United States v. $215, 587.22 in U.S. Currency

Decision Date30 March 2018
Docket NumberCase No.17–cv–00853(CRC)
Citation306 F.Supp.3d 213
CourtU.S. District Court — District of Columbia

Patricia Marie Sulzbach, Marina Carin Stevenson, Department of Justice, Criminal Division, Asset Forfeiture & Money Laundering Section, Washington, DC, for Plaintiff.


CHRISTOPHER R. COOPER, United States District Judge

This case turns on what it means to be a "money transmitting business." A federal statute, 18 U.S.C. § 1960, makes it a crime to operate one without a license. And the proceeds of a business operated in violation of that statute are subject to civil forfeiture. The government typically deploys these statutory authorities against non-bank financial institutions like wire remitters and currency exchangers. Rarely, if ever, have they been applied to ostensible nonfinancial professional-services firms that also transfer funds for clients. Until now, apparently.

The government alleges that Pennsylvania-based lobbyist Joseph Szlavik ran an unlicensed money transmitting business by accepting large sums of money from foreign clients—principally the President of Gabon, Ali Bongo, and his associates—and then, for a commission, transferring those funds from accounts he controlled to numerous recipients in the United States as directed by the clients. The underlying funds, the government suggests, are derived from official corruption on the part of President Bongo and his family. On the basis of these allegations, the government filed a verified complaint seeking forfeiture of $475,405.21 in seized funds that it contends are connected to Szlavik's business.

Mr. Szlavik and his wife have asserted claims to the money and now move to dismiss the government's complaint. The Szlaviks insist that Mr. Szlavik does not operate a money transmitting business but rather a government-affairs and public-relations "consultancy" which is beyond the reach of the money transmitting statute as a matter of law. But this argument rests more on semantics than substance. While Szlavik may offer bona fide professional services to his clients, the complete nature of his business activities remains disputed at this stage. The government's theory is that among the suite of services he has provided is money transmitting. And its complaint, while novel perhaps, contains sufficient allegations concerning the volume, frequency, and circumstances of Szlavik's money transfers to bring his purported activities within the broad ambit of the statute, regardless of what name one assigns them. The Court will therefore deny the Szlaviks' motion to dismiss and permit the case to proceed to discovery, where the factual record can be developed further.

I. Background

The government initiated this forfeiture action on May 9, 2017 by filing a verified complaint in rem against $475,405.21 in U.S. currency. Verified Compl. ("Compl.") ¶ 1. The Department of Homeland Security had seized these funds nearly four years earlier, in September 2013, upon a probable cause finding by a Magistrate Judge. Id. ¶ 3. The government seized the funds from nine separate bank accounts "held in the name of Joseph Szlavik" or, in the case of two of the accounts, in the name of businesses which he operated and controlled. Id. ¶¶ 2, passim . The complaint alleges that the funds in all nine accounts are proceeds of an unlicensed money transmitting business in violation of 18 U.S.C. § 1960 (b)(1)(A) and (B), and also property involved in a transaction with the proceeds of a specified unlawful activity in violation of 18 U.S.C. §§ 1956(c)(7)(A), 1956(a)(2)(A), and 1957. Id. ¶¶ 1, 97–108. Forfeiture is sought under 18 U.S.C. § 981(a)(1)(A) and (C). Id.

The government maintains that Mr. Szlavik operated an unlicensed money transmitting business between February 2010 and August 2013. Compl. ¶ 10. During this period, Szlavik allegedly received 19 wire transfers totaling $8.3 million into his accounts. Id. ¶ 27. These funds came mostly from various entities in Gabon, but he also received funds from entities in Switzerland and the United Arab Emirates as well. Id. In the same three-year period, the government recounts that Szlavik distributed more than $8.4 million, including 183 wire transfers of amounts greater than $1,000 to over 30 different individuals or entities and 134 checks for amounts greater than $1,000 to over 40 different vendors, individuals, and financial institutions. Id. ¶¶ 39–40. The complaint describes direct payments from Szlavik's accounts to a number of beneficiaries, including President Bongo's estranged wife. Id. ¶¶ 52–61. It also details payments to various companies and institutions including jewelers, a military academy, and an electrical equipment wholesaler. Id. ¶ 62.

