     05-6887-cv
     DSI Assoc. LLC v. United States



1                         UNITED STATES COURT OF APPEALS

2                             FOR THE SECOND CIRCUIT

3                                August Term, 2006

4    (Argued: November 15, 2006                      Decided: August 2, 2007)

5                              Docket No. 05-6887-cv

6                    -------------------------------------

7                               DSI ASSOCIATES LLC,

8                                Movant-Appellant,

9                                        - v -

10                           UNITED STATES OF AMERICA,

11                              Plaintiff-Appellee,

12     ALLEGHENY ENERGY, INC., ALLEGHENY ENERGY SUPPLY COMPANY, LLC,
13    MERRILL LYNCH & CO., and MERRILL LYNCH CAPITAL SERVICES, INC.,

14                         Interested-Party-Appellees.

15                               DANIEL L. GORDON,

16                                     Defendant.

17                   -------------------------------------

18   Before:     McLAUGHLIN and SACK, Circuit Judges, and RAKOFF,
19               District Judge*.

20               Appeal from an order of the United States District

21   Court for the Southern District of New York (Gerard E. Lynch,

22   Judge) denying a motion to intervene brought by movant-appellant

23   DSI Associates under Federal Rule of Civil Procedure 24 to



           *
             The Honorable Jed S. Rakoff, of the United States
     District Court for the Southern District of New York, sitting by
     designation.
1    contest a portion of the forfeiture order that was included in

2    the defendant's sentence.

3              Affirmed.

4                                DAVID J. MONZ, Updike, Kelly & Spellacy,
5                                P.C. (Barbara A. Frederick, of counsel)
6                                Hartford, CT, for Movant-Appellant.

 7                               BARBARA A. WARD, Assistant United States
 8                               Attorney for the Southern District of
 9                               New York (Michael J. Garcia, United
10                               States Attorney, and Katherine Polk
11                               Failla, Assistant United States
12                               Attorney, of counsel), New York, NY, for
13                               Plaintiff-Appellee.

14                               JOHN GUELI, Shearman & Sterling LLP
15                               (Stuart J. Baskin and Ladan F. Stewart,
16                               of counsel), New York, NY, for
17                               Interested-Party-Appellees Merrill Lynch
18                               & Co. and Merrill Lynch Capital
19                               Services, Inc.

20   SACK, Circuit Judge:

21             To resolve this appeal, we must determine whether a

22   general creditor may intervene in a criminal forfeiture

23   proceeding to assert its alleged rights to property subject to a

24   criminal order of forfeiture or challenge the underlying validity

25   of the forfeiture order, and if so, how.

26                                 BACKGROUND

27             On December 19, 2003, the defendant, Daniel L. Gordon,

28   pled guilty in the United States District Court for the Southern

29   District of New York (Gerard E. Lynch, Judge) to three counts of

30   an information (the "Information") charging him with undertaking

31   an elaborate scheme to defraud his employer, Merrill Lynch

32   Capital Services, Inc., and Merrill Lynch & Co. (collectively


                                       -2-
1    "Merrill Lynch") of many millions of dollars.   Count One charged

2    him with wire fraud in violation of 18 U.S.C. § 1343.   Count Two

3    charged him with laundering the proceeds of the wire fraud in

4    violation of 18 U.S.C. § 1956(a)(1)(B)(I).   And Count Three

5    charged him with conspiring to falsify Merrill Lynch's books and

6    records in connection with the sale of its energy trading unit,

7    Global Energy Markets ("GEM"), in violation of 18 U.S.C. § 371.1

8    The Information also included "forfeiture allegations" relating

9    to the fraudulently obtained money.

10             According to the Information, in or before 2000,

11   Merrill Lynch entered into a $500 million long-term energy call

12   agreement with the Williams Energy Marketing and Trading Company.

