United States of America v. All funds on deposit with R.J. O'Brien & Associates, held in the name of Bridge Investment, S.L., bearing account numbers XXX-X3931 and XXX-X1784, maintained at Harris Bank account number XXX-171

Filing 74

MEMORANDUM OPINION AND ORDER signed by the Honorable Matthew F. Kennelly on 3/27/12. (mk)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

UNITED STATES OF AMERICA,
Plaintiff,
v.
ALL FUNDS ON DEPOSIT WITH R.J.
O’BRIEN & ASSOCIATES, HELD IN THE
NAME OF BRIDGE INVESTMENT, S.L.,
BEARING ACCOUNT NUMBERS
XX-X3931 AND XXX-X1784, MAINTAINED
AT HARRIS BANK, ACCOUNT NUMBER
XXX-171-6,
Defendant.

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Case No. 11 C 4175

MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge:
The United States filed this in rem action seeking forfeiture of approximately
$6,600,000 held in futures trading accounts. It contends that the money is the property
of an affiliate of the Al-Qaeda terrorist organization. Three groups of insurance
companies (the insurance company claimants) with property damage claims arising
from the September 11, 2001 terrorist attacks have filed claims to the funds and
answers to the government’s complaint. The government has moved to strike their
claims and answers, and the insurance companies have moved to amend them. In
addition, a group of individuals (the personal injury claimants) asserting personal injury
and wrongful death claims arising from the September 11 attacks have moved to
intervene and filed an answer to the government’s forfeiture action. The government

has moved to strike their answer. For the reasons discussed below, the Court grants
the government’s motions to strike and denies the personal injury claimants’ motion to
intervene.
Background
A.

The defendant property
In 2003, an commodities futures trading account was opened at R.J. O’Brien &

Associates (RJO) in the name of Bridge Investment, S.L., a Spanish corporation. In
2005, Mohammad Qasim al Ghamdi (Al Ghamdi), who was identified as Bridge
Investment’s general manager, took control of the trading account. Between June and
September 2005, he deposited almost $24,000,000 in the account. The account lost
money, and by May 2006 only about $6,600,000 remained. Later in 2006, Bridge
Investment opened a second account with RJO but did not deposit any additional
money into the account.
The government alleges that the money Al Ghamdi deposited in the RJO account
was the property of Muhammad Abdallah Abdan Al Ghamdi, also known as Abu al
Tayyeb (Al Tayyeb), a member of Al-Qaeda and an associate of Al Ghamdi. The
government alleges that Al Tayyeb raised money in Saudi Arabia and used it to support
Al-Qaeda’s activity. He provided approximately $35 million to Al Ghamdi, and it was a
portion of this money that Al Ghamdi deposited in the RJO account. Saudi Arabian
authorities arrested Al Tayyeb in June 2006. At the time, he had been planning or
considering several different types of terrorist attacks on Saudi Arabia and the United
States.
In June 2007, the United States Department of the Treasury’s Office of Foreign
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Assets Control, using its authority under the International Emergency Economic Powers
Act, blocked Bridge Investment’s two accounts at RJO. The funds in the accounts
remained blocked when the government initiated this forfeiture action on June 19, 2011.
In this action, the government claims that the funds were forfeit as the assets of an
individual or entity planning or perpetrating an act of terrorism against the United States
or a foreign government in violation of 18 U.S.C. § 981(a)(1)(G)(I) and (iv). Following
the filing of the complaint, the Court issued an in rem arrest warrant for the funds, and
federal law enforcement agents then seized the funds. The United States Marshal has
held the funds since July 15, 2011.
B.

