United States District Court, D. South Carolina, Columbia Division
CAMERON McGOWAN CURRIE, Senior District Judge.
This matter is before the court on the verified in rem complaint of the United States seeking civil forfeiture of assets allegedly derived from certain specified illegal activities. See Second Amd. Verified Compl., ECF No. 71 ("Complaint"). The seized assets are fourteen (14) vehicles and funds from two bank accounts.
Verified Claims have been filed by Alibek Turkayev, individually and d/b/a Automotive Exports; KTNA Financial, Inc.; Chuan-Chuan Hsieng, individually; and CCHJ International, Inc. ("Claimants"), claiming ownership interests in the various vehicles and funds. Claimants have filed motions to dismiss, arguing, inter alia, that the Government's allegations of mail and wire fraud and money laundering fail as a matter of law because the Complaint omits essential elements and fails to comply with Rule 9(b)'s pleading requirements; that the Government is unable to establish violation of export laws; and that the Complaint does not allege with sufficient particularity how the bank accounts at issue facilitated the allegedly unlawful activities. See ECF Nos. 90-1 & 96-1 at 2-3. The motions seek dismissal of the Complaint and release of the vehicles and funds.
A. Complaint - Forfeiture In Rem
The Federal Rules of Civil Procedure and the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions ("Supp. R.") are applicable to in rem forfeiture actions. The Federal Rules of Civil Procedure ("FRCP") apply so long as they are not "inconsistent with" the Supplemental Rules. Supp. R. A(2). Supplemental Rule G(2)(f) provides that a civil in rem forfeiture complaint must "state sufficiently detailed facts to support a reasonable belief that the government will be able to meet its burden of proof at trial." The Government must "state[ ] the circumstances giving rise to the forfeiture claim with sufficient particularity" to allow a claimant to conduct a "meaningful investigation of the facts and draft[ ] a responsive pleading." United States v. Mondragon, 313 F.3d 862, 866 (4th Cir. 2002). "[T]he Government's forfeiture claim can advance forward in the face of a... motion to dismiss even if the Government's complaint does not provide all the facts that would allow the Government to ultimately succeed in the forfeiture proceeding." United States v. 630 Ardmore Drive, 178 F.Supp.2d 572, 581 (M.D. N.C. 2001). In assessing whether the Government has provided sufficient allegations to support a nexus between the alleged criminal offense and the Defendants In Rem, the court must look to the totality of the circumstances. Mondragon, 313 F.3d at 866.
Although the pleading standard under Supp. R. G(8)(b) is higher than the standard for FRCP 8(a), the pleading requirements are satisfied if the Government pleads enough facts to support a "reasonable belief" that the Government will be able to meet its burden of proof at trial. See United States v. Real Property Located at 5208 Los Franciscos Way, 385 F.3d 1187, 1193 (9th Cir. 2004) (noting that the Government "is not required to prove its case simply to get in the courthouse door").
To meet its ultimate burden of proof, the Government must prove by a preponderance of the evidence a "substantial connection between the property and the offense." 18 U.S.C. § 983(c)(3). However, the Government initially need not produce all evidence that will be introduced at trial and may instead "gather [ ] evidence after the filing of a Complaint for forfeiture to establish, by a preponderance of the evidence, that [the] property is subject to forfeiture." 18 U.S.C. § 983(c)(2).
B. Motion to Dismiss
"A claimant who establishes standing to contest forfeiture may move to dismiss the action under Rule 12(b)." Supp. R. G(8)(b)(i). In assessing a motion to dismiss, a court "must accept as true all well-pleaded allegations and must construe the factual allegations in the light most favorable to the plaintiff." Hall v. Virginia, 385 F.3d 421, 427 (4th Cir. 2004) (internal quotations and citation omitted). See also Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993) (same). "A motion to dismiss under Rule 12(b)(6) tests the sufficiency of a complaint; importantly, it does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992) (citation omitted).
In the light most favorable to the Government, the facts are that Claimants are either individual brokers or corporations involved in exporting luxury automobiles from the United States to foreign jurisdictions. The Government contends that luxury automobiles sold in the United States often carry a higher purchase price, and high taxes and tariffs overseas. Accordingly, individuals will frequently attempt to export new vehicles from the United States to foreign countries. To deter the purchase of luxury automobiles in the United States for immediate export to foreign countries, many automobile manufacturers enter into contractual relationships with their licensed dealerships. These contracts prohibit dealerships from selling a vehicle to individuals or companies who intend to export that vehicle. As a result of these contractual relationships and in an attempt to avoid financial and other penalties assessed by manufacturers, dealerships take steps to protect themselves from purchasers who intend to export a new vehicle by requiring new vehicle purchasers to sign agreements acknowledging an automobile manufacturer's export policy. Manufacturers and dealerships maintain lists of individuals and corporations believed to be involved in exporting vehicles overseas in contravention of the non-export agreements. Dealerships are generally prohibited by manufacturers from selling vehicles to individuals and companies appearing on these lists.
The Government contends that Claimants pursue the purchase of luxury automobiles through "straw purchasers" in an attempt to circumvent these prohibitions and export restrictions. The Government alleges that these "straw purchasers" generally purchase the vehicles and almost immediately turn the vehicles over to exporters for transfer overseas. The Government maintains the Claimants' actions cause false certificates of title and registrations to be issued in the United States and, ultimately, the entry of false information into an Electronic Export Information (EEI) forms submitted through the Automated Export System (AES), a centralized computer system through which export shipment data required by multiple agencies is filed electronically with the U.S. Customs and Border Protection Agency of the Department of Homeland Security.
The Government alleges that Claimants' actions violate several federal criminal statutes, including those dealing with international money laundering (18 U.S.C. §§ 1956(a)(2)(A), 1956(h)), wire and/or mail fraud (18 U.S.C. §§ 1341, 1343), smuggling (18 U.S.C. § 554), and submission of false or misleading information through the ...