Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 1 of 34 Page ID #:439 1 2 3 4 5 6 7 14 17 11 Karen Y. Paik (SBN 288851) BOIES, SCHILLER & FLEXNER LLP 401 Wilshire Boulevard, Suite 850 Santa Monica, California 90401 Telephone: (310) 752-2400 Fax: (310) 752-2490 E-mail: kpaik@bsfllp.com Attorneys for Claimant 912 North Hillcrest Road (BH), LLC 12 UNITED STATES DISTRICT COURT 13 FOR THE CENTRAL DISTRICT OF CALIFORNIA B O I E S , S C H I L L E R & F L E X N E R C A L I F O R N I A 10 M O N I C A , 9 S A N T A L L P 8 Matthew L. Schwartz (admitted pro hac vice) BOIES, SCHILLER & FLEXNER LLP 575 Lexington Ave. New York, New York 10022 Telephone: (212) 446-2300 Fax: (212) 446-2350 E-mail: mlschwartz@bsfllp.com LOS ANGELES DIVISION 15 16 18 UNITED STATES OF AMERICA, Plaintiff, v. 19 REAL PROPERTY LOCATED IN BEVERLY HILLS, CALIFORNIA, 20 Defendant. 21 Case No. 16-cv-05377-DSF (PLAx) CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Hearing Date: March 13, 2017 Time: 1:30 p.m. Place: Courtroom 7D 22 23 24 25 26 27 28 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 2 of 34 Page ID #:440 1 2 3 4 5 6 7 14 17 11 12 13 B O I E S , S C H I L L E R & F L E X N E R C A L I F O R N I A 10 M O N I C A , 9 S A N T A L L P 8 15 16 18 19 20 21 22 TABLE OF CONTENTS NOTICE OF MOTION AND MOTION .................................................................... vi PRELIMINARY STATEMENT ................................................................................. 1 RELEVANT ALLEGATIONS .................................................................................... 2 ARGUMENT ............................................................................................................... 4 I. THE COMPLAINT FAILS TO STATE A CLAIM AGAINST THE DEFENDANT PROPERTIES .......................................................................... 4 A. Legal Standard ......................................................................................... 4 B. The Complaint Fails to State a Claim Under 18 U.S.C. § 981(a)(1)(C) .......................................................................................... 5 1. The Complaint Fails To Allege That Anyone Committed A Crime................................................................................................. 6 2. The Complaint Fails to Plead the Elements of the Alleged Predicate Specified Unlawful Activity ........................................... 11 a. The Complaint Does Not Adequately Allege “An Offense Against A Foreign Nation”....................................................... 11 b. The Complaint Does Not Allege a Domestic Wire Fraud ....... 14 c. The Complaint Does Not Adequately Allege Scienter ............ 15 C. The Complaint Fails to State a Claim Under 18 U.S.C. § 981(a)(1)(A)........................................................................................ 16 1. The Complaint Fails to Adequately Allege Money Laundering Because It Fails to Adequately Allege Any Specified Unlawful Activities ......................................................................................... 16 2. The Complaint Fails to Allege that the Acquisition of the Defendant Property Was Intended to Conceal the Source of Funds ............................................................................................... 17 3. The Complaint Fails to Allege that the Acquisition of the Defendant Properties Violated 18 U.S.C. § 1957 ........................... 20 II. THE COMPLAINT CONCLUSIVELY ESTABLISHES THAT CLAIMANT IS AN “INNOCENT OWNER” ................................................ 21 III. THE COMPLAINT SHOULD BE DISMISSED UNDER THE ACT OF STATE DOCTRINE ....................................................................................... 22 CONCLUSION .......................................................................................................... 25 23 24 25 26 27 28 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 3 of 34 Page ID #:441 TABLE OF AUTHORITIES 1 2 3 4 5 6 7 14 17 11 12 13 B O I E S , S C H I L L E R & F L E X N E R C A L I F O R N I A 10 M O N I C A , 9 S A N T A L L P 8 15 16 18 19 20 21 22 23 24 25 26 27 CASES Ashcroft v. Iqbal, 556 U.S. 662 (2009) ..........................................................................................2, 4, 5, 10 Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964) ...................................................................................................... 24 Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) ..............................................................................................4, 5, 10 D’Angelo v. Petroleos Mexicanos, 422 F. Supp. 1280 (D. Del. 1976), aff’d, 564 F.2d 89 (3d Cir. 1977) .................................................................................. 24 Daniels-Hall v. Nationals Educ. Ass’n., 629 F.3d 992 (9th Cir. 2010) ......................................................................................... 23 de Fontbrune v. Wofsy, No. 14-15790, 2016 WL 5349749 (9th Cir. Sept. 26, 2016) ........................................ 13 Dowling v. United States, 473 U.S. 207 (1985) ...................................................................................................... 15 Federal Treasury Enterprise Sojuzplodoimport v. Spirits International, 809 F.3d 737 (2d Cir. 2016) .......................................................................................... 23 Goddard v. Google, Inc., 640 F. Supp. 2d 1193 (N.D. Cal. 2009) ........................................................................ 21 In re GlenFed, Inc. Securities Litigation, 42 F.3d 1541 (9th Cir. 1994) rev’d on other grounds, 60 F.3d 591 (9th Cir. 1995) .................................................... 10 In re Vitamin C Antitrust Litigation, 837 F.3d 175 (2d Cir. 2016) .......................................................................................... 24 Kimberlin v. National Bloggers Club, No. GJH-13-3059, 2015 WL 1242763 (D. Md. Mar. 17, 2015) ................................... 20 Liu v. Republic of China, 642 F. Supp. 297 (N.D. Cal. 1986)................................................................................ 24 Morrison v. National Australia Bank Ltd., 561 U.S. 247 (2010) ...................................................................................................... 14 Norex Petroleum Ltd. v. Access Industries, Inc., 631 F.3d 29 (2d Cir. 2010) ............................................................................................ 14 Petroleos Mexicanos v. SK Engineering & Construction Co., 572 Fed. Appx. 60 (2d Cir. 2014) ................................................................................. 14 28 i CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 4 of 34 Page ID #:442 1 2 3 4 5 6 7 14 17 11 12 13 B O I E S , S C H I L L E R & F L E X N E R C A L I F O R N I A 10 M O N I C A , 9 S A N T A L L P 8 15 16 18 19 20 21 22 23 24 25 26 27 28 Petroleos Mexicanos v. SK Engineering & Construction Co., No. 12 Civ. 9070 (LLS), 2013 WL 3936191 (S.D.N.Y. July 30, 2013) ....................... 14 Regalado Cuellar v. United States, 553 U.S. 550 (2008) ...................................................................................................... 18 Republic of Austria v. Altmann, 541 U.S. 677 (2004) ...................................................................................................... 23 Rubin v. Briscoe, No. 12-cv-10140, 2013 WL 1700957 (C.D. Cal. Apr. 18, 2013) ................................. 20 Sams v. Yahoo! Inc., 713 F.3d 1175 (9th Cir. 2013) ....................................................................................... 21 Timberlane Lumber Co. v. Bank of America, N.T. & S.A., 549 F.2d 597 (9th Cir. 1976) ......................................................................................... 24 Trader Joe’s Co. v. Hallatt, 835 F.3d 960 (9th Cir. 2016) ......................................................................................... 24 United States v. $1,399,313.74 in United States Currency, 591 F. Supp. 2d 365 (S.D.N.Y. 2008) ........................................................................... 19 United States v. $39,000 in Canadian Currency, 801 F.2d 1210 (10th Cir. 1986) ................................................................................. 6, 10 United States v. All Assets Held in Account No. XXXXXXX, 83 F. Supp. 3d 360 (D.D.C. 2015) ................................................................................ 15 United States v. Daccarett, 6 F.3d 37 (2d Cir. 1993) .................................................................................................. 4 United States v. French, 748 F.3d 922 (9th Cir. 2014) ......................................................................................... 20 United States v. Jinian, 725 F.3d 954 (9th Cir. 2013) ......................................................................................... 15 United States v. One 2006 Mercedes-Benz R350, No. 12-cv-07651, 2013 WL 877724 (C.D. Cal. Mar. 7, 2013) ....................................... 6 United States v. One Gulfstream G-V Jet Aircraft, 941 F. Supp. 2d 1 (D.D.C. 2013) .................................................................................. 19 United States v. One Tyrannosaurus Bataar Skeleton, No. 12-cv-4760, 2012 WL 3947563 (S.D.N.Y. Sept. 7, 2012)................................ 6, 16 United States v. One White Crystal Covered Bad Tour Glove and Other Michael Jackson Memorabilia, No. 11-cv-3582, 2012 WL 8455336 (C.D. Cal. Apr. 12, 2012) .......................11, 18, 21 United States v. One White Crystal Covered Bad Tour Glove and Other Michael Jackson Memorabilia, No. 11-cv-3582, 2012 WL 8467453 (C.D. Cal. Sept. 6, 2012) .................................. 5, 6 ii CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 5 of 34 Page ID #:443 1 2 3 4 5 6 7 14 17 11 12 13 B O I E S , S C H I L L E R & F L E X N E R C A L I F O R N I A 10 M O N I C A , 9 S A N T A L L P 8 15 16 18 19 United States v. Piervinanzi, 23 F.3d 670 (2d Cir.1994) ............................................................................................. 20 United States v. Prevezon Holdings LTD., 122 F. Supp. 3d 57 (S.D.N.Y. 2015) ....................................................................... 14, 15 United States v. Real Property known as 2291 Ferndown Lane, Keswick VA 22947-9195, No. 10-cv-0037, 2011 WL 2441254 (W.D. Va. June 14, 2011) ................................... 