United States v. Sum of $70,990,605

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

______________________________
)
UNITED STATES OF AMERICA, )
)
Plaintiff, )
)
v. ) Civil Action No. 12-1905 (RWR)
)
SUM OF $70,990,605, et al., )
)
Defendants. )
______________________________)

MEMORANDUM OPINION AND ORDER

Plaintiff United States filed this civil in rem forfeiture

action, alleging that the defendant funds -- approximately $63

million in three different banks -- are the proceeds of a wire

fraud conspiracy and subject to seizure under 18 U.S.C. §§ 981,

983 and 984. The United States moves under 18 U.S.C.

§ 981(g)(1) to stay the civil forfeiture proceeding, except for

any forthcoming government motions to strike under Supplemental

Rule G(8)(c), until the conclusion of the related criminal

proceedings. Claimants Hikmatullah Shadman, Najibullah, and

Rohullah (“Shadman claimants”) and Afghanistan International

Bank (“AIB”) also move for leave to file surreplies. Because a

protective order can protect the interests of the parties, a

complete stay is unjustified and the government’s motion to stay

will be denied. Because the proposed surreplies are
 - 2 -
unnecessary, the claimants’ motions for leave to file surreplies

will also be denied.

BACKGROUND

In short, the United States has alleged that the defendant

property is subject to forfeiture as the proceeds of a wire

fraud conspiracy and that Shadman, as a subcontractor and owner

of Hikmat Shadman Logistics Services Company (“HSLSC”),

“conspired to obtain payments from the United States for the

transportation of military supplies in Afghanistan through the

illegal and fraudulent use of the wires . . . [by making] bribe

payments, fraudulently inflat[ing] prices, and caus[ing] the

United States to be invoiced for and to make payments of

$77,920,605 to two bank accounts in Afghanistan[.]” 2d Am.

Compl. ¶¶ 10, 34. The United States alleges that Shadman paid

bribes to TOIFOR Global Life Support Services operations

managers Henry Omonobi-Newton and Paul Hele, id. ¶¶ 24, 38, and

that Shadman conspired with Hele to “inflate[] and manipulate[]”

subcontractors’ bids, id. ¶ 39, to allow Hele “to award TMRs

[Transportation Movement Requests] to [HSLSC] at an inflated

rate,” id. ¶¶ 23, 39g. Allegedly because of the bribery and

fraud, HSLSC was awarded 5,421 TMRs, which cost the United

States $77,920,605. See id. ¶¶ 35, 43.
 - 3 -
On August 27, 2013, Shadman, Najibullah, and Rohullah filed

a verified claim and statement of interest in the seized

property, asserting that they are the owners of the seized

funds. Verified Claim and Statement of Interest or Right in

Property Subject to Forfeiture In Rem at 8. They made these

claims both individually, and on behalf of their companies. Id.

at 14-16. It appears that all the accounts are held in the name

of the companies, rather than the individuals, except for one

account at Emirate National Bank. Id. at 8-12. The Shadman

claimants then filed a motion under 18 U.S.C. § 983(f) for

immediate release of funds and a motion for preliminary

injunctive relief, both of which have been denied. The Shadman

claimants also filed a motion to dismiss for failure to state a

claim and based on the affirmative defenses of international

comity and the act of state doctrine, which was also denied.

On October 16, 2013, AIB filed a verified claim, asserting

that it has legal title, ownership, and possessory interest to

$4,330,287.03 of the defendant funds. AIB’s Verified Claim of

Interest in Defendant Property at 2, 4.

The United States now moves under 18 U.S.C. § 981(g)(1) to

stay the civil forfeiture proceedings because “the United States

has a related criminal investigation and allowing discovery now

may jeopardize that investigation.” United States’ Mot. for a
 - 4 -
Stay Pursuant to 18 U.S.C. § 981(g) (“U.S. Mot.”) at 1. The

government requests that the proceeding be stayed until the

conclusion of the criminal case, with the exception of any

forthcoming government motions to strike a claim or answer under

Rule G(8)(c). Id. The government proposes a status report in

180 days to allow assessment of the continuing need for a stay.

Id. attach. 1 at 2. Claimants oppose. See Claimants’ Opp’n to

United States’ Mot. for a Stay (“Shadman Claimants’ Opp’n”);

Claimant AIB’s Opp’n to the United States’ Mot. for a Stay

Pursuant to 18 U.S.C. § 981(g) (“AIB’s Opp’n”). Both the

Shadman claimants and AIB also filed opposed motions for leave

to file a surreply.

