UNITED STATES OF AMERICA v. REAL PROPERTY LOCATED AT 8 DRIFT STREET, NEW BRUNSWICK, NEW JERSEY et al

Filing 45

OPINION filed. Signed by Judge Michael A. Shipp on 8/20/2015. (eaj)

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

UNITED STATES OF AMERICA,
Plaintiff,
Civil Action No. 14-3587 (MAS)

v.
OPINION

REAL PROPERTY LOCATED AT 8
DRIFT STREET, NEW BRUNSWICK,
NEW JERSEY, et al.,
Defendants in rem.

SHIPP, District Judge

This is a civil action in rem for the forfeiture of the defendant properties pursuant to 18
U.S.C. § 98l(a)(l)(A) and (a)(l)(C). Presently before the Court are several motions. On January
20, 2015, Claimants Gengwu Qiu ("Gengwu"), 52 BD, Inc. ("52 BD"), and TravelHome 1405,
LLC ("TravelHome") (collectively, "Claimants") moved for summary judgment pursuant to Rule
56 of the Federal Rules of Civil Procedure arguing that the claimed assets were not derived from
the alleged crimes. (ECF No. 29.) On February 2, 2015, Plaintiff United States of America (the
"Government") moved for summary judgment to strike the claims of Claimants Gengwu and 52
BD for lack of standing pursuant to Rule G(8)( c) of the Supplemental Rules for Admiralty or
Maritime Claims and Asset Forfeiture Actions and Rule 56 of the Federal Rules of Civil Procedure.
(ECF No. 31.) On April 8, 2015, Claimants filed an amended motion for summary judgment
additionally arguing that the alleged crimes, on which forfeiture is based, did not occur. (ECF No.
42.) The Court has carefully considered the parties' submissions and decides the matter without
oral argument pursuant to Local Civil Rule 78.1. For the reasons stated below, the Government's

motion for summary judgment to strike the claims of Gengwu and 52 BD is denied, and Claimants'
motion, and amended motion, for summary judgment are denied as premature.

I.

Background
The Government seeks forfeiture of certain real property and currency from three bank

accounts, which allegedly are proceeds from the transportation, transmittal, or transfer of money
from China to the United States by Gengmin Qiu ("Gengmin") that he knew was stolen, converted,
or taken by fraud in violation of 18 U.S.C. § 2314.
Gengwu, 52 BD, and TravelHome filed verified claims in the instant matter and assert an
interest in certain defendant properties. (ECF Nos. 14, 16, 22.) Specifically, Claimant Gengwu,
the brother of Gengmin, asserts an interest in the real property located at 1405 South Ocean
Boulevard, Myrtle Beach, South Carolina ("Myrtle Beach Property"), and in the currency in the
following bank accounts: (1) Cathay Bank account number 665931796, held in the name of 52 BD
("52 BD 1796"); (2) Cathay Bank account number 675981237, held in the name of Gengwu Qiu
("Gengwu 1237"); and (3) Cathay Bank account number 665934436, held in the name ofGengwu
Qiu ("Gengwu 4436"). (Verified Claim of Gengwu Qiu ("Gengwu Claim")~~ 2-5, ECF No. 14.)
Claimant 52 BD, through Gengwu, the sole owner since September 5, 2011, asserts an interest in
the currency seized from the 52 BD 1796 account. (Verified Claim of 52 BD, Inc. ("52 BD
Claim")~~

2-3, ECF No. 16.) TravelHome, through Judy Tang, a member and the manager of

TravelHome, asserts an interest in the Myrtle Beach Property as the legal and record owner of the
real property. (Verified Claim of TravelHome 1405, LLC ("TravelHome

Claim")~~

2-3, ECF

No. 22.)
The Government asserts that the defendant properties are subject to forfeiture because they
are proceeds derived from Gengmin's alleged crimes. (See generally Verified Compl., ECF No.

2

1.) Gengmin was the owner of a Chinese company, Zhejiang Changda Import and Export Co.,
Ltd. ("Changda"). (Id.

if 13.) In September 2005, Changda entered into contracts with I.M.

