United States v. Aventura Techs.
| Decision Date | 14 June 2022 |
| Docket Number | 19-CR-0582(DRH)(ARL) |
| Parties | UNITED STATES OF AMERICA, v. AVENTURA TECHNOLOGIES, INC., et al., Defendants. |
| Court | U.S. District Court — Eastern District of New York |
APPEARANCES ON THE MOTION:
For the Government:Breon Peace United States Attorney
By Alexander F. Mindlin, A.U.S.A. Ian C. Richardson, A.U.S.A Claire S. Kedeshian, A.U.S.A. Kayla C. Bensing, A.U.S.A.
For the Defendant Aventura Technologies, Inc.: Samuel M Braverman, Esq. Fasulo Braverman & Di Maggio, LLP
Pending before the Court are the objections filed by Aventura Technologies, Inc. ("Defendant" or "Aventura") to the Report and Recommendations of Magistrate Judge Arlene R. Lindsay dated March 10, 2022 (DE 242)(the "R&R").
By complaint dated November 6, 2019, Aventura was charged with unlawful importation, a money laundering conspiracy, and two counts of conspiracy to commit mail and wire fraud. In the same complaint, seven of its corporate employees stand accused with various combinations of the same offenses.
The gravamen of the complaint is that Defendant sold merchandise for well over a decade, both domestically and abroad, falsely claiming that the products were American-made and by a woman-owned business, when in fact not all of the subject goods were made in this country and the operation was not controlled by its purported owner, defendant Frances Cabasso, but rather by her spouse and co-defendant, Jack Cabasso. It is also alleged that millions of dollars were diverted from corporate coffers to the personal use of the Cabassos.
On November 6, 2019, i.e., the same date as the complaint, Magistrate Judge Vera M. Scanlon found probable cause to believe that many assets held by the multiple defendants -including two bank accounts held by Aventura totaling $1, 874, 791.48 - constituted forfeitable assets as property traceable to the charged criminality.
The seizure warrants against the two Aventura bank accounts were executed on November 7, 2019, with the monies seized deposited into interest bearing accounts.
Those accounts are the subject of the current motion, next discussed.
By motion filed on August 11, 2021, Aventura "move[d] this Court pursuant to the Fifth and Sixth Amendments to the United States Constitution for an order releasing funds seized by the Government so that (1) Aventura can defend itself in the instant prosecution, and (2) Aventura can contribute to the defense expenses of its co-defendant corporate employees." (DE 211 at 2.) Towards that end, Aventura sought a hearing to separate “the seized assets into ‘tainted'[1] and ‘untainted' categories and to return the ‘untainted' funds to Aventura immediately so that they may be used for its legal defense." (Defense Counsel's Jan. 26, 2022 Letter to Judge Lindsay (DE 232) at 2.) D. Judge Lindsay's March 10, 2022 R&R
In Judge Lindsay's well-crafted R&R, she recommends that the requested hearing be denied because Aventura failed to satisfactorily demonstrate that, absent a release of the seized assets, it will be unable to retain counsel of its choosing. In concluding that this failure precludes a granting of the requested relief, Judge Lindsay relied primarily on United States v. Bonventre, 720 F.3d 126 (2d Cir. 2013).
In Bonventre, Judge Walker, writing for the Circuit, explained that "if a defendant has sufficient unrestrained assets with which to fund his own defense," id. at 131, Sixth Amendment concerns are not implicated and thus a "Monsanto or Monsanto-like hearing"[2] is not warranted. Id. at 128.
Which is to say, Bonventre instructs that a "threshold showing" of need by the movant, id., is a prerequisite to the holding of the type of hearing Aventura seeks. It isn't that Aventura wholly ignored that requirement. However, its effort -consisting merely of a conclusory, unsworn statement by counsel as to the purported lack of otherwise available assets - was viewed by Judge Lindsay as "insufficient to comply with Bonventre which requires disclosure of [a] Defendant's net worth -including estimated income, a comprehensive list of all assets, an estimation of anticipated legal fees, and an explanation of how Defendant has been paying . . . operating expenses." (R&R at 5 (citing Bonventre, 720 F.3d at 133; FTC v. Star Resolution, LLC, 2016 U.S. Dist. LEXIS 24484 (W.D.N.Y. Feb. 29, 2016).)
