Source: http://ny.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20080801_0000548.ENY.htm/qx
Timestamp: 2018-03-25 03:31:02
Document Index: 394270282

Matched Legal Cases: ['§ 981', '§ 1956', '§ 981', '§ 981', '§ 1957', '§ 984']

ALL FUNDS ON DEPOSIT AT: CITIGROUP SMITH BARNEY ACCOUNT NO. 600-00338 HELD IN THE NAME OF KOBI ALEXANDER AND CITIGROUP SMITH BARNEY ACCOUNT NO. 600-27694 HELD IN THE NAME OF KOBI J. ALEXANDER, DEFENDANTS.
The opinion of the court was delivered by: Nicholas G. Garaufis, United States District Judge
Plaintiff United States of America (the "Government") brings this civil forfeiture action against Defendants Citigroup Smith Barney Account No. 600-00338 (the "338 Account") and Citigroup Smith Barney Account No. 600-27694 (the "694 Account") (collectively, the "Defendant Accounts") seeking forfeiture of funds totaling approximately $49 million. Jacob "Kobi" Alexander ("Kobi") and his wife Hana Alexander ("Hana") (collectively, "Claimants") have filed statements of interest respecting the Defendant Accounts. (Docket Entries ## 88-89.) In a Memorandum and Order dated September 10, 2007 the court, inter alia, directed the Government to amend its Complaint. (Memorandum & Order ("Sept. 10, 2007 Order"), Docket Entry # 80.) In a Memorandum and Order dated June 18, 2008, the court granted the Government leave to amend its Amended Complaint in order to incorporate into it allegations that were previously contained only in an attached Superseding Indictment. (Memorandum & Order, Docket Entry # 125.)
The Government has now filed its Second Amended Verified Complaint In Rem ("SAVC"). (Docket Entry # 128.) Claimants now move to dismiss the SAVC on numerous grounds. For the reasons stated below, Claimants' motions to dismiss are denied. In addition, the court's stay of its previous ruling on the Government's motion to disentitle Kobi from pursuing a claim to the Defendant Accounts as a fugitive is lifted. (See Sept. 10, 2007 Order at 41-42.) Kobi's statement of interest is therefore stricken.
I. The SAVC
The SAVC alleges that, beginning in 1991, Kobi, the CEO of Comverse Technology Inc. ("CTI") engaged with others in a scheme to defraud investors in CTI predicated on backdating of CTI's stock option grants to days when CTI's stock was trading at periodic low points. (SAVC ¶¶ 5, 7, 8, 14.) The SAVC alleges that the scheme violated the criminal prohibitions against conspiracy and mail, wire, and securities fraud. (Id. ¶¶ 9-13, 46-57.) It alleges, for instance, that failing to properly account for backdated options generally overstates profit and understates compensation expense and that backdating options violated the terms of CTI's stock option plans. (Id. ¶¶ 11-12.)
The SAVC alleges that Kobi backdated every company-wide grant after 1998 as well as six other option grants, numbered 7, 837, 1125, 1134, 1593, and 35803, and that he received more backdated options from CTI than any other person. (Id. ¶¶ 14, 61.) The SAVC also alleges that Kobi made false statements, misrepresentations, and material omissions in CTI's proxy statements, annual and quarterly filings, and stock option plans that concealed the existence of the backdating scheme. (Id. ¶¶ 25, 27-44.) The proxy statements, stock option plans, and annual filings were sent by mail to CTI's shareholders. (Id. ¶ 26.) Additionally, unanimous consent forms approving the backdated options were sent by mail to members of CTI's Board of Directors. (Id. ¶ 54.) CTI's annual and quarterly filings and its proxy statements were filed by wire with the SEC in Washington, D.C. (Id. ¶¶ 26, 57.) Unanimous consent forms were sent by fax to members of CTI's Board of Directors, and several e-mails were sent between CTI employees about the backdated options. (Id. ¶ 57.)
