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Case 1:10-cr-00600-DLI

Case 1:10-cr-00600-DLI Document 379 Filed 08/01/14 Page 1 of 6 PageID #: 2264 U.S. Department of

Document 379

Filed 08/01/14

Page 1 of 6 PageID #: 2264

U.S. Department of Justice

United States Attorney Eastern District of New York

SLR:LDM:BDM

271 Cadman Plaza East

F. #2010R00609

Brooklyn, New York 11201

August 1, 2014

By Hand and ECF

Honorable Dora L. Irizarry United States District Court Eastern District of New York 225 Cadman Plaza East Brooklyn, New York 11201

Re:

United States v. Steven Moskowitz Criminal Docket No. 10-600 (DLI)

Dear Judge Irizarry:

In accordance with the Court’s Order entered on July 14, 2014, the government respectfully writes in response to the motion by third-party petitioner Jay P. Booth seeking amendment of the order of forfeiture entered against defendant Steven Moskowitz in the above-referenced criminal forfeiture proceeding. See Motion To Amend Order of Forfeiture, Dkt. #377; Preliminary Order of Forfeiture, Dkt. #366. For reasons discussed below, the petition should be dismissed because the Court lacks subject matter jurisdiction to hear the petitioner’s claim in an ancillary proceeding, the petitioner lacks standing to advance his claim, and the petition is time barred.

  • I. Factual and Procedural History

The present forfeiture proceeding arises out of a criminal case against defendant Steven Moskowitz. On or about August 16, 2011, the defendant pleaded guilty to Counts One and Two of the above-captioned indictment charging conspiracy to commit securities fraud in violation of 18 U.S.C. § 371 and securities fraud in violation of 15 U.S.C. § 78j(b), respectively. On April 11, 2014, with the consent of the defendant, the Court entered a Preliminary Order of Forfeiture (the “Preliminary Order”), forfeiting, inter alia:

*

*

*

(b) any and all right title and interest in all shares and classes of stock of Spongetech Delivery Systems, Inc., held by the defendant or held in trust for the benefit of the defendant or any of the defendant’s family members,

Case 1:10-cr-00600-DLI

Document 379

Honorable Dora L. Irizarry

United States v. Steven Moskowitz, 10-CR-600 (DLI)

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including but not limited to those shares and classes of stock held by the Moskowitz Family Trust (collectively, the “Forfeited Stock”),

pursuant to 18 U.S.C. § 981(a)(1)(C) and 28 U.S.C. § 2461(c), as property constituting or derived from proceeds obtained directly or indirectly as a result of the defendant’s violation of 18 U.S.C. § 371 and 15 U.S.C. § 78j(b), and/or pursuant to 21 U.S.C. § 853(p) as substitute assets. See Preliminary Order, Dkt. #366. The defendant is presently scheduled to be sentenced on November 7, 2014. See July 14, 2014 Notice of Hearing.

In accordance with Rule 32.2 of the Federal Rules of Criminal Procedure, the government published notice of the Preliminary Order beginning on April 16, 2014 and ending on May 15, 2014. See Certificate of Service, Dkt. #371. On June 18, 2014, the petitioner filed a motion requesting that the Court amend the Preliminary Order to direct the disposition of Spongetech Delivery Systems, Inc. (“SDS”) stock held by other third-party shareholders. See Motion, Dkt. #377, at 2.

II.

Conduct of the Ancillary Proceeding

The post-trial ancillary proceeding is where third parties have an opportunity to establish their legal right, title or interest in criminally forfeited property. See 21 U.S.C. § 853(n). The ancillary proceeding closely resembles a civil action and, as such, is generally governed by the same procedures as those set forth in the Federal Rules of Civil Procedure. See e.g., Pacheco v. Serendensky, 393 F.3d 348, 352 (2d Cir. 2004) (commenting that civil procedures aid efficient resolution of claims in ancillary proceeding).

In order to advance a claim in an ancillary proceeding, a third-party petitioner must first establish a “legal interest” in a particular asset identified in the order of forfeiture, within the meaning of 21 U.S.C. § 853(n)(2). United States v. Ribadeniera, 105 F.3d 833, 834-35 (2d Cir. 1997); see also United States v. Timley, 507 F.3d 1125, 1129-30 (8th Cir. 2007) (“[A] party seeking to challenge the government’s forfeiture of money or property used in violation of federal law must first demonstrate a legal interest in the seized item sufficient to satisfy the court of its standing to contest the forfeiture.”) (citation omitted); United States v. Salti, 579 F.3d 656, 667 n. 11 (6th Cir. 2009) (holding that standing must be supported in same way as any other matter on what claimant bears burden of proof).

