In re Seizure & Search of the Motor Yacht Tango
| Decision Date | 04 April 2022 |
| Docket Number | 22-SZ-5 |
| Citation | 597 F.Supp.3d 149 |
| Parties | In the MATTER OF the SEIZURE AND SEARCH OF the MOTOR YACHT TANGO, With International Maritime Organization Number 1010703 |
| Court | U.S. District Court — District of Columbia |
Karen Patricia Seifert, U.S. Attorney's Office for the District of Columbia, Washington, DC, for USA.
On March 25, 2022, the government submitted an Application for a Seizure Warrant ("Application") to seize the Motor Yacht (M/Y) Tango (the "Target Property") in the port of Palma de Mallorca. See ECF No. 1 (Application for Seizure Warrant and Accompanying Documents) ("Warrant"). This Court, having reviewed the Application and accompanying Affidavit in Support ("Affidavit"), found that there was probable cause to believe the Target Property was subject to forfeiture under 18 U.S.C. § 981(a) and § 982(a) and GRANTED the Application.1
Pursuant to the International Emergency Economic Powers Act ("IEEPA"), 50 U.S.C. § 1701 et seq. , National Emergencies Act, 50 U.S.C. §§ 1601 et seq. , the President of the United States has authorized various sanctions to respond to the threats posed to the stability and sovereignty of Ukraine. See Affidavit ¶ 8. The Bank Secrecy Act, 31 U.S.C. § 5311 et seq. , requires U.S. financial institutions to take anti-money laundering measures to ensure that correspondent bank accounts established by foreign financial institutions are not used to avoid such sanctions programs. See id. ¶ 19. Willfully circumventing of these sanctions, or causing others to do so, is a criminal violation of IEEPA ( 50 U.S.C. § 1705 ), see, e.g. , United States v. Zarrab , No. 15-cr-867, 2016 WL 6820737, at *9 (S.D.N.Y. Oct. 17, 2016), and deceiving banks which are trying to enforce such sanction programs is bank fraud ( 18 U.S.C. § 1344 ), see, e.g. , Matter of Search of Multiple Email Accts. Pursuant to 18 U.S.C. § 2703 for Investigation of Violation of 18 U.S.C. § 1956 , No. 20-SC-3310, 585 F.Supp.3d 1, 14–15 (D.D.C. Feb. 8, 2022). The laundering of the funds involved in either such transactions is a money laundering violation ( 18 U.S.C. § 1956 ). See generally id. at 9.
Certain categories of property related to violations of these law are subject to criminal and civil forfeiture. See generally Stefan D. Cassella, Asset Forfeiture Law in the United States (2d ed. 2013). 18 U.S.C. § 981(a)(1)(B) provides for civil forfeiture of property that constitutes "proceeds traceable" to a specified unlawful activity (as defined in 18 U.S.C. § 1956(c)(7)(D) ), which includes bank fraud and violations of IEEPA. 18 U.S.C. § 982(a) and 28 U.S.C. § 2461(c) provide for criminal forfeiture for the same violations. The civil and criminal money laundering forfeiture provisions extend beyond the proceeds of the crime to include property "involved in" the scheme. See 18 U.S.C. §§ 981(a)(1)(A) and 982(a)(1). These latter provisions are broader because "money laundering largely depends upon the use of legitimate monies to advance or facilitate the scheme." United States v. Bikundi , 926 F.3d 761, 793 (D.C. Cir. 2019) (quoting United States v. Puche , 350 F.3d 1137, 1153 (11th Cir. 2003) ).
The government has established probable cause to believe that the Target Property, a 255-foot luxury yacht, is owned by sanctioned Russian oligarch Viktor Vekselberg. See Affidavit ¶ 34. The U.S. Treasury Department, Office of Foreign Assets Control (OFAC), which is located in Washington, D.C., designated Vekselberg as part of U.S. sanctions on Russia. See id. The government has further established probable cause to believe Vekselberg structured transactions involving the Target Property to conceal his identity, including through the use of shell companies, as part of a scheme to violate IEEPA and the bank fraud statute, both of which were part of a related international promotional money laundering scheme. See Affidavit ¶¶ 55, 62. These transactions are subject to U.S. jurisdiction as they passed through the United States while the correspondent banks processed the transactions. See Affidavit ¶ 44. The affidavit finally establishes jurisdiction over the Target Property by demonstrating by probable cause that the Target Property is proceeds of the IEEPA and bank fraud violation and is property involved in the money laundering violations. See Affidavit ¶¶ 53, 63. Thus, the Target Property is subject to forfeiture under 18 U.S.C. §§ 981(a) and 982(a).