19 United States v. Real Property known as Unit 5B of Onyx Chelsea Condo. Located at 261 W. 28th St., N.Y., N.Y. 10001-5933, No. 10 Civ. 5390 (GBD) (FM), 2011 WL 4359924 (S.D.N.Y. Sept. 19, 2011) .......... 25 United States v. Rogers, 321 F.3d 1226 (9th Cir. 2003) ....................................................................................... 20 United States v. Sanders, 929 F.2d 1466 (10th Cir. 1991) ..................................................................................... 18 United States v. Savage, 67 F.3d 1435 (9th Cir. 1995) ......................................................................................... 17 United States v. Seward, 272 F.3d 831 (7th Cir. 2001) ......................................................................................... 19 United States v. Ursery, 518 U.S. 267 (1996) ........................................................................................................ 6 United States v. Van Alstyne, 584 F.3d 803 (9th Cir. 2009) ......................................................................................... 17 United States v. Wilkes, 662 F.3d 524 (9th Cir. 2011) ......................................................................................... 19 United States v. Wynn, 61 F.3d 921 (D.C. Cir. 1995) ........................................................................................ 18 20 W.S. Kirkpatrick & Co. v. Environmental Tectonics Corp., Int’l, 493 U.S. 400 (1990) ...................................................................................................... 23 21 STATUTES 22 Malaysian Law: Malaysian Penal Code Section 415 .................................................................................................................... 16 23 24 25 26 27 Malaysian Law: Malaysian Penal Code Section 418 .................................................................................................................... 16 Malaysian Law: Malaysian Penal Code Section 166 .................................................................................................................... 16 UAE Law: Article 227 ..................................................................................................................... 16 28 iii CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 6 of 34 Page ID #:444 1 2 3 4 5 6 7 14 17 11 12 13 B O I E S , S C H I L L E R & F L E X N E R C A L I F O R N I A 10 M O N I C A , 9 S A N T A L L P 8 15 16 18 19 20 21 22 23 24 25 26 27 UAE Law: Article 229 ..................................................................................................................... 16 UAE Law: Article 5 ...................................................................................................................12, 13 United States Code Title 18, Section 1343.................................................................................................... 10 United States Code Title 18, Section 1956.................................................................................................... 16 United States Code Title 18, Section 1956 (c)(7)(B) .................................................................................... 11 United States Code Title 18, Section 1956(a)(1)(B) ..................................................................................... 19 United States Code Title 18, Section 1956(a)(1)(B)(i) ................................................................................. 17 United States Code Title 18, Section 1956(a)(2)(B) ............................................................................... 17, 19 United States Code Title 18, Section 1956(c)(7)(b)(iii).................................................................................. 7 United States Code Title 18, Section 1956(c)(7)(B)(iv) ................................................................................. 8 United States Code Title 18, Section 1957........................................................................................16, 20, 21 United States Code Title 18, Section 2314..........................................................................................9, 15, 16 United States Code Title 18, Section 2315..........................................................................................9, 15, 16 United States Code Title 18, Section 981(a)(1)(A) ................................................................................... 4, 16 United States Code Title 18, Section 981(a)(1)(C) ...............................................................................4, 5, 20 United States Code Title 18, Section 983(c) ................................................................................................... 5 United States Code Title 18, Section 983(d)(1) ............................................................................................ 21 United States Code Title 18, Section 983(d)(3)(A)....................................................................................... 21 28 iv CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 7 of 34 Page ID #:445 1 2 3 4 5 6 7 Federal Rules of Civil Procedure Rule 12(b)(6) ..................................................................................................................vi Federal Rules of Civil Procedure Rule 12(f)......................................................................................................................... 3 Federal Rules of Civil Procedure Rule 8(a)(2)...................................................................................................................... 4 C A L I F O R N I A F L E X N E R Federal Rule of Civil Procedure Rule 44.1..................................................................................................................13, 25 10 14 17 Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions Rule G(2)(f) ..................................................................................................................... 4 18 OTHER AUTHORITIES 19 January 26, 2016, Press Release, In Relation to the Investigation Papers Returned by MACC on SRC International and “Rm2.6 Billion,” available at http://bit.ly/1Pzcds5 ....................................................................................................... 23 11 12 13 & S C H I L L E R B O I E S , RULES M O N I C A , 9 United States Code Title 18, Section 983(d)(3)(A)(ii) .................................................................................. 22 S A N T A L L P 8 United States Code Title 18, Section 983(d)(3)(A)(i) ................................................................................... 22 15 16 20 Local Rules of the United States District Court, Central District of California Local Rule 7-3 ................................................................................................................vi Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions Rule E(2)(a) ..................................................................................................................... 4 Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions Rule G(1) ......................................................................................................................... 4 21 22 23 24 25 26 27 28 v CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 8 of 34 Page ID #:446 1 2 3 4 5 6 7 14 17 11 12 13 B O I E S , S C H I L L E R & F L E X N E R C A L I F O R N I A 10 M O N I C A , 9 S A N T A L L P 8 15 16 18 NOTICE OF MOTION AND MOTION TO ALL PARTIES AND THEIR COUNSEL OF RECORD: PLEASE TAKE NOTICE at 1:30 p.m. on March 13, 2017, or as soon thereafter as the parties may be heard, in the courtroom of the Honorable Dale S. Fischer of the United States District Court for the Central District of California, in Courtroom 7D, First Street Courthouse, 350 West 1st Street, Los Angeles, California 90012, Claimant 912 North Hillcrest Road (BH), LLC (“Hillcrest” or “Claimant”) will and hereby does move the Court for an Order, pursuant to Fed R. Civ. P. 12(b)(6) and Rule G of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions, dismissing Plaintiff United States of America’s Verified Complaint for Forfeiture In Rem (the “Complaint”) based on a failure to state a claim. This Motion is based on this Notice of Motion and Memorandum of Points and Authorities, the Declaration of Ali Al Hashimi dated January 13, 2017, the complete files and records of this action, and such further evidence or argument as may be presented at or before the hearing on this matter. This Motion is made following the conference of counsel pursuant to L.R. 7-3 which took place on January 6, 2017. Dated: February 10, 2017 Respectfully, 19 20 21 22 23 BOIES, SCHILLER & FLEXNER LLP Attorneys for Claimant 912 North Hillcrest Road (BH), LLC /s/ Matthew L. Schwartz MATTHEW L. SCHWARTZ 24 25 26 27 28 vi CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) PRELIMINARY STATEMENT 1 2 At 136 pages and 513 paragraphs long, the Government’s Complaint contains 3 allegations of how money allegedly originating with the Malaysian fund 1MDB 4 supposedly ended up being used to purchase various assets. But despite its length, the Complaint lacks basic and essential detail. Most 6 fundamentally, the Complaint fails to identify who committed the crimes that allegedly 7 give rise to forfeiture. Often written in the passive voice, the Complaint details a number 8 of transactions, but frequently fails to allege who was responsible for them. The 9 Complaint certainly never makes allegations sufficient to conclude that anyone C A L I F O R N I A 5 10 M O N I C A , 14 15 Claimant (and therefore the defendant property), Riza Aziz, is neither alleged to have 16 participated in any transactions involving 1MDB nor even to have knowledge of any 17 transactions involving 1MDB—let alone knowledge of any supposed misappropriation. 