Only after a petitioner makes a threshold showing of standing under Section 853(n)(2) may a court reach the me rits of a claim, at which point the court must determine whether the Petitioner has met his burden of showing that his legal interest is a “superior interest” as compared to the government’s interest at the time of the acts giving rise to forfeiture. Timely, 507 F.3d at 1130 n. 2 (distinguishing between “legal interest” required for petitioner to establish standing under Section 853(n)(2), and “superior legal interest”

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Honorable Dora L. Irizarry

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required for petitioner to ultimately prevail on merits under Section 853(n)(6)); Pacheco, 393 F.3d at 351 (“burden [falls] ultimately on the petitioner to prove her claim by a preponderance of the evidence”); United States v. Porchay, 533 F.3d 704, 709 (8th Cir. 2008) (“To prevail in the § 853(n) claim, [claimant] had to demonstrate by a preponderance

of the evidence that she had a superior right, title, or interest in the seized property

. . .

.”)

United States v. Nava, 404 F.3d 1119, 1125 (9th Cir. 2005) (“The petitioner bears the burden of proving his right, title, or interest under § 853(n)(6).”).

In order to show a superior interest, a petitioner must either demonstrate under Section 853(n)(6)(A) that he had priority of ownership over the forfeited property at the time

of the offense, or must demonstrate under Section 853(n)(6)(B) that he subsequently acquired the property as a bona fide purchaser for value without cause to believe the property was subject to forfeiture. Ribadeniera, 105 F.3d at 834-35. In addition, under the relation back doctrine, the government’s exclusive interest in forfeited property “vests in the United

States upon the commission of the act giving rise to forfeiture

.” 21 U.S.C. § 853(c);

. . . Nava, 404 F.3d at 1124 (“The title to the forfeited property vests in the United States at the

time the defendant commits the unlawful acts

. . .

.”).

Thus, the ancillary proceeding serves as a quiet title proceeding in which the Court must determine whether forfeited property actually belongs to the third-party that has asserted a claim to it. See, e.g. United States v. McHan, 345 F.3d 262, 275-76 (4th Cir. 2003) (holding that petitioner in ancillary proceeding, which is akin to equitable quiet title proceeding, has no Seventh Amendment right to jury trial). If the forfeited property belongs to the third party, then the property must be stricken from the order of forfeiture; however, if the property does not belong to the third party, then the preliminary order of forfeiture becomes final and the United States becomes the exclusive titleholder to the property. See

  • 21 U.S.C. §§ 853(n)(6) and (7); United States v. Puig, 419 F.3d 700, 703 (8th Cir. 2005)

(holding that if no third party files a meritorious claim to assets included in order of

forfeiture, then United States obtains clear title to property pursuant to 21 U.S.C. § 853(n)(7)).

The pleading requirements for a third-party petition are set forth in Section 853(n), which provides that:

The petition shall be signed by the petitioner under penalty of perjury and shall set forth the nature and extent of the petitioner’s right, title, or interest in the property, the time and circumstances of the petitioner’s acquisition of the right, title, or interest in the property, any additional facts supporting the petitioner’s claim, and the relief sought.

  • 21 U.S.C. § 853(n)(3).

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Honorable Dora L. Irizarry

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Thus, a third-party petition must be personally signed by all petitioners under penalty of perjury. See United States v. Speed Joyeros, S.A., 410 F. Supp. 2d 121, 124 (E.D.N.Y. 2006) (Weinstein, J.) (holding that petition filed by counsel and verified by accountants but not by petitioners themselves failed to satisfy requirements of Section 853(n)(3)). Indeed, the substantial danger of false claims in forfeiture proceedings counsels in favor of strict compliance with these verification requirements, which are not merely technicalities. Id. (citing Mercado v. United States Customs Service, 873 F.2d 641, 645 (2d Cir. 1989); United States v. Amiel, 995 F.2d 367, 371 (2d Cir. 1993)). Failure to adhere to them warrants dismissal of the petition. See, e.g., United States v. Klemme, 894 F. Supp. 2d 1113, 1117 (E.D. Wis. 2012) (dismissing claim not filed under penalty of perjury); United States v. Burge, 829 F. Supp. 2d 664, 666-67 (C.D. Ill. 2011) (dismissing claim signed only by claimant’s counsel for failure to comply with Section 853(n)(3)’s requirement that Petitioner verify petition under oath); United States v. Aiken, No. 2:09-cr-0097, 2010 WL 2951171, at *2 (D. Nev. July 22, 2010) (“Petitioners have failed to sign the petition under penalty of perjury. Such a failure warrants dismissal.”).

III.

The Petition Should Be Dismissed

For reasons set forth below, the petition should be dismissed because the Court lacks subject matter jurisdiction to hear the petitioner’s claim, the petitioner lacks standing to contest forfeiture of the Forfeited Stock, and the petition is time barred.

