In re 650 Fifth Ave. And Related Properties., No. 1:08–cv–10934–RJH.

CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)
Writing for the CourtRICHARD J. HOLWELL, District Judge:
Citation777 F.Supp.2d 529
PartiesIn re 650 FIFTH AVENUE AND RELATED PROPERTIES.
Docket NumberNo. 1:08–cv–10934–RJH.
Decision Date29 March 2011

777 F.Supp.2d 529

In re 650 FIFTH AVENUE AND RELATED PROPERTIES.

No. 1:08–cv–10934–RJH.

United States District Court, S.D. New York.

March 29, 2011.


[777 F.Supp.2d 534]

Anna Elizabeth Arreola, Eric James Snyder, Harry A. Chernoff, Sharon Cohen Levin, John Peter Cronan, Michael Dennis Lockard, United States Attorney Office, New York, NY, for Plaintiff.Peter I. Livingston, Rose & Livingston, New York, NY, Laina C. Lopez, Thomas G. Corcoran, Jr., Berliner, Corcoran & Rowe, LLP, Washington, DC, for Defendant.

MEMORANDUM OPINION AND ORDER
RICHARD J. HOLWELL, District Judge:

In this in rem forfeiture action, the United States seeks to forfeit real properties, partnership interests, and accounts owned by or under the control of claimants 650 Fifth Avenue Company, the Alavi Foundation (the “Foundation”), Assa Corp., and Assa Ltd. (together, with Assa Corp., the “Assa Claimants”). The government alleges that these properties are the proceeds of illegal services that the claimants allegedly provided to the Islamic Republic of Iran in violation of the International Emergency Economic Powers Act (“IEEPA”); traceable to such proceeds; or involved in the laundering of such proceeds. The claimants have moved to dismiss the complaint for failure to state a claim for which relief can be granted. For the reasons set forth below, the motion is denied.

BACKGROUND

The story of this case begins in 1973 when Shah Reza Mohammad Pahlavi, then

[777 F.Supp.2d 535]

the Shah of Iran, established a non-profit charitable foundation under the laws of the State of New York. (Compl. ¶ 24.) The Shah named the foundation the Pahlavi Foundation and caused the Iranian government to loan the foundation $42 million. ( Id.) The loan was made by Bank Markazi (the Central Bank of Iran) to Bank Melli Iran, a slate-owned financial institution, and in turn to the Pahlavi Foundation. ( Id.) The funds were used to purchase real estate at 650 Fifth Avenue in Manhattan and to construct a commercial office building on the property (“the Building”). ( Id.)

In 1979, a revolution toppled the Shah, who fled Iran, and Ayatollah Ruhollah Khomeini returned from exile to take control of the Iranian government. ( Id. ¶ 25.) On April 1, 1979, Khomeini proclaimed the establishment of the Islamic Republic of Iran. ( Id.) During this political upheaval, the directors of the Pahlavi Foundation resigned and were replaced. ( Id. ¶ 27.) And on February 25, 1980, the foundation filed an amended Certificate of Incorporation which changed the name of the Pahlavi Foundation to “The Mostazafan Foundation of New York.” ( Id.). The name of that foundation, which later became the Alavi Foundation (and therefore is also referred to below as the “Foundation”), referred to the Bonyad Mostazafan, an entity formed by the newly established Revolutionary Council of the Islamic Republic of Iran to manage property expropriated by the revolutionary government. ( Id. ¶ 26.)

A. The Formation of the Partnership

In the years following the revolution, the Foundation ran into a problem caused by its outstanding loan from Bank Melli. The federal tax code classified rent from the Building as debt-financed income unrelated to the Foundation's charitable services on which the Foundation was required to pay taxes. ( Id. ¶ 31.) In 1987, Tahmasb Mazaheri, then the Deputy Prime Minister of Iran and the head of the Bonyad Mostazafan, wrote a letter on Bonyad Mostazafan letterhead to Mir–Hossein Mousavi, then the Prime Minister of Iran, regarding “a major problem of the Mostazafan Foundation of New York, namely the debt they owe to the New York branch of Bank Melli Iran.” ( Id. ¶ 32.) Mazaheri asked Mousavi to approve a plan to transfer ownership of the Building to a new legal entity owned by the Mostazafan Foundation and a to be formed European company who would pay the debt balance to Bank Melli in exchange for its ownership share. ( Id.) Mazaheri reported that he had discussed the plan with the director of the Central Bank of Iran and the general director of Bank Melli. ( Id.) Mazaheri wrote another letter to Mousavi later in 1987 again requesting approval for the plan and estimating that the plan would result in tax savings of $3.5 million. ( Id. ¶ 33.) In a letter dated December 1, 1987 on letterhead entitled “Islamic Republic, Office of the Prime Minister,” Mousavi authorized the plan proposed by Mazaheri, who forwarded the letter to the director of the Central Bank of Iran. ( Id. ¶ 34.) However, for some reason not apparent from the complaint, the plan was not executed in 1987.