18 Thus, even taking the Complaint’s allegations at face value, Mr. Aziz plainly did not 19 engage in a money laundering transaction or any other offense. But without identifying 20 the person or persons the Government believes to be culpable, it is impossible to test the 21 adequacy of the Government’s allegations to determine whether the Complaint “state[s] misappropriated money from 1MDB with the requisite scienter, and fails to allege other 11 elements of the underlying offenses, as well. Moreover, the Complaint makes clear that 12 any alleged offenses were committed entirely abroad, without the sufficient nexus to the 13 United States required to invoke the jurisdiction of this Court. B O I E S , S C H I L L E R & F L E X N E R 1 S A N T A L L P Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 9 of 34 Page ID #:447 These deficiencies are fatal in this case. The alleged beneficial owner of the 22 23 24 25 26 27 28 1 Identical motions to dismiss pursuant to Rule 12(b)(6) are being filed on behalf of claimant Park Laurel Acquisition LLC in United States v. Real Property Located in New York, New York, No. 16-cv-05371-DSF (concerning “the Park Laurel Condominium”); on behalf of claimant 912 North Hillcrest Road (BH), LLC in United States v. Real Property Located in Beverley Hills, California, No. 16-cv-05377-DSF (“Hillcrest Property 1”); and on behalf of claimant Qentas Holdings Limited in United States v. Real Property Located in London, United Kingdom, Owned by Qentas Holdings, 16-cv-05380DSF (“Qentas Townhouse”). All three claimants are alleged to be beneficially owned by the same person, see Compl. ¶¶ 318, 329, 498, and the funds used to purchase all three defendant properties are alleged to have come from the same sources, see id. ¶¶ 203, 207. 1 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 10 of 34 Page ID #:448 1 sufficiently detailed facts to support a reasonable belief that the government will be able 2 to meet its burden of proof at trial,” as is required in civil forfeiture matters. Indeed, the 3 only facts that are clearly pled lead to the conclusion that the Claimant is an “innocent 4 owner” under the forfeiture laws. 6 judgment of forfeiture in this case would require the Court to second-guess and 7 undermine a sovereign decision of the Attorney General of Malaysia. Under the act of 8 state doctrine, U.S. courts must refrain from doing just that. RELEVANT ALLEGATIONS2 In relevant part, the Complaint alleges that in May 2012, a subsidiary of the 10 11 Malaysian “strategic investment and development company” 1Malaysia Development 12 Berhad (“1MDB”) raised approximately $1.75 billion in a bond issuance in order to 13 partially finance the acquisition of Tanjong Energy Holdings Sdn Bhd. Compl. ¶¶ 5, 14 122-23, 126. Those bonds were guaranteed by 1MDB and the International Petroleum 15 Investment Company (“IPIC”), an investment fund wholly-owned by the government of 16 Abu Dhabi. Id. ¶¶ 9, 131. 17 B O I E S , S C H I L L E R & C A L I F O R N I A 9 M O N I C A , F L E X N E R Finally, and separately, the Complaint must be dismissed for another reason: a S A N T A L L P 5 At the same time, 1MDB granted to Aabar Investments PJS Limited (“Aabar- 18 BVI”) an option to purchase up to 49% of the Tanjong Energy investment. Id. ¶ 134.3 19 1MDB also transferred to Aabar-BVI $576,943,490 in bond proceeds. Id. ¶¶ 146-47. 20 The Complaint alleges that Aabar-BVI transferred a total of $238 million to a 21 Singapore bank account in the name of Red Granite Capital Limited, of which $94.3 22 2 23 For purposes of this motion, the Court must assume that the Complaint’s nonconclusory allegations are true. See, e.g., Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 24 3 25 26 27 28 Aabar-BVI was allegedly similarly named to a subsidiary of IPIC called Aabar Investments PJS (“Aabar”). The Complaint alleges, without any factual support, that Aabar-BVI was “created and named [by someone who is not identified] to give the impression that it was associated with” Aabar, but that Aabar-BVI “has no genuine affiliation with Aabar or IPIC.” Compl. ¶ 10. Elsewhere, however, the Complaint alleges that Aabar-BVI’s directors were the Chairman and the CEO of Aabar, and that Aabar-BVI’s sole shareholder was Aabar, leading to the inference that Aabar-BVI was a legitimate foreign subsidiary of Aabar. See id. ¶¶ 31-32, 156. 2 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 11 of 34 Page ID #:449 1 million was transferred to an IOLA account at the law firm Shearman & Sterling. Id. 2 ¶¶ 202-203, 493. Funds in the Shearman IOLA account were then alleged to have been 3 used to purchase “Hillcrest Property 1,” the “Park Laurel Condominium,” and the 4 “Qentas Townhouse” (collectively, the “Defendant Properties”). Id. ¶¶ 320, 329, 496.4 beneficially owned by Riza Aziz, as is Red Granite Capital Limited. Indeed, Mr. Aziz 7 claimed ownership of the entities in his 2012 U.S. tax return, and properly disclosed the 8 transfer of funds from Aabar-BVI to Red Granite Capital Limited. Id. ¶¶ 204, 205, 318, 9 328, 498. Those funds, according to the Complaint, were reported as a gift under U.S. tax law, and Mr. Aziz, after discussion among his accountants and business manager, 11 obtained a letter documenting the gift, signed by the CEO of Aabar. See id. ¶¶ 205, 208, 12 32. Mr. Aziz also signed the deeds to the Qentas Townhouse and Park Laurel 13 Condominium, as well as a purchase and sale agreement to acquire Hillcrest Property 1. Id. ¶¶ 317, 329, 496. 10 14 16 way with transactions directly involving 1MDB, knew that the source of funds that Red 17 Granite Capital Limited received was allegedly from 1MDB (directly or indirectly), or 18 knew that Aabar-BVI was unaffiliated with Aabar or IPIC. B O I E S , S C H I L L E R & C A L I F O R N I A 6 M O N I C A , F L E X N E R According to the Complaint, the Defendant Properties are owned by entities S A N T A L L P 5 15 Importantly, nothing in the Complaint alleges that Mr. Aziz was involved in any 19 20 21 22 23 24 25 26 27 28 4 According to the Complaint, in addition to allegations about Aabar-BVI, funds were misappropriated from 1MDB in two other “phases.” These other phases relate to entities known as Good Star and Tanore, and the Complaint alleges that funds derived from these other phases were used to purchase other assets. See Compl. ¶ 4. However, no funds involved in the Good Star or Tanore phases are allegedly traceable to the Defendant Properties, so allegations about those phases, or about the properties involved in the Government’s other 15 cases, are “immaterial” and “impertinent” and should be disregarded. Fed. R. Civ. P. 12(f). 3 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 12 of 34 Page ID #:450 1 2 ARGUMENT I. 3 under 18 U.S.C. § 981(a)(1)(C), alleges that the Defendant Properties are “traceable” to 6 the “proceeds” of specified unlawful activity. Compl. ¶¶ 502-504. Its second, third, and 7 fourth claims, under 18 U.S.C. § 981(a)(1)(A), allege that the Defendant Properties were 8 “involved in” different kinds of money laundering offenses. Id. ¶¶ 505-513. But 9 notwithstanding its detailed allegations with respect to certain aspects of these C A L I F O R N I A 5 10 M O N I C A , 14 statement of the claim showing that the pleader is entitled to relief,” Fed. R. Civ. P. 15 8(a)(2), the Government’s complaint in a civil forfeiture case must “state sufficiently 16 detailed facts to support a reasonable belief that the government will be able to meet its 17 burden of proof at trial.” Supp. R. G(2)(f). 5 This heightened pleading standard is 18 necessary in light of the “drastic nature” of civil forfeiture. United States v. Daccarett, 6 19 F.3d 37, 47 (2d Cir. 1993) (“The particularity-of-pleading requirements in forfeiture 20 cases provide a way of ensuring that the government does not seize and hold, for a 21 substantial period of time, property to which, in reality, it has no legitimate claim.”) 22 (internal quotations omitted)). transactions, the Complaint fails to adequately plead any cognizable theory of liability as 11 to the Defendant Properties. 12 A. 13 Unlike most civil actions, in which the plaintiff need only plead “a short and plain Legal Standard B O I E S , S C H I L L E R & F L E X N E R The Complaint contains two essential theories of civil forfeiture. Its first claim, S A N T A L L P 4 THE COMPLAINT FAILS TO STATE A CLAIM AGAINST THE DEFENDANT PROPERTIES 23 24 25 26 27 28 “In addition, forfeiture in rem complaints must also meet the familiar Iqbal/Twombly plausibility standard.” United States v. One White Crystal Covered Bad 5 See also Supp. R. E(2)(a) (“the complaint shall state the circumstances from which the claim arises with such particularity that the defendant or claimant will be able, without moving for a more definite statement, to commence an investigation of the facts and to frame a responsive pleading”); see generally Supp. R. G(1) (incorporating Supplemental Rule E into civil forfeiture actions). 4 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 13 of 34 Page ID #:451 1 Tour Glove and Other Michael Jackson Memorabilia, No. 11-cv-3582, 2012 WL 2 8467453, at *2 (C.D. Cal. Sept. 6, 2012) (“Michael Jackson Memorabilia II”); see 3 generally Iqbal, 556 U.S. 678 (complaint must allege “sufficient factual matter” to state a 4 “plausible” claim); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (court should 5 disregard “labels and conclusions, and a formulaic recitation of the elements of a cause of 6 action” in assessing complaint). 7 Ultimately, the Government must satisfy its burden: C A L I F O R N I A 10 M O N I C A , 14 17 (1) the burden of proof is on the Government to establish, by a preponderance of the evidence, that the property is subject to forfeiture; 11 12 * 13 B O I E S , S C H I L L E R & F L E X N E R In a suit or action brought under any civil forfeiture statute for the civil forfeiture of any property— 9 S A N T A L L P 8 * * (3) if the Government’s theory of forfeiture is that the property was . . . involved in the commission of a criminal offense, the Government shall establish that there was a substantial connection between the property and the offense. 15 16 18 U.S.C. § 983(c). 18 Taken together, these standards require the government to plead “sufficiently 19 detailed facts” that are plausible and non-conclusory, and that “support a reasonable 20 belief that the government will be able to meet its burden of proof” in demonstrating that 21 the defendant properties are subject to forfeiture and (for certain theories) that there was a 22 “substantial connection between the property and the offense.” 23 B. The Complaint Fails to State a Claim Under 18 U.S.C. § 981(a)(1)(C) 24 The Complaint’s first claim for forfeiture fails for a simple reason: it does not 25 allege who supposedly committed what crime. Although the Complaint identifies four 26 alleged kinds of specified unlawful activity, nowhere does it identify allegedly criminal 27 acts, or who committed them. But it is fundamental to civil forfeiture that someone must 28 have committed a crime. The failure to specifically allege who committed what crime 5 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 14 of 34 Page ID #:452 1 renders the Complaint hopelessly defective. See United States v. $39,000 in Canadian 2 Currency, 801 F.2d 1210, 1220 (10th Cir. 1986). The Complaint is also deficient with 3 respect to its allegations of the particular specified unlawful activities. 