United States v. 8 Drift St.
| Decision Date | 20 February 2020 |
| Docket Number | Civil Action No.: 14-cv-03587 (PGS) |
| Parties | UNITED STATES OF AMERICA, Plaintiff, v. REAL PROPERTY LOCATED AT 8 DRIFT STREET, NEW BRUNSWICK, NEW JERSEY, et al., Defendant. |
| Court | U.S. District Court — District of New Jersey |
This matter comes before the Court on a motion for a pretrial order filed by Claimants Gengwu Qui ("Gengwu"), 52 BD, Inc. ("52 BD"), and TravelHome 1405, LLC ("TravelHome") (collectively, "Claimants") and on a cross-motion for summary judgment filed by Plaintiff United States of America ("Plaintiff" or the "Government"). This is a civil action in rem for the forfeiture of certain real and personal property pursuant to 18 U.S.C. § 981(a)(1)(A) and (a)(1)(C). Claimants are seeking a pretrial order clarifying the scope of the Stipulation and Consent Order of Civil Forfeiture filed in this matter on May 27, 2016 (the "Consent Order") (ECF No. 68). (ECF No. 99). The Government opposes Claimants' motion for a pretrial order and cross moves for summary judgment. (ECF No. 107). The Court has jurisdiction over this forfeiture action commenced by the Government under 28 U.S.C. § 1345; and over this action for forfeiture under 28 U.S.C. § 1355(a).
The Government seeks forfeiture of certain real property and currency from three bank accounts, which are alleged to be the unlawful proceeds traceable to the transportation, transmittal, or transfer of money from China to the United States by Gengmin Qui ("Gengmin"), that he knew was stolen, converted, or taken by fraud, in violation of criminal law provisions 18 U.S.C. §§ 2314, 1956, and 1957.
Gengwu, 52 BD, and TravelHome filed verified claims in this matter asserting an interest in the property at issue. (See ECF Nos. 14, 16, 22). Specifically, Claimant Gengwu, the brother of Gengmin, asserts an interest in the real property located at 1405 South Ocean Boulevard, Myrtle Beach, South Carolina (the "Myrtle Beach Property"), and in the currency in the following bank accounts: (1) Cathay Bank account number 665931796, held in the name of 52 BD ("52 BD 1796"); (2) Cathay Bank account number 675981237, held in the name of Gengwu Qiu ("Gengwu 1237"); and (3) Cathay Bank account number 665934436, held in the name of Gengwu Qiu ("Gengwu 4436"). (Verified Claim of Gengwu Qiu ("Gengwu Claim") ¶¶ 2-5, ECF No. 14). Claimant 52 BD, through Gengwu, the sole owner since September 5, 2011, asserts an interest in the currency seized from the 52 BD 1796 account. (Verified Claim of 52 BD, Inc. ("52 BD Claim") ¶¶ 2-3, ECF No. 16). Claimant TravelHome, through Judy Tang, a member and the manager of TravelHome, asserts an interest in the Myrtle Beach Property as the legal and record owner of the real property. (Verified Claim of TravelHome 1405, LLC ("TravelHome Claim") ¶¶ 2-3, ECF No. 22). The property interests described in this paragraph are referred to in this memorandum as the "defendant properties."
As stated above, the Government asserts that the defendant properties are subject to forfeiture because they are proceeds traceable to Gengmin's alleged criminal activity. (See generally Complaint, ECF No. 1). In this case, the vast majority of material facts are in dispute.1(See generally Responses of Claimants Gengwu Qui, 52 BD Inc., and TravelHome 1405, LLC to Plaintiff's Statement of Material Facts, ECF No. 110-1). According to the Government, the criminal activity occurred in connection with Gengmin's collection and disbursement of a value added tax ("VAT") refund that was imposed by the Government of China.
Evidently, I.M. Skaugen ("Skaugen"), a Norwegian company, contracted with Taizhou Wuzhou Shipbuilding Industry Co., Ltd. ("Wuzhou") to build three ships for Skaugen. (Government's Statement of Material Facts Pursuant to Local Civil Rule 56.1 ("Govt's SMF") ¶ 1, ECF No. 107-2). Certain material and equipment used in the construction of the ships were subject to VAT. (See id. ¶ 2). Under the contract, Skaugen was entitled to receive a portion of the VAT refund that resulted from the material and equipment purchased to build the ships. (See Second Declaration of Peter W. Gaeta, Ex. B, Ship Building Contract, Article 1.4 at QIU-00400600, ECF No. 107-5).