13   Merrill Lynch sought insurance to hedge against that obligation.

14   In response, Gordon used an entity he had created and operated,

15   Falcon Energy Holdings, S.A. ("Falcon"), to negotiate a

16   fraudulent energy insurance contract with Merrill Lynch.   On or

17   about August 25, 2000, Merrill Lynch entered into the purported

18   11-year energy insurance agreement with Falcon, transferring

19   approximately $43 million, its only payment pursuant to that

20   agreement, to Falcon's bank account, which Gordon had opened for

21   it in Switzerland.2


          1
             Gordon had created GEM for Merrill Lynch in or about
     1998, and thereafter had acted as its president.
          2
             According to the Information, on or about January 8,
     2001, Allegheny Energy Services Corporation ("AES") acquired GEM
     from Merrill Lynch and formed a new entity called Allegheny
     Energy Supply Company, LLP ("Allegheny"). Gordon served as the
     president of Allegheny from the company's inception until about

                                    -3-
1               At about the same time, Gordon incorporated Ostrich

2    Capital Partners, Inc. ("Ostrich"), in the Marshall Islands.     On

3    or about September 21, 2000, Gordon transferred approximately $33

4    million from the Falcon account in Switzerland to an Ostrich

5    account at the same bank.   Gordon subsequently made several

6    additional transfers from the Falcon account to accounts in the

7    United States, including a total of $30 million to a bank account

8    in New York in the name of Kings Holdings, LLC ("Kings

9    Holdings"), a Delaware corporation, all the outstanding shares of

10   which Gordon owned.   These transfers underlie the money

11   laundering charge against Gordon.

12              On or about November 14, 2000, Gordon used funds from

13   Kings Holdings' New York bank account to purchase from the

14   appellant DSI Associates LLC ("DSI") seventy percent of the

15   outstanding shares of Daticon, Inc. ("Daticon"), a private

16   document-management services company located in Connecticut.

17   Kings Holdings acquired 7,923 of the 11,318 outstanding shares of

18   Daticon from DSI for nearly $23 million in cash and an unsecured

19   promissory note of $4 million.   Gordon became chairman of

20   Daticon's board of directors and received a salary and other

21   income from the company from sometime in 2000 to sometime in

22   2002.   DSI continued to hold thirty percent of Daticon's

23   outstanding shares.

24              The Criminal Investigation and the Promissory Note


     September 2002, shortly after Gordon terminated the Falcon
     contract.

                                      -4-
1               After learning of Gordon's scheme, representatives of

2    the United States Attorney's office in Manhattan negotiated with

3    representatives of DSI with a view toward finding a neutral third

4    party to purchase all the shares of Daticon -- those held by

5    Kings Holdings and those held by DSI.    The government intended to

6    seize Kings Holdings' portion of the proceeds in a forfeiture

7    proceeding as part of its planned criminal prosecution of Gordon.



8               On July 18, 2003, while negotiations with the

9    government were proceeding, DSI filed suit against Kings Holdings

10   and Gordon in Connecticut state court.    DSI alleged that the two

11   had defaulted on the unsecured promissory note that was a part of

12   the consideration they paid to DSI for the Daticon stock.    At the

13   same time, DSI sought and received an ex parte prejudgment

14   attachment on $5 million worth of Kings Holdings' assets.

15              On August 6, 2003, DSI and Kings Holdings settled their

16   dispute and terminated the Connecticut proceedings.    Under the

17   settlement, the prejudgment attachment was vacated and in its

18   place Kings Holdings executed a non-negotiable, unsecured demand

19   promissory note for $2.5 million (the "Settlement Note" or the

20   "Note").   The settlement agreement provided that the Settlement

21   Note could be enforced by a claim against the proceeds of a sale

22   of Daticon, except in the event that the government placed any

23   such proceeds in an escrow account or initiated a forfeiture

24   proceeding against Kings Holdings.    The parties had received

25   notice from the government, however, that it intended to initiate

                                     -5-
1    forfeiture proceedings that would include any Daticon sale

2    proceeds.   They therefore agreed that if DSI attempted to collect

3    on the Settlement Note from the proceeds of the sale of Daticon

4    after such a proceeding had been initiated, it would do so within

5    the "context of" the criminal forfeiture proceeding unless the

6    United States Attorney for the Southern District of New York

7    "consented to any other means of collection."   Letter Agreement

8    dated Aug. 6, 2003, at 1.