4 1. 7 committed a crime that could give rise to forfeiture. See United States v. One 8 Tyrannosaurus Bataar Skeleton, No. 12-cv-4760, 2012 WL 3947563, at *2 (S.D.N.Y. 9 Sept. 7, 2012) (“The Verified Complaint must set forth a basis for believing that some C A L I F O R N I A F L E X N E R U.S. 267, 284 (1996), the Government has the burden of showing that someone has 10 person who engaged in the prohibited conducted [sic]—not necessarily the claimant— 11 had the requisite knowledge.”). It is for that reason that civil forfeiture complaints filed 12 in this District routinely identify who allegedly committed the offense giving rise to 13 forfeiture. See, e.g., United States v. One 2006 Mercedes-Benz R350, No. 12-cv-07651, 14 2013 WL 877724 (C.D. Cal. Mar. 7, 2013) (identifying the perpetrator of alleged wire 15 fraud and money laundering); Michael Jackson Memorabilia II, 2012 WL 8467453 16 (identifying who engaged in the alleged extortion and/or misappropriation, theft, or 17 embezzlement). 6 B O I E S , S C H I L L E R & 6 M O N I C A , Even though civil forfeiture cases proceed in rem, see United States v. Ursery, 518 S A N T A L L P 5 The Complaint Fails To Allege That Anyone Committed A Crime 18 19 20 21 22 23 24 25 26 27 28 6 The Complaints in both the One 2006 Mercedes-Benz and Michael Jackson Memorabilia cases, attached hereto as Exhibits A and B, explicitly allege who the Government believed had committed the underlying crimes. See Complaint ¶ 9, United States v. One 2006 Mercedes-Benz R350, No. CV12-7651-ODW-JEM (C.D. Cal. filed Sept. 6, 2012) (“On or about January 2006 and continuing into 2011, Cuccia embezzled substantial sums of money from his former employer, Lionsgate Entertainment, . . . in a kickback scheme he orchestrated with Larry Collins”) (attached as Exh. A); Second Amended Complaint ¶¶ 31-32, Michael Jackson Memorabilia, No. 11-cv-03582-GW-SS (C.D. Cal. filed June 11, 2012) (alleging that “Nguema and other members of the Inner Circle have gained enormous wealth through violations of E.G. law, including extortion, bribery and the misappropriation, theft, and embezzlement of public funds,” and that “Nguema, Michael J. Berger . . . , and George Nagler . . . , and others engaged in a conspiracy to commit bank fraud against financial institutions in the United States”) (Exh. B); see also, e.g., Complaint ¶ 8, United States v. $29,400.00 in U.S. Currency, No. 14-cv-00722-JVS-AN (C.D. Cal. filed May 16, 2014) (alleging that “Quang (also known as ‘Tony’) and Tran were conspiring with Pham to transport the proceeds of transactions in controlled substances”) (Exh. C); Complaint ¶ 7, United States v. Real Prop. in Safety Harbor, Florida, No. 09-cv-00716-JVS-AN (C.D. Cal. filed June 17, 2009) (“The government alleges that while aboard the cruise ship, Kocontes strangled Kanesaki to 6 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 15 of 34 Page ID #:453 1 The Complaint in this case, however, is conspicuously silent on this point. To be 2 sure, it alleges an “international conspiracy to launder money misappropriated” from 3 1MDB—but it fails to identify the alleged co-conspirators, or the allegedly criminal acts. 4 Compl. ¶ 5. At best, it at various points asserts that “1MDB officials and others 5 misappropriated and fraudulently diverted” money. Id. ¶ 9. 7 Given that the Complaint 6 identifies multiple relevant 1MDB officials, however, this allegation (which is of course 7 purely conclusory) provides no guidance. 14 17 S C H I L L E R B O I E S , The Complaint’s deficiency in this regard is compounded by the variety of specified unlawful activities alleged. For example, it alleges that the Defendant Properties are traceable to fraud by or against a foreign bank, a violation of 18 U.S.C. 11 § 1956(c)(7)(b)(iii). But nowhere does the Complaint allege (by name or otherwise) 12 13 & F L E X N E R C A L I F O R N I A 10 M O N I C A , 9 S A N T A L L P 8 15 16 18 19 20 21 22 23 24 25 26 27 28 death and threw her overboard into the sea.”) (Exh. D); Complaint ¶ 12, United States v. $61,098.00 in Money Orders, No. 08-cv-06066-DSF-CW (filed Sept. 16, 2008) (describing fraudulent student visa scheme and alleging that from “in or about 1999, and continuing to on or about April 9, 2008, in Los Angeles County, Zaman, and others, knowingly and with intent to defraud, devised, participated in, and executed a scheme to defraud and to obtain money and property by means of false and fraudulent material pretenses and representations, and the concealment of material facts.”) (Exh. E). Even when the Government declines to identify the person by their proper name, civil forfeiture complaints in this District typically identify the alleged perpetrator with particularity. See, e.g., Complaint ¶ 9, United States v. $985,000.00 in Escrow Funds, No. 14-cv-09114-DMG-E (C.D. Cal. filed Nov. 25, 2014) (alleging that the “owner” of a specific “retail store” use the store to fence stolen merchandise, and “directed associates to conduct robberies/burglaries targeting high-end merchandise, at times even providing co-conspirators with residential addresses to rob/burglarize”) (Exh. F). 7 A single paragraph of the Complaint identifies three individuals (none of whom are alleged to be 1MDB officials) who allegedly “knew that [certain] funds had been misappropriated from 1MDB and/or IPIC, and they intended to deprive 1MDB and/or IPIC of ownership over the funds.” Compl. ¶ 185. That allegation, made “upon information and belief,” relates solely to certain downstream transactions between the entities the Complaint refers to as Aabar-BVI, Blackstone, and Vasco, and its allegations of knowledge are limited to “at the time” of those downstream transactions. Id. The only other explicit allegations of knowledge or wrongdoing in the Complaint relate to even more remote transactions, involving the acquisition of other properties allegedly subject to forfeiture in the related cases. See Compl. ¶ 384 (alleging, upon information and belief, that an individual knew funds misappropriated from 1MDB were used to invest in EMI Music); ¶ 414 (alleging, upon information and belief, that an individual knew funds misappropriated from 1MDB were used to invest in the Park Lane Hotel). There are no allegations anywhere in the Complaint that anyone knew funds were being misappropriated from 1MDB at the time of the alleged misappropriation. 7 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) The allegations concerning the “Aabar-BVI Phase” do not mention any foreign banks 3 other than to identify where certain accounts were held, and there is no allegation that any 4 of them were defrauded, misled, or exposed to the risk of loss in any way. See, e.g., 5 Compl. ¶¶ 145, 146. Even when the Complaint alleges that “false” statements or 6 documents were provided to foreign banks (in connection with other “phases” not 7 traceable in any way to the Defendant Property), it offers no allegation or reason to 8 believe that the person who made the relevant statement or presented the relevant 9 document knew it to be false at the time. See, e.g., id. ¶¶ 43, 64, 67, 76.8 10 11 foreign offense under Malaysian or United Arab Emirates law involving the 12 misappropriation of public funds by or for the benefit of a public official, in violation of 13 18 U.S.C. § 1956(c)(7)(B)(iv). But, again, the Complaint fails to allege who the relevant 14 public official might be. As alleged, funds travelled from 1MDB to Aabar-BVI to Red 15 Granite Capital Limited to Shearman & Sterling, where they were used to pay for the 16 Defendant Properties. Since Mr. Aziz—whom the Complaint describes as being in the 17 motion picture industry, see Compl. ¶ 204—is alleged to be the beneficial owner of the 18 Defendant Properties, the funds plainly were not used “for the benefit of” a public 19 official. That leaves the possibility that the funds were misappropriated “by” a public 20 official. But who? To be sure, the Complaint alleges that various people were “public 21 officials.” See id. ¶¶ 25-28, 31. But the only acts of “public officials” alleged to be 22 involved in conduct resulting in the creation or transfer of funds used to purchase the Likewise, the Complaint alleges that the Defendant Properties are traceable to a B O I E S , S C H I L L E R & F L E X N E R 2 C A L I F O R N I A which foreign bank was defrauded in a transaction traceable to the Defendant Properties. M O N I C A , 1 S A N T A L L P Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 16 of 34 Page ID #:454 23 24 25 26 27 28 8 As an example (not in any way related to the Aabar-BVI phase or the Defendant Properties), the Complaint alleges that a statement by one person in May 2011 was “materially inconsistent” with a representation made by someone else nearly two years earlier, in September 2009. Compl. ¶ 97. At best, an allegation like this demonstrates that one of those two people was wrong. But without some reason to believe that the later speaker was aware of the earlier statement, the Complaint does not adequately allege that the statement was knowingly false. Worse, in this particular example, it is the earlier statement that is supposedly false. Plainly the earlier speaker could not have been aware of something said almost two years later. 8 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 17 of 34 Page ID #:455 1 Defendant Properties (i.e., in the “Aabar-BVI Phase”) is entirely innocent: • 1MDB Officer 2 signed an engagement agreement with Goldman Sachs relating 2 3 to the bond issuance. Compl. ¶ 123. • 1MDB Officer 3 served as “a primary point of contact” with Goldman Sachs. 