Securities and Exchange Commission v. Nadel et al

Filing 757

RESPONSE re #733 Order Receiver's Memorandum on Jurisdiction and Response to Wells Fargo Bank and Trste's Memorandum on Jurisdiction filed by Burton W. Wiand. (Cohen, Jonathan)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
v.

Case No. 8:09-cv-87-T-26TBM

ARTHUR NADEL,
SCOOP CAPITAL, LLC,
SCOOP MANAGEMENT, INC.
Defendants,
SCOOP REAL ESTATE, L.P.
VALHALLA INVESTMENT PARTNERS, L.P.,
VALHALLA MANAGEMENT, INC.
VICTORY IRA FUND, LTD,
VICTORY FUND, LTD,
VIKING IRA FUND, LLC,
VIKING FUND, LLC, AND
VIKING MANAGEMENT,
Relief Defendants.
/
THE RECEIVER’S MEMORANDUM ON JURISDICTION AND RESPONSE
TO WELLS FARGO BANK AND TRSTE’S MEMORANDUM ON JURISDICTION

Burton W. Wiand, as Receiver (the “Receiver”), filed a motion relating to claims
determinations and the claims process (the “Motion”) (Doc. 675). TRSTE, Inc. (“TRSTE”)
and Wells Fargo Bank, N.A., as successor to Wachovia Bank, N.A. (collectively, “Wells
Fargo”), filed an objection and opposition (the “Objection”) to the Motion (Doc. 690). The
Objection relates to a loan made by Wells Fargo to Receivership Entity Laurel Preserve,
LLC, and secured by land in North Carolina commonly referred to in this Receivership as the
“Laurel Mountain Property.” In the Objection, Wells Fargo argued in relevant part that
this Court lacks jurisdiction over the Laurel Mountain Property because it is purportedly
under the jurisdiction of the United States District Court for the Southern District of New
York (the “SDNY Court”) pursuant to a preliminary criminal forfeiture order (the
“Preliminary Forfeiture Order”), dated October 21, 2010 and filed December 2, 2010, in
United States v. Arthur Nadel, Case No. 1:09-cr-00433-JGK (S.D.N.Y.) (the “Nadel
Criminal Action”).
On February 3, 2012, the Court directed inter alia that Wells Fargo and the Receiver
file supplemental memoranda of law regarding this Court’s jurisdiction over the Receivership
property listed in the Preliminary Forfeiture Order (the “Forfeited Assets”) (Doc. 733).
Because all of the Forfeited Assets are Receivership property, the issue raised by the Court
impacts each of these assets. However, the Forfeited Assets comprise only a limited portion
of all Receivership property.1

1

The following assets were included in the Preliminary Forfeiture Order: (1) the
Marguerite J. Nadel Revocable Trust bank account (closed and funds transferred to
Receivership); (2) 15576 Fruitville Road, Sarasota, FL (still controlled by Receiver); (3) 131
Garren Creek Road, Fairview, NC (still controlled by Receiver); (4) 45 lots in Thomasville,
GA (sold in February 2010 (see Doc. 352)); (5) 33 acres in Grady County, GA (sold in April

1

On February 13, 2012, Wells Fargo filed its supplemental memorandum (Doc. 745)
(the “Supplemental Memo”) and essentially argued that (1) the SDNY Court has prior
exclusive jurisdiction over the Laurel Mountain Property; (2) the Receiver’s actions with
respect to the Laurel Mountain Property are a “nullity;” and (3) this Court cannot obtain
jurisdiction over the Laurel Mountain Property through a purported “secret agreement”
between the Receiver and the U.S. Attorney’s Office for the Southern District of New York
(the “USAO”). As demonstrated below, Wells Fargo’s arguments lack merit. In reality, this
Court was authorized to, and properly exercised, jurisdiction and control over each of the
Forfeited Assets. Wells Fargo’s arguments are nothing more than yet another effort to
overcome its inexcusable failure to file claims in the claims process in this case.
I.