  • A. The Court Lacks Subject Matter Jurisdiction To Hear The Petitioner’s Claim Because The Petition Fails To Allege An Interest in the Forfeited Stock

Through his petition, the petitioner does not assert an interest in the Forfeited Stock held by or on behalf of the defendant. Rather, the petitioner asserts an interest in an unidentified number of shares of SDS stock purportedly held by the petitioner and other third-party shareholders. These other shares, however, are not included within the scope of the Preliminary Order. See Preliminary Order, Dkt. #366. The Court therefore lacks subject matter jurisdiction to consider the petitioner’s claim in an ancillary proceeding. See, e.g., United States v. Perkins, 382 F. Supp. 2d 146, 148-49 (D. Me. 2005) (holding that court lacked jurisdiction to adjudicate validity of claimant’s lien against property of defendant that was not subject to forfeiture); United States v. Fabian, No. 1:11-cr-157, 2013 WL 150361, at *5 (W.D. Mich. Jan. 14, 2013) (court lacks subject matter jurisdiction over claim to assets not listed in the forfeiture order); United States v. Jamieson, No. 3:02-cr-707, 2007 WL 275966, at *5 (N.D. Ohio Jan. 26, 2007) (same); United States v. BCCI Holdings (Luxembourg) S.A. (Petition of Zhaman and Bhandari), 977 F. Supp. 20, 23-26 (D.D.C. 1997) (court must dismiss for lack of subject matter jurisdiction if the property claimed by the claimant was not listed among the assets forfeited from the defendant). Accordingly, the petitioner’s claim should be dismissed.

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Honorable Dora L. Irizarry

United States v. Steven Moskowitz, 10-CR-600 (DLI)

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  • B. The Petitioner Lacks Standing To Contest Forfeiture of the Forfeited Stock

The petitioner lacks standing because his petition failed to assert an interest in the Forfeited Stock and the petition is not signed under penalty of perjury. As required by statute and the terms of the Preliminary Order itself, the petition must be signed under penalty of perjury and specifically allege the “nature and extent of the petitioner’s right, title, or interest in the property [and] the time and circumstances of the petitioner’s acquisition of the right, title or interest in the property.” 21 U.S.C. § 853(n)(3); Preliminary Order, at ¶ 10.

The petition meets none of these requirements. First, as discussed above, the petitioner has failed to allege an interest in the Forfeited Stock. In addition, the petition was not signed by the petitioner or otherwise verified under penalty of perjury. As these deficiencies are fatal to the petitioner’s claim, the petition should be dismissed for lack of standing. United States v. Ginn, 799 F. Supp. 2d 645, 647 (E.D. La. 2010) (holding that to discourage false claims even pro se petition must be dismissed if not filed under penalty of perjury); United States v. King, No. 3:06-cr-212-J-33MCR, 2009 WL 2525560, at *2 (M.D. Fla. Aug. 17, 2009) (dismissing petition that was not filed under penalty of perjury and did not contain description of petitioner’s legal interest in forfeited property or how it was acquired).

  • C. The Petition Is Time Barred

Consistent with the governing statute, the Preliminary Order directed that any potential claimant to the Forfeited Stock file his petition “within thirty (30) days of the final

publication of notice

or no later than sixty (60) days after the first date of publication,

. . . whichever is earlier.” Preliminary Order, at ¶ 10; 21 U.S.C. § 853(n)(2). In the present case,

publication of the Preliminary Order began on April 16, 2014 and ended on May 15, 2014. See Certificate of Service, Dkt. #371. Thus, the time for filing a third-party petition expired on June 15, 2014. The petitioner’s claim, however, was not filed until June 18, 2014. Because petitioner did not submit his claim within the statutorily proscribed time period, it is time barred and therefore should be dismissed as untimely. United States v. Alvarez, 710 F.3d 565, 567-68 nn.10 & 11 (5th Cir. 2013) (upholding dismissal of untimely claim filed on 74th day); United States v. Marion, 562 F.3d 1330, 1339-40 (11th Cir. 2009) (holding that because Section 853(n)(2) creates 30-day window for third parties to file claims, claims not filed within that window must be dismissed as untimely); United States v. Grossman, 501 F.3d 846, 848-49 (7th Cir. 2007) (upholding dismissal of untimely claim filed by lienholder).

III. Conclusion

For the reasons discussed above, the government respectfully requests that the Court dismiss the petition, and enter the enclosed Final Order of Forfeiture at the defendant’s sentencing. Of course, the petitioner remains free to submit an affidavit of loss to the

Case 1:10-cr-00600-DLI

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Honorable Dora L. Irizarry

United States v. Steven Moskowitz, 10-CR-600 (DLI)

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government so that he may potentially be included as part of any order of restitution entered against the defendant or co-defendant Andrew Tepfer, who is presently scheduled to be sentencing on November 7, 2014. In this regard, the petitioner should direct any questions about filing an affidavit of loss to Victim Coordinator Lisa Foster, who may be reached at (718) 254-6375.

Encl.

Respectfully submitted,

LORETTA E. LYNCH United States Attorney

By:

/s

Brian D. Morris Nathan D. Reilly Assistant U.S. Attorneys (718) 254-6512/6196

cc: (By first class mail and Federal Express)

Mr. Jay P. Booth 195 Private Road 4436 Rhome, TX 76078