4 5 Id. ¶ 124. • Agreements related to IPIC’s guarantee of the bonds were signed by 1MDB 6 • The agreement granting Aabar-BVI options to purchase an interest in Tanjong 9 Energy was signed by 1MDB Officer 2 (and another person who is not alleged C A L I F O R N I A 8 10 12 alleged “public officials” in generating the funds that are supposedly traceable to the 13 Defendant Properties.9 Notably, the Complaint does not allege who directed a single M O N I C A , 14 payment in the alleged chain between 1MDB and the Defendant Properties; instead it 15 relies on the passive voice. See, e.g., Compl. ¶ 202 (alleging that money “was transferred 16 directly” between accounts). By filing a single form complaint in all 16 cases, the 17 Government’s pleading sweeps in numerous allegations that simply have nothing to do 18 with conduct that allegedly gives rise to the forfeiture of the Defendant Properties. But 19 stripped of this extraneous material, the relevant allegations are simply insufficient. to be a “public official”). Id. ¶ 134. 11 That is the sum total of the Complaint’s allegations regarding the conduct of B O I E S , S C H I L L E R & F L E X N E R Officer 2 and the Chairman of Aabar. Id. ¶ 131. S A N T A L L P 7 20 Next, the Complaint alleges that the Defendant Properties are traceable to 21 international transportation of stolen property or money, in violation of 18 U.S.C. 22 §§ 2314-2315. These statutes both require someone to “knowing[ly]” transfer or receive 23 stolen property or money. So who is the person that the Complaint alleges acted 24 25 26 27 28 9 The same section of the Complaint makes other reference to “public officials” without describing any actions allegedly taken by them. For example, the Complaint describes a Certificate of Incumbency, which stated that Aabar-BVI was incorporated in March 2012, that its directors were Aabar’s Chairman and its CEO, and that its sole shareholder was Aabar. Compl. ¶ 156. There is no allegation that Aabar’s Chairman or CEO were involved with either creating Aabar-BVI or obtaining this Certificate. See id. ¶¶ 157-58. 9 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 18 of 34 Page ID #:456 1 “knowingly”? Who, for that matter, “stole” the property or money in the first place? The 2 Complaint does not say. proceeds of wire fraud, in violation of 18 U.S.C. § 1343. Again, the Complaint does not 5 identify the acts of alleged wire fraud. The Complaint does allege that the offering 6 circular for 1MDB’s bonds “contained misleading statements and omitted material facts 7 necessary to make its representations not misleading”—language that evokes the anti- 8 fraud statutes. Compl. ¶ 133. Even putting aside that these are the sort of conclusory 9 allegations and legal recitations that courts must ignore under Iqbal and Twombly, the 10 Complaint is silent on who made these misleading statements and omissions, and whether 11 they were made with the requisite intent to defraud. See, e.g., $39,000 in Canadian 12 Currency, 801 F.2d at 1220 (affirming dismissal of civil forfeiture complaint where “the 13 complaint fails to assert facts supporting a reasonable inference that the money was 14 involved in a drug transaction. It specifies no date or location of any purported or 15 intended exchange, no dollar amount of such an exchange, no specific type or quantity of 16 controlled substance, and no identified participant . . . . These claims of unidentified 17 parties and unspecified conduct neither give a claimant a reasonable starting point from 18 which to initiate a meaningful investigation nor permit a responsive pleading that can 19 address identities, quantities, locations, or dates of an alleged offense. These unsupported 20 and conclusory allegations do not meet any definition of the word ‘particularity.’”). B O I E S , S C H I L L E R & C A L I F O R N I A 4 M O N I C A , F L E X N E R Finally, the Complaint alleges that the Defendant Properties are traceable to the S A N T A L L P 3 21 At best, the Complaint alleges that one of the world’s most well-known investment 22 banks issued an offering circular containing statements that turned out not to be true. 23 That is not sufficient to state a claim for wire fraud. See In re GlenFed, Inc. Sec. Litig., 24 42 F.3d 1541, 1548-49 (9th Cir. 1994) (“[I]t is clearly insufficient for plaintiffs to say that 25 the later, sobering revelations make the earlier, cheerier statement a falsehood . . . . [A] 26 plaintiff must set forth, as part of the circumstances constituting fraud, an explanation as 27 to why the disputed statement was untrue or misleading when made.”), rev’d on other 28 10 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 19 of 34 Page ID #:457 1 grounds, 60 F.3d 591 (9th Cir. 1995). 2 2. 3 6 does not adequately allege several material elements of the offenses that supposedly give 7 rise to forfeiture. Because the Government has failed to adequately allege a predicate 8 specified unlawful activity, its forfeiture claims must fail. United States v. One White 9 Crystal Covered Bad Tour Glove and Other Michael Jackson Memorabilia, No. 11-cv- C A L I F O R N I A crime, or a basis to infer that anyone acted with the requisite intent—the Complaint also 10 M O N I C A , 14 17 3582, 2012 WL 8455336, at *3 (C.D. Cal. Apr. 12, 2012) (“Michael Jackson 11 Memorabilia I”) (“[T]he Government must, at a minimum, plead specific allegations that 12 specific instances of criminal activity took place.”). 13 a. B O I E S , S C H I L L E R & F L E X N E R In addition to its most basic failing—not alleging who supposedly committed what 5 S A N T A L L P 4 The Complaint Fails to Plead the Elements of the Alleged Predicate Specified Unlawful Activity 15 16 18 19 20 21 22 23 24 The Complaint fails to adequately plead violation of foreign law. With respect to the alleged violations of UAE law, the Complaint does not adequately allege that any relevant person was a “public official” under UAE law. See 18 U.S.C. § 1956 (c)(7)(B) (iv). 10 Instead, the Complaint assumes that Aabar’s Chairman (who was also IPIC’s Managing Director) is a “public official” under UAE law, Compl. ¶ 31, presumably because IPIC and Aabar are owned by the UAE government. Id. ¶¶ 20-21. This conclusory assertion is wrong: the fact that IPIC and Aabar are owned by the UAE government does not transform them into governmental agencies, nor their employees into public officials. The Complaint seemingly acknowledges this fact, alleging only that Aabar’s Chairman was a public official, but not its CEO. Id. ¶¶ 30-31. The Complaint’s error is grounded in two simple mistranslations of UAE law. As 25 26 27 28 The Complaint Does Not Adequately Allege “An Offense Against A Foreign Nation” 10 For the reasons stated in Section I.B.1, supra, the Complaint fails to adequately allege any violation of Malaysian law related to the Aabar-BVI Phase—the only phase allegedly giving rise to the forfeiture of the Defendant Asset. 11 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Complaint erroneously translates the relevant UAE law to read “[t]he following shall ipso 3 jure be considered a public official.” See Compl., Attachment B. But properly 4 translated, that section refers to “public employees” (Al Hashimi Decl. ¶ 8), not public 5 officials—an important distinction. The Complaint similarly mistranslates another phrase 6 from Article 5, subsection 5, as “associations and public corporations”; properly 7 translated, the phrase refers to “public institutions and establishments.” Id. As the Al 8 Hashimi Declaration makes clear, these subtle mistranslations obscure key distinctions 9 that render the Complaint’s allegations insufficient under UAE law. 10 14 17 “public official” under UAE law simply because Aabar and IPIC are owned by the 18 government of the UAE is insufficient. He is not alleged to occupy an “administrative, 19 legislative or judicial position[]” or to “have certain authorities given to [him] by law.” 20 Id. ¶ 9(b). As detailed in the Al Hashimi Declaration, UAE law distinguishes between public 11 employees—who are employees of the public sector—and public officials, who are a 12 subset of public employees with “administrative, legislative or judicial positions whether 13 elected or appointed; they are decision-makers and have certain authorities given to them by law.” Id. ¶ 9(b). Put differently, to be a public official under UAE law requires more 15 than just employment in the public sector. B O I E S , S C H I L L E R & F L E X N E R 2 C A L I F O R N I A described in the accompanying Declaration of Ali Al Hashimi (“Al Hashimi Decl.”), the M O N I C A , 1 S A N T A L L P Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 20 of 34 Page ID #:458 16 21 Applying these standards, the Complaint’s allegation that Aabar’s Chairman was a Even if the terms “public official” and “public employee” were interchangeable— 22 and they are not (id. ¶¶ 8-9)—employees of IPIC and Aabar are not even clearly public 23 employees under UAE law. As described in the Al Hashimi Declaration, government- 24 owned companies such as IPIC and Aabar are not necessarily “public institutions and 25 establishments” (the proper translation) under Article 5. To the contrary, although IPIC 26 was established by law and is state-owned, it is “a private commercial enterprise and its 27 employees cannot be deemed to be public officials or even public employees.” Id. ¶ 9(e) 28 12 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 21 of 34 Page ID #:459 1 (also describing decision of UAE Federal Supreme Court holding that state-owned 2 telecom operator—established by law and whose board is chaired by the minister of 3 transportation and includes five members appointed by the Council of Ministers to 4 represent the government—is a private corporation rather than a public establishment). establishments,” and that Aabar’s Chairman was a “public official,” the Complaint still 7 fails to plead a claim under UAE law. As the Al Hashimi Declaration explains, Article 5 8 is inapplicable where a public employee’s acts are outside his role as a public employee. 9 Id. ¶ 12. In such cases, the person would be punished under the general provisions of the 10 Penal Code rather than those specifically applicable to public employees. Id. Here, the 11 Complaint alleges that money from 1MDB was diverted to Aabar-BVI, see Compl. 