E. Aventura's Objection to Judge Lindsay's March 10, 2022 R&R
By letter dated March 24, 2022 (DE 245), Aventura objected to Judge Lindsay's R&R. In its April 25, 2022 reply (DE 252) to the prosecution's answer to its objection (DE 250), it identifies what it perceives to be the logical flaw underlying the government's position as adopted by Judge Lindsay thusly:
[T]he Government continues to improperly conflate two separate issues: the financial need of a defendant to have access to seized funds to pay for legal services (the Monsanto question) with the Government's duty to prove to a court that the Government's seizure of assets pre-conviction is limited strictly to those assets [which] are tainted by underlying criminal conduct (the Kaley question.) . . . Aventura's motion seeks to put the Government to its burden to demonstrate to this Court that the money that the Government seized concurrent with the arrest of the defendants and which it continues to hold now was derived or is tainted by criminal conduct or it must be released to Aventura. The Supreme Court of the United States has repeatedly affirmed this due process right to a hearing in three consecutive decisions in the last decade and no case cited by the Government in its opposition overrules or distinguishes these controlling decisions.[3] The Government's continued bleating of the Monsanto question while ignoring the Kaley question led the Magistrate to make an erroneous decision, notwithstanding the number of times Aventura repeatedly restated the issue to the Magistrate. Aventura is entitled under the United States Constitution to due process, regardless of how many times the Government says that it is not. It is up to this Court to ensure that procedural due process is provided so that substantive due process can be had.
(DE 252 at 1-2 (emphasis in original) (footnote omitted).)
The Court notes that absent from Aventura's procedural due process objection is any comment, no less discussion, about Judge Scanlon's pre-seizure probable cause determination and its effect on the present dispute.
F. Government's April 7, 2022 Letter in Support of Judge Lindsay's R&R and in Response to Aventura's March 24, 2022 Objections to the R&R (DE 250)
The government urges this Court to adopt Judge Lindsay's recommendation, contending that United States v. Bonventre, 720 F.3d 126 (2d Cir. 2013) represents the prevailing, and repeatedly followed, law of the Circuit unaffected by the three Supreme Court decisions erroneously relied upon Aventura.
The prosecution recognizes that an indicted defendant "may seek a [pretrial] hearing ‘to litigate . . . whether probable cause exists to believe that the assets in dispute are traceable'" to the crime charged. (DE 250 at 4-5 (quoting Kaley v. United States, 571 U.S. 320, 324 (2014)).)[4] But, and this is the crux of the present dispute, the government insists that unless there is a threshold showing of need, no hearing is required under the Constitution as per Bonventre. (DE 250 at 5.)
F. Standard of Review
The standard of review that a district court applies to a magistrate judge's order "depends on whether the issue decided by the magistrate judge is dispositive or nondispositive." Blackrock Allocation Target Shares: Series S. Portfolio v. Wells Fargo Bank, Nat'l Ass'n, 2018 WL 3863447, at *3 (S.D.N.Y. Aug.13, 2018)(internal citation omitted); see generally Kiobel v. Millson, 592 F.3d 78, 106 (2d Cir. 2010)(Jacobs C. J., concurring). Whereas dispositive orders are subject to de novo review, if a party timely objects to a magistrate judge's nondispositive order, a district court may only "modify or set aside any part of the order that is clearly erroneous or is contrary to law." 28 U.S.C. § 636(b)(1)(A). A motion for the return of seized funds is a non-dispositive pretrial matter. See 28 U.S.C. §636(b)(1)(A) () Aventura's application does not fall within the ambit of any of the enumerated exceptions by implication or otherwise.
Because the subject order addressed a nondispositive motion this Court reviews Judge Lindsay's order for "clear error." See Fed.R.Civ.P. 72, advisory committee's note to 1983 amendment. "This standard is highly deferential and only permits reversal where the magistrate abused his discretion." Mental Disability Law Clinic v. Hogan, 739 F.Supp.2d 201, 204 (E.D.N.Y. 2010); accord AMBAC Fin. Servs. LLC v. Bay Area Toll Auth., 2010 WL 4892678, at *2 (S.D.N.Y. Nov. 30, 2010)(citation omitted). Under this standard, the question is whether the magistrate judge "fail[ed] to apply or misapplie[d] relevant statutes, case law or rules of procedure," Weiner v. McKeefery, 2014 WL 2048381, at *3 , or, in entering a finding of fact, rendered a decision that leaves this Court "with the definite and firm conviction that a mistake has been committed," United States v. Isiofia, 370 F.3d 226, 232 (2d Cir. 2004). See also Alvarado v. City of New York, 2009 WL 510813 (E.D.N.Y. Feb. 27, 2019)("[A] magistrate judge's decision is contrary to law only where it runs counter to controlling authority."); Gordon v....
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