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 J udge Irizarry:

In accordance with the Court’s Order entered on J uly 14, 2014, the
government respectfully writes in response to the motion by third-party petitioner J ay 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,
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Honorable Dora L. Irizarry
United States v. Steven Moskowitz, 10-CR-600 (DLI)
August 1, 2014
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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 J uly 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 J une 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 merits 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
United States v. Steven Moskowitz, 10-CR-600 (DLI)
August 1, 2014
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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
United States v. Steven Moskowitz, 10-CR-600 (DLI)
August 1, 2014
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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 J oyeros, 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. J uly 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 J urisdiction 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. J an. 14, 2013) (court lacks subject matter jurisdiction over claim to assets
not listed in the forfeiture order); United States v. J amieson, No. 3:02-cr-707, 2007 WL
275966, at *5 (N.D. Ohio J an. 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)
August 1, 2014
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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 J une 15, 2014. The petitioner’s claim, however, was not filed until J une 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
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Honorable Dora L. Irizarry
United States v. Steven Moskowitz, 10-CR-600 (DLI)
August 1, 2014
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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.
Respectfully submitted,

LORETTA E. LYNCH
United States Attorney

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

Encl.

cc: (By first class mail and Federal Express)

Mr. J ay P. Booth
195 Private Road 4436
Rhome, TX 76078
Case 1:10-cr-00600-DLI Document 379 Filed 08/01/14 Page 6 of 6 PageID #: 2269

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