Sunday, November 26, 2006

Case o' The Week: First the ruling, THEN the appeal - Lazarenko, Standing & Ripeness

The dust hasn't completely settled in the epic Lazerenko criminal trial (left) before civil folks are fighting over forfeited assets. In United States, Liquidators v. Lazarenko, the Ninth (including a guest spot by Justice O'Connor) suggests a novel approach -- get a district court ruling first, then appeal. 06 Cal. Daily Op. Serv. 18657 (Nov. 21, 2006), opinion available here. A case that is a long ways from indigent defense, but that provides an interesting discussion of criminal forfeiture and standing/ripeness issues.

Guest star Justice Sandra O’Connor, joining Judges Pregerson and Tallman.

In 2004, former Ukranian Prime Minister Lazarenko was convicted in federal district court of many counts, including money laundering. The government won a preliminary order of forfeiture of $2.5 million that was allegedly involved in money laundering. Id. at 18662. Third-party claimants (the “Liquidators”) were authorized by the “High Court of Antigua” to recover and disperse these same funds. Id. N.D. Cal. Judge Jenkins refused to hear the Liquidators’ motions challenging forfeiture of the funds until after Lazarenko was sentenced, and until there was an ancillary proceeding on the ultimate fate of the assets (as required by statute). Id. at 18665.

Issue(s): 1. Due Process:
The constitutionality of the criminal forfeiture statute, which delays third-party challenges until after a defendant’s sentencing. 2. Standing / Ripeness: We must first determine, however, whether Liquidators have standing to invoke the jurisdiction of this Court before the district court concludes ancillary proceedings.” Id. at 18662.

Held: 1. ? 2.
“We hold that they do not [have standing]. We further conclude that the controversy is not yet ripe for judicial review. We therefore dismiss this appeal for lack of appellate jurisdiction.” Id. at 18662.

Of Note:
This case only makes sense in the world of billable hours. Down below, the ancillary proceeding on the fate of the funds was delayed by the district court until the Ninth Circuit appeal was complete. The Liquidators’ Ninth Circuit appeal, in turn, complained that it took too long for the ancillary proceedings to begin. Seem circular? The Ninth seemed to think so. Id. at 18672.

What was this case really about? Maybe getting the government’s concession in oral argument that it owes pre-judgment interest if it had screwed up the criminal forfeiture . . . and maybe it did, since it appeared to have blown the statute of limitations. Id. at 18671. Looks like several AUSAs can kiss their Christmas bonuses goodbye . . . .

How to Use: Even if you’re not appointed to represent former Ukranian prime ministers, Lazarenko is of interest in two respects. First, Judge Tallman provides a clear and concise description of criminal forfeiture – it is a useful primer on an increasingly common government tactic. Id. at 18665-68. Second, the opinion gives an in-depth analysis of standing and ripeness jurisprudence, including the interrelationship of the two concepts. Id. at 18669-75. Interestingly, and perhaps unnecessarily, the Court goes beyond the constitutional component of standing and ripeness and analyzes the “prudential standing principle” as well. Id. at 18673.

For Further Reading:
Pavlo Ivanovych Lazarenko has had a colorful career. Appointed as Prime Minister of the Ukraine in 1996, he survived a bomb attempt on his life early in his term. See wikipedia article here. He resigned in 1997, after allegations of economic fraud and patronage. Id. He was arrested leaving France into Switzerland in 1998, on money laundering charges. Id. Released on bail, he went to Greece and then to the U.S., where he was arrested in 1999. Id. He was convicted in a jury trial before Judge Jenkins in 2004, and was sentenced to nine years in jail in August of 2006. See BBC article here. He was also ordered to pay a $10 million fine. Id.

ADDENDUM: 11.27.06 at 1:30 pm: A long talk with a counsel involved in this case provides a very different spin on the decision and issues at stake. According to one of the parties, the $2.5 million at stake in this case was originally subject to civil forfeiture years ago -- but the USAO blew the statute of limitations and the Liquidators won a summary judgment on the funds. Undeterred, the USAO swapped horses and shoehorned the millions into criminal forfeiture allegations, after Lazarenko was convicted. Apparently, the same statute of limitations problems plague these criminal forfeiture allegations -- but the Liquidators can't get to a hearing on the issue. Moreover, the quick ancillary proceedings promised by Judge Tallman can, in reality, often take years to resolve, and may not be wrapped up until Lazarenko's appeal is completed (which should conclude in 2012 or so . . . .).
In other words, the real issue in the case was this: if the government wrongfully seizes or forfeits funds before trial, can you challenge the seizure right away or must you wait years -- or decades -- to get a hearing? That question -- and the equitable concerns behind it -- certainly didn't make it into the opinion.
One real problem is Lazarenko's hit on the Ninth Circuit's earlier Crozier decision. Generally speaking, Crozier stands for the constitutional right to get a hearing on forfeited assets, earlier than the statute allows. Arguably, Lazarenko is inconsistent with Crozier. Keep an eye out for an en banc petition.

Steven Kalar, Senior Litigator N.D. Cal. FPD. Website available at



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