9                In September 2003, pursuant to an arrangement with the

10   government, Kings Holdings and DSI sold their shares of Daticon

11   to a neutral third party3 with the active monitoring and approval

12   of the government.   Approximately $22.9 million of the sale

13   proceeds were immediately placed in a government account pending

14   forfeiture proceedings.   Approximately $6.5 million of the

15   proceeds were deposited in an escrow account (the "Escrow

16   Account"), to be held there until the end of the following year,

17   to provide for post-acquisition contingencies specified in the

18   purchase agreement, which primarily related to the anonymous

19   third-party purchaser.    The remaining $6 million was transferred

20   into a separate escrow account (the "Separate Escrow Account")

21   until December 26, 2003, to be available in the event that post-

22   acquisition challenges arose relating to Gordon's ownership and

23   control of Kings Holdings.   If no challenges were made by that




          3
             The third party is not, to our knowledge, identified in
     the material submitted to us on appeal.

                                      -6-
1    date, the money would be transferred from the Separate Escrow

2    Account to a government account awaiting forfeiture.

3               On October 15, 2003, after making a demand for payment

4    in full of the Settlement Note, DSI filed another complaint in

5    Connecticut state court based on the Note.     DSI applied to the

6    court for a second ex parte prejudgment attachment order against

7    the sale proceeds that had been put into escrow funds in the

8    amount of $2.5 million, plus interest.   That day, the Connecticut

9    court entered a prejudgment attachment for $2.5 million against

10   the Separate Escrow Account.4   On December 26, 2003, when no

11   claims other than those embodied in the court's attachment order

12   on the $6 million Separate Escrow Account funds had been made,

13   that amount less the $2.5 million that remained the subject of

14   the prejudgment attachment was paid into the government account.

15   The $2.5 million apparently remains in the Separate Escrow

16   Account.

17              Gordon's Guilty Plea, Forfeiture,
18              and Ancillary Proceedings

19              Meanwhile, on December 19, 2003, Gordon pled guilty to

20   all three charges contained in the Information.     Pursuant to a

21   written plea agreement, he agreed to forfeit the $43 million he


          4
             Although the record reveals that the prejudgment
     attachment order was in the amount of $2.75 million, the district
     court and the government treated the attachment as one for $2.5
     million. See Preliminary Order of Forfeiture, dated Feb. 9,
     2004, at *4, Final Order of Forfeiture, dated Oct. 24, 2005, at
     *4. Because $2.5 million remains in the Separate Escrow Account
     and no party challenges the propriety of that amount, we, too,
     assume that $2.5 million is the proper amount subject to the
     state court attachment.

                                     -7-
1    initially received pursuant to the fraudulent scheme, as well as

2    any interest in property derived from proceeds traceable to the

3    wire fraud offense or involved in the money laundering offense.

4    On February 20, 2004, as part of Gordon's sentence, the district

5    court entered a Preliminary Order of Forfeiture requiring the

6    defendant to forfeit $43 million and any right, title, and

7    interest in specific property described in the Preliminary Order.



8              Title 21 U.S.C. §§ 853(n)(1) and (2) set forth the

9    procedure for asserting, in an ancillary proceeding, a third-

10   party claim with respect to property subject to a criminal order

11   of forfeiture:

12             (1) Following the entry of an order of
13             forfeiture under this section, the United
14             States shall publish notice of the order and
15             of its intent to dispose of the property in
16             such manner as the Attorney General may
17             direct. The Government may also, to the
18             extent practicable, provide direct written
19             notice to any person known to have alleged an
20             interest in the property that is the subject
21             of the order of forfeiture as a substitute
22             for published notice as to those persons so
23             notified.
24             (2) Any person, other than the defendant,
25             asserting a legal interest in property which
26             has been ordered forfeited to the United
27             States pursuant to this section may, within
28             thirty days of the final publication of
29             notice or his receipt of notice under
30             paragraph (1), whichever is earlier, petition
31             the court for a hearing to adjudicate the
32             validity of his alleged interest in the
33             property. . . .
34   21 U.S.C. § 853(n)(1), (2).




                                    -8-
1              Pursuant to section 853(n)(1), the government sent

2    notice to counsel for Merrill Lynch, Allegheny, and DSI, as

3    "person[s] known to have alleged an interest in the property that

4    is the order of forfeiture."   21 U.S.C. § 853(n)(1).   Under the

5    statute, the recipients of the notice had thirty days in which to

6    "petition the court for a hearing to adjudicate the validity of

7    his alleged interest in the property."   Id. § 853(n)(2).

