This case comes before the court on an interpleader complaint brought by the United States to determine the proper recipients of approximately $8 million previously seized by the U.S. in a criminal case. The U.S. has filed a motion for letters rogatory in order to serve foreign interpleader defendants, including the Federative Republic of Brazil. Two other interpleader defendants--Barry Fischer Law Firm, LLC ("Fischer") and the liquidators of Trade and Commerce Bank ("TCB")--oppose this motion and have filed a motion to dismiss Brazil as an interpleader defendant. The TCB liquidators have also filed a motion to permit execution on judgment.
The motions to dismiss Brazil and to permit execution on judgment are denied. Plaintiff's motion for letters rogatory is granted.
This case arises out of a series of financial frauds perpetrated by the Peirano family in Uruguay. Ultimately these frauds helped precipitate a financial crisis in Uruguay that nearly brought down the country's banking system, where the Peirano family owned nearly four out of every ten banks. The Peiranos involved in this fraud are currently imprisoned in Uruguay. Many of those who aided the Perianos are either imprisoned or on trial in other South American countries, including Brazil.
The Downfall of Trade and Commerce Bank
One of the banks brought down by these frauds was TCB, a British Virgin Islands ("BVI " ) entity, of which the Peiranos were principals. It appears that money was looted from TCB by the Peiranos and laundered with the help of interpleader defendants Kesten Development Corporation ("Kesten" ), a BVI corporation; its parent, Turist-Cambio Viagens Turismo LTDA ("Turist" ), a Brazilian company; and various principals of these companies.
In the aftermath of the bank's failure, depositors and investors lost millions of dollars and Kesten and Turist eventually went out of business. TCB entered bankruptcy and liquidators--interpleader defendants Richard E.L. Fogerty and G. James Cleaver--were appointed.
In January 1999, prior to the crisis at TCB, the DEA obtained warrants to seize the contents of bank accounts maintained by Kesten and Turist at bank branches in the U.S. Kesten's account contained $6,871,042.36 and Turist's account contained $1,345,771.64. These funds are the subject of the current interpleader action.
In 2000, the U.S. instituted a forfeiture action against Kesten and Turist. The forfeiture complaint alleged that the seized funds were involved in a drug money laundering conspiracy headed by a South American money exchanger, Markos Glikas. Glikas was convicted of conspiracy to commit money laundering in March 1999. As part of the conspiracy, Glikas allegedly delivered drug proceeds to Antonio Pires de Almeida ("Pires"), the former owner of Turist, who would then launder the money through various intermediate accounts, ultimately depositing it in Kesten's and Turist's accounts. Interpleader defendant Fischer represented Kesten and Turist in the forfeiture action. After protracted litigation, the forfeiture action was ultimately dismissed. U.S. v. $8,221,877.16, No. 00cv2667, slip op. (D.N.J. July 6, 2004).
Following this dismissal, but before the funds could be returned to Kesten and Turist, two Brazilian criminal courts entered restraining orders in Brazil against the funds. On January 24, 2005, the Brazilian Federal Prosecution Service obtained a "criminal complaint" against Pires and the other former principals of Kesten and Turist, who were previously the beneficial owners of the funds at issue in the current interpleader action. As part of the criminal proceedings, Brazil formally requested that the U.S. restrain the funds as they may be part of a future criminal forfeiture proceeding in Brazil. The United States District Court for the District of Columbia granted the U.S. a restraining order on January 26, 2005 pending the outcome of the Brazilian criminal proceedings.
While the District of Columbia litigation was ongoing, the liquidators of TCB revived the previously defunct Kesten and obtained a BVI judgment of approximately $16 million against Kesten for its role in the downfall of TCB. The liquidators had the BVI judgment recognized in the United States and then attempted to intervene in the District of Columbia litigation to lift the restraining order and execute on the funds. This intervention was opposed by the United States.
Before the conflict regarding the intervention could be resolved, the U.S. Court of Appeals for the District of Columbia Circuit handed down a decision in an unrelated case, which held that courts could not restrain assets in anticipation of foreign forfeiture proceedings, but could do so only after a final order of forfeiture had been issued. In re Tiger Eye Investments Ltd, 613 F.3d 1122 (D.C. Cir. 2010). Because a Brazilian forfeiture order had yet to come down with regard to the ...