In re: 650 Fifth Avenue and Related Properties
MEMORANDUM & ORDER granting 2249 Motion for Judgment of Forfeiture. For the reasons described above, the Government's motion to dismiss Assa Corp and Assa Co. Ltd.'s claims (dkt. no. 2249) is GRANTED. The Clerk of the Court shall close the open motion. The Government, after conferring with the other parties, shall submit a proposed form of final judgment. SO ORDERED. (Signed by Judge Loretta A. Preska on 3/31/2021) (va)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
IN RE: 650 FIFTH AVENUE AND
08 Civ. 10934 (LAP)
MEMORANDUM & ORDER
LORETTA A. PRESKA, Senior United States District Judge:
Before the Court is the Government’s motion to dismiss the
claims filed by Assa Corp., the former owner of a 40%
partnership interest in the 650 Fifth Avenue Company, and by
Assa Corp.’s parent company, Assa Co. Ltd. (together with Assa
Corp., “Assa”), related to properties subject to forfeiture in
Assa does not oppose the Government’s motion.2
Two groups of judgment creditors do, however: (1) Edwena R.
Hegna, Steven A. Hegna, Craig M. Hegna, and Lynn Marie Hegna
(See Notice of Motion to Dismiss Assa Corp. and Assa Co. Ltd’s
Claims and to Enter a Judgment of Forfeiture, dated Apr. 24,
2020 [dkt. no. 2249]; see also Memorandum of Law in Support of
the Government’s Motion to Dismiss Assa Corp. and Assa Co.
Ltd.’s Claims, dated Apr. 24, 2020 [dkt. no. 2250]; Reply
Memorandum of Law in Support of the Government’s Motion to
Dismiss Assa Corp. and Assa Co. Ltd.’s Claims, dated May 22,
2020 [dkt. no. 2271].)
2 (See Letter from Donald F. Luke, dated May 14, 2020 [dkt. no.
(collectively, the “Hegnas”)3 and (2) Dr. Lucille Levin and the
Trustee of the Jeremy Levin Trust (together, the “Levins”).4
For the reasons described below, the Government’s motion is
As alleged in the Government’s Amended Complaint,5 in the
1970s the Pahlavi Foundation of New York--an institution formed
by the former Shah of Iran--purchased the land where 650 Fifth
Avenue (the “Building”) is currently located and constructed the
Building using a $42 million loan from Bank Melli Iran, which
was funded by Bank Markazi, Iran’s Central Bank.
(Id. ¶ 24.)
After the Ayatollah Ruhollah Khomeini assumed power as Supreme
Leader of the Islamic Republic of Iran in 1979, a new board at
Pahlavi was installed that was controlled by the Bonyad
Mostazafan va Janbazan (the “Bonyad”).
(Id. ¶¶ 25-30.)
Ayatollah Khomeini formed Bonyad to centralize, take possession
of, and manage property expropriated by the revolutionary
(See Response in Opposition to Motion, dated May 20, 2020 [dkt.
no. 2266]; Hegna-Claimants’ Corrected Response to Motion (“Hegna
Opp.”), dated June 19, 2020 [dkt. no. 2286]; Hegna-Claimants’
Supplemental Memorandum in Opposition to United States’ Reply
Memorandum (“Hegna Supp. Opp.”), dated June 19, 2020 [dkt. no.
4 (See Levin Response to Government Motion to Dismiss Assa Corp.
and Assa Co. Ltd’s Claims and to Enter a Judgment of Forfeiture,
dated May 7, 2020 [dkt. no. 2260].)
5 (Amended Complaint (“AC”), dated Nov. 16, 2009 [dkt. no. 51].)
(Id. ¶¶ 25-30.)
The Pahlavi Foundation was renamed
“Mostazafan Foundation of New York” and, eventually, again
renamed as “Alavai Foundation of New York” (“Alavi”) in 1992.
(Id. ¶ 27.)
For tax purposes, Bonyad Mostazafan officials worked with
Iranian officials to convert Bank Melli’s mortgage interest into
a partnership interest, and Bank Melli used front companies,
including Assa, to conceal that partnership interest.
Bank Melli, through Assa, eventually increased its
interest in Alavi to 40%. (Id. ¶ 20.)
