United States v. All Right to & Interest in PNC Corp. Plaza Holdings, 20-cv-23278-GAYLES/GOODMAN

• Court: United States District Courts. 11th Circuit. United States District Courts. 11th Circuit. Southern District of Florida
• Parties: UNITED STATES OF AMERICA, Plaintiff, v. ALL RIGHT TO AND INTEREST IN PNC CORPORATE PLAZA HOLDINGS LLC HELD, CONTROLLED, OR ACQUIRED, DIRECTLY OR INDIRECTLY, BY OPTIMA CBD INVESTMENTS LLC AND/OR CBD 500 LLC, INCLUDING ANY INTEREST HELD IN OR SECURED BY THE REAL PROPERTY AND APPURTENANCES LOCATED AT 500 WEST JEFFERSON STREET, LOUSIVILLE, KY 40202, et al., Defendants.
• Docket Number: 20-cv-23278-GAYLES/GOODMAN
• Decision Date: 03 January 2023

UNITED STATES OF AMERICA, Plaintiff,
v.
ALL RIGHT TO AND INTEREST IN PNC CORPORATE PLAZA HOLDINGS LLC HELD, CONTROLLED, OR ACQUIRED, DIRECTLY OR INDIRECTLY, BY OPTIMA CBD INVESTMENTS LLC AND/OR CBD 500 LLC, INCLUDING ANY INTEREST HELD IN OR SECURED BY THE REAL PROPERTY AND APPURTENANCES LOCATED AT 500 WEST JEFFERSON STREET, LOUSIVILLE, KY 40202, et al., Defendants.

No. 20-cv-23278-GAYLES/GOODMAN

United States District Court, S.D. Florida, Miami Division

January 3, 2023

REPORT AND RECOMMENDATIONS ON CLAIMANTS' MOTION TO DISMISS (OR ABSTAIN FROM) GOVERNMENT'S VERIFIED CIVIL FORFEITURE COMPLAINT

JONATHAN GOODMAN UNITED STATES MAGISTRATE JUDGE

The Claimants in this in rem civil forfeiture action have asked this Court to dismiss the Verified Complaint filed by the United States (or to abstain from proceeding with the lawsuit) because, they say: (1) the doctrine of international comity requires abstention; and (2) the Verified Complaint fails to state a claim. In their motion [ECF No. 78], Claimants (Mordechai Korf, Uriel Laber, Optima CBD Investments LLC, and CBD 500, LLC) note that the purported fraud outlined in the Verified Complaint occurred in

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Ukraine -- but then emphasize that Ukrainian courts have now issued post-filing decisions finding the purportedly questionable loans at issue to be valid.^[1] Because these judicial decisions refute the allegations in the Verified Complaint, Claimants argue, international comity mandates dismissal or abstention.

In related arguments, Claimants say that “fairness” considerations justify abstention, which they contend would also promote the efficient use of scarce judicial resources.

Claimants also attack the substance of the Verified Complaint, arguing that it did not sufficiently trace the funds used to purchase the real estate at issue to the specified unlawful activity in Ukraine. They also say that (1) the Verified Complaint ignores that the real estate was repurchased in 2018 with funds the United States does not allege were tainted; (2) the United States failed to identify a cognizable in rem defendant; and (3) the claims are time-barred under the one-year statute of limitations for forfeiture claims.

For the reasons outlined below, the Undersigned respectfully recommends that United States District Judge Darrin P. Gayles deny the motion in part and grant the motion in part.^[2]

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By way of summary, though, the Undersigned acknowledges that the parties spent a substantial amount of their legal arguments on the international comity theory. But the Undersigned concludes that international comity principles do not compel dismissal here, where the United States itself is the plaintiff and has already determined that pursuing this lawsuit is in the national interest and would not jeopardize our country's relationship with Ukraine.

Moreover, the issue of whether the United States named the correct property to be forfeited generates problematic issues which justify a dismissal, though without prejudice, to give the United States an opportunity to file an amended complaint.

This issue involves some odd and arguably inconsistent steps by the United States. This includes a written representation in this case that the sale was a private transaction “without the involvement of the United States” -- even though government counsel (1) approved in writing (through his signature) the closing statement; (2) reviewed emails between attorneys for the buyer, seller, and lender; and (3) directed the participants not to use certain proceeds to pay attorney's fees and to change language in the closing statement.

Contrary to Claimants' argument [ECF No. 155, p. 3], the United States itself did not sell the real estate, nor did the Court. Instead, the sale of real estate was conducted by

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private parties after the United States obtained an Order permitting the consummation of a purchase and sale agreement for real estate which was entered into before the forfeiture complaint was filed. The proceeds of that sale are now held in escrow.

So the United States was surely involved in the interlocutory sale, but not as a seller or buyer or custodian. But the named in rem Defendant appears to be an unavailable defendant in this civil forfeiture lawsuit. More on this later.

However, the Undersigned also finds that one of the other arguments raised by Claimants -- whether the United States has adequately established a substantial enough connection between the property and the offense -- appears to have some merit but I conclude that the issue is best handled at a later stage, after the United States files an amended complaint naming a different in rem defendant.