Several of the alleged wire transfers contained references to invoices to be paid with the transferred funds, including fees for Szlavik himself. Id. ¶¶ 28, 32, 39. For instance, the complaint describes an email Szlavik sent in April 2013 requesting $363,340 for payments approved by President Bongo including travel expenses, legal expenses, dental expenses for "cadets" (presumably in the aforementioned military academy) and a $300,000 "consulting fee." A few weeks later, the primary bank account that Szlavik used for these transfers received a $363,340 deposit from an account in the name of the "Republic of Gabon." Id. ¶¶ 24, 29–31.

Finally, the complaint alleges that Szlavik "coordinated and participated in transferring large amounts of bulk cash currency into the United States." Id. ¶ 87. The government contends that Szlavik imported cash from Gabon to pay beneficiaries within the United States while retaining some of the cash as his "fee." Id. ¶¶ 91–92.

After the government filed its complaint, Szlavik and his wife Andrea (who has an interest in at least one of the accounts) filed a verified claim to the seized funds. They have now moved to dismiss the complaint.

II. Standard of Review

The pleading standard in a civil forfeiture action is governed by both the Federal Rules of Civil Procedure and the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions ("Supplemental Rules"). United States v. One Gulfstream G–V Jet Aircraft, 941 F.Supp.2d 1, 13 (D.D.C. 2013). Supplemental Rule G(2)(f) requires the government to "state sufficiently detailed facts to support a reasonable belief that [it] will be able to meet its burden of proof at trial." The Supplemental Rules provide a "more exacting" standard "than the liberal notice pleading standard contemplated by Federal Rule 8(a)(2)." Gulfstream, 941 F.Supp.2d at 14. Just as with a motion under Federal Rule 12(b), the government's factual allegations must be presumed true and liberally construed in its favor. United States v. $79,321, 522 F.Supp.2d 64, 68 (D.D.C. 2007).

III. Analysis

The government is seeking to recover the defendant funds under 18 U.S.C. § 981(a)(1)(A) and (C), which make property involved in or derived from violations of certain enumerated statutes subject to forfeiture. The government alleges underlying violations of four such statutes: 18 U.S.C. §§ 1960, 1956(c)(7)(A), 1956(a)(2)(A), and 1957. At bottom, however, the disposition of the Szlaviks' motion depends mainly on whether the government has adequately alleged that Mr. Szlavik's business meets 18 U.S.C. § 1960's definition of a "money transmitting business." So the Court will start there.

A. 18 U.S.C. § 1960

18 U.S.C § 1960 was enacted by Congress in 1990 "to combat the growing use of money transmitting businesses to transfer large amounts of monetary proceeds of unlawful enterprises." United States v. Velastegui, 199 F.3d 590, 593 (2d Cir. 1999) (citing S. Rep. No. 101–460, at 14 (1990), reprinted in 1990 U.S.C.C.A.N. 6645, 6658–59). It was amended to its current form in the USA PATRIOT Act of 2001. Pub. L. No. 107–56, 115 Stat. 272 (2001). Subsection (a) of the statute imposes criminal liability on anyone who "knowingly conducts, controls, manages, supervises, directs, or owns all or part of an unlicensed money transmitting business." 18 U.S.C. § 1960(a). Subsection (b) then provides that:

(1) the term "unlicensed money transmitting business" means a money transmitting business which affects interstate or foreign commerce in any manner or degree and—
(A) is operated without an appropriate money transmitting license in a State where such operation is punishable as a misdemeanor or a felony under State law, whether or not the defendant knew that the operation was required to be licensed or that the operation was so punishable;
(B) fails to comply with the money transmitting business registration requirements under section 5330 of title 31, United States Code, or regulations prescribed under such section; or
(C) otherwise involves the transportation or transmission of funds that are known to the defendant to have been derived from a criminal offense or are intended to be used to promote or support unlawful activity.
(2) the term "money transmitting" includes transferring funds on behalf of the public by any and all means including but not limited to transfers within this country or to locations abroad by wire, check, draft, facsimile, or courier; and
(3) the term "State" means any State of the United States, the District of Columbia, the Northern Mariana Islands, and any commonwealth, territory, or possession of the United States.

The government alleges that Szlavik operated an "unlicensed money transmitting business" as described under both subsection (b)(1)(A) and (b)(1)(B). (Subsection (b)(1)(C) is not in play). Each of these offenses has its own specific requirements that the Szlaviks argue have not been adequately pled. But, at the threshold, the Szlaviks contend that the government has failed to plead that Mr....

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