12 ¶ 118, while at the same time alleging that Aabar-BVI “was not a legitimate subsidiary of 13 Aabar or IPIC operating within the bounds of any authority granted by Aabar or IPIC,” 14 id. ¶ 158 (emphasis supplied). Taking these (entirely conclusory) allegations as true, the 15 only reasonable inference is that to the extent any Aabar or IPIC officers were involved 16 with Aabar-BVI, they did so outside of “the bounds of any authority granted by Aabar or 17 IPIC”—rendering Article 5 inapplicable. B O I E S , S C H I L L E R & C A L I F O R N I A 6 M O N I C A , F L E X N E R Finally, even assuming that Aabar and IPIC are “public institutions and S A N T A L L P 5 18 For these reasons, the forfeiture claims based on UAE law fail. To the extent there 19 is any dispute about what UAE law requires, moreover, open questions should be 20 resolved at the threshold. Under Federal Rule of Civil Procedure 44.1, questions of 21 foreign law are legal issues to be decided by the Court at the pleading stage, where the 22 Court can determine whether the complaint states a claim under the foreign law and (if it 23 does) define relevant questions for discovery and trial. See de Fontbrune v. Wofsy, 838 24 F.3d 992, 1000 (9th Cir. 2016) (directing courts to “consider[] foreign legal materials— 25 including expert testimony and declarations—at the pleading stage”). 26 27 28 13 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 22 of 34 Page ID #:460 1 To adequately plead wire fraud, the Complaint must allege facts that, if proven, would establish an offense that is “sufficiently domestic” to be actionable under U.S. law. 4 See United States v. Prevezon Holdings LTD., 122 F. Supp. 3d 57, 70 (S.D.N.Y. 2015) 5 (“Prevezon Holdings”). The Complaint’s allegations of wire fraud contain no such facts, 6 and cannot overcome the presumption against extraterritoriality. See Morrison v. Nat’l 7 Australia Bank Ltd., 561 U.S. 247, 266 (2010) (“[T]he presumption against 8 extraterritoriality would be a craven watchdog indeed if it retreated to its kennel 9 whenever some domestic activity is involved in the case.”). C A L I F O R N I A 3 10 11 that was routed through New York was not sufficient to overcome the presumption 12 against the wire fraud statute’s extraterritorial application. 122 F. Supp. 3d at 71. 13 Likewise, in Petroleos Mexicanos v. SK Engineering & Construction Co., 572 Fed. M O N I C A , 14 Appx. 60, 61 (2d Cir. 2014) (unpublished), the Second Circuit affirmed the dismissal of a 15 RICO claim predicated on wire fraud, despite three domestic contacts: (i) obtaining 16 financing, (ii) sending invoices to a U.S. bank for payment, and (iii) having the bank 17 issue payment in the United States. Id. The District Court in that case had held that the 18 claims were extraterritorial notwithstanding these domestic acts because “they allege a 19 foreign conspiracy against a foreign victim conducted by foreign defendants participating 20 in foreign enterprises.” No. 12 Civ. 9070, 2013 WL 3936191, at *3 (S.D.N.Y. July 30, 21 2012), aff’d 572 Fed. Appx. 60, 61 (“The allegations of domestic conduct are simply 22 insufficient”). See also Norex Petroleum Ltd. v. Access Indus., Inc., 631 F.3d 29, 33 (2d 23 Cir. 2010) (“simply alleging that some domestic conduct occurred cannot support a claim 24 of domestic application [of a RICO claim]”). In Prevezon Holdings (a civil forfeiture action), the court held that a wire transfer B O I E S , S C H I L L E R & F L E X N E R The Complaint Does Not Allege a Domestic Wire Fraud S A N T A L L P 2 b. 25 26 27 28 Here, the Aabar-BVI phase falls short of even the level of domestic contact present in Petroleos Mexicanos. The Complaint alleges the existence of a wholly foreign scheme: the alleged conspirators (whoever they are) were located abroad, took all 14 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 23 of 34 Page ID #:461 1 2 3 4 5 relevant action while abroad, and used foreign banks to further their alleged scheme. The only domestic contact alleged to give rise to forfeiture in the Complaint is that some of the alleged wire transfers were processed through U.S. correspondent bank accounts. See, e.g., Compl. ¶¶ 145, 146, 150, 152.11 Of course, certain of the Defendant Properties are themselves in the United States. 6 7 14 17 11 12 13 B O I E S , S C H I L L E R & F L E X N E R C A L I F O R N I A 10 M O N I C A , 9 S A N T A L L P 8 15 16 18 19 But where wire fraud is the specified unlawful activity to which the funds for the Defendant Properties are allegedly traceable, the purchase of the property itself cannot be the required domestic contact, as the underlying violation would effectively merge into the transaction in question. That is, if the property is traceable to the “proceeds” of wire fraud, then the wire fraud necessarily predated the property’s acquisition. See Prevezon Holdings, 122 F. Supp. 3d at 72 (government’s argument “confuses the underlying SUA (by the Organization) with the later alleged money laundering (by [defendant])”). For similar reasons, any domestic activity related to the “Good Star” or “Tanore” phases— which, to be clear, also consists only of correspondent banking activity, see, e.g., Compl. ¶¶ 104-105—or related to the acquisition of any of the defendant assets in the 15 other civil forfeiture actions filed by the Government, are irrelevant to determining whether the Defendant Property in this case represents the proceeds of a sufficiently domestic wire fraud. c. 20 Each of the four alleged specified unlawful activities also requires the Government 21 22 23 24 25 The Complaint Does Not Adequately Allege Scienter to plead scienter. See United States v. Jinian, 725 F.3d 954, 960 (9th Cir. 2013) (wire fraud); United States v. All Assets Held in Account No. XXXXXXX, 83 F. Supp. 3d 360, 375 (D.D.C. 2015) (18 U.S.C. §§ 2314 and 2315); see also Dowling v. United States, 473 U.S. 207, 214 (1985) (Section 2314). And both the Malaysian and UAE laws cited in the 26 27 28 11 Many of these alleged transfers are in no way traceable to the Defendant Properties. 15 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 24 of 34 Page ID #:462 1 Complaint likewise contain scienter requirements. 12 labels. This is, of course, a corollary to the fact that the Complaint fails to state who 4 allegedly committed any offense. But beyond simply identifying an alleged perpetrator, 5 the Complaint must allege that that person acted with the requisite intent, which it fails to 6 do. See One Tyrannosaurus Bataar Skeleton, 2012 WL 3947563, at *2 (dismissing civil 7 forfeiture alleging violations of 18 U.S.C. §§ 2314 and 2315: “the Verified Complaint 8 must set forth a basis for believing that some person who engaged in the prohibited 9 conducted [sic]—not necessarily the claimant—had the requisite knowledge”). C A L I F O R N I A 3 10 C. 11 The Complaint’s second, third, and fourth claims fare no better than its first. 12 Those claims, under 18 U.S.C. § 981(a)(1)(A), allege that the Defendant Properties were 13 “involved in” a money laundering transaction. But the Complaint does not allege a M O N I C A , 14 plausible basis for believing that the acquisition of the Defendant Properties—the 15 purchase of real estate at significant prices that the Complaint does not claim were 16 anything other than fair market prices—represents an act of money laundering. 17 The Complaint Fails to State a Claim Under 18 U.S.C. § 981(a)(1)(A) B O I E S , S C H I L L E R & F L E X N E R The Complaint is devoid of allegations of scienter, save for a few conclusory S A N T A L L P 2 1. 18 19 20 The Complaint Fails to Adequately Allege Money Laundering Because It Fails to Adequately Allege Any Specified Unlawful Activities All offenses under 18 U.S.C. §§ 1956 and 1957 are of course predicated upon an underlying commission of some specified unlawful activity. For the reasons given above, 21 22 23 24 25 26 27 28 12 See, e.g., UAE Law [as translated in Attachment C to the Complaint] Article 227 (“Punishment by term imprisonment shall be inflicted upon any public official . . . who willfully prejudices such an interest in order to gain advantage for himself or for another person); Article 229 (“A prison term not exceeding five years shall be inflicted upon any one who willfully commits an act of fraud” (emphases added)); see also Al Hashimi Decl. ¶ 10. Malaysian Penal Code [as translated in Attachment B to the Complaint] Section 166 (“whoever, being a public servant, knowingly…”); Section 405 (“whoever . . . dishonestly misappropriates . . .”); Section 415 (“whoever . . . (a) fraudulently or dishonestly . . . (b) intentionally induces . . .”); Section 418 (“whoever cheats with knowledge . . .” (emphases added)). 16 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 25 of 34 Page ID #:463 1 the Complaint fails to adequately allege any such offense, and as a result its money 2 laundering allegations also must fail. See United States v. Savage, 67 F.3d 1435, 1441 3 (9th Cir. 1995) (“Congress considered money laundering to be separate conduct 4 occurring after the completion of the underlying criminal offense.”), partially abrogated 5 on other grounds, United States v. Van Alstyne, 584 F.3d 803, 813 (9th Cir. 2009). 6 7 The Complaint’s third and fourth claims allege that the Defendant Properties were “involved in” a money laundering transaction in violation of 18 U.S.C. § 1956(a)(1)(B)(i) and § 1956(a)(2)(B), i.e., a transaction in the proceeds of specified unlawful activity that 11 was knowingly “designed in whole or in part . . . to conceal or disguise the nature, the 12 location, the source, the ownership, or the control of the proceeds of specified unlawful 13 activity,” or (in the case of Section 1956(a)(2)(B) only) to “avoid a transaction reporting requirement.” But the Complaint does not allege that the purchases of the Defendant 15 Properties were designed to conceal or avoid anything. 10 14 17 beneficial owner of the Defendant Properties—engaged in each transaction openly and 18 transparently. The Complaint states, for example, that he claimed beneficial ownership 19 of the various entities that possessed, directly or indirectly, the Defendant Properties on 20 his U.S. tax returns. See Compl. ¶¶ 318 (Kreger Trading Inc. / Hillcrest Property 1), 328 21 (Sorcem Investments Inc. / Park Laurel Condominium), 498 (Qentas Holdings Limited / 22 Qentas Townhouse). He also is alleged to have signed all of the relevant transaction 23 documents in his own name. Id. ¶¶ 317 (Hillcrest Property 1), 326 (Park Laurel 24 Condominium), 496 (Qentas Townhouse). B O I E S , S C H I L L E R & C A L I F O R N I A 9 M O N I C A , F L E X N E R The Complaint Fails to Allege that the Acquisition of the Defendant Property Was Intended to Conceal the Source of Funds S A N T A L L P 8 2. 16 25 Far from alleging concealment, the Complaint alleges that Mr. Aziz—the alleged These facts—which the Government itself alleges—are simply inconsistent with 26 any conceivable allegation that the transactions were “designed” to “conceal or disguise.” 