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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`IN RE: 650 FIFTH AVENUE AND
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`RELATED PROPERTIES
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`USDC SDNY
`USDC SDNY
`DOCUMENT
`DOCUMENT
`ELECTRONICALLY FILED
`ELECTRONICALLY FILED
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`DOC #:
`DOC #: _________________
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`DATE FILED: September 1, 2017
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`08 Civ. 10934 (KBF)
`and all member and
`related cases
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`OPINION & ORDER
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`09-cv-165 (KBF)
`09-cv-166 (KBF)
`09-cv-553 (KBF)
`09-cv-564 (KBF)
`10-cv-1627 (KBF)
`10-cv-2464 (KBF)
`11-cv-3761 (KBF)
`12-mc-19 (KBF)
`12-mc-20 (KBF)
`12-mc-21 (KBF)
`12-mc-22 (KBF)
`13-mc-71 (KBF)
`13-cv-1825 (KBF)
`13-cv-1848 (KBF)
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`OPINION & ORDER
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`Plaintiffs,
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`KIRSCHENBAUM, et al.,
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`X
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`KATHERINE B. FORREST, District Judge:
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`650 FIFTH AVENUE and RELATED
`PROPERTIES,
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`Defendants.
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`Beginning on May 30, 2017, and continuing through June 29, 2017, a jury
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`trial was held in the above-captioned forfeiture action, Case No. 08-cv-10945 (the
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`“Forfeiture Action”). On June 29, 2017, the unanimous jury returned a verdict in
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`favor of the Government requiring forfeiture of a number of properties.
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`Beginning on May 30, 2017, and continuing through June 28, 2017, a bench
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`trial was also held in a number of above-captioned private turnover actions (the
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`Case 1:12-mc-00071-P1 Document 2 Filed 09/01/17 Page 2 of 16
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`“TRIA/FSIA Action” or “Turnover Action”) On June 29, 2017, the Court issued an
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`Opinion & Order finding that the Judgment Creditors have proven entitlement to
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`attach and execute upon the same properties as well as additional properties under
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`both § 201(a) of the Terrorism Risk Insurance Act and § 1610(b)(3) of the Foreign
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`Sovereign Immunities Act. (ECF No. 1895.)
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`Before Judgment can be entered in either action, however, the Court must
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`resolve a number of post-trial motions1:
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`Motion 1: A motion by the Government to dismiss claims by the Levin
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`Judgement Creditors, the Texas Islamic Education Center (“IEC”), and the
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`Maryland IEC (see ECF Nos. 1988, 2001, 2012, 2015, 2023, 2034, 2038)2;
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`Motion 2: The Alavi Foundation and the 650 Fifth Avenue Company’s
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`(“Claimants”) motion pursuant to Rules 50 and 59 of the Federal Rules of Civil
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`Procedure for judgment as a matter of law or a new trial with respect to the
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`Forfeiture Action (see ECF Nos. 1999, 2018, 2033);
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`Motion 3: A motion by Claimants to reduce the amount awarded by the jury
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`in the Forfeiture Action as contrary to the 8th Amendment (see ECF No. 1998,
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`2017);
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`1 Additional motions have been filed that are not addressed in this Opinion & Order. Among those
`are applications by certain judgment creditors, the Levins; the Levins are not parties in the above-
`captioned consolidated and coordinated proceedings and the Court addresses their applications
`separately. In addition, there are a number of motions dealing with issues of priority of judgment
`that the Court also addresses separately.
`2 On August 18, 2017, Amir Reza Oveissi voluntarily withdrew his previously filed notice of claim.
`(ECF No. 2029.)
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`2
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`Case 1:12-mc-00071-P1 Document 2 Filed 09/01/17 Page 3 of 16
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`Motion 4: A motion by Claimants to dismiss the Forfeiture Action on the
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`basis of a lack of subject matter jurisdiction (see ECF No. 1992, 2021, 2032); and
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`Motion 5: A motion by Alavi and the 650 Fifth Avenue Company for stays
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`pending appeal of judgment in both the Forfeiture Action and the Turnover Action
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`(see ECF No. 1989, 2022, 2036).
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`The Court addresses each of these motions in turn.
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`A. Motion 1: The Government’s Motion to Dismiss
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`The Government has moved to dismiss three outstanding claims3 with
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`respect to certain of the properties at issue in the Forfeiture Action.
