United States v. $1,071,251.44 of Funds Associated With Mingzheng Int'l Trading Ltd.

• Decision Date: 15 August 2018
• Docket Number: Civil Action No. 17-cv-1166 (KBJ)
• Citation: 324 F.Supp.3d 38
• Parties: UNITED STATES of America, Plaintiff, v. $1,071,251.44 OF FUNDS ASSOCIATED WITH MINGZHENG INTERNATIONAL TRADING LIMITED; $347,446.93 of Funds Associated with Mingzheng International Trading Limited; $42,632.00 of Funds Associated with Mingzheng International Trading Limited; $30,258.00 of Funds Associated with Mingzheng International Trading Limited; $253,638.25 of Funds Associated with Mingzheng International Trading Limited; and $157,749.07 of Funds Associated with Mingzheng International Trading Limited; Defendants.
• Court: U.S. District Court — District of Columbia

324 F.Supp.3d 38

UNITED STATES of America, Plaintiff,

v.$1,071,251.44 OF FUNDS ASSOCIATED WITH MINGZHENG INTERNATIONAL TRADING LIMITED; $347,446.93 of Funds Associated with Mingzheng International Trading Limited; $42,632.00 of Funds Associated with Mingzheng International Trading Limited; $30,258.00 of Funds Associated with Mingzheng International Trading Limited; $253,638.25 of Funds Associated with Mingzheng International Trading Limited; and $157,749.07 of Funds Associated with Mingzheng International Trading Limited; Defendants.

Civil Action No. 17-cv-1166 (KBJ)

United States District Court, District of Columbia.

Signed August 15, 2018

Brian P. Hudak, U.S. Attorney's Office, Zia Mustafa Faruqui, U.S. Attorney's Office for the District of Columbia, Washington, DC, for Plaintiff.

MEMORANDUM OPINION ADOPTING REPORT & RECOMMENDATION OF THE MAGISTRATE JUDGE

KETANJI BROWN JACKSON, United States District Judge

Plaintiff United States of America commenced this civil forfeiture action in remagainst $1,902,975.69 in illicit funds belonging to Mingzheng International Trading Limited ("Mingzheng")—a front company that existed to launder money on behalf of the Democratic People's Republic of Korea ("North Korea"). (SeeCompl., ECF No. 1, ¶¶ 1–2.) During the course of an investigation into Mingzheng's activities, the FBI identified the target funds as having passed through the U.S. financial system, in route to, or from, North Korea. (SeeAff. in Supp. of Pl.'s Mot. for Entry of Default J. & Order of Forfeiture, ECF No. 19-1, at 3.)¹ Eventually, these funds were frozen in accounts that Mingzheng maintained with six U.S. financial institutions, and the government commenced in remcivil forfeiture proceedings against the targeted funds.

To that effect, on June 14, 2017, Plaintiff filed a Verified Complaint for Forfeiture In Rem. (See generallyAm. Compl.) Mingzheng failed to respond, and at the government's request, the Clerk of the Court entered a default in this case. (SeeClerk's Entry of Default, ECF Nos. 9–14.) The government subsequently filed a motion for default judgment pursuant to Federal Rule of Civil Procedure 55(b), and requested that this Court order the forfeiture of the named funds. (See generallyPl.'s Mot. for Default J., ECF No. 15.) On February 2, 2018, this Court referred the government's motion to a Magistrate Judge, and the matter was randomly assigned to Magistrate Judge Michael Harvey. (SeeMinute Order of Feb. 1, 2018; Minute Entry of Feb. 1, 2018.) Magistrate Judge Harvey ordered two rounds of supplemental briefing from the government and held a hearing regarding the government's motion. Then, on June 29, 2018, Magistrate Judge Harvey issued a Report and Recommendation recommending that this Court grant the government's motion for default judgment and order that the $1,902,975.69 that associated with Mingzheng be forfeited. (SeeR. & R., ECF No. 20, at 2, 21.)²

In reaching that decision, Magistrate Judge Harvey found that the government satisfied both the substantive and procedural requirements for a default judgment, which stem from Federal Rule of Civil Procedure 55 and Supplemental Admiralty and Maritime Claims Rule G of the Federal Rules of Civil Procedure. (Seeid.at 6–19.) Starting with the procedural requirements, Magistrate Judge Harvey concluded that the government had provided more than adequate notice to the general public and the individual entities who had a known interest in the targeted funds. (See id.at 10–12.) See alsoFed. R. Civ. P. Supp. R. G(4) (requiring that such notice be provided). The government notified the public by posting a notice "for 30 consecutive days on the website www.forfeiture.gov[,]" and it further provided the three potential direct claimants with reasonable notice by contacting "law enforcement officials a t the U.S. embassies in these countries, and effect[ing] service consistent with each country's laws[.]" (R. & R. at 10.) As to the remaining procedural requirements, Magistrate Judge Harvey found that the government's complaint satisfied Supplemental Rule G(2)(a)–(e) because the complaint was "verified; identifie[d] the bases for jurisdiction and venue ...; describe[d] the property by identifying the specific amount of funds associated with Mingzheng held at each of six U.S. banks ...; and identifie[d] the provisions under which forfeiture is sought[.]" Id.at 12 (discussing Fed. R. Civ. P. Supp. R. G(2)(a)–(e).)