In 1993, Bank Melli transferred legal ownership of Assa to
itself, using a holding company. (Id. ¶¶ 118-119.)
Iran sanctions took effect in 1995, Bank Melli again transferred
its Assa interest to two Iranian straw owners and continued
managing Assa’s affairs through its representatives. (Am. Compl.
¶¶ 47, 112-17.)
From 1995 through 2008, Bank Melli received
millions of dollars of rental income from the Building through
(Id. ¶¶ 120-21.)
Since the filing of the
Government’s initial complaint in 2008, income attributable to
Assa’s 40% interest has been deposited into accounts designated
by the Government.
(Mot. at 3.)
On December 17, 2008, the Government commenced this action,
and, on November 12, 2009, filed the Amended Complaint seeking
forfeiture of the interests of Assa, Alavi, and the Partnership
in the Building and proceeds traceable to the Building, as well
as other properties, pursuant to: (1) 18 U.S.C. §§ 981(a)(1)(A)
and (a)(1)(C), as proceeds of violations of the International
Emergency Economic Powers Act (“IEEPA”); (2) 50 U.S.C. §§ 17011705; (3) the Iranian Transactions and Sanctions Regulations
(“ITSRs”), 31 C.F.R. Part 560; and (4) 18 U.S.C. §§ 1956 and
1957, as property involved in, and proceeds traceable to
property involved in, money laundering.
Assa filed its claims asserting its ownership interests
with respect to the properties in response to the Government’s
initial complaint on January 20, 2009, and, on April 1, 2010,
Assa filed amended claims asserting its ownership interest with
respect to certain properties referenced in the Amended
Complaint, specifically, the Building, 40% of the Partnership
(including 40% of the net revenue realized by the Partnership),
and funds seized from various bank accounts held in Assa’s name
(the “Defendant Properties”).6
On June 15, 2011, Assa filed an
answer to the Amended Complaint contesting the claims of
(Claim, dated Jan. 14, 2009 [dkt. no. 5]; Assa Limited’s
Amended Verified Statement of Interest in Defendant Properties,
dated Mar. 26, 2010 [dkt. no. 120]; Assa Corp.’s Amended
Verified Statement of Interest in Defendant Properties, dated
Apr. 1, 2010 [dkt. no. 121].)
forfeiture and setting forth various affirmative defenses,
including its innocent owner defense.7
On September 16, 2013, Judge Forrest granted summary
judgment for the Government as to Bank Melli’s ownership and
control of Assa and the forfeitability of Assa’s interests in
the Partnership, the Building, and Assa’s income from the
Partnership as the proceeds of sanctions violations and property
involved in, or traceable to property involved in, money
laundering, and dismissed Assa’s statute-of-limitations defense
In re 650 Fifth Ave., No. 08 Civ. 10934 (KBF), 2013
WL 5178677, at *36-38 (S.D.N.Y. Sept. 16, 2013).
After a jury trial in 2017 as to the forfeitability of
Alavi’s and the Partnership’s property interests in the
Defendant Properties, final judgment was entered. (See Judgment
(“Judgment”), dated Oct. 4, 2017 [dkt. no. 2089].)
appealed the Judgment. (See Assa Notice of Appeal, dated Nov. 3,
2017 [dkt. no. 955 in 9 Civ. 553].)
The Court of Appeals
affirmed various discovery rulings, see United States v. Assa
Co., 774 F. App’x 51, 52 (2d Cir. 2019) (summary order), and the
summary judgment as to Bank Melli’s ownership and control of
Assa, see Kirschenbaum v. Assa Corp., 934 F.3d 191, 200 (2d Cir.
The Court of Appeals dismissed the sua sponte grant of
(Answer to the Amended Complaint for Forfeiture in Rem, dated
June 15, 2011 [dkt. no. 182].)
summary judgment dismissing Assa’s statute of limitation defense
and remanded for further proceedings.
United States v. Assa
Co., 934 F.3d 185, 191 (2d Cir. 2019).
After the Government commenced this action, a number of
victims of state-sponsored terrorism who held unsatisfied
judgments against Iran (the “Judgment Creditors”) also filed
turnover actions, seeking to execute on their judgments against
Assa’s interests under Section 201(a) of the Terrorism Risk
Insurance Act of 2002 (“TRIA”), Pub. L. No. 107-297, 116 Stat.
