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United States v. Any and All Funds on Deposit in Account No. 12671905

August 10, 2010

UNITED STATES OF AMERICA, PLAINTIFF,
v.
ANY AND ALL FUNDS ON DEPOSIT IN ACCOUNT NO. 12671905, HELD IN THE NAME OF LANDLOCKED SHIPPING COMPANY AT WELLS FARGO BROKERAGE SERVICES, LLC, AND ALL INTEREST AND OTHER PROCEEDS TRACEABLE THERETO, ANY AND ALL FUNDS ON DEPOSIT IN ACCOUNT NO. 0578010886, HELD IN THE NAME OF LANDLOCKED SHIPPING COMPANY AT WELLS FARGO BANK, N.A., AND ALL INTEREST AND OTHER PROCEEDS TRACEABLE THERETO, AND ONE MERCEDES S600 FOUR-DOOR SEDAN, BEARING VEHICLE IDENTIFICATION NUMBER WDBGA57G5XA421548 DEFENDANTS-IN-REM.



The opinion of the court was delivered by: Harold Baer, Jr., District Judge

OPINION & ORDER

In this action, the United States Government seeks forfeiture of a vehicle and funds from the sale of a multi-million dollar chateau allegedly connected to the criminal activity of Victor Kozeny. In 2005, Kozeny was indicted for, inter alia, money laundering and Foreign Corrupt Practices Act violations, but he has to date resisted extradition efforts from his residence in the Bahamas. According to the Government, Kozeny used the property at issue here, known as "Peak House," as part of a fraudulent investment scheme related to the privatization of state-owned businesses in the Republic of Azerbaijan. The claimants, Dr. Jitka Chvatik and the Landlocked Shipping Company, assert that they are the rightful owners of the funds from the sale of Peak House, and have moved to dismiss this action on summary judgment as precluded by the relevant statute of limitations. The Government cross-moved, and argues that the claimants lack standing, are barred by the fugitive disentitlement doctrine, and that the statute of limitations was tolled for long enough to allow this action to proceed. For the reasons that follow, the claimants' motion is GRANTED.

I. BACKGROUND

The United States Government ("Government") seeks to obtain the proceeds from the sale of a residential real estate property located in Aspen, Colorado. The real estate, a residence located at 2137 Red Mountain Road, was known as "Peak House," and the funds from its sale are known as the "Peak House funds." See Pl.'s Local Civ. R. 56.1 Stmt. of Undisputed Material Facts in Supp. of Mot. to Strike or for Summ. J. ("Pl.'s 56.1"), ¶ 19, 75. After suit was initiated, a verified claim was filed by Landlocked Shipping Company ("Landlocked"), a Turks and Caicos Islands corporation, and Dr. Jitka Chvatik ("Chvatik"), a German citizen and retired medical doctor, (collectively, "Claimants"), asserting ownership of the Peak House funds. See Verified Claim (May 7, 2009) (Docket No. 4).

This suit arises out of civil and criminal litigations related to the affairs of Victor Kozeny ("Kozeny"), a wealthy international businessman implicated in investment fraud, money laundering, and Foreign Corrupt Practices Act violations. Dr. Chvatik is the mother of Victor Kozeny. Pl.'s 56.1 ¶ 1. In 1997 and 1998, Kozeny became involved in a program to purchase options and vouchers issued by the Republic of Azerbaijan as part of the country's plan to privatize certain state-owned businesses. Id. ¶ 9.*fn1 Around that same time, the Peak House property in Aspen, Colorado, was purchased. The nature of the acquisition, and who ultimately owned and controlled the property, is the primary subject of dispute in this proceeding.

