US v. $3,000 IN CASH

• Decision Date: 29 November 1995
• Docket Number: Civ. A. No. 95-607-A.
• Citation: 906 F. Supp. 1061
• Court: U.S. District Court — Eastern District of Virginia
• Parties: UNITED STATES of America, Plaintiff, v. $3,000 IN CASH and All Monies From Certain Bank Accounts, Defendants.

906 F. Supp. 1061

UNITED STATES of America, Plaintiff, v. $3,000 IN CASH and All Monies From Certain Bank Accounts, Defendants.

Civ. A. No. 95-607-A.

United States District Court, E.D. Virginia, Alexandria Division.

November 29, 1995.

COPYRIGHT MATERIAL OMITTED

Helen F. Fahey, United States Attorney, Gordon D. Kromberg, Assistant United States Attorney, Alexandria, Virginia, Laury L. Gordon, Trial Attorney, Asset Forfeiture/Money Laundering, Washington, DC, for plaintiff.

Charles S. Leeper, Karl N. Metzner, Rebecca E. Kuehn, Spriggs & Hollingsworth, Washington, DC, for Claimant Kurt S. Moylan.

Lawrence E. Freedman, Fairfax, Virginia, for Claimant Ihedinachi I. Uzodinma.

C. Victor Mbakpuo, Silver Spring, Maryland, for Claimant C. Victor Mbakpuo.

MEMORANDUM OPINION

ELLIS, District Judge.

This 18 U.S.C. § 981 civil forfeiture action presents two questions concerning who qualifies as an "owner" so as to have standing to invoke the innocent-owner provision of § 981(a)(2). The first is whether one who is at once a victim and a participant in a fraud is barred by the doctrine of unclean hands from asserting an equitable interest in the money he paid in connection with the fraud. The second question is whether one who gives an associate money in connection with a planned commercial real estate venture, knowing that the money will be commingled with the associate's other funds in bank accounts, is a bailor with standing to challenge the forfeiture of the associate's accounts, or merely a general creditor without such standing.

The matter is now before the Court on plaintiff's motion for summary judgment and claimants' various cross-motions for summary judgment.¹ For the reasons that follow, plaintiff's motion is granted and claimants' motions are denied.

I

This is a tale of audacious international fraud. It serves as a striking reminder that avarice fueled by the lure of easy money can overwhelm good judgment, with costly consequences.

In April 1994, Kurt Moylan, a Guam businessman and former Lieutenant Governor of Guam, was contacted by a person identifying himself as Dr. Benjamin Okafor from Nigeria. Okafor represented himself to be a member of the Nigerian royal family and the second-in-command of the Nigerian National Petroleum Corporation ("NNPC"), a state-owned enterprise. Okafor told Moylan that the predecessor government of Nigeria had "over-invoiced" a construction project by $20 million. Specifically, he explained that a foreign contractor had performed certain construction work for NNPC, and although the firm had billed and been fully paid $30 million, the Nigerian government had already earmarked or released a total of $50 million for the project. According to Okafor, the excess $20 million was being held in an account at the Central Bank of Nigeria ("CBN") and because the money had been designated for payment of a foreign firm, the current Nigerian government could not directly access the funds. For this reason, Okafor explained to Moylan, the current Nigerian government needed the assistance of a foreign firm to retrieve the funds. And this is where Moylan, as the operator of a foreign firm, could help the Nigerian government and, not incidentally, himself. The specifics of the deal, Okafor told Moylan, were that the Nigerian government was willing to pay 40% of the $20 million to Moylan if Moylan would provide an invoice for work done to NNPC in the amount of $20 million and a bank account outside of Nigeria into which the funds could be transferred.

Moylan agreed to the proposal and submitted the requested false invoice on April 20, 1994. This invoice for $20 million stated that his company, Home Financial Corp., had erected "super propylene for Monax axial flow turbine pipes" at a Nigerian refinery, even though, as Moylan admitted in his deposition, none of his companies had ever performed such work. After submission of the false invoice, all that remained, it seemed, was for Moylan to complete the "formal application" for the funds. To this end, Moylan agreed to meet Okafor in Hong Kong in late May 1994 so that Okafor could guide him through the technicalities of the Nigerian formal application documents. In Hong Kong, for the first time, Okafor told Moylan that he would have to pay administrative fees and taxes totaling $1,350,000 before CBN would release the money. Moylan, although initially reluctant, ultimately agreed to pay the requested amount. Okafor said the payments would have to be made to an official Nigerian "money exchanger" and identified Ihedi Uzodinma in Woodbridge, Virginia as such an official. Thereafter, Moylan wired $500,000 from Guam to Uzodinma's account at NationsBank in Virginia in two installments. At Okafor's direction, Moylan wired the remaining $850,000 to an account in England in the name of another money exchanger, George Oxford. On learning the account in England was closed, Moylan wired the $850,000 to Uzodinma in Virginia.

