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UNITED STATES v. HERBAWI

July 16, 1997

UNITED STATES OF AMERICA, Plaintiff,
v.
ALI HERBAWI, Re: 599 Chili Avenue, Rochester, New York, Defendant.



The opinion of the court was delivered by: LARIMER

 This is a forfeiture proceeding regarding 599 Chili Avenue, Rochester, New York ("the property"). Ali Herbawi ("Herbawi") holds legal title to the property. Pending before the Court are the petitions of William F. McGrath ("McGrath") and Mahmoud Abed ("Abed"), which seek adjudication of their alleged interests in the property.

 FACTS

 A. Background

 On November 25, 1996, Herbawi pleaded guilty to a money laundering conspiracy in this Court. Pursuant to his plea agreement, Herbawi agreed to forfeit any interest he had in the property as the record title holder, although at the time of the plea, Herbawi disclaimed any interest in or right to the property. A preliminary order of forfeiture was entered on January 27, 1997. Subsequently, McGrath and Abed filed petitions claiming an interest in the property, pursuant to 21 U.S.C. § 853(n).

 McGrath is the holder of a Note and Mortgage executed by Ali Herbawi on July 2, 1992--the date McGrath transferred the property by deed to Herbawi. (Exs. C, D, N). The Government concedes that McGrath has a legal interest in the property as the first mortgagee and has agreed to exempt that interest from the order of forfeiture.

 Abed claims that he is the equitable owner of the property, even though the legal title to the property is in Herbawi's name. The Government moved to dismiss Abed's petition. I denied the motion, finding that Abed had made a prima facie showing that he has an interest in the property, and ordered that a hearing be held to adjudicate his interest.

 On its motion to dismiss, the Government argued essentially that Abed's interest in the property was merely an equitable interest, which did not constitute a "legal right, title, or interest in the property" under 21 U.S.C. § 853(n)(6)(A). According to the Government, Abed was not entitled to relief from this Court, but was required, instead, to petition the Attorney General for relief under 21 U.S.C. § 853(i).

 In rejecting the Government's position, I determined that the phrase "legal right, title, or interest in the property" has been interpreted broadly to include both equitable and legal interests in forfeited property. United States v. Schwimmer, 968 F.2d 1570, 1582 (2d Cir. 1992); United States v. Lavin, 942 F.2d 177, 185 (3d Cir. 1991); United States v. Reckmeyer, 836 F.2d 200, 205 (4th Cir. 1987). Therefore, those third parties who are able to demonstrate that they have a specific interest in the property, whether it be legal or equitable, may seek relief from the court adjudicating the forfeiture under 21 U.S.C. § 853(n). All other third parties who do not have a specific interest in the property, but merely assert general claims (such as general unsecured creditors), must seek relief from the Attorney General under 21 U.S.C. § 853(i). See Lavin, 942 F.2d at 185.

 B. Hearing Regarding Abed's Interest in the Property

 At the hearing, which took place on June 30, 1997 and July 3, 1997, Abed testified and called three other witnesses, John Gatti, Miguel Reyes, and Herbawi. Numerous exhibits also were introduced. Other than cross-examining the petitioner's witnesses, the Government offered no evidence or witnesses in rebuttal and in defense of its claim to the property. I find that the evidence offered at the hearing fairly established the following:

 John Gatti, the real estate broker for McGrath, showed the property to Abed on April 27, 1992. Abed then negotiated with Gatti regarding the purchase of the property. Ultimately, Abed, acting as power of attorney for Ismail Sleem, entered into a purchase and sale contract for the property. (Ex. A). This deal, however, was never closed. (Ex. M).

 A second contract for the sale of the property was executed on May 8, 1992 between Abed's uncle, Mohammed Salem Suleiman ("Suleiman"), and McGrath. (Ex. B). The terms of this contract provided for a $ 20,000 down payment and a $ 45,000 purchase money mortgage to be held by McGrath.

 Abed attended the closing on July 2, 1992 with a power of attorney from Suleiman, (Ex. H), which was executed at the United States Consulate in Jerusalem, where Suleiman apparently then resided. Also present at the closing was Abed's uncle, Herbawi, who was familiar with powers of attorney that had been executed in foreign countries. Frank Maggio ("Maggio"), McGrath's attorney, refused to accept the power of attorney for execution of the purchase money mortgage, even though Miguel Reyes, Abed's attorney, assured him that it was valid. Maggio was concerned that Suleiman was unknown to him, did not live in this country, and provided little security should a law suit result from this transaction. At that point, it ...


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