THE SDNY COURT DOES NOT HAVE PRIOR EXCLUSIVE
JURISDICTION OVER THE FORFEITED ASSETS, INCLUDING THE
LAUREL MOUNTAIN PROPERTY
Wells Fargo argues the SDNY Court has exclusive jurisdiction over the Laurel

Mountain Property pursuant to the “prior exclusive jurisdiction rule” because it purportedly
obtained jurisdiction over that property before this Court did so. Supp. Memo at 4-5. Wells
2011 (see Doc. 620)); (6) Venice Jet Center (sold in January 2010 (see Doc. 321)); (7) the
Laurel Mountain Property (still controlled by Receiver); (8) Tradewind, LLC and related
aircraft (operating business in Receivership; aircraft have been sold or returned to lenders
(see Docs. 108, 119, 433, 491, 581)); (9) Guy-Nadel Foundation, Inc. (accounts closed and
funds transferred to Receivership).
At the relevant time, the Receiver identified for the U.S. Attorney’s Office that, based
on his investigation as of that date, the Forfeited Assets were the ones funded with proceeds
of Nadel’s scheme. Following that date, the Receiver continued his investigation and
identified numerous other assets funded with scheme proceeds. As such, the Forfeited Assets
do not include all of the properties in Receivership. Wells Fargo is simply wrong when it
asserts that “all of the Nadel related property” was subjected to forfeiture. See Supp. Memo
at 2.

2

Fargo misunderstands both the prior exclusive jurisdiction rule and the nature of the SDNY
Court’s jurisdiction. Specifically, the prior exclusive jurisdiction rule is concerned with
comity and the prevention of conflicts between courts. As such, it only applies when two
courts attempt to assert in rem jurisdiction over the same property. See, e.g., United States v.
Bank of N.Y. & Trust Co., 296 U.S. 463, 477 (1936) (holding rule applies “[i]f the two suits
are in rem or quasi in rem . . .”). Here, as explained below, the SDNY Court only exercised
in personam jurisdiction over Nadel’s interests in the Forfeited Assets, while this Court
exercised in rem jurisdiction over the actual Forfeited Assets.

As such, this Court’s

jurisdiction has always been and continues to be appropriate because there are no conflicts.
Indeed, this absence of conflict is further demonstrated by the following facts: (1) the SDNY
Court and this Court share the same goal – recovering assets to compensate the victims of
Nadel’s Ponzi scheme; (2) the Receiver and the USAO have an understanding that their
mutual goal would be most efficiently served by allowing the administration, liquidation, and
distribution of recovered assets through the Receivership; and (3) neither the SDNY Court
nor the United States has taken any steps to control any Forfeited Asset or objected to the
Receiver’s or this Court’s control of those assets. Wells Fargo’s self-serving attempt to
undermine this Court’s jurisdiction simply lacks merit.
A.

This Court Has In Rem Jurisdiction Over Receivership Property; The
SDNY Court Has In Personam Jurisdiction Over Nadel And His
Forfeited Interests Therein

Wells Fargo incorrectly asserts that the SDNY Court has exercised “jurisdiction and
control” over Receivership assets, including the Laurel Mountain Property. See Supp. Memo
at 2. As an initial matter, neither the SDNY Court nor the United States has ever attempted

3

to assert control over any Receivership asset. See Morello Decl. ¶ 7 (Doc. 713). More
importantly, there is a critical difference between the type of jurisdiction exercised by this
Court and the type exercised by the SDNY Court. As explained below, those differences –
which are conveniently ignored by Wells Fargo – completely undermine its argument.
This Court has in rem jurisdiction over the Laurel Mountain Property pursuant to 28
U.S.C. § 754.2 See, e.g., Terry v. June, 2003 WL 22125300, *2 (W.D. Va. 2003) (“A courtappointed receiver may obtain in rem jurisdiction over any and all receivership property by
complying with the procedural requirements of 28 U.S.C. § 754.”).3 In contrast, the SDNY
Court has in personam jurisdiction over Arthur Nadel and his interests in the Forfeited
Assets; it does not have in rem jurisdiction over the property itself. On April 28, 2009, Nadel
was indicted on six counts of securities fraud, one count of mail fraud, and eight counts of
wire fraud. On February 24, 2010, he pled guilty to all charges in the Indictment. Through
28 U.S.C. § 2461(c) and 18 U.S.C. § 981(a)(1)(C), a defendant who pleads guilty to such
crimes is subject to criminal forfeiture pursuant to 21 U.S.C. § 853. See, e.g., United States
2

Wells Fargo initially argued that the Receiver failed to comply with 28 U.S.C. § 754
and thus neither he nor this Court obtained “complete jurisdiction and control” over the
Laurel Mountain property (see Doc. 690). The Receiver demonstrated this was false (see
Doc. 712), and now Wells Fargo apparently concedes it was wrong (see Supp. Memo at 2
n.3).