2322 (2002) (codified as a note to 28 U.S.C. § 1610), and
Section 1610(b)(3) of the Foreign Sovereign Immunities Act of
1976 (“FSIA”), Pub. L. No. 94-583, 90 Stat. 2891 (codified, as
amended, at 28 U.S.C. §§ 1602 et seq.).
(Mot. at 5.)
dated April 18, 2014, Judge Forrest found that Assa is owned and
controlled by the government of Iran and that its property
interests are subject to turnover.
In re 650 Fifth Ave., No. 08
Civ. 10934 (KBF), 2014 WL 1516328, at *14 (S.D.N.Y. Apr. 18,
Following the 2017 trial, on October 4, 2017, Judge
Forrest entered a final judgment of turnover in favor of
Judgment Creditors against Assa and Assa’s co-defendant, Alavi,
pursuant to Section 201 of the TRIA, section 1608 of the FSIA,
and other statutes.
(See Judgment (“Turnover Judgment”), dated
Oct. 4, 2017 [dkt. no. 925 in 9 Civ. 166].)
Pursuant to the
Turnover Judgment, “[a]ll right, title, and interest of Assa
Corporation and Assa Company Limited in the [Defendant] Property
shall be, and the same hereby are, extinguished.”
Judgment at 7.)
The Assa Property includes Assa’s 40%
partnership interest and its interest in the previously seized
funds. (Id. at 5-6.)
On April 16, 2014, this Court entered a Stipulation and
Order of Settlement Between the United States and Certain ThirdParty Claimants, in which the United States and additional
Judgment Creditors agreed, in sum and substance, that (1) the
net proceeds from the forfeiture of any of the Defendants-inrem, including Assa, to the United States would be distributed
to the Judgment Creditors on a pro rata basis based on the
unsatisfied amount of the compensatory damages portions of the
Judgment Creditors’ judgments against the Government of Iran;
(2) the Judgment Creditors would not assert that the TRIA takes
precedence over the forfeiture action except as necessary to
protect their interests . . . against non-settling judgment
creditors; and (3) upon the completion of the distribution of
funds to the Judgment Creditors, they will withdraw their claims
and answers in the forfeiture action.
(See Stipulation and
Order of Settlement Between the United States and Certain ThirdParty Claimants (“Settlement Agreement”), dated Apr. 16, 2014
[dkt. no. 1122].)
The Hegnas entered into an agreement on September 29, 2017
with the United States and Judgment Creditors pursuant to which
they agreed to be held to the same terms as the Judgment
Creditors under the aforementioned Settlement Agreement. (See
First Codicil to the Stipulation and Order of Settlement Between
the United States and Certain Third-Party Claimants (“Codicil”),
dated Oct. 4, 2017 [dkt. no. 2088].)
3. The Instant Motion
In its motion, the Government seeks dismissal of Assa’s
innocent ownership claims to properties subject to forfeiture in
this action. (Mot. 1.)
The Government contends that because
Assa no longer has any interest in the properties to which it
filed claims it no longer has standing to maintain a claim in
this action, and Assa’s claims should be dismissed and a
judgment of forfeiture should be entered.
(Id. at 1, 10-11.)
In opposition, the Levins, who hold partially satisfied
judgments against Iran,8 argue that their pending claims against
the Assa property in an individual Terrorism Risk
The Levins additionally argued that the Court should not rule
on the Government’s motion before ruling on the Levins’
Motion for Summary Judgment against Assa. (See Levin Opp. at 1.)
The Court denied the Levins’ Motion for Summary Judgment on July
28, 2020. (Memorandum & Order, dated July 28, 2020 [dkt. no.
Insurance Act (“TRIA”) turnover action take priority over any
forfeiture claims, and that because the Levins have a writ of
execution against the Defendant Properties they have a priority
claim over any other judgment creditor claims, as well
as any claim by the Government.
(Levin Opp. at 6.)
argue that the Government is seeking impermissibly to use the
Kirschenbaum turnover judgment against Assa to support a motion
for a forfeiture judgment against Assa’s assets.
(Id. at 8.)