DISCUSSION

I. MOTION TO STAY

When the United States moves for a stay, “the court shall

stay the civil forfeiture proceeding if the court determines

that civil discovery will adversely affect the ability of the

Government to conduct a related criminal investigation or the

prosecution of a related criminal case.” 18 U.S.C. § 981(g)(1).

To determine if the criminal case is related, “the court

shall consider the degree of similarity between the parties,

witnesses, facts, and circumstances involved in the two

proceedings, without requiring an identity with respect to any
 - 5 -
one or more factors.” 18 U.S.C. § 981(g)(4). The United States

“may, in appropriate cases, submit evidence ex parte in order to

avoid disclosing any matter that may adversely affect an ongoing

criminal investigation or pending criminal trial.” 18 U.S.C.

§ 981(g)(5). 1

Here, the government states that a United States Attorney’s

Office, the Fraud Section of the United States Department of

Justice, and the Office of the Special Inspector General for

Afghanistan Reconstruction are all “investigating whether Mr.

Shadman and others violated U.S. criminal laws in connection

with the award and receipt of lucrative contracts and payments

for the transportation of U.S. military supplies in Afghanistan

. . . .” U.S. Mot. at 5. Because the United States’ criminal

investigation stems, at least in part, from the same conduct

that gives rise to this forfeiture action, the facts and

circumstances involved in both the criminal and civil

proceedings are similar. Id. at 5-6. The identity of facts and

circumstances also means that the witnesses -- such as the

1
The United States here chose not to submit any matters ex
parte, though it did request leave to do so “[i]f this Court
finds that the record set forth herein is insufficient to
establish that civil discovery will adversely affect the ability
of the Government to conduct the related criminal
investigation.” U.S. Mot. at 2, 8. However, because, as is
explained below, the United States has shown that some specific
civil discovery may adversely affect the criminal investigation,
such ex parte evidence may not be necessary.
 - 6 -
confidential informants and others that either witnessed or were

involved in the alleged fraud and bribery -- will be similar

since the operative events in both cases are the same. Id. at

5-7. Finally, while the parties are not identical, the parties

are similar as Shadman is one of the claimants in the civil

proceeding and Shadman is being investigated criminally. Id. at

5. Thus, where, as here, “a criminal investigation and a civil

forfeiture action have common facts, similar alleged violations

and some common parties, the actions are clearly related.”

United States v. All Funds on Deposit in Suntrust Account No.

XXXXXXXXX8359 in the Name of Gold and Silver Reserve, Inc., 456

F. Supp. 2d 64, 65 (D.D.C. 2006).

In addition to being related, civil discovery must

adversely affect the related criminal investigation to merit a

stay. For example, civil discovery will adversely affect the

related criminal investigation when “civil discovery would

subject the Government’s criminal investigation to ‘early and

broader civil discovery than would otherwise be possible in the

context of the criminal proceeding.’” Suntrust, 456 F. Supp. 2d

at 65 (quoting United States v. One Assortment of Seventy-Three

Firearms, 352 F. Supp. 2d 2, 4 (D. Me. 2005)). This is because

“civil discovery may not be used to subvert limitations on

discovery in criminal cases, by either the government or by
 - 7 -
private parties.” McSurely v. McClellan, 426 F.2d 664, 671-72

(D.C. Cir. 1970) (footnotes omitted). However, if the

government fails to show that civil discovery will in fact

adversely affect its criminal investigation, a stay should be

denied. See Suntrust, 456 F. Supp. 2d at 65; United States v.

All Funds ($357,311.68) Contained in Northern Trust Bank of Fla.

Account No. 7240001868, No. Civ.A.3:04-CV-1476-G, 2004 WL

1834589, at *2 (N.D. Tex. 2004) (“There is no presumption that

civil discovery, in itself, automatically creates an adverse

affect on the government’s related criminal proceeding.”).

The government asserts that civil discovery “will subject

the United States to broader and earlier discovery than would

occur in the criminal proceeding[,]” U.S. Mot. at 6, because the

claimants have requested access to “any evidence in [the

government’s] possession relating to the facts alleged in this

case[,]” id. (quoting Shadman Claimants’ Request for Status

Conference and Motion for Protective and Preservation Orders at

9), which may “require the United States prematurely to disclose

to the Claimants the identities of confidential informants,” id.

at 7. The United States contends that, if it were to disclose

the identities of the confidential informants, then witnesses

may be put “at risk and [the disclosure could] interfere with

the Government’s ability to obtain confidential information from
 - 8 -
others in the criminal investigation.” Id. Exposing

confidential informants can justify a stay. See, e.g.,

Suntrust, 456 F. Supp. 2d at 66 (“Such discovery could

compromise any existing confidential informants and/or interfere

with the Government’s ability to obtain confidential information

from others.”); United States v. Funds Held in Names or for Ben.

of Wetterer, 138 F.R.D. 356, 360 (E.D.N.Y. 1991) (finding, under

the good cause standard that predated the Civil Asset Forfeiture

Reform Act, that a stay was justified because the

interrogatories would reveal “cooperating witnesses and identity

of informants”).

