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Nigerian Forfeiture|Process Advances

WASHINGTON (CN) - The U.S. government's forfeiture action against millions of dollars now held in investment portfolios by relatives of a man who allegedly conspired with a former dictator of Nigeria will go to trial, after a motion to dismiss some of the claims was denied in D.C. district court.

Abubakar Atiku Bagudu allegedly conspired with General Sani Abacha, president of Nigeria from his 1993 military coup until his death in 1998, as well as Abacha's sons and other Nigerian government officials, to defraud the Nigerian government and embezzle and launder hundreds of millions of dollars in proceeds from their corruption to accounts around the globe.

The U.S. Department of Justice began what it called "the largest kleptocracy forfeiture action ever brought in the U.S." in November 2013. Its Bagudu case seeks the forfeiture of 16 properties, four of which were included in a motion to dismiss filed by the man's relatives.

The relatives claim to be beneficiaries of the investment portfolios, and none of them are implicated in any wrongdoing, according to the opinion written by District Judge John D. Bates.

The funds at issue were acquired through two illegal schemes, according to the Justice Department's allegations - the "Security Votes Fraud" and the "Debt Buy-Back Fraud."

The Security Votes Fraud occurred between January 1994 and June 1998, when the government alleges that Abacha and his co-conspirators used fraudulent national security letters to withdraw funds from the Central Bank of Nigeria.

Abacha claimed that the funds were going to be used "to address unidentified 'emergencies' that threatened Nigeria's national interests," but were instead transferred into the conspirators' accounts overseas, the opinion stated.

A Nigerian Special Investigation Panel after Abacha's death found that the scheme stole more than $2 billion in public funds.

The Debt Buy-Back Fraud was orchestrated in 1996, when Bagudu arranged for his company, Mecosta, to purchase some of the Nigerian government's outstanding debt.

Abacha guaranteed that Nigeria would buy back the debt from Mecosta before the company had even acquired the debt. When Bagudu sold the debt back to Nigeria, he did so at a mark-up that cost the Nigerian government hundreds of millions of dollars more than if Nigeria had bought it back on the open market.

Mecosta made a profit of approximately $282.5 million in the scheme.

In its forfeiture case, the government is required to "state sufficiently detailed facts to support a reasonable belief that the government will be able to meet its burden of proof at trial," and "state the circumstances from which the claim arises with such particularity that the defendant or claimant will be able, without moving for a more definite statement, to commence an investigation of the facts and to frame a responsive pleading," Bates wrote.

A civil forfeiture complaint may not be dismissed because the government lacked sufficient evidence of forfeitability at the time of filing.

Bagudu's relatives, filed their motion to dismiss based on four arguments, including lack of jurisdiction, statute of limitations and violation of their due-process rights, international comity and act of state, and failure to allege the investment portfolios are subject to forfeiture. Each argument failed, according to Bates.

Funds held in foreign accounts can be subject to U.S. forfeiture as long as the funds used the U.S. banking system, Bates wrote. The government has alleged extensive storage and transfer of the funds throughout the U.S. banking system, and Congress has ordered that any forfeiture case involving foreign-held funds must be heard in Washington, he added.

As for the statute of limitations, since the relatives' investment funds are held in the United Kingdom the government has no time limit to bring its claim due to Congressional rules regarding funds "absent" from the United States, Bates found.

Even if the funds were in the United States, the government only has to bring its allegations within two years of discovering the funds' connection to a crime, and the government's claims show that it did bring this action within two years of discovering the involvement of Bagudu's investment portfolios, Bates said.

The relatives argued that doctrines of international comity and act of state prevent the government from bringing its current action, because a 2003 settlement between Nigeria and Bagudu fully resolved Bagudu's alleged involvement in the misappropriation of funds. But the Justice Department countered that those doctrines do not apply when the executive branch of the U.S. government has brought a forfeiture action against assets involved in the violation of U.S. criminal laws.

Finally, the relatives' argument that the government did not sufficiently allege why the investment portfolios are subject to forfeiture fails under the requirements for a forfeiture case at this stage, Bates found. The government provided enough detailed facts to support a reasonable belief that it will be able to prove that the portfolios are subject to forfeiture.

The feds also made enough of a case that the relatives should be able to start their own investigation of the facts to respond to the allegations, the judge said.He also entered a default judgment for 12 properties in the case the relatives hadn't challenged.

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