27 Indeed, numerous courts have found that the “undisguised purchase, registration, and 28 17 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 26 of 34 Page ID #:464 1 use” of property that is allegedly the illegal proceeds of money laundering is 2 “inconsistent with a motivation to conceal the ownership of the illegal proceeds.” See 3 United States v. Wynn, 61 F.3d 921, 925 (D.C. Cir. 1995) (citing United States v. 4 Sanders, 929 F.2d 1466, 1472-73 (10th Cir. 1991)). 7 Properties together contain no allegations of scienter related to the real estate transaction, 8 the property owners (Claimants Qentas Holdings Limited, Park Laurel Acquisition LLC, 9 and 912 North Hillcrest Road (BH), LLC), or their alleged beneficial owner, Mr. Aziz. C A L I F O R N I A F L E X N E R these transactions. The 33 paragraphs (out of 513) devoted to all three Defendant 10 Moreover, the Complaint does not make any allegations that would permit the inference 11 that Mr. Aziz knew that funds used to acquire the properties were traceable to 1MDB (let 12 alone any crime), or that the real estate transaction itself had some purpose to conceal or 13 disguise criminal activity. 13 According to the Complaint, Mr. Aziz was not involved in 14 any transaction with 1MDB and was not involved in any conversation or written 15 exchange concerning 1MDB whatsoever. Indeed, the face of the Complaint offers no 16 basis to infer that Mr. Aziz had even heard of 1MDB at the time of these transactions. 17 B O I E S , S C H I L L E R & 6 M O N I C A , The Complaint simply does not allege that anyone intended to disguise anything in S A N T A L L P 5 18 19 20 21 22 23 24 25 26 27 28 13 With respect to Hillcrest Property 1, the Complaint alleges its acquisition was done in a way “to obscure the ownership, source, and control of the assets.” Compl. ¶ 322. The only basis for this entirely conclusory allegation is that the property was sold “through the sale of a holding company . . . rather than the direct sale of the property itself.” Id. This allegation is wholly insufficient to support a plausible claim of concealment money laundering. Real estate is regularly transferred in this manner, for many entirely legitimate reasons, and the Complaint contains no non-conclusory motive for the transaction. See Michael Jackson Memorabilia I, 2012 WL 8455336, at *5 (finding that Claimant’s “use of shell companies and corporations . . . to purchase luxury items, are commonplace financial arrangements and do not readily, without further allegations, support the reasonable belief that the Government will be able to meet its burden of proof at trial.”). Moreover, this is not the sort of transaction that can support a concealment charge as a matter of law. The Supreme Court has held that in order to constitute concealment, the transaction itself must be designed to conceal—it is not enough to allege that the manner in which the transaction occurred was confidential. Compare Regalado Cuellar v. United States, 553 U.S. 550, 563 (2008) (holding “merely hiding funds during transportation is not sufficient to violate the statute, even if substantial efforts have been expended to conceal the money. . . . In this context, ‘design’ means purpose or plan; i.e., the intended aim of the transportation.”) with Compl. ¶ 322 (transfer was “effectuated” through sale of holding company to conceal). 18 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 27 of 34 Page ID #:465 1 See United States v. One Gulfstream G-V Jet Aircraft, 941 F. Supp. 2d 1, 15 (D.D.C. 2 2013) (dismissing complaint that alleged “inner circle” of corrupt officials stole public 3 funds from Equatorial Guinea, noting that “careful scrutiny of the complaint reveals that 4 [the Claimant] is often implicated by association only” and “other allegations make no 5 mention of [the Claimant] whatsoever”). “traceable to property involved in” a money laundering transaction, it may not point to 8 the alleged theft of funds from 1MDB or misappropriation from IPIC as a money 9 laundering transaction. “[T]ransactions that created the criminally-derived proceeds must C A L I F O R N I A 7 10 M O N I C A , 14 Properties were intended to conceal or disguise anything, its third and fourth claims must 15 be dismissed. See United States v. $1,399,313.74 in U.S. Currency, 591 F. Supp. 2d 365, 16 373 (S.D.N.Y. 2008) (dismissing forfeiture action because “the Government does not 17 allege that Claimants knew that their transactions with [peso broker] were ‘designed . . . 18 to conceal or disguise.”); United States v. Real Prop. known as 2291 Ferndown Lane, 19 Keswick VA 22947-9195, No. 10-cv-0037, 2011 WL 2441254, at *6 (W.D. Va. June 14, 20 2011) (dismissing 1956(a)(1)(B) claim where “[n]owhere . . . does the government allege 21 that the purchase of the Defendant Property was consummated in order to conceal the 22 source of illicit funds”). be distinct from the money-laundering transaction.” United States v. Wilkes, 662 F.3d 11 524, 545 (9th Cir. 2011) (quoting United States v. Seward, 272 F.3d 831, 836 (7th Cir. 12 2001)). 13 Because the Complaint fails to allege that the purchases of the Defendant B O I E S , S C H I L L E R & F L E X N E R Finally, to the extent that the Complaint alleges that the Defendant Properties are S A N T A L L P 6 23 The Complaint’s fourth claim is deficient for one additional reason: money 24 laundering in violation of 18 U.S.C. § 1956(a)(2)(B) requires allegations that funds were 25 transferred internationally into or out of the United States. As alleged, the only transfer 26 involved in the acquisition of any of the Defendant Properties (as distinct from the 27 alleged underlying theft) that travelled internationally were those funds transferred from 28 19 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 28 of 34 Page ID #:466 1 Red Granite Capital Limited’s accounts in Singapore to the Shearman IOLA in the 2 United States, which ultimately were used to buy all three of the Defendant Properties. 3 See Compl. ¶¶ 206-207. This transfer is alleged to have been executed by Mr. Aziz, id. 4 ¶ 206, but as explained above, the Complaint does not allege facts giving rise to an 5 inference that he acted either with the intent to conceal—he disclosed the transfer in his 6 U.S. taxes, see id. ¶¶ 318, 328, 498—or that he knew the funds represented the proceeds 7 of specified unlawful activity. C A L I F O R N I A 9 The Complaint Fails to Allege that the Acquisition of the Defendant Properties Violated 18 U.S.C. § 1957 10 11 “involved in” a violation of 18 U.S.C. § 1957. Compl. ¶ 506. See United States v. 12 Rogers, 321 F.3d 1226, 1229 (9th Cir. 2003). The same infirmities that plague the 13 Complaint’s § 981(a)(1)(C) claim (related to property traceable to criminal proceeds) M O N I C A , 14 render this claim flawed. As described above, see supra Section I.B.1, the Complaint 15 fails to allege that any of the participants in the purchase of the Defendant Properties 16 knew they involved criminal property. See United States v. French, 748 F.3d 922, 936 17 (9th Cir. 2014) (reversing § 1957 conviction where “government has not pointed to any 18 evidence from which a rational trier of fact could infer that French knowingly engaged in 19 a monetary transaction involving criminal property”); see also Rubin v. Briscoe, No. 12- 20 cv-10140, 2013 WL 1700957, at *5 (C.D. Cal. Apr. 18, 2013) (finding § 1957 allegations 21 deficient where plaintiffs failed to “connect any particular monetary transactions or 22 unlawful activity to the money laundering predicate, nor does he allege whether 23 the. . . Defendants had the requisite intent to launder funds in furtherance of a RICO 24 scheme.” (internal quotations omitted)).14 The Complaint’s second claim for relief alleges that the Defendant Properties were B O I E S , S C H I L L E R & F L E X N E R 3. S A N T A L L P 8 25 26 27 28 14 For purposes of alleged violation of Section 1957, moreover, the Government may not rely upon the knowledge of the seller, because a property seller, as the recipient of funds, does not “engage in a monetary transaction.” See, e.g., United States v. Piervinanzi, 23 F.3d 670, 677 (2d Cir.1994); Kimberlin v. Nat’l Bloggers Club, No. GJH13-3059, 2015 WL 1242763, at *9 (D. Md. Mar. 17, 2015). 20 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 29 of 34 Page ID #:467 mental state in a transaction allegedly giving rise to the forfeiture of the Defendant 3 Properties in particular. It is not enough to allege that some participant had the 4 appropriate mental state in some transactions alleged in this sprawling complaint, wholly 5 unrelated to the Defendant Properties. See Michael Jackson Memorabilia I, 2012 WL 6 8455336, at *4 (“While the Complaint does allege specific transactions and includes facts 7 such as when, where, from whom and to whom various sums were transferred, and then 8 proceeds to connect such transactions to the purchase of the Defendant Assets, the 9 Complaint is puzzlingly silent as [to] facts showing that such transactions involved C A L I F O R N I A 2 10 11 Stripped of extraneous allegations, the chain of alleged transactions relevant to the 12 Defendant Properties is comparatively brief: the Complaint alleges that the proceeds of a 13 1MDB bond issuance were transferred to Aabar-BVI, and then to Red Granite Capital M O N I C A , 14 Limited where they were used to purchase the Defendant Properties. To make a 15 forfeiture claim based on § 1957, the Complaint must allege that somewhere in this 16 chain—and not in other, unrelated transactions—there was a money laundering 17 transaction made with the requisite knowledge. And, as discussed above, the Complaint 18 fails to make any such allegation. 19 II. proceeds derived from an SUA, as required to prove money laundering.”). B O I E S , S C H I L L E R & F L E X N E R As noted above, the Complaint must allege that someone acted with the requisite S A N T A L L P 1 20 21 22 23 24 25 26 27 28 THE COMPLAINT CONCLUSIVELY ESTABLISHES THAT CLAIMANT IS AN “INNOCENT OWNER” The Complaint should also be dismissed because it conclusively establishes that the Claimant—the alleged 100% owner of the property, and the only claimant in this action—is an “innocent owner” under the forfeiture laws. See 18 U.S.C. § 983(d)(3)(A). Although this is an affirmative defense not ordinarily evaluated on a motion to dismiss, see id. § 983(d)(1), plaintiffs can plead themselves out of court by making allegations that establish the defense. See Sams v. Yahoo! Inc., 713 F.3d 1175, 1179 (9th Cir. 2013); Goddard v. Google, Inc., 640 F. Supp. 2d 1193, 1199-1200 n.5 (N.D. Cal. 2009). The Complaint alleges that Claimants acquired each of the Defendant Properties at 21 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) value.” 