The claimants
Three different groups of insurance companies have filed verified claims and

answers: (1) OneBeacon Insurance Group; (2) American Alternative Insurance
Company, The Princeton Excess & Surplus Lines Insurance Company, and Great
Lakes UK Insurance Company (collectively American Alternative); and (3) Vigilant
Insurance Company, Chubb Custom Insurance Company, Chubb Indemnity Insurance
Company, Federal Insurance Company, Chubb Insurance Company of New Jersey,
Chubb Insurance Company of Canada, Pacific Indemnity Company, and Great Northern
Insurance Company (collectively Chubb). The insurance company claimants
collectively paid more than $2.5 billion in property damage and business interruption
claims arising from the September 11 terrorist attacks. In 2003, they and other similarly
situated insurance companies filed suit against Al-Qaeda and other defendants in the
United States District Court for the Southern District of New York seeking to recover the
funds they had paid out.
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A group of several thousand individuals who assert personal injury or wrongful
death claims related to the September 11 attacks filed suit in 2002 against Al-Qaeda
and other defendants in the United States District Courts for the District of Columbia
and the Southern District of New York. Their cases were consolidated with the suit
brought by the insurance companies in the Southern District of New York.
In April and May 2006, the district court in New York issued what the insurance
claimants call “default judgments” against Al-Qaeda and the other defendants in favor of
the insurance companies and the personal injury plaintiffs because the defendants had
not answered the complaint. The district court did not, however, determine the amount
of liability or issue a final judgment. (For this reason, the so-called “judgments” were
actually orders of default, not judgments.) In 2007, the insurance companies moved the
court to assess damages in the total amount of more than $9.4 billion in favor of all the
insurance company plaintiffs, including some plaintiffs who are not claimants here.
The district court, however, took no action on the insurance companies’ motion
until July 13, 2011, when it referred the motion to a magistrate judge. Consequently,
when the insurance company claimants filed claims and answers in this forfeiture action
in August and September 2011, they were able to say only that the New York court had
determined liability in their favor, and they were unable to specify the amount of their
claim.
In October 2011, the magistrate judge in New York recommended that the
insurance companies be awarded the judgment they sought, with only minor
subtractions. The district court adopted the recommendation fully and entered judgment
in favor of the insurance companies on December 22, 2011. Because the insurance
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companies are entitled to treble damages under the applicable law, OneBeacon’s
judgment is worth almost $530 million, American Alternative’s is for more than $320
million, and Chubb’s is for $6.65 billion. On January 25, 2012, the district court in New
York determined that there was no reason for delay and issued final judgments in favor
of the insurance companies even though other portions of the consolidated cases were
ongoing. On January 27, the insurance company claimants moved in this case to filed
amended claims and answers reflecting that they now have final judgment for definite
amounts.
The personal injury plaintiffs did not fill a timely claim or answer in the present
forfeiture action. In November 2011, however, they sought to intervene as claimants
either as a matter of right or permissively. The personal injury plaintiffs have not yet
had their damages calculated by the New York district court, and thus they do not have
final judgments. Because there are thousands of individual plaintiffs, each of whom
requires a separate determination of damages, counsel for the personal injury claimants
cannot predict when they might have final judgments. The personal injury claimants
state, however, that they have reached a confidential agreement with the insurance
company claimants under which any funds that the insurance company claimants
recover will be used to fund further litigation against Al-Qaeda.
Discussion
The government contends that both sets of claimants lack standing because they
are only general unsecured creditors vis-a-vis the seized funds. The government also
argues that the personal injury plaintiffs cannot satisfy the requirements for either
intervention as of right or permissive intervention.
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A.

Article III standing
“There are two different forms of standing in a forfeiture case such as this:

Article III standing and statutory standing. To contest a forfeiture, a claimant first must
demonstrate a sufficient interest in the property to give him Article III standing,
otherwise there is no case or controversy.” United States v. $103,387.27, 863 F.2d
555, 560 n.10 (7th Cir. 1988) (internal quotation marks omitted). State law defines what
interest the claimants actually have, and federal law determines if that interest is
sufficient for standing. United States v. 5 S 351 Tuthill Rd., 233 F.3d 1017, 1021 (7th
Cir. 2000).
In a civil forfeiture case, a claimant’s standing depends on three elements: “(1)
an immediate threat of injury; (2) fairly traceable to the [government’s] conduct; that (3)
a favorable federal court decision likely would redress or remedy.” Id. at 1022. As a
general rule, the standing requirement is “undemanding,” and the sorts of claimants who
lack standing are those who have experienced “purely psychological harm” or “simple
indignation.” Id. (internal quotation marks omitted). “[W]hile ownership and possession
generally may provide evidence of standing, it is the injury to the party seeking standing
that remains the ultimate focus.” United States v. Cambio Exacto, S.A., 166 F.3d 522,
527 (2d Cir. 1999) (money transmitting companies had standing to contest forfeiture of
their customers’ funds, because companies were liable to customers to make up any
shortfalls).
It is undisputed that the claimants do not have a security interest or a lien on the
defendant funds. The government contends that many courts have held that general
unsecured creditors lack Article III standing in a civil forfeiture case. E.g., United States
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v. One-Sixth Share of James J. Bulger in All Present and Future Proceeds of Mass
Millions Lottery Ticket No. M246233, 326 F.3d 36, 44 (1st Cir. 2003); Cambio Exacto,
166 F.3d at 528–29; United States v. $20,193.39, 16 F.3d 344, 346 (9th Cir. 1994);
United States v. All Assets Held at Bank Julius Baer & Co., Ltd., 772 F. Supp. 2d 191,
198–99 (D.D.C. 2011); United States v. Currency $11,331, 482 F. Supp. 2d 873, 880
(E.D. Mich. 2007); United States v. 105,800 Shares of Common Stock of FirstRock
Bancorp, Inc., 830 F. Supp. 1101, 1117 (N.D. Ill. 1993). However, although these cases
address standing, they do so in terms that suggest the courts were actually considering
the standing requirements that the civil forfeiture statute and rules impose on claimants,
not standing under Article III.
Both the civil forfeiture statute and Supplemental Federal Rule of Civil Procedure
G require that a claim “state the claimant’s interest in [the forfeited] property.” 18 U.S.C.
§ 983(a)(2)(C)(ii); Fed. R. Civ. P., Supp. R. G(5)(i)(B); see also 18 U.S.C. § 983(d)(6)
(stating that claimant asserting innocent owner defense must have “an ownership
interest in the specific property sought to be forfeited” and cannot have “only a general
unsecured interest in, or claim against, the property or estate of another”). A claimant
must comply with these procedural rules to establish statutory standing. $103,387.27,
863 F.2d 555, 560 n.10; United States v. Commodity Account No. 549 54930 at Saul
Stone & Co., No. 96 C 8423, 1999 WL 91910, at *1–2 (N.D. Ill. Feb. 11, 1999). Many of
the court decisions holding that an unsecured creditor lacks standing do not expressly
state whether they mean statutory standing, but they discuss the requirements of either
the civil forfeiture statute or Rule G. E.g., $20,193.39, 16 F.3d at 346 (discussing
requirements of forfeiture statute and innocent owner defense); Bank Julius Baer, 772
7

F. Supp. 2d at 198–99 (discussing requirements of forfeiture statute and Rule G);
Currency $11,331, 382 F. Supp. 2d at 880 (discussing definition of innocent owner in
forfeiture statute). Decisions discussing the requirements of the civil forfeiture statute
and rule are better understood as decisions based upon statutory standing, not the
constitutional dimension of standing.
Even the decisions cited by the government that expressly state that an
unsecured creditor lacks Article III standing rely on the civil forfeiture statute and Rule
G. In One-Sixth Share, the First Circuit stated that an unsecured creditor lacked Article
III standing but as justification cited the forfeiture statute and the Ninth Circuit decision
in $20,193.39, which was also based on analysis of the forfeiture statute. One-Sixth
Share, 326 F.3d at 44; $20,193.39, 16 F.3d at 346; see also United States v.
$11,900.00, No. 09-2303-STA, 2009 WL 3571554, at *4 (W.D. Tenn. Oct. 26, 2009)
(citing $20,193.39 for the proposition that unsecured creditors lack Article III standing).
Similarly, in FirstRock Bancorp, the court stated that unsecured creditors lack Article III
standing but did so in the context of discussing the statutory innocent owner defense
and cited as authority a California district court case that discussed the statutory
standing requirement. FirstRock Bancorp, 830 F. Supp. at 1117 (citing United States v.
127 Shares of Stock in Paradigm Mfg., Inc., 758 F. Supp. 581, 583 (E.D. Cal. 1990));
see also United States v. Two Bank Accounts, No. Civ. 06-4016-KES, 2009 WL
803615, at *6 (D.S.D. Mar. 24, 2009) (stating that general unsecured creditors lacked
Article III standing, but citing $20,193.39, One-Sixth Share, and Paradigm Mfg.).
In this case, however, the Court need not grapple with the distinctions between
Article III standing and statutory standing. As discussed in the next section, it is clear
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that claimants lack statutory standing to challenge the forfeiture.
B.