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`1.
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`The Levins’s claim
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`The first claim addressed in the Government’s motion is that brought by the
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`“Levin Judgment Creditors” on February 4, 2015, purporting to make a “Claim to
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`any Distribution of Forfeited Properties in Lieu of Notice of Claim under Rule G.”
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`(ECF No. 1271 at 1.) In their claim, the Levins assert an interest in the building
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`located at 650 Fifth Avenue (the “Building”) and certain other real property owned
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`by Alavi and located in Queens, New York. The Government is correct that the
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`claim should be dismissed.
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`As an initial matter, the claim does not even purport to be a valid claim
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`under the Civil Asset Forfeiture Reform Act (“CAFRA”) or Rule G of the
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`3 The motion was initially made as to four claims but one of the entities at issue, Amir Reza Oveissi,
`has withdrawn his claim (ECF No. 2029), thereby mooting that portion of the Government’s motion.
`3
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`Case 1:12-mc-00071-P1 Document 2 Filed 09/01/17 Page 4 of 16
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`Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions
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`(“Rule G”).
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`In addition, the Levins’s claim is untimely. Once a forfeiture action has been
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`commenced—as it was here in November 12, 2009—rule G(5) sets deadlines by
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`which potential claimants must come forward. These requirements “force claimants
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`to come forward as quickly as possible after the initiation of forfeiture proceedings,
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`so that the court may hear all interested parties and resolve the dispute without
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`delay, and to minimize the danger of false claims by requiring claims to be verified
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`or solemnly affirmed.” United States v. $8,221,877.16 in United States Currency,
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`330 F.3d 141, 150 n.9 (3d Cir. 2003) (internal quotations omitted). Rule G(8)
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`provides for dismissal (or, in Rule G parlance, “striking”) of a claim that has failed
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`to comply with filing requirements.
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`The Government duly published notice that it had filed its claim on an
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`Internet site commencing December 1, 2009, and running for 30 consecutive days.
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`Accordingly, the Levins’s claim had to be filed not later than January 31, 2010—60
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`days from first publication. It was not. The Levins obtained their judgment against
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`Iran in 2007—but failed to file a claim until 2015. By this time, all of the parties in
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`the consolidated and coordinated cases had spent enormous amounts of time in
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`discovery, district court motion practice, and in connection with certain appeals.
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`Throughout this time the Levins remained on the sidelines.
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`Third, even if the Levins’s claim was timely, they lack standing under Rule
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`G(8). Statutory standing here requires that a claimant have an interest in the
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`4
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`Case 1:12-mc-00071-P1 Document 2 Filed 09/01/17 Page 5 of 16
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`defendant property. The Levins do not. The Levins are, at most, general creditors.
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`The law is clear that a general, unsecured creditor without a lien lacks any specific
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`interest in defendant property and thus lacks standing to contest its forfeiture. 18
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`U.S.C. § 983(d)(6)(B)(i); DSI Assocs. LLC v. United States, 496 F.3d 175, 184 (2d
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`Cir. 2007).
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`For these reasons, the Court dismisses the Levins’ claim in the Forfeiture
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`Action.
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`2.
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`The Texas IEC claim
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`The Government has also moved to dismiss the claim asserted by the Texas
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`IEC. On February 16, 2010, the Texas IEC, claiming a leasehold interest in the
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`defendant property located in Texas, filed a “Verified Claims and Statement of
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`Interest.” (ECF No. 63.) On its face, that claim concedes that it does not challenge
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`Alavi’s interest in the property. The Forfeiture Action was directed at any interest
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`that Alavi had in the property—an interest, therefore, which the Texas IEC claim
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`did not address. On June 29, 2017, the jury awarded the Government a 15%
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`interest in Alavi’s interest in the Texas property. The forfeited interest may
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`therefore be fulfilled without impingement on any valid leasehold interest.4 The
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`Texas IEC claim is therefore dismissed as moot.
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`3.
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`The Maryland IEC claim
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`The third and final remaining claim that the Government seeks to dismiss
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`from the Forfeiture Action is asserted by the Maryland IEC. That entity filed a
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`4 This Court need not, and does not, reach the validity of any leasehold interest.