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With respect to the other Forfeited Assets, the Court obtained in rem jurisdiction
because the Receiver either complied with 28 U.S.C. § 754 or such compliance was
unnecessary because the property was located within this Court’s territorial jurisdiction. See
Gilchrist v. Gen. Elec. Capital Corp., 262 F.3d 295, 300-01, 302 (4th Cir. 2001) (noting that
“district court’s in rem jurisdiction ordinarily extends … to property within its jurisdiction”
and that “when it appointed the receiver, the district court created a receivership estate over
which it had in rem jurisdiction”); Eller Indus., Inc. v. Indian Motorcycle Mfg., Inc., 929 F.
Supp. 369, 372 (D. Co. 1995) (“Upon imposition of a receivership, all property in the
possession of the debtor passes into the custody of the receivership court, and becomes
subject to its authority and control.”).

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v. Vampire Nation, 451 F.3d 189, 200 (3d Cir. 2006) (“[W]e read the plain language of §
2461(c), by virtue of the chain of cross-references leading to § 1956(c)(7) and § 1961(1), to
explicitly permit criminal forfeiture for general mail fraud. . . .”); United States v. Day, 524
F.3d 1361, 1376 (D.C. Cir. 2008) (“We find that criminal forfeiture is available for general
mail and wire fraud violations. . . .”).
As the Eleventh Circuit has explained, there are important differences between civil
and criminal forfeiture. “The former type of forfeiture is a remedial action against property,
whereas the latter is a punitive action against a defendant.” United States v. Gilbert, 244
F.3d 888, 918 (11th Cir. 2001).4
The classical distinction between civil and criminal forfeiture was founded
upon whether the penalty assessed was against the person or against the thing.
Forfeiture against the person operated in personam and required a conviction
before the property could be wrested from the defendant. Such forfeitures
were regarded as criminal in nature because they were penal; they primarily
sought to punish. Forfeiture against the thing was in rem and the forfeiture
was based upon the unlawful use of the res, irrespective of its owner’s
culpability. These forfeitures were regarded as civil; their purpose was
remedial.
Id. at 919 (citations omitted) (quoting United States v. Seifuddin, 820 F.2d 1074, 1076–77
(9th Cir.1987)). When criminal forfeiture occurs, “the property itself is not forfeited; rather,
the defendant’s interest in the property is forfeited. If criminal forfeiture reached beyond that
portion of the property that was owned by a defendant, such a form of forfeiture would be in

4

Gilbert’s discussion of when ancillary proceedings to adjudicate third party rights in
forfeited property may begin (see 244 F.3d at 926) has been superseded by the 1996
amendments to Federal Rule of Civil Procedure 32(d) and the 2000 adoption of Rule 32.2,
but that is not relevant here. See United States v. Marion, 562 F.3d 1330, 1340-41 (11th Cir.
2009).

5

rem, against the property, rather than in personam, against the defendant.”5 Id.; see also
United States v. Kennedy, 201 F.3d 1324, 1329 (11th Cir. 2000) (“The criminal forfeiture
provisions of section 853 authorize the government to seek forfeiture of a defendant’s
interest in subject property.”). “Because the defendant is before the court, the court has the
power to adjudicate his ownership interest in property, by virtue of the criminal charges
against him.” Gilbert, 244 F.3d at 920; see also Vampire Nation, 451 F.3d at 202 (“In the
interest of clarity, we emphasize that the District Court ordered a forfeiture judgment in
personam. The in personam designation distinguishes this judgment from one in rem.”);
United States v. Hall, 434 F.3d 42, 59 (1st Cir. 2006) (noting that “criminal forfeiture is a
sanction against the individual defendant rather than a judgment against the property itself”);
Day, 524 F.3d at 1378 (citing Hall).
Here, the SDNY Court obtained in personam jurisdiction over Nadel through the
Nadel Criminal Action, and pursuant to the Preliminary Forfeiture Order, Nadel forfeited his
interest in the Forfeited Assets to the United States. However, neither the SDNY Court nor
any other court except this Court has ever obtained in rem jurisdiction over Forfeited Assets.
As explained below, there is no conflict between the actions taken by the SDNY Court
pursuant to its in personam jurisdiction over Nadel and the actions taken by this Court

5

The limited nature of in personam criminal forfeiture is illustrated by the exemption
from such forfeiture of property transferred to a bona fide purchaser for value who was
reasonably without cause to believe that the property was subject to forfeiture. See 21 U.S.C.
§ 853(c); Gilbert, 244 F.3d at 920 (“[A]n order of forfeiture imposed upon a defendant as a
penalty for his wrongdoing determines the government’s title in property only as against the
named defendants, while civil forfeiture actions which are brought in the jurisdiction where
the res is located are in rem and determine the government’s title in property as against the
whole world.” (quotation omitted)).