8              The substantive portion of section 853(n) provides:

 9             (6) If, after the hearing, the court
10             determines that the petitioner has
11             established by a preponderance of the
12             evidence that--
13               (A) the petitioner has a legal right,
14               title, or interest in the property, and
15               such right, title, or interest renders
16               the order of forfeiture invalid in whole
17               or in part because the right, title, or
18               interest was vested in the petitioner
19               rather than the defendant or was
20               superior to any right, title, or
21               interest of the defendant at the time of
22               the commission of the acts which gave
23               rise to the forfeiture of the property
24               under this section; or
25               (B) the petitioner is a bona fide
26               purchaser for value of the right, title,
27               or interest in the property and was at
28               the time of purchase reasonably without
29               cause to believe that the property was
30               subject to forfeiture under this
31               section;
32             the court shall amend the order of forfeiture
33             in accordance with its determination.
34             (7) Following the court's disposition of all
35             petitions filed under this subsection, or if
36             no such petitions are filed following the
37             expiration of the period provided in
38             paragraph (2) for the filing of such
39             petitions, the United States shall have clear
40             title to property that is the subject of the
41             order of forfeiture and may warrant good

                                     -9-
1               title to any subsequent purchaser or
2               transferee.
3    Id. § 853(n)(6),(7).

4               Merrill Lynch and Allegheny filed timely petitions in

5    response to the section 853(n) notice, asserting a prior superior

6    interest in some of the forfeited property.     See id.

7    § 853(n)(6)(A).   On June 10, 2005, the district court endorsed a

8    Stipulation and Order of Settlement that provided for Merrill

9    Lynch and Allegheny to split the final amount forfeited -- except

10   for $10 million to be kept by the government5 -- in return for

11   the withdrawal of their petitions.     The stipulation also provided

12   that Merrill Lynch and Allegheny would divide equally the $2.5

13   million that remained in escrow pending resolution of the

14   Connecticut state court proceeding if and when those funds were

15   transferred from the Separate Escrow Account into the government

16   account.

17              On October 24, 2005, the district court sentenced

18   Gordon to 42 months' incarceration and entered a Final Order of

19   Forfeiture.

20              DSI's Motion to Intervene




          5
             The government kept $5 million in cash and held an
     additional $5 million, which it had permitted Gordon's wife to
     pay to it in exchange for title to a condominium that had been
     subject to forfeiture.


                                    -10-
1              On September 29, 2004, more than five months after the

2    thirty days in which to petition for relief under section 853(n)

3    had elapsed, DSI moved to intervene in Gordon's criminal

4    forfeiture proceeding pursuant to Rule 24 of the Federal Rules of

5    Civil Procedure.   DSI proffered two principal arguments in

6    support of its motion: (1) the original $4 million promissory

7    note used by Kings Holdings as consideration for the Daticon

8    shares (subsequently reduced to the Settlement Note) was not

9    tainted by the fraudulent scheme and therefore could not be

10   forfeited because the district court did not have jurisdiction

11   over the proceeds derived from, or traceable to, the equivalent

12   proportion of Daticon stock;6 and (2) the district court did not

13   have authority to enter an order forfeiting to the United States

14   property that was the subject of the Connecticut court

15   attachment.   DSI conceded, however, that it was statutorily

16   barred from intervening in the criminal proceeding under the

17   terms of 21 U.S.C. § 853(k), which provides that, except as set

18   forth in section 853(n), no party claiming an interest in

19   property subject to forfeiture under section 853 may intervene in

20   a trial or appeal of a criminal case involving such forfeiture,

21   or bring an action against the government concerning the validity


          6
             As the district court phrased it, "DSI[] claims that
     because the promissory note was separate from the proceeds of
     Gordon's criminal activities, only the proceeds of the sale of
     85% of Kings's Daticon shares . . . are forfeitable, and the
     proceeds of the sale of Kings's remaining 'untainted' shares
     remain available to satisfy DSI's claim against Kings." United
     States v. Gordon, 2005 WL 2759845, at *1, 2005 U.S. Dist. LEXIS
     24897, at *3-*4 (S.D.N.Y. Oct. 13, 2005).

                                    -11-
1    of the party's alleged interest in the property, after an

2    indictment or information alleging that the property is subject

3    to such forfeiture has been filed.7   DSI further conceded that,

4    as a general unsecured creditor, it did not have standing to

5    petition the court through the ancillary proceeding provided for

6    in section 853(n).