Skaugen SE ("Skaugen"), the buyer of three ships, and Taizhou Wuzhou Shipbuilding Industry
Co., Ltd. ("Wuzhou"), the shipbuilder, to perform customs work as the import-export agent. (Id.

ifif 13, 15-16.) China has a form of value added tax ("VAT"). (Id. if 14.) The VAT system requires
each seller of a product to pay a tax on the value added to the product, and in theory, the ultimate
cost of the tax is only passed on to the end consumer. (Id.

if 14.) China exempts exported goods

from VAT, but since sellers have to pay the VAT at each stage of production, the VAT is
reimbursed once the good is exported. (Id.)
In March 2009, the first ship was delivered to Skaugen, and Changda remitted the VAT
rebate, approximately $4 million, to Skaugen in September 2009. (Id.

if 17.) In October 2009, the

second ship was delivered to Skaugen; however, Changda never remitted the VAT rebate to
Skaugen. 1 (Id.

ifif 18, 23.) On or about January 25, 2010, the VAT rebate, RMB 2 25,113,530.92,

or approximately $3. 7 million, was transferred from an agency of the government of China to an
account at the Agricultural Bank of China ("ABC") held in the name of Changda. (Gov't's
Statement of Undisputed Material Facts 3 ("SUMP") if 2, ECF No. 37.) In January and February

1

In May 2010, the third ship was completed and available for delivery. Delivery, however, was
delayed because Changda had not assisted with the customs and export requirements. Skaugen
resolved the customs issues without Changda, and the third ship was delivered in September 2011.
(Verified Compl. if 24.)
2

Renminbi, abbreviated RMB, is the official currency of mainland China.

3

Gengwu and 52 BD did not dispute the Government's Statement of Undisputed Material Facts
submitted in support of the Government's motion for summary judgment, and therefore, those
facts which are properly supported by the record are deemed admitted for purposes of this motion.
See Muskett v. Certegy Check Servs., Inc., No. 08-3975, 2010 WL 2710555, at *3 (D.N.J. July 6,
2010).
3

2010, Gengmin transferred approximately $1.9 million of the VAT rebate to a bank account in the
United States held in the name of BD Global Corp. ("BD Global"), a shell company formed by
Gengmin ("BD Global 6099"). (Id. ~ 3-; Verified Compl. ~~ 20-21.) Subsequently, the monies
were completely transferred out of the BD Global 6099 account to other accounts in the United
States and used to purchase real and personal property, including the defendant properties.
(Verified Compl.

~

28.)

On June 14, 2011, Gengwu opened a bank account with ABC ("ABC Gengwu account"),
and on the same date, an "interbank transfer" of RMB 3,000,000 was immediately deposited into
his account and then was transferred to an account held in the name of Green Stem Trading, LLC,
located in Dubai, United Arab Emirates ("Green Stem account").

(Id.~~

5-6.) Also on June 14,

2011, the Green Stem account made the first of seven transfers to a bank account at Cathay Bank
in the United States controlled by Gengmin and held in the name of East International Inc. ("East
International 6610").

(Id.

~

7.) Between June and July 2011, a total of RMB 16,800,000,

approximately $2,555,850, was transferred from the ABC Gengwu account to the Green Stem
account and then to the East International 6610 account. (Id.

~

10.) Subsequently, the monies

were transferred to the accounts of either Gengmin or Gengwu, or companies they controlled, and
used to purchase real and personal property in the United States. (Verified Compl.
II.

~

28.)

Legal Standards
A.

Summary Judgment

Summary judgment is appropriate where "there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter oflaw." Fed. R. Civ. P. 56(a). A dispute
is genuine if there is sufficient evidentiary support such that "a reasonable jury could return a
verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A

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fact is material if it has the ability to "affect the outcome of the suit under governing law." Kaucher
v. Cnty. ofBucks, 455 F.3d 418, 423 (3d Cir. 2006) (citing Anderson, 477 U.S. at 248).