According to the Government, the home was purchased and controlled by Kozeny and associated corporate entities. Peak House was purchased by Landlocked for about $19.75 million on or around June 6, 1997. Pl.'s 56.1 ¶ 22. The sole shareholder of Landlocked is another corporate entity, Apollo Nominees Limited ("Apollo"). Id. ¶ 3. Claimants note, and the Government does not dispute, that Chvatik is the principal and sole beneficiary of Apollo, and also the sole beneficial owner of Landlocked. Id. ¶ 4; Quelch Decl. ¶ 7; Chvatik Decl. ¶ 12. The Government contends that Landlocked shares characteristics with other "shell" companies of which Kozeny was a director, specifically that it was incorporated by the same law firm, the same lawyer facilitated the transfer of money for the upkeep of the property, and that all of these companies treat Chvatik as beneficiary. Pl.'s 56.1 ¶¶ 9-17. According to the Government, another entity, "Daventree," of which Kozeny is a director, provided funds to finance the purchase of Peak House. Id. ¶¶ 14-16.*fn2 Finally, another entity, Peak House Corporation, provided transportation, maintenance, and services for Peak House. Id. ¶ 7. Chvatik is not a beneficiary of Peak House Corporation, and testified that she has no knowledge of who controlled it; the corporation's services for the home were often funded by corporate entities associated with Kozeny. See id. ¶¶ 8, 35-40.

Kozeny was involved in the purchase, use, and sale of Peak House. In 1997, he visited Aspen to view suitable properties for purchase, and spoke to Heidi Houston, a real estate broker, about purchasing the property. Id. ¶¶ 20-21. Kozeny is listed as the buyer of Peak House on a hand-written document from the real estate closing. Id. ¶ 24. The Government further claims, based on affidavits from those associated with Kozeny's investment scheme, that Kozeny held himself out to others as the owner of Peak House. Id. ¶ 26. Additionally, Kozeny had the water and electricity service transferred to his name, his assistant directed the real estate agent not to show the house without Kozeny's authorization, spoke to the manager of Peak House about various construction projects on the property and their funding, and retained and paid an interior design firm to decorate the home. Pl.'s 56.1 ¶¶ 27-28, 41-53. Kozeny spent parts of various months from 1997 to 1999 at Peak House, entertained guests at the residence, and conducted meetings and other events associated with the Azerbaijan investment program at the home, most notably a black tie Christmas party in 1997. Id. ¶¶ 29-32. In 1999, Kozeny communicated with Houston about the sale of Peak House, which ultimately occurred in 2001 for about $22 million. See id. ¶¶ 56-58, 70, 75. An itemized list of property of Peak House provided in connection with the sale indicates certain items monogrammed with a "K" or "VK." Id. ¶ 71.

Although some of the general points above are not in dispute, Claimants paint a very different picture as to how Landlocked, and by extension Chvatik, came to own and control Peak House. Claimants explain that Chvatik's father was a very successful and wealthy businessman, who asked Chvatik to take control of his business affairs and arrange for an estate plan to protect his assets. See Resp. by Claimants Landlocked Shipping Company and Dr. Jitka Chvatik to Pl.'s Local Civ. R. 56.1 Stmt. ("Claimant's 56.1 Resp.") ¶¶ 95-98. As part of this plan, a number of trusts were established to benefit Chvatik, one of which, the Caribbean Yachting Trust, later called Epsilon Trust, directed the formation of Landlocked in October 1995. Id. ¶¶ 99-107. As noted above, Chvatik is the beneficiary of the trust that holds the capital shares of Landlocked, and the Trustee is obligated to pay her any income Landlocked receives. See Chvatik Decl. ¶¶ 11-12. With regard to the source of the funds, Claimants assert that despite Kozeny's role as director of the Daventree trust, it was Chvatik who directed that funds from Daventree Limited be used by Landlocked to purchase Peak House. See Lester Decl., Ex. 6 at 77-78 (Chvatik Dep., Oct. 30, 2009) (hereafter "Chvatik Dep."); Chvatik Decl. ¶ 19.

According to Claimants, Chvatik decided to purchase Peak House in 1997 as an investment and because of her interest in a ski resort residence. Chvatik Dep. 77-80. In 1996, Chvatik had been looking at residences at ski resorts in Europe, and also made visits to ski areas in the United States, including Aspen. Claimant's 56.1 Resp. ¶¶ 114-15. In March 1997, Kozeny informed Chvatik that he and his family would be vacationing in Aspen. Chvatik, who was undergoing medical treatment at the Mayo Clinic in Minnesota at the time, asked him to look into properties for her. Id. ¶ 116-17. Kozeny told Chvatik about Peak House around that same time, and sent her brochures and other materials about the real estate. Id. ¶ 118-19. She asked her attorney, Dr. Hans Bodmer of von Meiss Blum, a Swiss law firm, who also allegedly performed work for Kozeny, to acquire Peak House through one of her trusts; the firm engaged a United States law firm, Chopin Miller, to represent Landlocked in the acquisition. Id. ¶¶ 121-22; see also Pl.'s 56.1 ¶¶ 11, 18, 25. Bodmer sent documents to Chvatik that confirmed the Peak House purchase. Claimant's 56.1 Resp. ¶¶ 125-26.*fn3