Kobi deposited more than a million CTI shares he acquired by exercising backdated stock options issued to him in option grants 7, 837, 1125, 1134, and 35803 into the 338 Account. (Id. ¶¶ 60-61.) He later sold those shares, realizing $72,059,395.29. (Id. ¶ 61.) On or about January 28, 2004, Kobi opened the 694 Account and funded it with $1 million from the 338 Account. (Id. ¶ 64.) Kobi later transferred an additional $4 million from the 338 Account into the 694 Account. (Id.) These transfers occurred soon after Kobi sold for $5.1 million a block of shares in the 338 Account that were acquired through the exercise of backdated stock options. (Id.)
On June 21, 2006, Kobi flew to Israel. (Id. ¶ 65.) At that time he was already aware that he was under investigation by the United States Attorney's Office for the Eastern District of New York (the "USAO") for his involvement in the backdating scheme. (Id.) Kobi's lawyers told the USAO in July that Kobi would be returning to the United States on July 28, 2006. (Id. ¶ 66.) On July 25, 2006, Kobi transferred approximately $7 million from the 694 Account (from which he could not withdraw funds directly) into the 338 Account. (Id. ¶ 68.) During the month of July, Kobi transferred $58 million from the 338 Account to two accounts at Bank Leumi and Bank Hapoalim in Israel. (Id. ¶ 70.) Kobi subsequently transferred millions of dollars of the funds transferred to Bank Leumi to banks in other countries, including Namibia and Cyprus, from which they were subsequently transferred into other accounts and trust accounts. (Id. ¶¶ 72-87.) On July 26, 2006, for example, a bank check in the amount of $12 million drawn upon Kobi's account at Bank Leumi was deposited into an account at Standard Bank in Windhoek, Namibia. (Id. ¶ 72.) Kobi opened this account on July 21, 2006 using a newly issued Israeli passport. (Id.)
Kobi did not return to the United States on July 28, 2006. (Id. ¶ 75.) Instead, on or before that date he flew to Namibia, which at that time did not have an extradition treaty with the United States. (Id.) On July 31, 2006, the Defendant Accounts were seized based on a Warrant for the Arrest of Articles In Rem issued by Magistrate Judge Cheryl L. Pollak. (Id. ¶ 76.) The issuance of this Warrant blocked an attempt by Kobi to wire an additional $12 million from the 338 Account out of the country. (Id. ¶ 78.) At the time the 694 Account was seized, it contained fewer than $4 million. (Id. ¶ 69.)
On September 20, 2006 a Grand Jury in the Eastern District of New York returned a thirty-two count indictment against Kobi. (Id. ¶ 79.) On September 27, 2006, Kobi was arrested in Namibia pursuant to a provisional arrest warrant issued by the Namibian courts at the request of the United States. (Id. ¶ 80.) He was subsequently released on bail. (Id.) The Government's request to extradite Kobi is currently pending in the Namibian courts. (Id.)
II. THE GOVERNMENT'S SIX FORFEITURE CAUSES OF ACTION
The Government alleges in its first cause of action that the Defendant Accounts are subject to forfeiture under 18 U.S.C. § 981(a)(1)(A) because they were involved in money-laundering transactions in violation of 18 U.S.C. § 1956. (Id. ¶¶ 91-93.) In its third cause of action, the Government alleges that the Defendant Accounts are also subject to forfeiture under 18 U.S.C. § 981(a)(1)(C) because they contain proceeds of specified unlawful activity: mail, wire, and securities fraud and conspiracy to commit mail, wire and securities fraud. (Id. ¶¶ 97-98.) In its fifth cause of action, the Government alleges that the Defendant Accounts are subject to forfeiture under 18 U.S.C. § 981(a)(1)(A) because they were involved in transactions or attempted transactions in violation of 18 U.S.C. § 1957, which prohibits certain knowing transactions or attempted transactions in criminally derived property. (Id. ¶¶ 101-102.) The Government's second, fourth, and sixth causes of action are "substitute assets forfeiture" counts under 18 U.S.C. § 984, under which the Government seeks to seize any identical property found in the same place or account as the funds subject to forfeiture under the first, third, and fifth causes of action. (Id. ¶¶ 94, 96, 99-100, 103-04.)
The Supplemental Rules for Certain Admiralty and Maritime Claims and Asset Forfeiture Actions (the "Supplemental Rules") govern this civil forfeiture proceeding. Supplemental Rule G(2)(f) requires the complaint in a civil forfeiture proceeding to "state sufficiently detailed facts to support a reasonable ...