The party moving for summary judgment has the initial burden of proving an absence of a
genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 330 (1986). "When the
moving party ... does not bear the burden of persuasion at trial, the moving party may meet its
burden on summary judgment by showing that the nonmoving party's ... evidence is insufficient
to carry its burden of persuasion at trial." Sempier v. Johnson & Higgins, 45 F.3d 724, 727 (3d
Cir. 1995) (citing Celotex, 477 U.S. at 323-24). "Thereafter, the nonmoving party creates a
genuine issue of material fact if sufficient evidence is provided to allow a reasonable jury to find
for him at trial." Id. (citing Anderson, 477 U.S. at 248). "The mere existence of a scintilla of
evidence" supporting the nonmovant' s case is insufficient to defeat a motion for summary
judgment. Anderson, 477 U.S. at 252. "In considering a motion for summary judgment, a district
court may not make credibility determinations or engage in any weighing of the evidence." United
States v. $7,599,358.09, 953 F. Supp. 2d 549, 554 (D.N.J. 2013), appeal dismissed (Jan. 10, 2014)

(internal quotation marks omitted). To decide whether a genuine dispute of material fact exists,
the Court must consider all facts, drawing all reasonable inferences in a light most favorable to the
non-moving party. Kaucher, 455 F.3d at 423.
B.

Civil Forfeiture Framework

Civil asset forfeiture proceedings are governed by two sets of procedural rules: the
Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions
("Supplemental Rules") and the Federal Rules of Civil Procedure ("Civil Rules"). See United
States v. $8,221,877.16 in U.S. Currency, 330 F.3d 141, 149 (3d Cir. 2003). "The balance between

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the two is struck in favor of the Supplemental Rules, which always apply to civil forfeiture
proceedings." Id.
"[T]he only initial parties to a civil forfeiture action are the Government, as the plaintiff,
and the property the Government seeks to forfeit, as the defendant." United States v. $263,327.95,
936 F. Supp. 2d 468, 471 (D.N.J. 2013). "Any individual or entity that wishes to assert a claim to
the property can do so only by intervening in the action as a claimant." Id. To invoke the Court's
jurisdiction, a claimant must establish it has both statutory and Article III standing to contest a
civil forfeiture. $8,221,877.16 in US. Currency, 330 F.3d at 150 n.9. Supplemental Rule G(8)(c)
provides that "the government may move to strike a claim or answer ... because the claimant lacks
standing" and that the motion "may be presented ... by summary judgment [to determine] whether
the claimant can carry the burden of establishing standing by a preponderance of the evidence."
Supp. R. G(8)(c). Once a claimant has established standing, the Government must show by a
preponderance of the evidence that the property at issue is subject for forfeiture.

18 U.S.C.

§ 983(c)(l). Standing, however, is a threshold issue, and courts must determine standing before
addressing any other issue. See, e.g., United States v. $263,327.95, 936 F. Supp. 2d 468, 471
(D.N.J. 2013).
Accordingly, this Court must address the Government's summary judgment motion as to
standing before addressing Claimants' motions for summary judgment that the property at issue is
not subject to forfeiture.

III.

The Government's Motion for Summary Judgment

Here, the Government is not seeking dismissal based on Gengwu and 52 BD's lack of
statutory standing, but instead moves to strike their claims because they have failed to establish
Article III standing.

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A.

Article III Standing

"Article III standing is commonly associated with an inquiry into injury-in-fact, causation,
redressability and other prudential factors, but the inquiry is more focused in forfeiture cases."

United States v. Contents of Accounts Nos. 3034504504 & 144-07143 at Merrill Lynch, Pierce,
Fenner & Smith, Inc., 971 F.2d 974, 985 (3d Cir. 1992) (internal citation omitted). "To prove
standing, [a claimant] must show that he has a colorable ownership or possessory interest in the
funds." Mantilla v. United States, 302 F.3d 182, 185 (3d Cir. 2002). However, "[c]ourts generally
do not deny standing to a claimant who is either the colorable owner of the res or who has any
colorable possessory interest in it." Contents of Accounts Nos. 3034504504 & 144-07143, 971
F.2d at 985. Where a claimant asserts an interest in more than one of the defendant properties, the
claimant "must establish his standing as to each." Mantilla, 302 F .3d at 185 (citing Kadonsky v.

United States, 216 F.3d 499, 508 (5th Cir. 2000)).
"[A]t the summary judgment stage, a claimant must prove by a preponderance of the
evidence that he has a facially colorable interest in the res such that he would be injured if the
property were forfeited to the United States." United States v. $148,840.00 in US. Currency, 521
F.3d 1268, 1273 (10th Cir. 2008).