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pursuant to its in rem jurisdiction over Receivership property. Because there is no such
conflict, this Court has and always has had jurisdiction over the Laurel Mountain Property
and all other Forfeited Assets as of the time the applicable method for acquiring such
jurisdiction was satisfied.
B.

There Is No Conflict Between This Court’s In Rem Jurisdiction Over
Receivership Property And The SDNY Court’s In Personam Jurisdiction
Over Nadel’s Interests Therein

As Wells Fargo’s own authorities recognize, the prior exclusive jurisdiction rule is
concerned with principles of comity and only applies where there is a conflict between two
courts regarding a specific res. This is not the situation here. “If the two suits are in rem or
quasi in rem, so that the court must have possession or control of the res in order to proceed
with the cause and to grant the relief sought, the jurisdiction of one court must of necessity
yield to that of the other.” Bank of N.Y., 296 U.S. at 477. In such situations, “the court first
assuming jurisdiction over property may maintain and exercise that jurisdiction to the
exclusion of the other. . . .” Id. The purpose of this rule is to “conciliate the distinct and
independent tribunals of the States and of the Union, so that they may co-operate as
harmonious members of a judicial system coextensive with the United States.” Id. at 478;
Farmers’ Loan & Trust Co. v. Lake St. Elevated R. Co., 177 U.S. 51, 61 (1900) (“This rule is
essential to the orderly administration of justice, and to prevent unseemly conflicts between
courts whose jurisdiction embraces the same subjects and persons.”); Merrill Lynch, Pierce,
Fenner & Smith, Inc. v. Haydu, 675 F.2d 1169, 1173 (11th Cir. 1982) (“Principles of comity
come into play when separate courts are presented with the same lawsuit.”); United States v.
One 1985 Cadillac Seville, 866 F.2d 1142, 1145 (9th Cir. 1989) (noting that the rule “is a

7

prudential limitation applied by the Supreme Court in the interest of judicial harmony”);6 see
also Penn Gen. Cas. Co. v. Commw. of Pa., 294 U.S. 189, 195 (noting that purpose of rule is
to “avoid unseemly and disastrous conflicts in the administration of our dual judicial
system”).
Consequently, when – like the situation here – two courts do not both attempt to
exercise in rem jurisdiction over a res, those courts may have concurrent jurisdiction, and the
prior exclusive jurisdiction rule simply does not apply. Id. (holding that “if the two suits are
in rem or quasi in rem,” one court must yield to the other, but if one court proceeds in
personam, the courts have concurrent jurisdiction); 1st Nat’l Credit Corp. v. Von Hake, 511
F. Supp. 634, 639 (D. Utah 1981) (holding that if one action is in rem and “one action is in
personam, even though adjudicating, without physically controlling, a right in the res, [a]
conflict does not exist” (quoting 1A Moore’s Federal Practice P 0.214 at 2502 (2d ed. rev.
1980))). And unless the proceedings in both courts are “in rem as to the same property, both
courts may proceed to adjudicate the actions at their own pace.” 1st Nat’l Credit Corp., 511
F. Supp. at 639; see also Lankenau v. Coggeshall & Hicks, 350 F.2d 61, 64-65 (2d Cir. 1965)
(holding no conflict exists where res is not basis of competing court’s jurisdiction but merely

6

Wells Fargo relies on the above-cited authorities in its Supplemental Memo. See
Supp. Memo at 3 n.4, 4-5. But each of those cases is factually distinguishable from the
situation here because in those cases, the courts in conflict attempted to assert in rem
jurisdiction over the same asset. For example, in One 1985 Cadillac Seville, the United
States brought an in rem civil forfeiture action directly against the property to be forfeited.
866 F.2d at 1145. Similarly, in Farmers’ Loan & Trust, “two sets of bondholders” sought to
foreclose on the same mortgage and thus to assert control over the same res. 177 U.S. at 60,
62. That is not the case here: this Court exercises in rem jurisdiction over Receivership
property and the SDNY Court exercises in personam jurisdiction over Nadel’s interests
therein.

