICO case is not an in rem proceeding against certain assets; rather, it is an in personam proceeding against the defendant. In re Billman, 915 F.2d 916, 920 (4th Cir. 1990). Thus, " the government [ ] may pursue a forfeiture order by demanding either a money judgment, specific property, or substitute property." United States v. Poulin, 690 F.Supp.2d 415, 420 (E.D. Va. 2010) aff'd, 461 Fed.Appx. 272 (4th Cir. 2012). In order to obtain a forfeiture money judgement, " [t]he government is not required to trace the proceeds of the RICO offense into a specific bank account." In re Billman, 915 F.2d at 920. Rather, the statute requires forfeiture of the total profits of criminal activity, regardless of whether those funds are still in the defendant's possession. United States v. Ginsburg, 773 F.2d 798, 802-03(7th Cir. 1985); see also, United States v. Amend, 791 F.2d 1120, 1128 n.6 (4th Cir. 1986) (" The Ginsburg reasoning is persuasive, and the government need not have offered evidence that the forfeitable assets were still in existence at the time of [the defendant]'s conviction." ). Pursuant to 18 U.S.C. § 1963(m), the provision for the forfeiture of substitute assets, " a forfeiture money judgment can be satisfied out of any of the defendant's assets." In re Billman, 915 F.2d at 920.

         In the context of a conspiracy, forfeiture extends to funds obtained by a defendant's conspirators that were reasonably foreseeable and part of the jointly undertaken criminal activity. Conspirators are responsible, both substantively and at sentencing, for the " reasonably foreseeable acts and omissions" of their co-conspirators committed " in furtherance of the jointly undertaken criminal activity." United States v. McHan, 101 F.3d 1027, 1043 (4th Cir. 1996) (quoting U.S.S.G. § 1B1.3(a)(1)(B)) (applying vicarious liability principles to criminal forfeiture in drug distribution case). Because forfeiture is " an element of the [defendant]'s sentence," Libretti v. United States, 516 U.S. 29, 116 S.Ct. 356, 133 L.Ed.2d 271 (1995), it follows that conspirators are also responsible for the reasonably foreseen proceeds obtained by their co-conspirators. McHan, 101 F.3d at 1043; United States v. Hurley, 63 F.3d 1, 22 (1st Cir. 1995) (applying this reasoning in the context of a RICO violation).

         III. Burden of Proof

         This Court next addresses the standard of proof for a RICO forfeiture. The parties disagree over what standard the Court should apply to this Motion. For the reasons stated below, the Court finds that preponderance of the evidence is the proper standard.

         The Supreme Court has made clear that forfeiture is an aspect of the defendant's sentence, not an element of the underlying crime. Libretti v. United States, 516 U.S. 29, at 38-39, 116 S.Ct. 356, 133 L.Ed.2d 271 (1995). The Supreme Court has also instructed that district courts should use a preponderance of the evidence standard when making factual determinations bearing on punishment. See United States v. Watts, 519 U.S. 148, 156, 117 S.Ct. 633, 136 L.Ed.2d 554 (1997). Because a forfeiture is part of a defendant's punishment, it follows that a preponderance of the evidence standard is the appropriate standard to apply to forfeiture. Therefore, a district court or jury

Page 595

making a forfeiture determination need only find facts warranting forfeiture by a preponderance of the evidence. See United States v. Christensen, 801 F.3d 971, 2015 WL 5010591 (9th Cir. 2015); United States v. DeFries, 129 F.3d 1293, 1312, 327 U.S.App.D.C. 181 (D.C. Cir. 1997). The Fourth Circuit embraced this line of reasoning in United States v. Najjar, 300 F.3d 466 (4th Cir. 2002). Although the Fourth Circuit has also indicated in dicta that it has not yet definitively held that preponderance of the evidence is the proper standard, see United States v. Cherry, 330 F.3d 658, 669 n. 18 (4th Cir. 2003), this Court is persuaded by the line of reasoning set out above and choses to follow the preponderance standard now.

         IV. Specific ...

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