"This threshold burden is not rigorous: To have standing, a

claimant need not prove the underlying merits of the claim." United States v. One Lincoln

Navigator 1998, 328 F.3d 1011, 1013 (8th Cir. 2003) (internal quotation marks omitted); see also
De Saro v. United States, 173 F. App'x 760, 764 (11th Cir. 2006) ("Courts have repeatedly
cautioned against confusing the constitutional standing inquiry with the determination on the
merits of the forfeiture action."). "Although a claimant must make an initial evidentiary showing
of such an interest, a claimant need not definitively prove the existence of that interest."

$148,840.00 in US. Currency, 521 F.3d at 1273 (citing United States v. $577,933.89, More or

7

Less, in U.S. Funds, 287 F .3d 66, 79 (2d Cir. 2002) ("[T]he only question that the courts need
assess regarding a claimant's standing is whether he or she has shown the required 'facially
colorable interest,' not whether he [or she] ultimateIy proves the existence of that interest.")). "The
constitutional standing requirements are forgiving, and any colorable claim on the property
generally suffices." De Saro, 173 F. App'x at 764. Thus, "the district court must ask itself whether
'a fair-minded jury' could find that the claimant had standing on the evidence presented." United

States v. $133,420.00 in U.S. Currency, 672 F.3d 629, 638 (9th Cir. 2012) (citing Anderson, 477
U.S. at 252).
Although a claim of ownership with some supporting evidence is typically enough to
establish standing, possession of mere legal title is insufficient to establish standing where claimant
is only a nominal or straw owner. Contents ofAccounts Nos. 3034504504 & 144-07143, 971 F.2d
at 985 ("[C]ourts have uniformly rejected standing claims put forward by nominal or straw
owners ... .");see also Mantilla, 302 F.3d at 185 (A nominal or straw owner's assertion of an
interest "without some explanation or contextual information regarding the claimant's relationship
to the seized property [is] insufficient to establish standing." (internal quotation marks omitted)).
"The rationale for this rule is to prevent individuals engaged in illegal activities from hiding their
assets and circumventing the forfeiture laws by placing the legal title to property in another's
name." United States v. Premises & Real Prop. with Bldgs., Appur. & lmprov. at 191 Whitney Pl.,
No. 980060, 2000 WL 1335748, at *l (W.D.N.Y. Sept. 7, 2000); United States v. $100,000 in U.S.

Currency, No. 13-21831, 2014 WL 1330845, at *3 (S.D. Fla. Mar. 28, 2014), appeal dismissed
(Mar. 20, 2015) ("[T]he law is plain that the opening of an account by one person in order to
transfer money to another person is insufficient to confer standing on the account holder."). Thus,
it is the claimant's burden to come forward with some evidence to show he "exercised dominion

8

and control over the" defendant property. Contents ofAccounts Nos. 3034504504 & 144-07143,
971 F.2d at 986; see also Mantilla, 302 F.3d at 185 (claimant must come forward with evidence
"from which a reasonable trier of fact" could discern his interest).
B.

Analysis

The Government argues that Gengwu and 52 BD do not have Article III standing because
they are unable to demonstrate they have an actual ownership interest in the claimed defendant
properties since they are mere nominees. The Government argues that Gengwu and 52 BD cannot
establish dominion or control over the defendant properties because all the funds have been
commingled with funds of Gengmin's and transferred amongst various accounts such that they
cannot demonstrate that the funds remaining in the subject accounts came from the funds Gengwu
originally transferred to the United States. In further support of their argument, the Government
relies on the lack of information Gengwu provided in response to the special interrogatories
propounded by the Government and Gengwu' s prior inconsistent explanation as to the source of
the funds Gengwu and 52 BD are claiming an interest in. Specifically, the Government asserts
that in prior litigation in New York, Gengwu stated that the funds he is currently asserting an
interest in had been given to him by his brother, Gengmin, for payment of a loan he made to his
brother's company for legal expenses arising out of an arbitration in China; in this litigation,
Gengwu asserts the funds were an unexpended portion of investment monies he entrusted to
Gengmin to invest in real property in the United States. The Government additionally points to
further conflicting statements made by Gengwu in past visa applications. As such, the Government
asserts summary judgment should be entered striking the claims of Gengwu and 52 BD because
the burden falls on them to establish standing and they have not met that burden.