18 U.S.C. § 983(d)(3)(A)(i). The Complaint also alleges the second prong of the 3 innocent owner defense, because it alleges facts that establish that each Claimant (and its 4 alleged beneficial owner, Mr. Aziz) “did not know and was reasonably without cause to 5 believe that the property was subject to forfeiture.” Id. § 983(d)(3)(A)(ii). As detailed 6 above, the Complaint fails to allege that Claimant or Mr. Aziz was involved in or knew 7 about any transactions with 1MDB. Rather, the Complaint alleges that the CEO of an 8 Abu Dhabi investment fund gave Mr. Aziz a gift based on their “close personal 9 relationship.” Compl. ¶ 209. After receiving advice from tax professionals, Mr. Aziz 10 13 believed the funds to be entirely legitimate. In addition to procuring the supporting letter 14 from Aabar’s CEO, the CEO also publicly stated that he funded Red Granite Pictures 15 (another entity allegedly associated with Mr. Aziz). Id. ¶¶ 217-18. Mr. Aziz is alleged to 16 have entered into every transaction in his own name or through an entity that he reported 17 on his U.S. tax returns, signed every document personally, and to have employed the 18 services of lawyers, accountants and business managers in doing so. Id. ¶¶ 208, 317, 326, 19 496. All of this establishes that Claimants “did not know and w[ere] reasonably without 20 cause to believe that the property was subject to forfeiture.” 18 U.S.C. 21 § 983(d)(3)(A)(ii). 22 III. then secured a letter from Aabar’s CEO documenting the gift, which he used to support 11 his U.S. tax filings. Id. 12 The facts alleged in the Complaint further establish that Mr. Aziz and Claimants B O I E S , S C H I L L E R & F L E X N E R 2 C A L I F O R N I A a significant price, Compl. ¶¶ 317, 329, 496, making them “bona fide purchaser[s] . . . for M O N I C A , 1 S A N T A L L P Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 30 of 34 Page ID #:468 23 24 25 26 27 28 THE COMPLAINT SHOULD BE DISMISSED UNDER THE ACT OF STATE DOCTRINE Finally, the Complaint must be dismissed for one independent reason: the Government will not be able to prove its case without requiring this Court to secondguess a sovereign decision of a foreign nation. As a result, the “act of state” doctrine requires that the Complaint be dismissed. Under that doctrine, U.S. courts may not “question the validity of public acts (acts 22 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 31 of 34 Page ID #:469 1 jure imperii) performed by other sovereigns within their own borders, even when such 2 courts have jurisdiction over a controversy in which one of the litigants has standing to 3 challenge those acts.” Republic of Austria v. Altmann, 541 U.S. 677, 700 (2004); see also 4 W.S. Kirkpatrick & Co. v. Envtl. Tectonics Corp., Int’l, 493 U.S. 400, 406 (1990). Malaysian Attorney General. But the act of state doctrine “precludes any review,” 7 Federal Treasury Enterprise Sojuzplodoimport v. Spirits International B.V., 809 F.3d 8 737, 743 (2d Cir.), cert. denied, 137 S. Ct 160 (2016), of the validity of the Attorney 9 General’s findings that certain of the transactions described in the Complaint were C A L I F O R N I A 6 10 M O N I C A , 14 17 Complaint, and found them to be entirely innocent and unrelated to 1MDB. See 18 generally Jan. 26, 2016, Press Release, In Relation to the Investigation Papers Returned 19 by MACC on SRC International and “Rm2.6 Billion,” available at http://bit.ly/1Pzcds5 20 (Exh. G). 15 Second, the Attorney General instructed the MACC to close its investigation 21 of the allegedly diverted 1MDB funds. Id. (“I will return the relevant investigation 22 papers to MACC today with the instruction to close the three investigation papers[.]”). 23 Although those findings pertain to only some of the transactions detailed in the 24 Complaint, the Government’s entire theory of the case presupposes that the Malaysia genuine and legitimate, and that no criminal conduct occurred in connection with those 11 transactions. See generally Compl. ¶ 263 (referring to AG’s statements). These 12 actions—and the Attorney General’s simultaneous instruction to the Malaysian Anti- 13 Corruption Commission (“MACC”) to close its investigations—constitute “acts of state” and, under the act of state doctrine, “the acts of foreign sovereigns taken within their own 15 jurisdictions shall be deemed valid.” W.S. Kirkpatrick, 493 U.S. at 409. B O I E S , S C H I L L E R & F L E X N E R Here, the Complaint seeks relief that would effectively invalidate two acts by the S A N T A L L P 5 16 First, the Attorney General investigated certain of the transactions identified in the 25 26 27 28 15 The Attorney General’s press release is quoted at length in paragraph 263 of the Complaint, and so appropriately considered on this motion. See generally Daniels-Hall v. Nationals Educ. Ass’n., 629 F.3d 992, 998 (9th Cir. 2010). 23 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 32 of 34 Page ID #:470 1 Attorney General’s findings are factually and legally invalid. There is therefore no way 2 for this litigation to proceed without a ruling from this Court on whether the Malaysian 3 Attorney General’s sovereign functions were illegitimate. 16 bars claims based on conduct that a foreign governmental body investigated and decided 6 not to act upon. 422 F. Supp. 1280, 1281 (D. Del. 1976), aff’d, 564 F.2d 89 (3d Cir. 7 1977). There, the President of Mexico created commissions that refused to recognize 8 claims asserted by the plaintiff. D’Angelo held that the commissions’ actions were acts 9 of state of the Mexican government and thus required the court to abstain from revisiting C A L I F O R N I A 5 10 12 invalid Malaysia’s Attorney General’s official acts performed within Malaysia’s own 13 territory. As such, this Court should invoke the act of state doctrine and dismiss the M O N I C A , 14 Complaint. Liu v. Republic of China, 642 F. Supp. 297, 302-03 (N.D. Cal. 1986) 15 (“Clearly, a lawsuit that calls into question the propriety and thoroughness with which 16 another country has investigated and prosecuted wrongdoing by high level [government] 17 officials involving such a serious offense . . . touches ‘sharply on national nerves.’”) 18 (quoting Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 428 (1964)). As the 19 Second Circuit recently explained, “[i]f deference by any measure is to mean anything, it 20 must mean that a U.S. court not embark on a challenge to a foreign government’s official 21 representation to the court regarding its laws or regulations, even if that representation is 22 inconsistent with how those laws might be interpreted under the principles of our legal 23 system.” In re Vitamin C Antitrust Litig., 837 F.3d at 189. the claims or reviewing the proceedings before the commissions. Id. at 1288-89. 11 Just as in D’Angelo, the Government here is requesting this Court to declare B O I E S , S C H I L L E R & F L E X N E R The court in D’Angelo v. Petroleos Mexicanos held that the act of state doctrine S A N T A L L P 4 24 25 26 27 28 16 The Complaint’s broader allegations involving embezzlement from 1MDB and Aabar, and the acts of various foreign officials, likewise implicate questions of international comity that also require dismissal. See generally Timberlane Lumber Co. v. Bank of Am., N.T. & S.A., 549 F.2d 597, 614–15 (9th Cir. 1976); see also Trader Joe’s Co. v. Hallatt, 835 F.3d 960, 972-73 (9th Cir. 2016) (citing Timberlane); In re Vitamin C Antitrust Litig., 837 F.3d 175, 184 (2d Cir. 2016) (applying Timberlane test “[t]o determine whether to abstain from asserting jurisdiction on comity grounds”). 24 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 33 of 34 Page ID #:471 1 advance of any such hearing, Claimants will be prepared to submit to the Court “relevant 5 materials to aid in the interpretation of the [foreign law], including [additional] written or 6 oral expert testimony accompanied by extracts from various kinds of foreign legal 7 materials and foreign statutes, foreign judicial cases, and foreign law treatises.” United 8 States v. Real Prop. Known as Unit 5B of Onyx Chelsea Condo. Located at 261 W. 28th 9 St., N.Y., N.Y. 10001-5933, No. 10 Civ. 5390 (GBD) (FM), 2011 WL 4359924, at *2 10 14 17 11 (S.D.N.Y. Sept. 19, 2011). Dated: February 10, 2017 Respectfully, 12 13 & F L E X N E R 4 C A L I F O R N I A Civil Procedure 44.1, the Court should conduct a hearing on Malaysian and UAE law. In M O N I C A , S C H I L L E R B O I E S , The Complaint should be dismissed. Alternatively, pursuant to Federal Rule of 3 S A N T A L L P 2 CONCLUSION 15 16 18 19 20 21 22 BOIES, SCHILLER & FLEXNER LLP Attorneys for Claimant 912 North Hillcrest Road (BH), LLC /s/ Matthew L. Schwartz MATTHEW L. SCHWARTZ 575 Lexington Ave. New York, New York 10022 Telephone: (212) 446-2300 Fax: (212) 446-2350 E-mail: mlschwartz@bsfllp.com Karen Y. Paik (SBN 288851) 401 Wilshire Boulevard, Suite 850 Santa Monica, California 90401 Telephone: (310) 752-2400 Fax: (310) 752-2490 E-mail: kpaik@bsfllp.com 23 24 25 26 27 28 25 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6) Case 2:16-cv-05377-DSF-PLA Document 53 Filed 02/10/17 Page 34 of 34 Page ID #:472 3 Hillcrest Road (BH), LLC’s Motion to Dismiss the Verified Complaint for Forfeiture In 4 Rem Pursuant to Fed. R. Civ. P. 12(b)(6), as well as the accompanying Declaration of Ali 5 Al Hashimi and its attachments were electronically filed on February 10, 2017, with the 6 Clerk of the Court using the CM/ECF system thereby sending notice of electronic filing 7 to all counsel of record. In addition, I hereby certify that a true and correct copy of the 8 foregoing was served by e-mail on Assistant U.S. Attorneys John J. Kucera and Christen 9 Sproule. C A L I F O R N I A I hereby certify that a true and correct copy of the foregoing Claimant 912 North 10 M O N I C A , 14 17 11 DATED: February 10, 2017 12 /s/ Matthew L. Schwartz MATTHEW L. SCHWARTZ 13 B O I E S , S C H I L L E R & F L E X N E R CERTIFICATE OF SERVICE 2 S A N T A L L P 1 15 16 18 19 20 21 22 23 24 25 26 27 28 26 CLAIMANT 912 NORTH HILLCREST ROAD (BH), LLC’S MOTION TO DISMISS THE VERIFIED COMPLAINT FOR FORFEITURE IN REM PURSUANT TO FED. R. CIV. P. 12(b)(6)