As a result of the large transfers to Uzodinma, an agent of the Federal Bureau of Investigation ("FBI") contacted Moylan on June 20 and inquired about the transfers. In a ten minute conversation with the agent, Moylan outlined the transaction and expressed no concern regarding its legitimacy. At the time, Moylan still believed he would receive the $8 million on June 21. On the morning of June 21, Moylan received a call from Okafor who asked whether he had been contacted about the deal. Because this call followed closely on the heels of the FBI visit, Moylan began to suspect that something was amiss. That afternoon, at 3:45 p.m. in Guam, Moylan received a call from a purported employee of the National Reserve Bank in New York telling him that his money was coming. Rather than soothing Moylan's anxieties, the call further aroused his suspicions because he recognized that the call had to have been made at 1:45 a.m. New York time, a time when Federal Reserve Bank employees were unlikely to be at work. By this time, Moylan had begun to believe he had fallen victim to a fraud. He attempted to recover the money through his local banks and when those efforts failed, he contacted the FBI.

The FBI, as a result of its investigation, arrested Uzodinma in Virginia, and in June 1994 seized $1,291,128.89 in cash and bank accounts related to the fraud. The government has alleged two bases for the forfeiture of this cash. Count I alleges that Okafor used wire communications in a scheme to defraud Moylan, and that after Uzodinma received these proceeds of wire fraud, he engaged in unlawful financial transactions with them in amounts greater than $10,000, thereby rendering the money forfeitable for violations of 18 U.S.C. § 1957. Count II alleges that by wiring the $1,350,000 to Uzodinma to promote a wire fraud against NNPC, Moylan transferred or attempted to transfer the money internationally, thereby rendering it forfeitable for a violation of 18 U.S.C. § 1956(a)(2).

There are three claimants to the funds: Uzodinma, Moylan, and Victor Mbakpuo. Mbakpuo, who for purposes of these motions was wholly unaware of the fraud on Moylan, had given Uzodinma $55,000 in anticipation of joining with him in a commercial real estate joint venture. Uzodinma deposited this sum in various accounts: $30,000 in an account with First Virginia Bank, Fairfax, Virginia and $20,000 in a Third Federal Savings and Loan account in Cleveland, Ohio, both of which accounts were seized by the government, and the remaining $5,000 in an account with Ameribanc, Annandale, Virginia, which account was not seized.

II

The funds in this case were seized pursuant to 18 U.S.C. § 981. Under § 981, the government bears the burden of demonstrating probable cause that a substantial connection exists between the property seized and the underlying criminal activity. See Boas v. Smith, 786 F.2d 605, 609 (4th Cir.1986). This showing can be made on the basis of otherwise inadmissible hearsay. United States v. 7715 Betsy Bruce Lane, 906 F.2d 110 (4th Cir.1990). The burden then shifts to the claimant to establish, by a preponderance of the evidence, either that the property was not involved in illegal activity, thereby rebutting the government's showing of probable cause, or that claimant did not know about or consent to the illegal activity, pursuant to the so-called "innocent-owner defense" of 18 U.S.C. § 981(a)(2). United States v. Thomas, 913 F.2d 1111, 1114 (4th Cir.1990).² But before the innocent-owner defense can be asserted, the claimant "first must demonstrate a sufficient interest in the property to give him Article III standing; otherwise there is no `case or controversy' in the constitutional sense, capable of adjudication in the federal courts." United States v. $38,000 in United States Currency, 816 F.2d 1538, 1543 (11th Cir.1987).³ To establish the requisite standing, the claimant must offer some evidence that he is an owner of the seized property. United States v. $38,570 United States Currency, 950 F.2d 1108, 1112 (5th Cir.1992).

Congress has indicated that the "term `owner' should be broadly interpreted to include any person with a recognizable legal or equitable interest in the property seized."⁴ Even one who merely possessed the seized property might qualify as an "owner." See, e.g., United States v. $122,043. in United States Currency, 792 F.2d 1470 (9th Cir. 1986). But despite its liberal interpretation, "owner" does not encompass those with an undefined interest in the seized property. Specifically, an unsecured creditor generally lacks standing to challenge a forfeiture because, while that person may have an interest in the property of the debtor from whom assets were seized, she cannot show that she held an interest in the specific property forfeited. See, e.g., United States v. $20,193.39 United States Currency, 16 F.3d 344 (9th Cir.1994); United States v. $47,875. in United States Currency, 746 F.2d 291 (5th Cir. 1984); United States v. $500,000, 730 F.2d 1437 (11th...