9

In response, Gengwu and 52 BD argue that Gengwu's verified statements that he is the
owner of the defendant properties, taken together with the fact that the funds were seized from
bank accounts in Claimants' names, is sufficient to establish standing in response to the
Government's motion for summary judgment. In addition, Claimants argue that the Government
has failed to establish that Gengwu and 52 BD are mere nominees. To further support that they
have standing and are not nominees, Gengwu and 52 BD rely on the declaration of Gengwu and
his responses to the Government's special interrogatories, as well as the records from the bank
accounts at issue. Furthermore, Gengwu and 52 BD argue that the Government cannot shift its
burden of tracing the defendant properties to the proceeds of an unlawful activity onto them by
demanding that they prove that the funds they claim an interest in were not derived from the VAT
rebate. For the purpose of establishing Article III standing, at this stage in the proceedings, the
Court agrees.
The Government does not dispute that Gengwu and 52 BD have legal title to the defendant
properties at issue, but instead asserts that they are only nominees. Thus, the issue is whether
Gengwu and 52 BD are nominal or straw owners of the property or legal owners who exercised
dominion and control. "[T]he government cannot prevent every person unwilling to completely
explain his relationship to property that he claims to own, and that is found in his possession and
control, from merely contesting a forfeiture of that property in court." United States v. $148,840.00
in U.S. Currency, 521 F.3d 1268, 1276 (10th Cir. 2008). "[O]ur society is one that values both

personal property rights and the appropriate judicial resolution of disputes involving those rights."
Id. Here, it is undisputed that Gengwu transferred approximately $2.5 million from China, through

a bank account in Dubai, to a bank account in the United States controlled by Gengmin. (SUMF
~~

5-10.) Thereafter, those funds were transferred and commingled with funds Gengmin had

10

earlier transferred from China in various accounts in the United States held in the names of
Gengwu and Gengmin, as well as various other entities. (Id.

~if

16-18.)

Although Gengwu and 52 BD incorrectly assert that Gengwu's verified statement along
with their legal title to the defendant properties is sufficient in this case to establish standing at the
summary judgment stage, Gengwu and 52 BD have provided sufficient additional evidence to
establish standing. As the facts demonstrate when taken in the light most favorable to Gengwu
and 52 BD, Gengwu is a self-employed businessman and entrepreneur primarily in the business of
the manufacture and sale of welding machines; he owns more than twenty patents on welding
machines. (Gengwu's Responses to Plaintiffs Special Interrogatories ("Special Interrogatories")

if 14, ECF No. 31-3.) In response to the special interrogatories, Gengwu stated, under penalty of
perjury, that the purpose of transferring the approximately $2.5 million to the United States to
Gengmin was to invest in real property. (Special

Interrogatories~

5.) Gengwu, on the advice of

his brother and a friend, decided in 2011 it was a good time to move part of his investment funds
to the United States. (Deel. of Gengwu Qiu ("Qiu Deel.

I")~

6, ECF No. 29-1.) On or about May

11, 2011, Gengwu sold his seventy percent interest in shares of Taizhou City Bida Industrial and
Trading Co., Ltd., a retailer and wholesaler of hardware, plastic products, iron handcrafts, rubber
goods, and construction material, for approximately $1.76 million, or RMB 10,570,000. (Special
Interrogatories~

14, Ex. E.) Gengwu further stated that the funds were his personal funds and

were derived from his business activities. (Special

Interrogatories~

5.) Because Gengwu was in

China, he gave Gengmin a power of attorney to invest the funds on his behalf.
Interrogatories~

(Special

5; Qiu Deel. I, Ex. A ("Power of Attorney"), ECF No. 29-2.) Gengmin used the

funds transferred to him by Gengwu to invest in the Myrtle Beach Property, and the unexpended
funds were ultimately transferred to the three bank accounts at issue. (Special Interrogatories~ 5.)