`5
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`Case 1:12-mc-00071-P1 Document 2 Filed 09/01/17 Page 6 of 16
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`claim on December 16, 2009. (ECF No. 53.) In particular, the Maryland IEC
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`asserts that it has a possessory interest in the properties located at 7917 Montrose
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`Road, Potomac, Maryland, and 8100 Jeb Stuart Road, Potomac, Maryland, based on
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`its status as tenant and/or occupant. On June 29, 2017, the jury awarded the
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`Government a 17% interest in these two properties. As with the Texas IEC claim,
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`the Government has disclaimed any intent to forfeit the leasehold interest. The
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`Maryland IEC claim is therefore dismissed as moot.5
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`The Government’s motion to dismiss is GRANTED in its entirety.
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`B. Motion 2: Claimants’ Motion for JNOV or a New Trial
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`Claimants seek to have the jury verdict with regard to the defendant real
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`properties thrown out on three bases: (1) that the only proceeds that the
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`Government could have shown resulted from IEEPA violations were Alavi’s
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`management fees, (2) that there was insufficient evidence from which the jury could
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`find that the interest in the 650 Fifth Avenue Company (the “Partnership Interest”)
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`was retained as a result of IEEPA violations, and (3) that there was insufficient
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`evidence from which the jury could find that the defendant properties were
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`5 In 2013, the Maryland IEC sought to add other bases for a claimed interest. Such additional bases
`were not timely filed. To allow such additional claims would be to allow subversion of the Rule G
`filing requirements. In addition, to the extent that such additional bases include a theory of
`constructive trust, the Maryland IEC lacks standing: it lacks any ownership interest necessary to
`support a determination on such a claim in its favor. Moreover, the Maryland IEC has failed to
`assert sufficient facts supportive of the elements of a claim for constructive trust under Maryland
`law—fraud, misrepresentation, or other improper methods or other reasons why the Alavi interest
`would not be valid. To the contrary, the Maryland has supported Alavi’s continued interest in the
`properties at issue. To the extent the Maryland IEC has asserted Sharia law in support of its claims,
`such principles are inapplicable in this forum.
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`6
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`Case 1:12-mc-00071-P1 Document 2 Filed 09/01/17 Page 7 of 16
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`“involved in” money laundering. All bases are without merit and the motion is
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`DENIED.
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`1.
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`Proceeds not limited to management fees
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`Claimants’ assert that the only proceeds traceable to IEEPA violations were
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`management fees—thus precluding any award of a Partnership Interest that
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`exceeded such fees. This is incorrect. The legal definition of “proceeds” is broad,
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`United States v. Seabrook, 661 Fed. App’x 84, 86 (2d Cir. 2016), and allows for a
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`“but for” test in determining what constitute proceeds, United States v. Grant, 2008
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`WL 4376365, at *2 n.1 (S.D.N.Y. Sept. 25, 2008) (No. S4-05-Cr-1192); see also
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`United States v. Nicolo, 597 F. Supp. 2d 342, 350 (W.D.N.Y. 2009). There was more
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`than sufficient evidence in the record before the jury to support its determination
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`that in this case, “proceeds” of the IEEPA violations exceeded simply management
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`fees.
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`Here, the IEEPA violations enabled Alavi to operate the Building for the
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`Government of Iran; it allowed Alavi to conceal the ownership of the Government of
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`Iran and prevent turnover in aid of execution on valid judgments due and owing by
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`the Government of Iran and registered in this district. All of the entities and
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`personnel that were required to manage and operate the Building were hired by
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`Alavi—and functioned entirely as Alavi’s agents. On the overall factual record, a
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`limitation of any award to “management fees” was certainly not required.6
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`6 Claimants’ argue that even if the net income from the Building were proceeds, the Government
`failed to prove that post-1995 expenditures on Alavi’s properties and into its bank accounts were
`derived from the Building’s net income versus some other source. Claimants made this argument to
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`7
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`Case 1:12-mc-00071-P1 Document 2 Filed 09/01/17 Page 8 of 16
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`2.