On March 22, 1988, Habib Zobeidi Om–Jarideh, a member of the Board of Directors of the Foundation, wrote a letter on the Foundation's letterhead to Mohammad Badr Taleh, the President of the Foundation, in a renewed attempt to solve the tax problem. ( Id. ¶ 36.) The letter noted that the plan advanced by Mazaheri “was presented for two reasons: 1.[t]o avoid paying an unnecessary and large amount of taxes to the U.S. government” and “2. [t]o express our concerns about possible interference by the New York public prosecutor in the Foundation's business.” ( Id.) Zobeidi advised against the plan because the IRS would consider it tax evasion since “no real change has been

[777 F.Supp.2d 536]

made except the loan has been changed in name to capital, with the only result being the payment of no tax.” ( Id.) And on March 14, 1989, Badr wrote to Mazaheri requesting approval to enter into a long-term lease of the Building as an alternative. ( Id. ¶ 37.) However, the Bonyad Mostazafan rejected this proposal and instead approved the plan originally advanced by Mazaheri.

On July 31, 1989, the Foundation entered into a written partnership agreement (the “Partnership Agreement”) with Assa Corp., a corporation newly organized under the laws of the State of New York, that established a partnership called 650 Fifth Avenue Company (the “Partnership”). ( Id. ¶ 41.) Pursuant to the Partnership Agreement, the Foundation agreed to contribute the Building and Assa Corp. agreed to contribute $44.8 million to the Partnership, to be used to retire the debt on the Building owed to Bank Melli. ( Id. ¶ 42.) The Foundation initially took a 65% interest in the Partnership; Assa Corp. took the remaining 35% interest. The Foundation now owns a 60% interest in the Partnership and Assa Corp. owns the remaining 40% interest. ( Id. ¶ 20.)

In correspondence with the New York Attorney General, the Foundation, through counsel, represented that the officers of the Partnership were Mohammad Hossein Behdadfar, Moshen Kakavand, and Peter Livingston, and that the directors were Behdadfar and Kakavand. ( Id. ¶¶ 43–44.) The Foundation also represented that the sole shareholder of Assa was Assa Co. Ltd., an entity organized under the laws of Jersey, Channel Islands, United Kingdom; that Assa Ltd.'s sole beneficial owners were Behdadfar and Kakavand; and that “there were no pre-existing arrangements or understandings between any director, officer or principal of Assa Corp. and the [Mostazafan] Foundation.” ( Id. ¶ 44.) Badr, the President of the Mostazafan Foundation, made similar representations in a verified petition filed in New York State Supreme Court for leave to transfer the Building to the Partnership. ( Id. ¶ 46.) And the Foundation, through counsel, represented to the Assistant Attorney General that “the formation of the Partnership represents an arms-length transaction between the Foundation and Assa Corp.” ( Id. ¶ 45.)

B. Assa Corp. and Bank Melli

The government alleges that these representations were false because contemporaneous correspondence and minutes of meetings of Bonyad Mostazafan officials show that Assa Corp. was actually controlled by Bank Melli. The government alleges that Behdadfar and Kakavand, officers and directors of the Partnership and the beneficial owners of Assa Co. Ltd., were, respectively, a Bank Melli board member and a manager of the London branch of Bank Melli. ( Id. ¶ 40.) The government quotes from meeting minutes and letters signed by Bonyad Mostazafan officials that describe the Partnership as the result of “the mutual agreement between the New York Foundation and Bank Melli Iran”; a “partnership agreement between the Mostazfan Foundation of New York and Bank Melli Iran”; and “agreements between the Ministry of Finance, Bank Melli Iran, and the Bonyad Mostazafan.” ( Id. ¶¶ 38–39.) These documents also state that “Assa Co., which belongs to Bank Melli, is the partner of the Mostazafan Foundation” and that the Bonyad Mostazafan “decided to form a company called Assa Channel Islands which would be financed by the bank and under direction of Mr. Behdadfar and Mr. Kakavand.” ( Id. ¶¶ 39–40.) The government alleges that Assa Co. Ltd., and thus Assa Corp., continue to be owned by two individual shareholders, Davood Shakeri and Fatemeh

[777 F.Supp.2d 537]

Aghamiri, who are Iranian citizens and representatives of Bank Melli. ( Id. ¶ 47.)