Since the Chinese government does not assess VAT on goods that are exported, it reimburses VAT to sellers in the supply chain that have already paid into the VAT once it recovers proof that the goods were exported. (Compl. ¶ 14; Govt's SMF ¶ 2). A business practice in China is to retain an import/export broker: to apply for a VAT reimbursement; and to subsequently transfer the VAT refund to the appropriate party. In this case, Skaugen and Wuzhou contracted with Zheijang Changda Import and Export Co., Ltd. ("Changda") to act as broker. (Govt's SMF ¶¶ 1, 3). Changda is controlled by Gengmin. (Id. ¶ 1). Changda's responsibilities as broker allegedly included, inter alia, the accounting for the inventory of materials subject to the VAT. (Id. ¶ 2). This type of accounting is generally maintained in a ledger format known as a "redbook." (Id.). Once a ship was constructed and exported, Changda was contractually bound to apply for a reimbursement of VAT, which was to be reimbursed bythe Chinese government directly to the broker (i.e., Changda). (See id.). Changda was then responsible for distributing the refund to the appropriate party under the contract (i.e., Skaugen). (See Ship Building Contract, Article 1.4).
Upon the completion and delivery of the first ship to Skaugen in March 2009, Changda sought and obtained from the Chinese government a VAT reimbursement of approximately $4 million. (Govt's SMF ¶ 8). Per the contract, Changda made a disbursement of the VAT refund to Skaugen. (Id. ¶ 9). It is undisputed that Changda complied with all requirements as the import/export broker concerning the delivery of the first ship and made the appropriate transfers of the VAT refund. (Id.).
In October 2009, the second ship was delivered to Skaugen; however, Changda never remitted any portion of the VAT refund to Skaugen. (Compl. ¶¶ 18, 23).2 On or about January 25, 2010, the VAT refund of approximately $3.7 million was transferred from the Government of China to an account at the Agricultural Bank of China ("ABC") in Changda's name. (Govt's SMF ¶ 21). In February 2010, Gengmin, as principal of Changda, transferred approximately $1.7 million to a bank account in the United states held in the name of BD Global Corp. ("BD Global"), a company formed by Gengmin ("BD Global 6099"). (Id. ¶ 23). Subsequently, the monies were completely transferred out of the BD Global 6099 account; and then transferred among several bank accounts in the United States and used to purchase the Myrtle Beach Property described above, inter alia. (See Compl. ¶¶ 25, 28-66).
Gengwu and Chun Yan, the brother and sister of Gengmin, contend that none of their assets can be traced to the funds that Gengmin allegedly acquired by fraud. It is undisputed that in November 2008, Gengmin transferred all of his interest in Taizhou City Bid Da Industrial Trading Co., Ltd. ("Bi Da") to Gengwu and Chun Yan. (Govt's SMF ¶ 7). On or about June 8, 2011, Gengwu and Chun Yan sold Bi Da for $2.3 million. (Id. ¶ 33). Through a series of transactions, these funds were transferred from China to the United States via Dubai, United Arab Emirates. (Id.). It is undisputed that the funds were deposited into a business checking account ending in 6610 held by East International, Inc. ("East International 6610"), a company incorporated by Gengmin with an address in South River, New Jersey. (Id. ¶¶ 29, 33). It is undisputed that between June and July 2011, approximately $2,555,850 was received into the East International account from an account of Green Stem Trading LLC located in Dubai. (Id. ¶¶ 34, 35). Subsequently, the monies were allegedly transferred to the accounts of either Gengmin or Gengwu, or companies they controlled, and used to purchase real and personal property in the United States. .
In opposition, Claimants contend that there are three "principal disputes of fact" arising from the Government's Statement of Material Facts:
(Claimants' Opp. Br. at 4, ECF No. 110). In addition, to rebut the Government's Statement of Material Facts, Claimants filed the Declaration of Claimant Gengwu Qui ("Gengwu Decl."). Among other things, the Gengwu Declaration states that Gengwu "was not involved in any wayin the sale of the ships or the application for the refund"; he never "had an interest in Changda"; and "no portion of the VAT refund was transferred to Gengwu or to any company controlled by Gengwu." (Gengwu Decl. ¶¶ 23, 24, ECF No. 110).
On July 17, 2014, a federal grand jury returned a 38-count criminal indictment charging Gengmin with conspiring to transport stolen property across state lines, with interstate transportation of stolen property, with conspiring to launder money and engage in transactions in criminally derived property, and with engaging in monetary transactions in criminally derived property. United States of America v. Gengmin Qiu, 14-cr-401 (PGS), ECF No. 21. However, on May 26, 2016, Gengmin pled guilty to only a one-count superseding information that charged him with criminal contempt in violation of 18 U.S.C. §§ 402 and 2. Id., ECF No. 143.
Summary judgment is appropriate under Federal Rule of Civil Procedure 56(c) when the moving party demonstrates that there is no genuine issue of material fact and the evidence establishes the moving party's entitlement to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S....
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