8

security for judgment); Riehle v. Margolies, 279 U.S. 218, 225 (1929) (“The establishment of
a claim constituting the basis of the right to participate in the distribution of property in the
possession of one court is often conclusively determined by a judgment obtained in another
court.”); NBC Universal v. NBCUNIVERSAL.COM, 378 F. Supp. 2d 715, 717 (E.D. Va.
2005) (holding no conflict exists between related in personam and in rem actions).
Here, there is no conflict because this Court has exercised in rem jurisdiction over the
Laurel Mountain Property and the rest of the Forfeited Assets and the SDNY Court (or any
other court) has not. But even more broadly, there is no conflict between the two courts
because the SDNY Court’s goals and the efforts of the USAO and the goals of this Court and
the Receivership do not conflict. As explained in the Receiver’s reply to the Objection (Doc.
712) (the “Reply”) and in the accompanying declaration of Gianluca Morello in support of
the Reply (Doc. 713) (the “Morello Declaration”), there is an understanding between the
Receiver and representatives of the USAO that assets controlled by Nadel, including the
Laurel Mountain Property, would be administered, liquidated, and distributed through the
Receivership claims process to compensate victims. Contrary to Wells Fargo’s assertions,
there is nothing unusual or improper about that arrangement. See, e.g., United States v.
Weiss, 467 F.3d 1300, 1307 (11th Cir. 2006) (holding that receivership may be maintained at
the same time as in personam forfeiture proceedings and that the United States may assert its
interest in forfeited property through the receivership “should it choose to do so”); S.E.C. v.
Madoff, 2009 WL 980288, *2 n.1 (S.D.N.Y. 2009) (suggesting that Attorney General
delegate forfeited property to bankruptcy estate to save administrative costs, pursuant to the
authority granted by 21 U.S.C. § 853(i)(1)).

9

This understanding is the reason why no

representative of the United States has ever challenged this Court’s jurisdiction over
Receivership property and why the U.S. Marshalls Service has never attempted to possess or
control any of the Forfeited Assets.
Moreover, there is nothing, nor has there ever been anything, “secret” about the
Receiver’s understanding with the USAO. As explained in the Receiver’s Reply and the
Morello Declaration, Wells Fargo received ample notice that the Court and the Receiver had
asserted jurisdiction and control over the Laurel Mountain Property and established a claims
process. See Reply (Doc. 712, Sections III and IV). The Receiver mailed notice of the
claims process to hundreds of entities and individuals, including Wells Fargo. Id. The
Receiver also published notice of the claims process in the Wall Street Journal and the
Sarasota Herald Tribune. Id. In fact, representatives of the Receiver and Wells Fargo
exchanged numerous communications regarding the Laurel Mountain Property – beginning
no later than one month after this Receivership was commenced – and counsel for the
Receiver specifically advised Wells Fargo with respect to the Laurel Mountain Property that
its interests would not be considered by the Receiver and this Court unless it filed a claim.
Id. Had Wells Fargo ever notified the Receiver of its intent to seek relief in the SDNY Court,
the Receiver would have explained his arrangement with the USAO. Instead, Wells Fargo
filed a petition in the SDNY Court in violation of the injunctive provisions of the Order
Appointing Receiver without ever notifying the Receiver or this Court. Wells Fargo’s
assertion that the administration and liquidation of the Laurel Mountain Property through the
Receivership rather than the SDNY Court’s criminal forfeiture was a “secret” is nothing
more than a fabrication, designed to divert attention away from its fatal failure to file a claim

10

in this proceeding. The only improper conduct has been Wells Fargo’s.
In fact, consistent with the understanding between the Receiver and the USAO and to
remove any doubt, the SDNY Court released the Laurel Mountain Property from forfeiture
on February 9, 2012. See Supp. Memo at 9. And the Receiver understands that the United
States shortly will move the SDNY Court to release all of the remaining Forfeited Assets
from the Preliminary Forfeiture Order as well. C.f. Penn Gen., 294 U.S. at 197 (court with
exclusive jurisdiction (which the SDNY Court does not have) “can determine how far it will
permit any other court to interfere.”). In short, this Court has had and continues to have
requisite jurisdiction and control, and thus the claims process should proceed as requested by
the Receiver so that Nadel’s victims may finally receive distributions.
II.