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` The Partnership Interest was “retained”
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`The law provides that property “retained” as a result of a criminal offense is
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`subject to forfeiture. 18 U.S.C. § 981; United States v. Torres, 703 F.3d 194, 200 (2d
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`Cir. 2012). The avoidance of loss by way of a criminal offense can result in
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`“retained” property subject to forfeiture. Torres, 703 F.3d at 199. Here, the
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`evidence at trial amply supported that the services that Alavi provided in violation
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`of IEEPA allowed and enabled the concealment of Iran’s interest in the Partnership
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`and the Building, as well as its ownership of Assa, allowing retention of the
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`Partnership Interest. Alavi’s participation in the Partnership was a primary way in
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`which long-term and multi-layered concealment was accomplished. There was
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`substantial evidence at trial that Alavi viewed the revelation of the truth of the
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`relationships with Iran as catastrophic—“sure death,” as stated in the notes of a
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`board member. In addition, Alavi defended against various lawsuits by concealing
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`Iran’s true interest in the Building, and its overall control. Had Alavi revealed the
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`truth, all of its assets would have been turned over to satisfy various judgments far
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`in excess of their value long ago.
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`3.
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`The Building and Partnership Interest were involved in money
`laundering
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`The final argument that Claimants assert in support of their motion is that
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`the evidence failed to support that the Partnership Interest and Building were
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`the jury, and the jury acted well within its discretion in rejecting it based on the factual record.
`There was testimony that donations were de minimis; and that prior to 1995, Alavi had serious
`financial difficulties and operated in the red. Tax records further corroborate Alavi’s financial
`position.
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`8
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`Case 1:12-mc-00071-P1 Document 2 Filed 09/01/17 Page 9 of 16
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`involved in money laundering. This argument is without merit. There is no doubt
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`that substantial evidence supports that both of these assets were primary means
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`through which proceeds, traceable to IEEPA violations, were concealed and
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`laundered. Moreover, such proceeds were again, not limited to management fees.
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`Here, the income from the Building was used to sustain its operations and for
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`improvements—in short, it was laundered. In addition, management of the
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`Building was part and parcel of the IEEPA violation, and concealment of the
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`violation; payments were made to Alavi and its employees (via allocation) for work
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`in connection with such operations constituted money laundering transactions.
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`Thus, the record fully supports that management fees paid to Alavi and derived
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`from its Partnership Interest were used to conduct money laundering transactions.
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`The Partnership Interest was there involved in a money laundering transaction and
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`is thus subject to forfeiture.
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`Accordingly, Claimants’ motion is DENIED.
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`C. Motion 3: Claimants’ Motion to Reduce Award
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`Claimants ask this Court to reduce the jury award on the basis that it is
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`grossly disproportionate to the offense and therefore in violation of the 8th
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`Amendment. This argument is without merit and the motion is DENIED.
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`Here, the forfeiture of the Partnership Interest first and foremost targets the
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`proceeds of a crime. The property is therefore “guilty property” and the 8th
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`Amendment’s prohibition on excessive fines does not apply. United States v. Sum of
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`9
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`Case 1:12-mc-00071-P1 Document 2 Filed 09/01/17 Page 10 of 16
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`$185,336.07 U.S. Currency Seized from Citizen’s Bank Account L7N01967, 731 F.3d
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`189, 194 (2d Cir. 2013).
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`As to the Building—which was involved in money laundering and is therefore
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`subject to a proportionality analysis—the record amply supports the jury award as
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`it stands. The record evidence leaves no doubt that the offense at issue was an
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`extremely serious one involving national security, and one that was carried out in a
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`brazen manner for years and years.7 Similarly, the money laundering that occurred
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`was based on the IEEPA violations, and was an attempt to end-run a sanctions
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`regime.
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`In addition, the evidence amply demonstrated that the conduct at issue in
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`this trial was the product of planned, carefully executed judgment: Claimants were
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`aware of Iranian interest, ownership and control, and they proceeded to conduct
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`themselves in a way designed to maximize protections for Iran, in the face of clear
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`and well-understood laws that made those actions unlawful. IEEPA was meant to
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`prevent precisely what occurred here. In sum, the seriousness of the offense, the
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`nexus between the offense and the award and the level of culpability all support the
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`award as it stands.
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`The fact that the jury award threatens Alavi’s “existence” does not lead to a
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`conclusion that there is a violation of the 8th Amendment. Alavi may, to the extent
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`7 The Court’s curative instructions to the jury do not require a finding otherwise. As the
`Government correctly notes in opposition to this motion, such instructions are not intended to, and
`cannot, alter the underlying statutory purpose.
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`10
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`Case 1:12-mc-00071-P1 Document 2 Filed 09/01/17 Page 11 of 16
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`it is able to otherwise act within the law, continue its charitable works. It will not,
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`however, have access to the assets that the jury has awarded.
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`This motions is therefore DENIED.