After the purchase, Chvatik made "many" vacation trips to Peak House from 1997 to 2000. Claimant's 56.1 Resp. ¶¶ 127. She also allowed her sons, including Victor Kozeny, to use Peak House, and even granted Kozeny permission to make changes to its interior. Id. ¶¶ 128-29. Chvatik also issued instructions to Apollo, the trustee entity that controlled Landlocked, to execute contracts to rent and, eventually, sell Peak House and invest the proceeds into Landlocked's bank account. Id. ¶¶ 131-32; Quelch Decl. ¶ 13. Chvatik also signed income tax returns on behalf of Landlocked to report receipts of the rentals. Claimant's 56.1 Resp. ¶¶ 133.

In 2001, Chvatik directed Chopin Miller, with the assistance of a real estate agent and another Colorado law firm, to sell the Peak House property. Id. ¶¶ 134-35.

Peak House, and later the Peak House funds, became the subject of litigation when Kozeny's investment scheme failed. In or around the summer of 1998, Kozeny told several investors in the investment program that privatization of Azerbaijan's businesses would not occur, and that their investment was worthless. Some of the investors confronted Kozeny, suspicious that they were defrauded. Pl.'s 56.1 ¶ 55. On December 17, 1999, Marlwood Commercial Inc., an entity that had purchased vouchers and options as part of Kozeny's program, filed suit against Kozeny in London and, as a result, an order was issued freezing up to $17 million of Kozeny's assets worldwide. Id. ¶ 59.*fn4 More significantly, another set of investors brought suit against Kozeny, Landlocked, and Peak House Corporation in the District of Colorado. Id. ¶ 62. On June 12, 2000, Federal District Court Judge Lewis T. Babcock issued a preliminary injunction that prohibited the sale, disposition, or other transfer of ownership of Peak House. Id. As part of this order, Judge Babcock made a series of factual findings, which concluded that there was sufficient evidence to find that Kozeny owned and controlled Peak House. Id. ¶¶ 63-64, 67-68. James Nesland, currently counsel for Claimants in this action, was also counsel for Kozeny in the Colorado litigation. Id. ¶ 69. On November 2, 2001, with Judge Babcock's authorization, Peak House was sold for $22 million with proceeds deposited in accounts held in Landlocked's name at Wells Fargo Bank, N.A. Id. ¶¶ 70-73, 75.

Between 2003 and 2005, a series of individuals associated with Kozeny and his Azerbaijan investment scheme pled guilty to violations of the Foreign Corrupt Practices Act ("FCPA") and conspiracy to launder money. See Pl.'s 56.1 ¶¶ 76-78. In 2005, pursuant to a sealed indictment, Kozeny was charged with one count of engaging in a conspiracy to violate the FCPA, twelve counts of substantive violations of the FCPA, six counts of violations of the Travel Act, one count of money laundering conspiracy, and four counts of money laundering.

Id. ¶ 79; see also Sealed Indictment, United States v. Kozeny, No. 05 Cr. 518 (SAS) (Docket No. 1) (unsealed on Oct. 6, 2005). As part of the indictment, the Government asserted the Peak House funds were subject to criminal forfeiture. Sealed Indictment, ¶ 83(a)(v). On February 13, 2009, Judge Scheindlin issued a restraining order that prohibited the disposition of the Peak House funds. See Post-Indictment Restraining Order, February 13, 2009 (Docket No. 167). At the time he was indicted, Kozeny resided in the Bahamas. Pl.'s 56.1 ¶ 80. The Government attempted to extradite Kozeny, and he was initially arrested by Bahamanian authorities, but the arrest and extradition were overturned by the Supreme Court in the Bahamas and he was released. Id. ¶¶ 81-86. As of the date that summary judgment motions were filed in this action, ...


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