Prudential and statutory standing
The claimants’ status as unsecured creditors means that they are outside the

zone of interests protected by the forfeiture statute. As a result, they do not satisfy what
courts refer to as prudential standing limitations. “[P]rudential standing . . . embodies
judicially self-imposed limits on the exercise of federal jurisdiction.” Elk Grove Unified
Sch. Dist. v. Newdow, 542 U.S. 1, 12 (2004) (internal quotation marks omitted). The
courts have not defined the limits of prudential standing, but it “encompasses the
general prohibition on a litigant’s raising another person’s legal rights, . . . and the
requirement that a plaintiff’s complaint fall within the zone of interests protected by the
law invoked.” Id. (internal quotation marks omitted).
The civil forfeiture statute contains specific protections for “innocent owners,” 18
U.S.C. § 983(d), and it is only those who have an ownership interest in the property to
be forfeited who are within the zone of interests protected by the statute and thus “hold
the right to defend against forfeiture proceedings.” United States v. $500,000.00, 591
F.3d 402, 404 (5th Cir. 2009). General unsecured creditors like the claimants in this
case are excluded from the statutory definition of owner and thus lack prudential
standing. Id. at 404–05; see 18 U.S.C. § 983(d)(6)(B)(I). In particular, courts have
decided that victims of crimes committed by the owners of forfeited property are not
within the zone of interests protected by the civil forfeiture statute. In United States v.
Approximately $133,803.53, 683 F. Supp. 2d 1090 (E.D. Cal. 2010), the claimant was a
victim of fraud committed by the former owner of the defendant property and claimed
that it was the beneficiary of a constructive trust that included the property. Id. at
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1092–93. The court noted that Congress had included in the civil forfeiture statute a
provision allowing the Attorney General to use forfeited property to compensate “any
victim of the offense giving rise to the forfeiture” and a provision stating that “[t]he
Attorney General shall have sole responsibility for disposing of petitions for remission or
mitigation with respect to property involved in a judicial forfeiture proceeding.” Id. at
1094–95 (citing 18 U.S.C. § 981(d), (e)(6)). The court reasoned that “Congress’s
creation of a remission process for crime victims and explicit delegation of responsibility
to the Attorney General over petitions filed pursuant to that process, combined with the
absence of statutory language negating the application of the prudential standing
doctrine to potential claims of victims, compels the conclusion that the claimant in this
case lacks prudential standing.” Id. at 1095.
In United States v. Real Prop. Located at 730 Glen-Mady Way, 590 F. Supp. 2d
1295 (E.D. Cal. 2008), the court employed similar reasoning. The claimants were
victims of fraud and thus were, under California law, beneficiaries of a constructive trust
over the defendant property. Id. at 1301. Their interest in the property was sufficient to
convey Article III standing, but because the civil forfeiture statute provided an
administrative method for compensating the victims of crimes, the court concluded that
they lacked prudential standing. Id. at 1302–03. The court also noted that the
protections given to innocent owners, a statutory term that specifically excludes
unsecured creditors and does not otherwise mention the victims of crimes, also
suggested that victims of crimes lacked prudential standing. 590 F. Supp. 2d at 1303 &
n.4 (citing 18 U.S.C. § 983(d)).
Because the claimants in the present case do not have “an ownership interest in
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the specific property sought to be forfeited,” they are not innocent owners and thus are
not specifically protected by the forfeiture statute. 18 U.S.C. § 983(d)(6)(A). Further,
the statute creates a separate administrative process to provide compensation to the
victims of crimes related to forfeit property and gives the Attorney General sole authority
over its administration. Id. § 981(d), (e)(6). The Court concludes that both groups of
claimants fall outside the zone of interests protected by the forfeiture statute and thus
lack prudential standing. For this reason, the Court strikes the claims and answers of
the insurance company claimants and the answer of the personal injury plaintiffs.
The claimants also lack statutory standing. To have statutory standing, a plaintiff
must meet certain requirements of the forfeiture rules. Cambio Exacto, 166 F.3d at 527.
Supplemental Rule G requires that a claim “identify the claimant and state the
claimant’s interest in the property.” Fed. R. Civ. P., Supp. R. G(5)(a)(i)(B); accord 18