The Hegnas assert that they have a first priority lien and that
the Levins have not shown that they have “anything more than a
(Hegna Opp. at 2-3.)
They also assert that
the Government is not entitled to forfeiture of the rents in the
custody of a United States Marshal’s account earned after
December 18, 2008, because those funds are not criminal proceeds
and because the Government did not identify this property
specifically in its forfeiture complaint.
(Id. at 5; Hegna
Supp. Opp. at 4.)
“In order to contest a governmental forfeiture action,
claimants must have both standing under the statute or statutes
governing their claims and standing under Article III of the
Constitution as required for any action brought in federal
United States v. Cambio Exacto, S.A., 166 F.3d 522, 526
(2d Cir. 1999).
Standing is a threshold issue.
claimant can contest a forfeiture, he must demonstrate
Mercado v. U.S. Customs Serv., 873 F.2d 641, 644 (2d
““If the claimant cannot show a sufficient interest in the
property to give him Article III standing there is no case or
controversy, in the constitutional sense, capable of
adjudication in the federal courts.”
United States v. New
Silver Palace Restaurant, Inc., 810 F. Supp. 440, 442 (E.D.N.Y.
In a forfeiture proceeding, the requirements for standing
1. The claimant must have suffered an injury in fact
of a legally protected interest;
2. There must be a causal connection between the
conduct complained of and claimant’s injury; and
3. It must be likely, as opposed to speculative, that
the injury can be redressed by a favorable decision.
In re 650 Fifth Avenue and Related Properties, 2013 WL 4572527,
at *3. “Generally, what is required to establish standing . . .
in civil forfeiture actions is demonstration of an ownership
interest or possessory interest in the seized or forfeited
United States v. PokerStars, No. 11 Civ. 2564 (LBS),
2012 WL 1659177, at *2 (S.D.N.Y. May 9, 2012).
“may move to strike a claim or answer” at “any time before
trial” because the claimant lacks standing.
Supp. R. for
Admiralty or Maritime Claims and Asset Forfeiture Actions Supp.
Before turning to the Government’s motion as to Assa’s
claims, the Court addresses the submissions filed by the two
1. The Hegnas
The Hegnas’ entry into the Settlement Agreement compels
denial of their opposition to the Government’s motion.
Hegnas joined the Settlement Agreement to share in the pro rata
distribution of the net proceeds of forfeited property, they
agreed to be “bound by the terms and conditions set forth” in
the so-ordered Settlement Agreement.
(See Codicil, at 3 ¶ 5.)
The Government agreed to withdraw its objection to the entry of
a judgment of turnover with respect to forfeited property in
favor of the Hegnas because the Hegnas agreed to the Settlement
Agreement’s terms, including to not “take any position in this
litigation adverse to the positions taken by the USAO.”
(Settlement Agreement at 11-12, ¶ 4.)
The Hegnas’ opposition to
the Government’s motion here is clearly a position adverse to
The Settlement Agreement therefore bars the
Apart from the Settlement Agreement bar, the Hegnas’ claim
fails on the merits.
The Hegnas’ contention that the Government
cannot effect a forfeiture of the funds on deposit in the United
States Marshal's account because the “‘Defendant Properties’
specifically identified in the complaints and judgments do not
include the funds in the Account” and such accounts must be
mentioned “by specific allegation in its civil forfeiture
complaint” is belied by the Government’s Amended Complaint,
which seeks forfeiture of “[a]ll right, title, and interest of
[Assa] [and] Bank Melli Iran. . . in 650 Fifth Avenue Company
. . . and all property traceable thereto.”
Compl. ¶ 3(a) (emphasis added).)
(See e.g., Gov.
This includes the distribution
of income due to Assa from its partnership interest.
and as an additional basis for denial of the Hegnas’ opposition,
the Hegnas’ argument that the post-seizure rents collected do
not constitute forfeitable proceeds of a crime has been rejected
by this Court previously.
The Hegnas assert in their supplemental brief that the
Settlement Agreement is not effective “because certain parties,
including the Hegna family, have been unable to reach an
agreement among themselves and with the Hegna family on the
required Second Codicil that establishes the parties' pro rata
shares,” (Hegna Supp. at 5), but the Codicil does not appear to
contemplate such a requirement to become effective.