NO ACTION TAKEN BY THE RECEIVER WAS “A NULLITY”
Wells Fargo also argues that because this Court purportedly lacks jurisdiction over

the Laurel Mountain Property, every action by the Receiver with respect to that property is “a
nullity.” Supp. Memo at 7. Specifically, Wells Fargo argues the Receiver lacked authority
to demand that it file a claim in the claims process. Id. Wells Fargo is wrong, and it failed to
cite a single case supporting its argument. As explained above, because there is no conflict
between the SDNY Court’s in personam jurisdiction over Nadel and this Court’s in rem
jurisdiction over Receivership property, this Court’s Receivership proceedings have always
been appropriate, and at all relevant times it had jurisdiction over the Laurel Mountain
Property. But even if the SDNY Court had in rem jurisdiction of the Laurel Mountain
Property or any other Receivership res – which it never did – such jurisdiction would still not
deprive this Court of its authority to establish the claims process and to require creditors,

11

including creditors claiming a security interest in Forfeited Assets, to file proof of claim
forms by the bar date. As the United States Supreme Court explained,
an order which results in the distribution of assets among creditors has
ordinarily a twofold aspect. In so far as it directs distribution, and fixes the
time and manner of distribution, it deals directly with the property. In so far as
it determines, or recognizes a prior determination of, the existence and amount
of the indebtedness of the defendant to the several creditors seeking to
participate, it does not deal directly with any of the property. The latter
function, which is spoken of as the liquidation of a claim, is strictly a
proceeding in personam.
Riehle, 279 U.S. at 224; see Wolff v. Cash 4 Titles, 351 F.3d 1348, 1354 n.19 (11th Cir.
2003) (applying Riehle).
While it is often said that, of two courts having concurrent jurisdiction in rem,
one first taking possession acquires exclusive jurisdiction, it is exclusive only
so far as its exercise is necessary for the appropriate control and disposition of
the property. The jurisdiction does not extend beyond the purpose for which it
is allowed, to enable the court to exercise it appropriately and to avoid
unseemly conflicts. The other court does not thereby lose its power to make
orders which do not conflict with the authority of the court having jurisdiction
over the control and disposition of the property.
Penn Gen., 294 U.S. at 198.
Here, the claims process seeks to determine the existence, validity, and amount of the
Receivership Entities’ indebtedness to potential creditors by requiring them to file proof of
claim forms.

The claims process is an in personam proceeding with respect to the

Receivership Entities, at least until actual distributions are made. If Wells Fargo felt that it
was required to protect its purported interest in the Laurel Mountain Property by seeking
relief in the SDNY Court, it still should have filed a claim in the Receiver’s claims process
for a determination of the amount and validity of the alleged liability flowing to it from a
Receivership Entity. See Riehle, 279 U.S. at 224 (“There is no inherent reason why the

12

adjudication of the liability of the debtor in personam may not be had in some court other
than that which has control of the res. It is only necessary that in the receivership[,] proof of
the claim be made in an orderly way, so that it may be established who the creditors are and
the amounts due them.”).
III.

EVEN IF DETERMINATION OF WHICH COURT OBTAINED
JURISDICTION FIRST WAS RELEVANT (AND IT IS NOT), THIS COURT
OBTAINED JURISDICTION BEFORE THE SDNY COURT
As explained above, the prior exclusive jurisdiction rule does not apply here because

this Court’s in rem jurisdiction over the Forfeited Assets does not conflict with the SDNY
Court’s in personam jurisdiction over Nadel and his interests. But even if the rule did apply,
contrary to Wells Fargo’s contention, this Court first obtained jurisdiction over the Forfeited
Assets, including the Laurel Mountain Property.
As an initial matter, the relation-back doctrine codified in 21 U.S.C. § 853(c) does not
help Wells Fargo. That doctrine specifies when title to forfeited property vests in the United
States; it does not address when the Court administering the applicable forfeiture proceedings
obtains jurisdiction over a defendant’s interest in the forfeited property. See Supp. Memo at
6; United States v. Bailey, 419 F.3d 1208, 1213 (11th Cir. 2005) (“[T]he relation-back
doctrine operates retroactively to vest title in the Government effective as of the time of the
act giving rise to the forfeiture. That is, it does not secretly vest title at the very moment of
the act, but rather title vests at the time of the court-ordered forfeiture and then relates back to
the act.” (citation and quotation omitted)).
Further, as explained in the Receiver’s Reply, the Court and Receiver obtained
jurisdiction and control over the Laurel Mountain Property, at latest, on June 10, 2009,