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`D. Motion 4: Claimants’ Motion to Dismiss for Lack of Subject
`Matter Jurisdiction
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`Claimants assert that the Court lacks subject matter jurisdiction over the
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`Forfeiture Action based on its decision—issued immediately following the jury
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`verdict—that the same property is subject to turnover on the basis of the Foreign
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`Sovereign Immunities Act (“FSIA”). This is a frivolous argument. First, the as the
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`record makes clear, and as was intentional, this Court’s decision on the FSIA claims
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`followed the jury verdict in the Forfeiture Action. The Court has not entered
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`judgment in either action. It intends to enter judgment simultaneously. This
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`eliminates this argument out of the gate. As a result of this, as a technical matter
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`alone, there was never a moment when the Forfeiture Action was being litigated
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`when judgment had been entered finding that the property was that of a foreign
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`sovereign. It is an odd argument since Claimants contest that they “are” a foreign
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`sovereign.
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`In addition, this argument is one that has plainly been waived. The
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`Forfeiture Action has long been coordinated with the FSIA and TRIA actions—they
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`were litigated together literally for years. And, for years, Claimants never asserted
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`that the Court lacked subject matter jurisdiction in the Forfeiture Action—for the
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`obvious reason that they have always maintained that they are not a foreign
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`sovereign.
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`11
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`Case 1:12-mc-00071-P1 Document 2 Filed 09/01/17 Page 12 of 16
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`But in all events, subject matter jurisdiction in the Forfeiture Action is
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`conferred by §§ 1345 and 1355—not § 1330.
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`Claimants’ motion is accordingly DENIED.
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` F. Motion 5: Motion by Alavi and 650 for a Stay Pending Appeal
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`Alavi and 650 Fifth Avenue Co. have moved for stays pending appeal of the
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`judgments soon to be entered in both the Forfeiture Action and TRIA/FSIA Action.
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`(While this application is made prior to entry of judgment, the Court deems it ripe
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`as all parties are aware that this Court intends to enter judgment shortly.) For the
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`reasons set forth below, the Court declines to enter a stay in either case with regard
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`to the Building at 650 Fifth Avenue and its associated bank accounts, but does
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`grant a very limited stay of six months with regard to sale of the properties at
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`which schools currently operate and which are used for religious observance (that
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`is, the Queens, Texas and Maryland properties). The parties are requested to confer
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`on an appropriate form of order reflecting this determination.
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`Alavi and the 650 Fifth Avenue Co. seek a return to the same status as that
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`which was put in place following this Court’s summary judgment decision in the fall
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`of 2013. At that time, a court order provided for the appointment of a monitor of the
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`Building, a prohibition on the sale or disposition of assets and the use of rental
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`income for a limited set of expenditures. Such an order no longer makes sense.
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`That order prevented sale of the Building as well as the other properties—and the
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`current posture of the case now requires that those properties be reviewed
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`12
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`Case 1:12-mc-00071-P1 Document 2 Filed 09/01/17 Page 13 of 16
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`independent of one another, and that any stay reflect their different use and
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`statuses.
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`The standard for issuing a stay pending appeal is well known. This Court
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`must consider: (1) whether the movant has made a strong showing that it is likely
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`to succeed on the merits, (2) whether the applicant will be irreparably harmed
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`absent a stay, (3) whether issuance of a stay will substantially injure other parties’
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`interested in the proceeding, and (4) the public interest. Nken v. Holder, 556 U.S.
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`418, 434 (2009). A stay is not a matter of right, but is a matter concerning the
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`exercise of judicial discretion. Hilton v. Braunskill, 481 U.S. 770, 777 (1987).
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`There are several reasons why the broad stay Alavi and 650 Fifth Avenue
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`seek would be inappropriate here.
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`First, 40% of the value of the Building—Assa’s interests—was long ago
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`forfeited and subject to turnover under TRIA/FSIA. Assa did not appeal that
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`decision and it is final. The Assa interest is therefore not subject to appeal—and a
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`stay prevents the satisfaction of the judgments. The value of the Assa interest in
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`the Building is significant—worth over a hundred million dollars. In an uncertain
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`local, national and world economic environment, it would be unfair to the ultimate
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`recipients of the funds to subject them to lengthy additional economic risk. Thus,
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`the finality of these cases with regard to the Assa interest is itself sufficient reason
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`to deny the stay as to the Building.
