LAWFUEL – Legal News Daily –
The Asset Forfeiture Unit of the United States
Attorney’s Office for the Southern District of New York has
forfeited or reached agreements to forfeit more than $1.1 billion
in calendar year 2007. The forfeitures stem from a variety of
cases prosecuted by the Office, from corporate fraud cases to
cases concerning public corruption, fraud in the United Nations
Oil-for-Food program, international narcotics trafficking, art
and antiquities thefts, and internet gambling.
The Department of Justice uses the fiscal year to track
forfeitures, and the Office’s forfeitures also exceeded $1.1
billion for the 2007 fiscal year (“FY07″), which runs from
October 1, 2006, to October 1, 2007. The Office collected
approximately $717.8 million and reached agreements to forfeit an
additional $450 million, bringing the Office’s forfeiture total
in FY 2007 to over $1.1 billion.
For the third consecutive fiscal year, the United
States Attorney’s Office for the Southern District of New York
has led the nation in deposits to the Government’s various Asset
Forfeiture Funds. In FY07, the nationwide total of deposits into
the Asset Forfeiture Funds was approximately $1.3 billion, with
the forfeited assets collected by the United States Attorney’s
Office for the Southern District of New York — $717.8 million —
comprising 55% of the national total. The top districts and
totals are as follows:
Top Districts for Asset Forfeiture in FY07
District Amount Deposited into the AFFs
Southern District of New York $717.8M
Western District of Virginia $183.6M
Eastern District of New York $49.2M
Southern District of Florida $37.5M
Southern District of Texas $29.2M
District of Connecticut $19.7M
District of New Jersey $17.5M
District of Maryland $15.8M
Southern District of California $15.6M
Central District of California $15.3M
Recent highlights of the Office’s asset forfeiture program appear
below.
Corporate Fraud Cases
Together, the Office’s Securities and Commodities Fraud
Unit and the Asset Forfeiture Unit have advanced the innovative
use of forfeiture laws to locate, seize, and forfeit crime
proceeds in order to restore them to victims.
This was done in several high-profile corporate fraud
cases, including the Adelphia, Refco, and Bayou prosecutions. In
those cases, this Office obtained three of the largest
forfeitures in Department of Justice history, totaling in excess
of $1.3 billion to date, with the goal of using the forfeited
funds to provide restitution to victims. Each case required the
resolution of complex issues arising from third-party claims to
the properties and from competing parallel proceedings, including
bankruptcies, class actions and creditor lawsuits. As a result
of the Office’s work on these cases, Assistant United States
Attorneys (“AUSAs”) from this Office received the Attorney
General’s John Marshall Award for Outstanding Legal Achievement
for Asset Forfeiture at the Attorney General’s Award ceremony on
October 2, 2007. AUSAs in the Southern District of New York have
received the award a record six out of the last seven years.
AremisSoft
In this securities fraud case, this Office seized, forfeited and
ultimately repatriated to the United States for restoration to
victims approximately $200 million that had been secreted in
accounts in the Isle of Man. In 2006, three AUSAs from this
Office were awarded the Attorney General’s John Marshall Award
for Outstanding Legal Achievement for Asset Forfeiture for their
participation in these forfeiture proceedings. This Office has
taken the novel approach of initiating, in 2007, civil money
laundering actions against two international banks, Lloyds and
Bank of Cyprus, which are alleged to have aided a fugitive
defendant in the laundering of the proceeds of the AremisSoft
securities fraud.
Adelphia
Following the securities fraud convictions of two former
executives of Adelphia Communications, JOHN and TIMOTHY RIGAS,
this Office negotiated a record-breaking settlement that resolved
the Government’s forfeiture claims against the RIGASES, potential
claims to the property by other members of the RIGAS family, and
potential criminal and civil claims against Adelphia. This
settlement resulted in the creation of a $715 million fund in
2007 to be used to compensate defrauded investors. Because the
defrauded Adelphia shareholders could number in the tens of
thousands, this Office retained a Special Master to identify and
notify potential victims and oversee a fair and equitable return
of the forfeited funds pursuant to the federal regulations
governing the remission of forfeited property to crime victims.