U.S.C. § 983(a)(2)(C)(ii).
A general unsecured creditor, which is what the claimants are, lacks an interest
in the specific property to be forfeited. $20,193.39, 16 F.3d at 346; see United States v.
$7,599,358.09, Civ. Action No. 10-5060 (SRC), 2011 WL 3611451, at *3 (D.N.J. Aug.
15, 2011) (fraud victims whose funds were intermingled with other money lacked
standing to challenge forfeiture because they had no interest in specific property).
Thus, an unsecured creditor lacks statutory standing to challenge a forfeiture. United
States v. Funds Totaling $42,958.85, No. 93 C 2241, 1994 WL 46695, at *1–2 (N.D. Ill.
Feb. 14, 1994). “The federal courts have consistently held that unsecured creditors do
not have standing to challenge the civil forfeiture of their debtors’ property.” One-Sixth
Share, 326 F.3d at 44 (internal quotation marks omitted); accord United States v. Boyle,
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No. 04 CR 86-2, 2009 WL 2391857, at *2 (N.D. Ill. July 24, 2009) (unsecured creditor
lacked standing under criminal forfeiture statute). The claimants do not cite any
decision in which a court has determined that a general unsecured creditor has
statutory standing to assert a claim in a forfeiture case. Their claims and answers are
properly stricken for this reason as well.
Claimants argue that the standing inquiry should be independent of the
determination of whether a claimant is an owner of the property to be forfeited, which
they argue is a merits issue. The cases they cite, however, are distinguishable. In
United States v. One 1990 Beechcraft, 619 F.3d 1275 (11th Cir. 2010), the court stated
that the statutory definition of ownership was not “part of the standing inquiry, [but
instead] an element of the innocent owner’s claim on the merits.” Id. at 1277 n.3
(internal quotation marks omitted). But in that case, it was undisputed that the claimant
had legal title to the defendant property. The disputed issue was whether the claimant
exercised any “dominion or control” or was just a straw owner. Id. at 1277 (internal
quotation marks omitted); see 5 S 351 Tuthill Rd., 233 F.3d at 1022–23 (where claimant
was beneficiary of a land trust, question of whether interest in defendant property was
purely nominal was not an issue of standing). Unlike the claimants in One 1990
Beechcraft or 5 S 351 Tuthill Rd., the claimants in this case do not have any sort of
legal title or beneficial interest in the defendant property. Claimants also rely on the
statement of the court in FirstRock Bancorp that status as an owner or lienholder is a
separate inquiry from standing. 830 F. Supp. at 1115 & n.9. But the court in that case
concluded that unsecured creditors lacked standing, although as discussed above it
characterized this as a constitutional rather than a statutory decision. Id. at 1117.
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Finally, claimants contend that they have standing because they are the
beneficiaries of a constructive trust that covers the property at issue. Under Illinois law,
which the parties agree applies, “a constructive trust is imposed to prevent unjust
enrichment by imposing a duty on the person receiving the benefit to convey the
property back to the person from whom it was received.” Dexia Credit Local v. Rogan,
629 F.3d 612, 630 (7th Cir. 2010). Constructive trusts can arise in many different
circumstances, id., but “[g]enerally, a court imposes a constructive trust to remedy (1)
actual or constructive fraud; (2) the breach of a fiduciary duty; or (3) duress, coercion, or
mistake.” Poziombka v. Winkle (In re Estate of Vogel), 291 Ill. App. 3d 1044, 1047, 684
N.E.2d 1035, 1037 (1997). “The proceeds of the alleged wrongful conduct must exist
as an identifiable fund traceable to that conduct, such that it can become the res of the
proposed trust.” Eychaner v. Gross, 202 Ill. 2d 228, 274, 779 N.E.2d 1115, 1143
(2002).
The claimants do not, of course, contend that they conferred any benefit on AlQaeda that a constructive trust could return. Nor are their claims, for property damage,
personal injury, and wrongful death, the sorts of claims for which constructive trusts are
typically imposed. They also do not contend that the defendant funds are proceeds of
the wrongful conduct that caused their injuries. Claimants argue that constructive trusts
are a broad equitable remedy, but they have cited no Illinois case in which a court has
imposed a constructive trust based on claims similar to theirs. The Court concludes that
claimants’ constructive trust theory does not give them standing to assert claims in this
proceeding. See Approximately $133,803.53, 683 F. Supp. 2d at 1095–97 (claimant
who was the beneficiary of constructive trust still lacked prudential standing).
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C.