As to the substantive requirements, Magistrate Judge Harvey found that the government alleged ample facts in its complaint to establish a reasonable belief that the government could prove by a preponderance of the evidence that these funds were subject to civil in remforfeiture, as required by Fed. R. Civ. P. Supp. R. G(2)(f). (Seeid.at 8, 18–19.) The government's complaint notes that no person or entity may legally assist North Korea in accessing the U.S. financial system without a license from the federal government, pursuant to regulations issued under the International Emergency Economic Powers Act ("IEEPA"), 50 U.S.C. § 1701, et seq., and it alleges that Mingzheng had violated that prohibition with regard to the targeted funds. (SeeCompl. ¶¶ 32–35; 37–40.) Additionally, the complaint explains that Mingzheng also violated the federal money laundering statute (see id.¶¶ 1–2), which prohibits individuals from moving money within, to, or from the United States with the intent to promote a "specified unlawful activity[,]" 18 U.S.C. § 1956(a)(2)(A), such as a violation of the IEEPA, seeid.§ 1956(c)(7)(D). Either of these two alternative theories suffice to subject Mingzheng's illicit funds to civil forfeiture. See id.§ 981. (See alsoR. & R. at 6.)

After explaining these conclusions, Magistrate Judge Harvey informed the parties of their right to file written objections to specific portions of his report, and explained that such submissions must state the basis for any objection. The parties had 14 days after they received the Magistrate Judge's Report and Recommendation to file any such objections, seeLCvR 72.3(b), but no objections were submitted.

Given all of the above and after reviewing Magistrate Judge Harvey's report, this Court agrees with the Report and Recommendation's thorough analysis and conclusions. The Court will therefore ADOPTthe Report and Recommendation in its entirety. Accordingly, Plaintiff's Motion for Default Judgment will be GRANTEDand an order of forfeiture against Mingzheng totaling $1,902,975.69 will issue.

A separate Order consistent with these conclusions will accompany this Memorandum Opinion.

REPORT AND RECOMMENDATION

G. MICHAEL HARVEY, UNITED STATES MAGISTRATE JUDGE

Plaintiff United States of America ("Plaintiff" or "the government") brought this civil forfeiture action in rem against funds totaling $1,902,975.69 ("Defendant Funds") associated with Mingzheng International Trading Limited ("Mingzheng"), which are currently held in blocked funds accounts at six U.S. financial institutions. Plaintiff has now filed a Motion for Default Judgment pursuant to Rule 55(b) of the Federal Rules of Civil Procedure 55(b), 18 U.S.C. § 983(a)(4)(A), and Rule G of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions (the "Supplemental Rules"). The motion was referred to the undersigned for a Report and Recommendation on February 1, 2018, and, after two rounds of supplemental briefing and an oral argument, is ripe for resolution.¹ For the reasons set forth below, the undersigned recommends granting Plaintiff's Motion and issuing an order of forfeiture against the Defendant Funds totaling $1,902,975.69.

I. STATUTORY FRAMEWORK AND BACKGROUND

On June 14, 2017, the government filed a Verified Complaint for Forfeiture In Rem (the "Complaint") against Defendant Funds totaling $1,902,975.69 associated with Mingzheng in connection with an alleged scheme to launder U.S. dollars on behalf of sanctioned entities in the Democratic People's Republic of Korea, commonly known as North Korea. [Dkt. 1]. This action arises from a FBI investigation of Mingzheng, a company incorporated in Hong Kong, for violations of the International Emergency Economic Powers Act (the "IEEPA"), 50 U.S.C. § 1701 et seq. , among other statutes. Id. , ¶ 1.

The IEEPA grants the President of the United States authority to regulate "any unusual and extraordinary threat," originating in whole or in substantial part outside of the U.S., to the national security, foreign policy, or economy of the United States. 50 U.S.C. § 1701 ; [Dkt. 1, ¶ 1]. The authority is expansive, and includes the power to investigate, regulate, or prohibit payments "between, by, through, or to any banking institution" to the extent that they involve an interest of any foreign country or national, and to prohibit transactions involving any property in which a foreign country or national has an interest. 50 U.S.C; § 1702; [Dkt. 1, ¶ 1]. Pursuant to Executive Order 13382 and the regulations implementing it, 31 C.F.R. § 544.101 et seq. , no U.S. person may provide financial or other services to a person or entity listed as a "Specially Designated National," or "SDN," except as authorized or licensed by the Treasury Department's Office of Foreign Asset Controls ("OFAC"); nor may a non-U.S. person "cause the provision of financial or other services by a U.S. person for the benefit" of a SDN without the permission of OFAC. [Dkt. 1, ¶¶ 8–9 (citing 31 C.F.R. § 544.405, 50 U.S.C. § 1705 ) ]. Violation of those provisions is a crime pursuant to 50 U.S.C. § 1705, and 18 U.S.C. § 371 criminalizes conspiracy to violate the IEEPA. Id. , ¶ 6.U.S. financial institutions must comply with OFAC's sanctions programs, as well as with anti-money laundering requirements set forth in the Bank Secrecy Act, a statute administered by the Financial Crimes Enforcement Network ("FinCEN"). Id. , ¶ 11. These anti-money laundering requirements include measures focused on regulating foreign financial institutions...