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`Second, even as to the remaining Alavi and 650 Fifth Avenue Co. interests in
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`the Building and other properties, these cases are now in far different postures than
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`13
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`Case 1:12-mc-00071-P1 Document 2 Filed 09/01/17 Page 14 of 16
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`they were in 2013. Both cases have now been tried, and decisions have been
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`rendered. That is, there are two separate and entirely dispositive awards which
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`have to be appealed—and both would have to be successful before complete reversal.
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`The resolution of these cases was largely based on factual findings—and those facts
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`do not support the positions taken by Alavi and 650 Fifth Avenue Co. This Court
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`views the jury award as amply supported by the evidence and its bench trial
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`decision as similarly supported. The likelihood that any appeal would succeed in
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`vacating both of them—which is what would be necessary to prevent moving
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`forward with sale of the properties—is remote. Thus, the first factor that this Court
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`must consider—likelihood of success on the merits—weighs strongly against a stay.
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`The second factor weighs against a stay for the Building but in favor of a
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`limited, six-month stay with regard to the properties at which current charitable
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`works are presently conducted. The Building is a financial asset—charitable
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`activities such as a school or place of worship do not occur on its premises. It will be
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`sold eventually to pay for the judgments in this matter—and there is no irreparable
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`harm to any person or entity from proceeding to do so now. The other properties—
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`those at which charitable works continue to occur—stand in a different position. As
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`to those, an immediate sale of the properties would cause disruption to individuals
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`who are true third parties to these proceedings. Providing the charitable
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`organizations time to find alternative arrangements is preferable. On the other
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`hand, those organizations occupy real estate the value of which is subject to market
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`fluctuations. The victims of terrorism who stand to benefit from the judgments
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`14
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`Case 1:12-mc-00071-P1 Document 2 Filed 09/01/17 Page 15 of 16
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`entered in these cases would be harmed (and would have no person or entity from
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`whom they could seek recompense) should the value of those properties significantly
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`decline. On balance, a six month stay is a reasonable accommodation to both sets of
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`interests.
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`Despite Alavi’s arguments to the contrary, neither the jury award nor the bench
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`decision require Alavi’s charitable works to cease—but it is true that the funding
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`sources for those works, and in some instances the location, must change.
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`The third factor takes into account the interests of the victims of terrorism
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`who stand to recover from the sale of the assets at issue. As events occur locally,
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`nationally and internationally that impact the economies in which the properties at
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`issue are situated, the value of the properties is at risk. The victims of terrorism
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`have waited literally years to recover what they are owed. During that time,
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`property values have fluctuated significantly. If there is an economic downturn
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`that causes a real decrease in value between the date judgments are entered and
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`the date of sale, the victims have no person or entity to whom they can look to make
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`up the difference. This is not monetary harm that can be addressed with other
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`funds—there are no other funds.
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`The Court finds that the balance between the second and third factors weighs
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`strongly against a blanket stay; the Court finds that the competing interests are
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`appropriately addressed with a limited six month stay for the Queens, Texas, and
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`Maryland properties at which charitable works are currently ongoing. (Preparation
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`for sale can be made during that time).
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`15
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`Case 1:12-mc-00071-P1 Document 2 Filed 09/01/17 Page 16 of 16
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`Finally, the public interest also weighs strongly against a stay. There is a
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`strong public interest in proceeding to liquidate the properties in an orderly
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`manner. The resolution of these actions has taken years, and during those years (as
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`the record clearly showed at trial), additional violations of the law occurred. The
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`efforts at concealing assets did not stop when the lawsuits were filed—they
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`continued with vigor. The victims of terrorism should not have to pay for the
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`concealment and subterfuge any longer. The public has an interest in seeing its
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`laws enforced.
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`Accordingly, the motions for stays are DENIED except to the limited extent
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`set forth above, namely, to provide a six month period during which the charitable
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`organizations with active operations at certain properties find alternative
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`arrangements.
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`CONCLUSION
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`For the reasons set forth above, the Government’s motion (motion number 1)
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`is GRANTED in part and Claimants’ motions (motions numbers 2-5) are DENIED.
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`The Clerk of Court is directed to terminate the motions as indicated.
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`SO ORDERED.
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`New York, New York
`September 1, 2017
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`Dated:
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`____________________________________
`KATHERINE B. FORREST
`United States District Judge
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`16
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