Intervention
The personal injury plaintiffs have moved to intervene in this case, arguing that

they satisfy the requirements of both intervention as of right under Federal Rule of Civil
Procedure 24(a) and permissive intervention under Rule 24(b). A party seeking to
intervene under Rule 24, however, must still comply with the forfeiture rules. United
States v. One Parcel of Real Property, 942 F.2d 74, 77 (1st. Cir. 1991) (treating
intervention motion as claim); United States v. 8 Gilcrease Ln., 641 F. Supp. 2d 1, 4–5
(D.D.C. 2009) (intervenors must comply with forfeiture rules and state an interest in the
defendant property in order to have statutory standing); United States v. One Silicon
Valley Bank Account, No. 1:05-cv-295, 2007 WL 1594484, at *2 (W.D. Mich. June 1,
2007) (intervenors seeking to support government’s forfeiture claim must have statutory
standing and comply with forfeiture rules); see also DSI Assocs. LLC v. United States,
496 F.3d 175, 184–85 (2d Cir. 2007) (claimant cannot use intervention as an alternative
means of participating in criminal forfeiture proceeding). For the reasons previously
described, the personal injury claimants cannot meet the requirements of the forfeiture
statute. Thus they cannot intervene under Rule 24.
D.

Amendment
The insurance company claimants seek leave to file amended claims. Although

the insurance companies’ current claims are deficient and they lack statutory standing,
the Court has discretion to allow a claimant to amend its claim or file a new, late claim.
See $103,387.27, 863 F.2d at 560–61 (addressing claimants who lacked statutory
standing because their claim was not verified); United States v. One 2005 Rolls Royce
Phantom, No. 07 C 2870, 2008 WL 109114, at *3 (N.D. Ill. Jan. 8, 2008) (allowing
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claimant to file a claim and answer more than three months late even though it had an
unsatisfactory explanation of its lateness, because court and government knew of
claimed interest and government was not prejudiced).
The Court’s ability to permit an amended or late claim does not help claimants,
however, because even after amendment, they would lack the requisite interest in the
property that is the subject of the forfeiture action. The fact that their claim against Al
Qaeda has now been reduced to a money judgment does not alter the insurance
company claimants’ status as unsecured creditors who lack statutory and prudential
standing. In particular, they have not served citations to discover assets, which, under
Illinois law, would create a lien on the defendant property and thus give them an interest
in the property.1 See 735 ILCS 5/2-1402(a), (m). Accordingly, the district court denies
the insurance company claimants’ motion to amend on the ground that the proposed
amendment would be futile. Stanard v. Nygren, 658 F.3d 792, 797 (7th Cir. 2011).
Conclusion
For the reasons stated above, the Court grants the government’s motions to
strike the claimants’ claims and answers [docket nos. 42, 51]. The Court also denies
the personal injury claimants’ motion to intervene [docket no. 39] and the insurance
company claimants’ motion to amend [docket no. 59]. The case is set for a status
hearing on April 10, 2012 at 8:45 a.m., in chambers (Room 2188) to set a schedule for

1

The Court need not consider whether they legally can serve a citation at this time or, if
so, whether it would be appropriate then to allow the insurance claimants to amend their
claims. Similarly, the Court need not consider the effects of the Terrorism Risk
Insurance Act of 2002, Pub. L. 107-297, § 201, 116 Stat. 2332, 2337, on the claimants’
ability to execute their judgments against the property at issue in this case.
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any further proceedings in this case.

________________________________
MATTHEW F. KENNELLY
United States District Judge
Date: March 27, 2012

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