11

Further, Gengwu stated that he has received statements for the bank accounts and is in possession
of the checkbooks, either individually or through an agent. 4 (Id.

ii 7.) At the summary judgment

stage, drawing all reasonable inferences in a light most favorable to Gengwu and 52 BD, the above
evidence is sufficient to confer standing.
Gengwu and 52 BD have made an unequivocal claim of ownership over the defendant
properties at issue and presented evidence of a power of attorney to Gengmin and the sale of
significant assets prior to transferring money to the United States. Taken together, these facts are
sufficient to show Gengwu had dominion and control over the funds when he transferred them
through Dubai and to the United States to Gengmin. Further, the power of attorney shows that
Gengwu intended to remain in control of these funds, or the real property they funded, even though
they were commingled with Gengmin's funds in numerous bank accounts. At this stage, Gengwu
does not need to show where each dollar originated from before it was transferred into the ABC
Gengwu account. On the evidence presented, a fair-minded trier of fact could find that Gengwu
and 52 BD have standing.
Moreover, the Government's argument as to the lack of information Gengwu provided in
response to the special interrogatories is unconvincing because the Government could have moved
to compel more specific responses. Additionally, the Government's reliance on Gengwu' s prior

4

For the first time in its Reply Brief, the Government argues, and attaches documents in support,
(1) that Gengwu was not in the United States at the time when Gengwu 4436 was opened; (2) that
the signature of the person who opened Gengwu 4436 was not that of Gengwu; and (3) bank
records of Gengwu 123 7 establish that debits took place on the account when Gengwu was not in
the United States. Although the Government raised these new arguments to rebut Claimants'
assertion that no other person signed checks on the accounts or otherwise withdrew funds from the
accounts, "this Court has discretion to decline to consider new facts or arguments raised in a reply."
D 'Aiuto v. City of Jersey City, No. 06-6222, 2007 WL 2306791, at *4 (D.N.J. Aug. 8, 2007).
Because Claimants have been denied an opportunity to respond to the new arguments raised and
the supporting documents, this Court will not consider them in ruling on the pending motion for
summary judgment.
12

inconsistent story and false information on his past visa application only casts doubt on his
credibility, and the Court cannot make such credibility determinations on a motion for summary
judgment; the Court declines to hold an evidentiary hearing at this time to make such
determinations. Furthermore, at this stage, Gengwu and 52 BD need not prove the underlying
merits of their claims. "It may well be that forfeiture ultimately will prove appropriate, but [the
Court] find[s] it obvious that [Claimants] risk[] injury within the meaning of Article III and thus
may have [their] day in court." $148,840.00 in US. Currency, 521 F.3d at 1276. The Court's
conclusion at this juncture only allows Gengwu and 52 BD the ability to contest that their rights
to the defendant properties are properly subject to forfeiture; however, this holding does not mean
that the Court may not revisit the issue at a later stage in this litigation.
IV.

Claimants' Motion for Summary Judgment

Claimants move for summary judgment on the grounds that "none of the assets in which
they claim interests [sic] constitute or were derived from the proceeds of the alleged crimes on
which Plaintiff bases it claims for forfeiture or were otherwise involved in a transaction or
attempted transaction in violation of federal law." (Notice of Motion 1, ECF No. 29.) Claimants
filed an amended motion, additionally arguing that "the alleged crimes on which Plaintiff bases its
claim for forfeiture did not in fact occur." (Notice of Motion 1, ECF No. 42.) In opposition, the
Government argues that Claimants' motion is premature because the Government has not yet had
the opportunity to conduct discovery. (ECF No. 35.) The Court agrees. The parties have not yet
engaged in discovery under the Civil Rules, and district courts should not grant summary judgment
until a non-movant has had an adequate opportunity for discovery. At this stage in the proceedings
Claimants' motions for summary judgment are premature.

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V.

Conclusion
For the reasons set forth above, the Government's motion for summary judgment to strike

the claims of Gengwu and 52 BD is denied, and Claimants' motion and amended motion for
summary judgment are denied as premature. An order consistent with this Opinion will be entered.

MI~P
UNITED STATES DISTRICT JUDGE

Dated: August~, 2015

14