Here, the Shadman claimants have not only tried to identify

the confidential informants, e.g., Claimants’ Mot. for Expedited

Review and Mot. to Dismiss Complaint at 11, 13 (asserting that

“we believe we know the identity of these confidential sources”

and identifying people the Shadman claimants suspect are the

confidential informants), but the Shadman claimants have also

requested statements of the confidential informants via

interrogatories, Claimants’ Notice of Supplemental Authority in

Support of Mot. to Dismiss (“Supp. Authority”), Ex. 1 (Request

21) (requesting “[a]ny and all written statements of all

confidential sources”), as well as statements from other

witnesses, id. (requesting “all statements of witnesses who are
 - 9 -
specifically referenced by name”), which it would not

necessarily be entitled to in criminal discovery. Compare

Federal Rule of Criminal Procedure 16 (“[T]his rule does not

authorize the discovery . . . of statements made by prospective

government witnesses except as provided in 18 U.S.C. § 3500.”)

with Federal Rule of Civil Procedure 26 (allowing discovery of

“any nonprivileged matter that is relevant to any party’s claim

or defense”); see also United States v. Morrow, Criminal No. 04-

355 (CKK), 2005 WL 3163806, at *4 (D.D.C. April 13, 2005)

(“[T]he Government enjoys a qualified although time-honored

privilege to withhold the identity of its informants from

criminal defendants.” (internal quotation marks omitted));

United States v. Edelin, 128 F. Supp. 2d 23, 33 (D.D.C. 2001)

(“Criminal defendants are only entitled to statements of non-

testifying witnesses or co-conspirators if those statements

qualify as Brady material.”). The breadth of these discovery

requests from the claimants could certainly adversely affect the

United States by allowing the claimants access to discovery that

they ordinarily would not have access to in a criminal case.

See Campbell v. Eastland, 307 F.2d 478, 487 (5th Cir. 1962) (“In

handling motions for a stay of a civil suit until the

disposition of a criminal prosecution on related matters and in

ruling on motions under the civil discovery procedures, a judge
 - 10 -
should be sensitive to the difference in the rules of discovery

in civil and criminal cases. While the Federal Rules of Civil

Procedure have provided a well-stocked battery of discovery

procedures, the rules governing criminal discovery are far more

restrictive.”). 2

The government also states that civil discovery for

individuals currently under investigation would impair the

criminal investigation because “it may prematurely expose facts

and testimony of witnesses to potential subjects of the

investigation[,]” U.S. Mot. at 7, and the requested discovery

with respect to law enforcement officers would require discovery

from those still actively involved in the investigation, id. at

8. Discovery of officers actively involved in a criminal

investigation could adversely affect the investigation. E.g.,

United States v. All Funds Deposited in Account No. 20008524845,

2
AIB argues that only the Shadman claimants “have sought
discovery that would adversely affect [the government’s] ongoing
investigations.” AIB’s Opp’n at 5. While that may be true, AIB
provides no legal authority supporting its implicit argument
that individual claims should be parsed out and evaluated on a
case by case basis. The provision permitting a stay is
unequivocal: “the court shall stay the civil forfeiture
proceeding if the court determines that civil discovery will
adversely affect the ability of the Government to conduct a
related criminal investigation[.]” 18 U.S.C. § 981(g)(1).
While, as is discussed below, Section 981(g)(3) permits a court
to institute a protective order instead of a stay in certain
situations, the provision does not appear to contemplate
assessing who causes the adverse impact in determining if a stay
is appropriate.
 - 11 -
First Union Nat’l Bank, 162 F. Supp. 2d 1325, 1332 (D. Wyo.

2001). However, the United States does not point to any

requests to depose law enforcement officials, or how particular

requested discovery would adversely affect the investigation.

Additionally, the United States claims that civil discovery

“would also expose prematurely the identities of those

individuals presently under investigation, which could result in

the destruction of evidence.” U.S. Mot. at 7. The United

States offers no evidence, however, that destruction of evidence

is likely. While destruction of evidence would adversely affect

a criminal investigation, the United States cannot rest on

speculation about what may happen.

Ultimately, a stay may be “unnecessary if a protective

order limiting discovery would protect the interest of one party

without unfairly limiting the ability of the opposing party to

pursue the civil case.” 18 U.S.C. § 981(g)(3). “In no case,

however, shall the court impose a protective order as an

alternative to a stay if the effect of such protective order

would be to allow one party to pursue discovery while the other

party is substantially unable to do so.” 18 U.S.C. § 981(g)(3).