Refco
This Office successfully seized and restrained over $100 million
in 2007 in connection with the fraud at Refco, a large,
Manhattan-based financial services company that offered
securities, derivatives and commodities brokerage services to
investors. In a civil action arising out of a non-prosecution
agreement with the Austrian bank, BAWAG, related to the Refco
case, BAWAG forfeited more than $437 million to compensate the
victims of the Refco fraud.
Bayou Funds
The Asset Forfeiture Unit resolved novel forfeiture issues
arising from the implosion, in August 2005, of the Connecticut
and Westchester County, New York-based hedge funds known as the
Bayou Funds. In 2007, $112 million was forfeited from three
criminal defendants, who have pleaded guilty, and will be applied
to the restitution orders entered in the criminal case pursuant
to the Department of Justice’s restoration policy. This Office
has worked extensively with attorneys who have filed a host of
related civil actions, including bankruptcy proceedings and a
shareholder class action suit, in order to reasonably assure that
their efforts to recover assets on behalf of the investors are
coordinated with the Government’s efforts in that regard.
Internet Gambling
In 2007, NETeller PLC — an internet payment business
based in the Isle of Man and traded on the Alternative Investment
Market of the London Stock Exchange — admitted to criminal
wrongdoing, and agreed to forfeit $136 million in proceeds as
part of an agreement to defer prosecution of the company for
gambling violations. In addition, the founder and former
President of NETeller both pleaded guilty in 2007, to charges
that they conspired to promote illegal internet gambling by
providing payment services in the United States to offshore
internet gambling businesses, and agreed to jointly forfeit an
additional $100 million in proceeds.
Public Corruption
The Asset Forfeiture Unit works closely with the
Public Corruption Unit to ensure that state, municipal and public
officials who commit crimes are forced to disgorge their illgotten
gains and compensate victims for their losses by
forfeiting their money and property.
Norman Hsu
The Asset Forfeiture Unit has been working to recover money for
the victims of NORMAN HSU, who was charged in 2007 with allegedly
defrauding the investors in his fraudulent Ponzi scheme of more
than $60 million, and illegally pressuring certain investors into
donating money to candidates for public office. The Office has
already located and recovered approximately $4 million and
continues actively to seek further fraud proceeds.
Judith Leekin
LEEKIN was arrested in 2007 by state law enforcement in Florida
and charged with the abuse of several children she had adopted in
the state of New York. After the investigation revealed that
LEEKIN received millions of dollars in subsidies from New York
State to care for the adopted children, and that LEEKIN used the
money to support a lavish lifestyle while the children were
neglected and kept in abysmal conditions, this Office filed a
civil forfeiture action in 2007, to recover the homes in Florida
purchased by LEEKIN with the proceeds of her fraud. The Office
is also working to locate and seize other assets LEEKIN purchased
with the fraud proceeds.
Oil-for-Food Program
The Office has brought several cases relating to
corruption in the United Nations’ Oil-for-food program. The
program was designed to permit oil revenues to be used for
humanitarian purposes to benefit the Iraqi people,
notwithstanding international sanctions against Saddam
Hussein’s regime, but the regime, through a secretly implemented
system of “surcharges” that had to be paid to the regime in
exchange for oil allocations, instead enriched itself. In 2007,
this Office forfeited or reached agreements to forfeit
approximately $47 million related to Oil-for-food cases, and is
seeking to have the forfeited funds be provided to the
Development fund for Iraq, as representative of the Iraqi people.
International Narcotics Trafficking
AUSAs in the Asset Forfeiture Unit have worked closely
with the Office’s International Narcotics Trafficking Unit to
seize and forfeit millions of dollars in drug proceeds as part of
the Office’s effort to dismantle international narcotics and
money-laundering organizations.
Avianca
In a novel approach to the persistent problem of narcotics
importation, this Office employed the forfeiture laws in a 2004
suit against a major Colombian airline, Avianca, based on the
repeated smuggling of narcotics into the United States on Avianca
airplanes. The Office brokered a settlement which required
Avianca to take actions, including the retention of a private
monitor through 2007, to improve the airline’s performance in
preventing the transport of narcotics, explosives, and other
dangerous contraband. Avianca has instituted new screening and
security procedures to prevent the transportation of contraband.