Procedural and Factual Background

The United States filed [ECF No. 1] its Verified Complaint for Forfeiture in Rem on August 6, 2020. Verified by an FBI Special Agent, the lawsuit at issue was designated as Case No. 20-cv-23279 and assigned to United States District Judge Robert N. Scola, Jr. but was then transferred [ECF No. 23] to United States District Judge Marcia G. Cooke, who had an earlier-filed action (No. 20-cv-23278) involving similar facts and issues. The two cases were consolidated with another civil forfeiture action (No. 20-cv-25313) and the two higher-numbered actions were administratively closed. [ECF No. 49]. As of the February 24, 2021 consolidation, all future filings were to be made only in 20-cv-23278.

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Claimants filed their motion to dismiss [ECF No. 78] on May 24, 2021. The United States filed its substantive response to the motion on April 8, 2022. [ECF No. 119]. Judge Cooke recused herself and the case was reassigned to Judge Gayles on April 25, 2022. [ECF No. 125]. Claimants filed their reply on April 25, 2022 [ECF No. 12] and Judge Gayles referred the dismissal motion to me on May 25, 2022. [ECF No. 132].

The Undersigned held a three-hour hearing on July 8, 2022 [ECF No. 142] and issued a post-hearing Order requiring additional briefing on myriad topics [ECF No. 143]. Over the course of the next month and a half, the parties filed numerous submissions in compliance with the Order for additional memoranda [ECF Nos. 146-156]. The most-recent submissions are the Government's September 7, 2022 Supplemental Response [ECF No. 161] and Claimants' September 14, 2022 Supplemental Response [ECF No. 162].

The Verified Complaint, which includes a jury trial demand, concerns real property in Louisville, Kentucky (i.e., a building known as PNC Plaza, located at 500 West Jefferson Street).

Government Summary of the Complaint (from its opposition to the dismissal motion)

The Verified Complaint is lengthy (44 pages) and factually complex, so the Undersigned deems it appropriate to use the Government's summary of its own lawsuit. The summary is found at pages 2-3 of ECF No. 119:

The United States seeks to forfeit all right to and interest in PNC Corporate Plaza Holdings LLC held, controlled, or acquired, directly or indirectly, by Optima CBD

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Investments LLC and CBD 500 LLC (the “Defendant Asset”). Complaint, [ECF No. 1, ¶ 3]. The United States seeks forfeiture of the Defendant Asset pursuant to: (1) 18 U.S.C. § 981(a)(1)(C), because it is traceable to violations of United States law and specified unlawful activity, including violations of 18 U.S.C. §§ 1956, 1957, 2314, and 2315; and (2) 18 U.S.C. § 981(a)(1)(A), because it was involved in and facilitated one or more money laundering offenses in violation of 18 U.S.C. §§ 1956 and 1957. Id. ¶¶ 4-6.

Ihor Kolomoisky and Gennadiy Boholiubov used their ownership and control of PrivatBank to misappropriate more than $5 billion from the bank via fraudulent loans. Id. ¶ 17. They then laundered the loan proceeds through a vast network of accounts at PrivatBank's Cyprus branch in a series of transactions designed to disguise the nature, source, ownership, and control of the funds. Id. ¶ 19. The funds were then transferred to the United States for the purchase of assets, safekeeping, and further laundering. Id. ¶¶ 20-21.

Concerning PNC Plaza, Kolomoisky and Boholiubov obtained two lines of credit to companies owned by them, including: (1) Loan No. 4Z10330D for $9,300,000 to Zaporozhye Ferroalloy Plant (“ZFZ”), a metal processing plant, purportedly for the purpose of funding the ferroalloy production operations of that company; and (2) Loan No. 4N11415D for $13,500,000 to Nikopol Ferroalloy Plant (“NZF”), also a metal processing plant, for the same purported purpose of funding its ferroalloy production operations. Id. ¶¶ 108-24. The loan applications were submitted and approved, and the

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funds disbursed to ZFZ's and NZF's respective accounts, just two weeks after Optima CBD Investments LLC made the initial deposit to purchase PNC Plaza, in the case of the loan to ZFZ, and only ten days before Optima acquired the property, in the case of the loan to NZF. Id. ¶¶ 108, 116.

Kolomoisky and Boholiubov laundered the fraudulent loan proceeds by transferring a portion of the funds from NZF and ZFZ's accounts through a convoluted web of related business entities that they controlled. Id. ¶¶ 125-32. Eventually, the funds were transferred to companies in the United States that were established by their associates Mordechai Korf and Uriel Laber. Id.

Korf and Laber used those entities to further launder the misappropriated PrivatBank funds by acquiring properties and businesses in the United States, including PNC Plaza in 2011. Id. ¶¶ 126-29. In 2016, PrivatBank was nationalized amidst staggering losses exceeding $5 billion. Id. ¶ 11.

Claimants' Description of the Complaint (from their motion to dismiss)

Claimants' view of the Verified Complaint emphasizes the Ukraine-focused nature of the allegations and notes that the United States does not make certain allegations. Their summary (provided below) is from pages 3-5 of their dismissal motion:

The lynchpin of every allegation of misconduct in...