The sole employee of Assa Corp. in the United States from 1996 through late 2008 was Mohammad Hassan Dehghani Tafti, an Iranian citizen who allegedly obtained visas to enter and work in the United States under false pretenses. ( Id. ¶¶ 112–116.) The complaint quotes from e-mails sent by Tafti and received by Tafti from officials in the Overseas Network Supervisory Department (ONSD) of Bank Melli regarding Assa Corp. business. These e-mails reflect that Tafti requested information regarding Assa Corp.'s expenses, a possible sale of the Building, loan documentation, and financial statements from Bank Melli officials. ( Id. ¶ 117.) The e-mails also reflect that Tafti requested that Bank Melli officials change the residence of the Assa Co. Ltd. shareholders, Shaken and Aghamiri, to a country other than Iran. ( Id.)

The complaint also quotes telexes in which officials at the office of Bank Melli in New York and the ONSD discussed the possibility of transferring ownership of Assa Corp. from Assa Co. Ltd. to...

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29 practice notes
  • United States v. Kenner, No. 3-CR-607 (JFB) (AYS)
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • March 10, 2020
    ...property used to conceal or otherwise facilitate money laundering is also forfeitable" (citing In re 650 Fifth Ave. & Related Props. , 777 F. Supp. 2d 529, 563-64 (S.D.N.Y. 2011) )). While "the mere pooling or commingling of tainted and untainted funds in an account does not, without more, ......
  • In re 650 Fifth Ave., 08 Civ. 10934 (KBF)
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • April 18, 2014
    ...stay), reconsideration denied, No. 08 Civ. 10934 (RJH), 2012 WL 363118 (S.D.N.Y. Feb. 2, 2012); In re 650 Fifth Ave. & Related Props., 777 F. Supp. 2d 529 (S.D.N.Y. 2011) (denying a motion to dismiss the forfeiture action). 5. The Court made no binding findings of fact in that opinion, but ......
  • In re 650 Fifth Ave., 08 Civ. 10934 (KBF)
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • March 28, 2014
    ...stay), reconsideration denied, No. 08 Civ. 10934 (RJH), 2012 WL 363118 (S.D.N.Y. Feb. 2, 2012); In re 650 Fifth Ave. & Related Props., 777 F. Supp. 2d 529 (S.D.N.Y. 2011) (denying a motion to dismiss the forfeiture action). 5. The Court made no binding findings of fact in that opinion, but ......
  • United States v. Miller, Case No. 1:17–cr–213
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Eastern District of Virginia)
    • March 8, 2018
    ...laundered fraud proceeds were used to pay the companies' monthly lease and tax expenses); In re 650 Fifth Ave. and Related Props. , 777 F.Supp.2d 529, 564 (S.D.N.Y. 2011) ("[R]eal [p]roperty is involved in a money laundering offense if laundered funds are used ... to pay for improvements." ......
  • Request a trial to view additional results
29 cases
  • United States v. Kenner, No. 3-CR-607 (JFB) (AYS)
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • March 10, 2020
    ...property used to conceal or otherwise facilitate money laundering is also forfeitable" (citing In re 650 Fifth Ave. & Related Props. , 777 F. Supp. 2d 529, 563-64 (S.D.N.Y. 2011) )). While "the mere pooling or commingling of tainted and untainted funds in an account does not, without more, ......
  • In re 650 Fifth Ave., 08 Civ. 10934 (KBF)
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • April 18, 2014
    ...stay), reconsideration denied, No. 08 Civ. 10934 (RJH), 2012 WL 363118 (S.D.N.Y. Feb. 2, 2012); In re 650 Fifth Ave. & Related Props., 777 F. Supp. 2d 529 (S.D.N.Y. 2011) (denying a motion to dismiss the forfeiture action). 5. The Court made no binding findings of fact in that opinion, but ......
  • In re 650 Fifth Ave., 08 Civ. 10934 (KBF)
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • March 28, 2014
    ...stay), reconsideration denied, No. 08 Civ. 10934 (RJH), 2012 WL 363118 (S.D.N.Y. Feb. 2, 2012); In re 650 Fifth Ave. & Related Props., 777 F. Supp. 2d 529 (S.D.N.Y. 2011) (denying a motion to dismiss the forfeiture action). 5. The Court made no binding findings of fact in that opinion, but ......
  • United States v. Miller, Case No. 1:17–cr–213
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Eastern District of Virginia)
    • March 8, 2018
    ...laundered fraud proceeds were used to pay the companies' monthly lease and tax expenses); In re 650 Fifth Ave. and Related Props. , 777 F.Supp.2d 529, 564 (S.D.N.Y. 2011) ("[R]eal [p]roperty is involved in a money laundering offense if laundered funds are used ... to pay for improvements." ......
  • Request a trial to view additional results

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