Operation White Dollar and other BMPE Cases
Operation White Dollar was a two-year, joint U.S., U.K.,
Colombian, and Canadian investigation that resulted in the
coordinated dismantling of a 30-member Colombian money-laundering
organization and the forfeiture of more than $20 million in
money-laundering proceeds. The investigation targeted the users
of the Black Market Peso Exchange System (“BMPE”), through which
Columbian-based narcotics traffickers launder their U.S. acquired
narcotics proceeds.
The BMPE operates as follows: In Columbia, narcotics traffickers who have U.S. currency from narcotics sales
contact a Columbian peso broker. The peso broker exchanges
Columbian pesos he controls in Columbia for cash narcotics
proceeds the trafficker controls in the United States. A twostage
exchange is arranged: in the U.S., the peso broker’s
representatives pick up the narcotics proceeds from the
trafficker’s representatives; in Columbia, the peso broker pays
the trafficker the corresponding amount in pesos (less the
broker’s commission). The BMPE system is used by Columbians to
obtain a better exchange rate than the banks provide, to avoid
the Columbian currency transaction reporting requirements, and/or
to avoid paying certain Columbian import and exchange tariffs.
In Operation White Dollar, narcotics proceeds were forfeited by
seizing the accounts of Columbian businessmen who had received
currency deposits from the peso brokers. One of the accounts
seized belonged to a prominent Colombian industrialist named JOSE
DOUER-AMBAR. In connection with a deferred prosecution agreement
and the settlement of a civil asset forfeiture action, DOUER
agreed to forfeit $20 million. In related cases and
investigations in 2007, the Office forfeited additional narcotics
proceeds laundered through the Columbian BMPE.
Consuelo Marquez
As part of the prosecution of CONSUELO MARQUEZ, the Office
forfeited, in 2004 and 2007, more than $18 million in narcotics
proceeds in five brokerage accounts. MARQUEZ worked as an
investment representative for Lehman Brothers and managed
accounts owned by MARIO ERNESTO VILLANUEVA MADRID, then-governor
of Quintana Roo, Mexico. While governor, VILLANUEVA MADRID
allegedly received millions of dollars in narcotics proceeds from
a Mexican cocaine cartel, in exchange for which he provided
Quintana Roo police and other resources to the cartel to protect
and transport the cocaine. With the assistance of MARQUEZ,
VILLANUEVA MADRID established numerous brokerage accounts at
Lehman in the name of British Virgin Island shell corporations
and deposited millions of dollars in narcotics proceeds into
those accounts.
Art and Antiquities Cases
In addition to the Office’s use of the forfeiture laws
to recover money, the Office has made pioneering use of federal
forfeiture laws to recover and return stolen art and cultural
heritage property. (The value of such recoveries is not included
in the $1.1 billion totals described above.) The Office has
handled a number of noteworthy art and antiquities forfeitures,
including the 2007 forfeiture of an Egyptian Alabaster Offering
Vessel which dated to the Old Kingdom, Dynasty IV-VIII, 2575-2134
B.C. which had been stolen from Egypt and smuggled into the
United States; arrangements are being made to return the vessel
to Egypt. Other notable examples from past years include: a
painting by Lavinia Fontana and another by Anton Graff, returned
to Switzerland; a stolen Etruscan bronze statue, dated circa 490
B.C., returned to Switzerland; an antique gold platter (phiale)
dated circa 450 B.C., returned to Italy; a rare manuscript,
returned to Mexico; and a medieval carved wood panel, originally
inside the historic Great Mosque in Dvrigi, returned to Turkey.
In an ongoing case that has garnered international
attention, this Office has used forfeiture laws to uphold the
rights of Jewish victims to reclaim art stolen during the
Holocaust era. The pending civil forfeiture action, United
States v. Portrait of Wally, involves a renowned painting by
Austrian impressionist Egon Schiele currently valued at $20
million. The lawsuit alleges that the painting was stolen by the
Nazis from a Viennese Jewish woman, Leah Bondi Jaray, and was
acquired by an Austrian collector, who knew it was stolen, in
1950.
In 1997, the painting was imported into the United States
for exhibition at the Museum of Modern Art, and this Office
thereafter initiated a civil forfeiture action with a view
towards returning the painting to the heirs of Mrs. Jaray. The
case has been in litigation since 1999.
Following the institution of the case, the Austrian government enacted
legislation which opened government archives so Holocaust victims
could gather information on their property, as well as
legislation which allowed numerous Holocaust victims to recover
their stolen property.