Accordingly, the Hegnas’ opposition is denied.
2. The Levins
The Levins principally contend that the Government’s
forfeiture motion seeks improperly to “piggyback on the
Kirschenbaum Judgment Creditors’ turnover judgment against Assa”
and that the Levins’ claim under TRIA is superior to the
Government’s claim to Assa’s property under the forfeiture
(Levin Opp. at 4, 11-13.)
The Court finds these arguments to be meritless.
the Court’s October 4, 2017 Judgment explicitly extinguished
“all right, title, and interest” of Assa Corporation and Assa
Company Limited in the Assa Property.
(See Judgment, dated Oct.
4, 2017 [dkt. no. 940 in 9 Civ. 00165].)
Moreover, the Court of
Appeals affirmed the Turnover Judgement as to Assa.
Kirschenbaum, 934 F.3d at 198 (“Kirschenbaum held that the same
record ‘demonstrates as a matter of law that Bank Melli owned
and controlled Assa even after 1995.’
Although Assa was not a
party to that appeal and is not bound by this finding, none of
its arguments persuade us to reach a contrary conclusion.
Assa entities are owned and controlled by Iran.
They are Iran’s
alter egos as a matter of law and are therefore foreign states
under the FSIA.” (quoting Kirschenbaum v. 650 Fifth Ave. &
Related Properties, 830 F.3d 107, 136 (2d Cir. 2016)).
Accordingly, Assa no longer has a legal interest in the
Defendant Property, which is the basis for the Government’s
motion for forfeiture.
Second, the Court of Appeals already has rejected the Levins’
reading of TRIA’s “notwithstanding clause” that would consider
their TRIA action an outstanding claim that prevents the entry
of a judgement of forfeiture as to Assa.
Levin v. United
States, 774 F. App'x 49, 50 (2d Cir. 2019) (summary order) (“The
Levins additionally argue that the Terrorism Risk Insurance Act
(“TRIA”) preempts Rule G(5) in this action.
They rely on § 201
of TRIA, which states that ‘[n]otwithstanding any other
provision of law, . . . the blocked assets of [a] terrorist
party (including the blocked assets of any agency or
instrumentality of that terrorist party) shall be subject to
execution or attachment in aid of execution in order to satisfy
[a] judgment [against the terrorist party].’ But a different
issue is before us: whether the Levins can seek a distribution
of property seized by the Government.
We do not understand TRIA
§ 201’s ‘notwithstanding’ clause to extend so far.”)
the Court also observes that the Levins hold no TRIA judgment
but only claims that they are currently pursuing.
The Government’s citation of Smith ex rel. Estate of Smith
v. Federal Reserve Bank of New York, 346 F.3d 264 (2d Cir.
2003), is persuasive.
In Smith, the Court of Appeals found that
there was no conflict between the TRIA and the President’s
confiscation authority under IEEPA to confiscate blocked Iraqi
Id. at 271-72.
There, the Court found that this was
the case even though it rendered the assets unavailable for
execution by the Plaintiffs under TRIA.
although forfeiture would render Assa’s properties unavailable
for execution under TRIA, it does not follow that TRIA’s
“notwithstanding” clause trumps the Government’s ability to
effect forfeiture here.
Accordingly, the Levins’ opposition is denied.
3. Assa’s Claims
For many of the same reasons discussed above, Assa lacks
standing to pursue its claims to the Defendant Properties.
Turnover Judgment categorically extinguished “all right, title,
and interest” of Assa in the Defendant Properties, (see
Judgment), and the Court of Appeals solidified the termination
of Assa’s ownership interest, Kirschenbaum, 934 F.3d at 198, a
decision from which Assa did not appeal.
Because Assa no longer has any legal interest in the
Defendant Properties, it lacks standing to maintain its claim.
Accordingly, Assa’s forfeiture claim and answer, including its
innocent owner claim, is dismissed.
For the reasons described above, the Government’s motion to
dismiss Assa Corp and Assa Co. Ltd.’s claims (dkt. no. 2249) is
The Clerk of the Court shall close the open motion.
The Government, after conferring with the other parties,
shall submit a proposed form of final judgment.
New York, New York
March 31, 2021
LORETTA A. PRESKA
Senior United States District Judge
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