13

pursuant to 28 U.S.C. § 754 – more than four months before entry of the Preliminary
Forfeiture Order. See Reply (Doc. 712) at 1-3. In the Supplemental Memo, Wells Fargo
contends the relevant event in the SDNY Court is not the entry of the Preliminary Forfeiture
Order but rather the return of the Indictment against Nadel on April 28, 2009. See Supp.
Memo at 5. Wells Fargo concludes that because Nadel was indicted before the Receiver
complied with 28 U.S.C. § 754 in connection with the Laurel Mountain Property, the SDNY
Court has prior exclusive jurisdiction – Wells Fargo’s argument compares apples to oranges.
See Supp. Memo at 6-7. As the United States Supreme Court has explained,
when the two suits have substantially the same purpose and the jurisdiction of
the courts is concurrent, that one whose jurisdiction and process are first
invoked by the filing of the bill is treated as in constructive possession of the
property and as authorized to proceed with the cause. Jurisdiction thus
attaches upon the filing of the bill of complaint in court, at least where process
subsequently issues in due course.
Penn Gen., 294 U.S. at 196 (citation omitted). The Complaint in this case was filed on
January 21, 2009 – more than three months before Nadel was indicted.7 As such, this Court
obtained constructive possession of all assets traceable to Nadel’s scheme, including the
Laurel Mountain Property and the Forfeited Assets, well before the indictment. In addition,
this Court obtained actual possession of the Laurel Mountain Property on June 10, 2009,
7

Wells Fargo also contends the SDNY Court’s jurisdiction “could have arguably
vested as early as January 27, 2009,” when Nadel was arrested (Supp. Memo at 5), but the
Complaint in this action was still filed almost a week before that date. Even if the criminal
complaint against Nadel controls (an argument that Wells Fargo does not make) that
document was filed in the SDNY Court on January 21, 2009 – the same day as the Complaint
in this action. Because the complaints were filed concurrently, there is no basis to conclude
that the SDNY Court obtained prior jurisdiction. In any event, as explained above, the issue
of which court obtained jurisdiction first is moot because there is no conflict between this
Court’s in rem jurisdiction over Receivership property and the SDNY Court’s in personam
jurisdiction over Nadel and his interests.

14

pursuant to 28 U.S.C. § 754. The SDNY Court has never obtained actual possession of any
Receivership property. To the extent priority of jurisdiction is relevant to this Court’s
inquiry (and, as explained above, it is not), this Court obtained jurisdiction before the SDNY
Court.
CONCLUSION
For the foregoing reasons, the Objection should be denied, and the Court should grant
the Motion and allow the claims process to proceed.

15

Respectfully submitted,
s/Jonathan B. Cohen_
Jonathan B. Cohen, FBN 0027620
[e-mail]
Sean P. Keefe, FBN 413828
[e-mail]
JAMES, HOYER, NEWCOMER &
SMILJANICH, P.A.
One Urban Centre, Suite 550
4830 West Kennedy Blvd.
Tampa, FL 33609
Tel: [phone]
Fax: [phone]
-andGianluca Morello, FBN 034997
[e-mail]
Michael S. Lamont, FBN 0527122
[e-mail]
Jared J. Perez, FBN 0085192
[e-mail]
WIAND GUERRA KING P.L.
3000 Bayport Drive, Suite 600
Tampa, FL 33607
Tel: [phone]
Fax: [phone]
Attorneys for the Receiver, Burton W. Wiand8

8

Wiand Guerra King P.L. participates in this filing only to the extent the issues raised
by the Court with respect to its jurisdiction would impact Receivership property with no
relation to Wells Fargo.

16

CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on February 23, 2012, I electronically filed the foregoing
with the Clerk of the Court by using the CM/ECF system.
I FURTHER CERTIFY that on February 24, 2012, I will mail the foregoing
document and the notice of electronic filing by first-class mail to the following non-CM/ECF
participant(s):
Arthur G. Nadel, Register No. 50690-018
FCI BUTNER LOW
Federal Correctional Institution
P.O. Box 999
Butner, NC 27509

s/

17

Jonathan B. Cohen