But the inquiry does not end there. The "Court must have venue to issue a [seizure] warrant." Investigation of Violation of 18 U.S.C. § 1956 , 585 F.Supp.3d at 9. That is, there must be "reason to believe" that the property subject to forfeiture is located within the district or a place Congress has empowered the court to act. See United States v. Thorne , 548 F. Supp. 3d 70, 126 (D.D.C. 2021), as corrected (July 16, 2021). Specifically, Congress empowered the District Court for the District of Columbia to seize property located in a foreign country. See 28 U.S.C. § 1355(b)(2).2 Thus, this Court has jurisdiction and venue to issue a seizure warrant for the overseas Target Property pursuant to 18 U.S.C. §§ 981(b)(3) and 982(b)(1), and 21 U.S.C. § 853(f).3
The Government initially requested authority to search the documents, electronics, and items located in the Target Property. The Court rejected this request as it does not have venue to issue a search warrant for property held at a foreign port under Rule 41 of the Federal Rules of Criminal Procedure.4 And no other statutory basis exists for such extraterritorial authority. However, the Government may choose to bring copies of the contents of these items to a location where this Court has venue, including within the District of Columbia, see Rule 41(b)(1), any U.S. territory, see Rule 41(b)(5)(A), or a U.S. embassy or consulate abroad, see Rule 41(b)(5)(B).
Yet, no warrant to search is needed here and seeking a search warrant for the sake of a warrant is questionable. See Matter of Search of Encrypted Data , No. 20-SW-321, 2021 WL 2100997, at *3 (). Generally speaking, a person must have a reasonable expectation of privacy for the Fourth Amendment to apply and for a search warrant to be required. See Katz v. United States , 389 U.S. 347, 360, 88 S.Ct. 507, 19 L.Ed.2d 576 (1967) (Harlan, J., concurring). The Fourth Amendment does not apply to the search and seizure of property owned by a nonresident alien located in a foreign country. See United States v. Verdugo-Urquidez , 494 U.S. 259, 259, 110 S.Ct. 1056, 108 L.Ed.2d 222 (1990). As such, Vekselberg, a foreign national, lacks a reasonable expectation of privacy in the Target Property. See id. ; United States v. Loera , 333 F. Supp. 3d 172, 182 (E.D.N.Y. 2018), aff'd sub nom. United States v. Guzman Loera , 24 F.4th 144 (2d Cir. 2022) ().
Forfeitures are punitive, and thus the Excessive Fines Clause of the Eighth Amendment limits the Government's forfeiture power. See Austin v. United States , 509 U.S. 602, 609–10, 113 S.Ct. 2801, 125 L.Ed.2d 488 (1993). A forfeiture violates the Excessive Fines Clause only "if it is grossly disproportional to the gravity of a defendant's offense." United States v. Bajakajian , 524 U.S. 321, 334, 118 S.Ct. 2028, 141 L.Ed.2d 314 (1998).5 However, any Excessive Fines challenges at this stage are premature as Eighth Amendment issues are not ripe until after a court enters a civil or criminal forfeiture order. See, e.g. , United States v. Sum of $70,990,605 , 4 F. Supp. 3d 189, 207-208 (D.D.C. 2014) ; In the Matter of the Search of One Address in Washington, D.C., Under Rule 41 , 512 F. Supp. 3d 23, 30 n.12 (D.D.C. 2021).
Even if an Eighth Amendment challenge was ripe now, it utterly fails. Courts considering whether a forfeiture is "grossly disproportional" under Bajakajian consider several factors—and while circuits differ in precisely which factors they use, all consider the nature of the harm caused by the wrongdoer's conduct. See, e.g. , United States v. Suarez , 966 F.3d 376, 385 (5th Cir. 2020) ; Bikundi , 926 F.3d at 795 ; United States v. Malewicka , 664 F.3d 1099, 1104 (7th Cir. 2011). In money laundering and bank fraud cases, the court must consider the harm to society in general. See United States v. Waked Hatum , 969 F.3d 1156, 1169 (11th Cir. 2020), cert. denied sub nom. Hatum v. United States , ––– U.S. ––––, 142 S. Ct. 72, 211 L. Ed. 2d 12 (2021). Society suffers "when criminally derived funds are laundered to allow the criminal unfettered, unashamed and camouflaged access to the fruits of those ill-gotten gains." Waked Hatum , 969 F.3d at 1169 ; United States v. O'Kane , 155 F.3d 969, 972–73 (8th Cir. 1998). As sanctions protect national security, violations of IEEPA require a broader consideration of the harm to U.S. national security interests. Indeed, "there is a compelling governmental interest in maintaining national security and public safety" via IEEPA and the related sanctions regime. United States v. Islamic Am. Relief Agency , No. 07-cr-087, 2009 WL 4016478, at *3 (W.D. Mo. Nov. 18, 2009) (citing Haig v. Agee , 453 U.S. 280, 307, 101 S.Ct. 2766, 69 L.Ed.2d 640 (1981) ) ("Protection of the foreign policy of the United States is a governmental interest of great importance, since foreign policy and national security considerations cannot neatly be compartmentalized.").
The harm to society here is acute. The laundered funds structured around the Target Property are part of a pattern of corruption used to circumvent U.S. sanctions. Vekselberg is a Russian Oligarch whom OFAC has sanctioned initially in response to Russia's annexation of Crimea and the threat posed to...
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