Here, a well-crafted protective order limiting discovery could

“protect the interest” of the government while preserving the

ability of the claimants to pursue the civil case. See id.
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There are several areas in which the claimants can seek

discovery that would not implicate the sensitive information

that the government seeks to protect, such as additional

information about the applicability of international comity, the

act of state doctrine, or the innocent owner defense.

The government, however, argues that civil discovery “may

have the effect of inappropriately allowing one party to conduct

discovery while the other party –- the United States -– would be

unable to take discovery from the persons with pertinent

knowledge of the facts” because the witnesses may claim the

Fifth Amendment privilege against self-incrimination. U.S. Mot.

at 7. Yet, the government offers no evidence that any witness

has claimed the Fifth Amendment, and no indictment has yet been

returned. Cf. SEC v. Dresser Indus., 628 F.2d 1368, 1376 (D.C.

Cir. 1980) (affirming the district court’s refusal to stay a

proceeding at the request of a person under investigation

because there had been no indictment or threat to the person’s

Fifth Amendment privilege, and because Federal Rule of Criminal

Procedure 16(b) “ha[d] not come into effect” nor had the

subpoena required the person to reveal the basis of his

defense). The United States offers no evidence that it cannot
 - 13 -
take discovery because of the pending criminal investigation. 3

E.g., Northern Trust Bank, 2004 WL 1834589, at *2 (“[T]he

Government’s arguments do nothing more than speculate about how

civil discovery will adversely affect its criminal

investigation. . . . Such speculative and conclusory theories

undercut the requirement of section 981(g) that the Government

actually show that civil discovery will adversely affect its

ability to conduct the criminal investigation.” (emphasis

omitted)). Accordingly, because there is no evidence that only

one side will be able to take discovery with a properly crafted

protective order in place, a protective order is permissible.

II. MOTIONS FOR LEAVE TO FILE SURREPLY

“The standard for granting . . . leave to file a surreply

is whether the party making the motion would be unable to

contest matters presented to the court for the first time in the

opposing party’s reply.” Lewis v. Rumsfeld, 154 F. Supp. 2d 56,

61 (D.D.C. 2001). A surreply is not justified to correct “an

alleged mischaracterization.” Id.

The Shadman claimants and AIB request leave to file a

surreply. AIB contends that the government “improperly raised

[a standing argument] for the first time in its reply.”

3
There is, of course, nothing that prevents the government
from renewing its motion for a stay if its ability to conduct
discovery is impaired by parties and witnesses who do, in fact,
assert their Fifth Amendment privilege.
 - 14 -
Claimant AIB’s Mot. for Leave to File a Surreply in Further

Opp’n to the U.S.’s Mot. for a Stay Pursuant to 18 U.S.C.

§ 981(g) at 2. Because the government’s standing argument was

not considered, AIB is not “unable to contest” the matter, and

thus a surreply is unnecessary.

The Shadman claimants argue that the government made “new

assertions and material misrepresentations” in its reply.

Claimants’ Mot. for Leave to File Surreply in Opp’n to the

U.S.’s Mot. for a Stay Pursuant to 18 U.S.C. § 981(g) at 1. A

surreply, however, is not justified to correct alleged

mischaracterizations. Lewis, 154 F. Supp. 2d at 61.

Additionally, the Shadman claimants did not identify any

arguments that the government raised for the first time in its

reply. While the Shadman claimants point to the government’s

argument that a protective order is inappropriate, the United

States brought up this argument in its original motion for a

stay. Accordingly, a surreply is unjustified and will be

denied. See id.

CONCLUSION

The government has failed to demonstrate that a stay is

necessary because a well-crafted protective order limiting

discovery will suffice to protect the United States’ asserted

interest and the protective order will not allow only one side
 - 15 -
to pursue discovery. Additionally, the claimants do not prove

that a surreply is necessary. Accordingly, it is hereby

ORDERED that the government’s motion to stay [56] be, and

hereby is, DENIED without prejudice. It is further

ORDERED that the United States consult the claimants and

submit within 30 days a proposed protective order suggesting

limitations to discovery that will protect its interests while

also allowing claimants to move forward with the case. It is

further

ORDERED that AIB’s motion for leave to file a surreply [64]

be, and hereby is, DENIED. It is further

ORDERED that the Shadman claimants’ motion for leave to

file a surreply [65] be, and hereby is, DENIED.

SIGNED this 17th day of April, 2014.

/s/
RICHARD W. ROBERTS
Chief Judge