7               The district court addressed the merits of the motion

8    and denied it.   First, it observed that despite the fact that

9    Kings Holdings paid for the Daticon shares with approximately $23

10   million in cash that was traceable to the defendant's criminal

11   conduct and a $4 million promissory note, DSI received all of the

12   Daticon shares due to it and therefore retained "no legally[]

13   cognizable interest in any portion of the [Daticon] shares," or

14   the proceeds thereof, because it was, as it readily admitted, a

15   general creditor with no specific claim on any of the forfeited

          7
              Section 853(k) states in full:
                Except as provided in subsection (n) ["Third
                Party Interests"], no party claiming an
                interest in property subject to forfeiture
                under this section may--
                (1) intervene in a trial or appeal of a
                criminal case involving the forfeiture of
                such property under this section; or
                (2) commence an action at law or equity
                against the United States concerning the
                validity of his alleged interest in the
                property subsequent to the filing of an
                indictment or information alleging that the
                property is subject to forfeiture under this
                section.
     21 U.S.C. § 853(k).



                                    -12-
1    property.    United States v. Gordon, 2005 WL 2759845, at *2-*3,

2    2005 U.S. Dist. LEXIS 24897, at *7 (S.D.N.Y. Oct. 13, 2005).    As

3    a general creditor, and as DSI and the government agreed, DSI did

4    not have standing to initiate a section 853(n) proceeding to

5    protect their interests.

6                Second, the district court pointed out that although

7    the Fifth Amendment's Due Process Clause requires that any person

8    who claims a legal interest in property subject to forfeiture

9    receive notice and an opportunity to be heard, due process does

10   not require "that persons claiming merely that they would be

11   advantaged in some way if the defendant were allowed to keep more

12   of his assets should be allowed to intervene to object to the

13   forfeitability of assets admittedly belonging to the defendant."

14   Id. at *3, 2005 U.S. Dist. LEXIS 24897, at *8.    Assuming without

15   deciding that Federal Rule of Civil Procedure 24 was applicable

16   to Gordon's criminal proceeding, the district court therefore

17   concluded that DSI "ha[d] no right to intervene under Rule 24(a)

18   [of the Federal Rules of Civil Procedure], section 853(n), or any

19   other provision of law."    Id., 2005 U.S. Dist. LEXIS 24897, at

20   *8-*9.

21               Third, the district court also denied DSI permissive

22   intervention under Rule 24(b), concluding that such intervention

23   would constitute an unwarranted interference in the

24   "expeditious . . . adjustment of rights as between the defendant

25   and the Government," which lies at the core of the criminal



                                     -13-
1    forfeiture provisions.    Id., 2005 U.S. Dist. LEXIS 24897, at *8-

2    *9.

3              Finally, the district court observed that DSI's motion

4    to intervene was not its only recourse in pursuing satisfaction

5    of the Settlement Note.   Section 853(i) confers broad discretion

6    on the Attorney General to take any action "to protect the rights

7    of innocent persons which is in the interest of justice."      Id.,

8    2005 U.S. Dist. LEXIS 24897, at *10 (quoting 21 U.S.C.

9    § 853(i)(1)) (emphasis and internal quotation marks deleted).

10   The district court further noted that the government had

11   specifically invited DSI to pursue such discretionary relief.

12   Id., 2005 U.S. Dist. LEXIS 24897, at *10.

13             DSI appeals.

14                                DISCUSSION

15             On appeal DSI argues that it has standing to intervene

16   under Rule 24 of the Federal Rules of Civil Procedure.    It

17   contends that the district court exceeded its statutory

18   forfeiture authority by including the untainted portion of the

19   proceeds of the Daticon stock sale in the forfeited property.     It

20   further argues that to the extent that section 853(n) ancillary

21   proceedings provide the exclusive means of pursuing its interest

22   in the proceeds of the Daticon stock sale, the statute violates

23   the Due Process Clause of the Fifth Amendment of the

24   Constitution.8


           8
             The district court found, and DSI does not dispute, that
     DSI's original petition to the district court was untimely in
     light of the thirty-day limit provided by 21 U.S.C. § 853(n).
                                    -14-
1              I. Standard of Review

2              We review the denial of a motion to intervene under

3    Rule 24 of the Federal Rules of Civil Procedure, whether as of

4    right under Rule 24(a) or by permission under Rule 24(b), for

5    abuse of discretion.     See In re Holocaust Victim Assets Litig.,

6    225 F.3d 191, 197 (2d Cir. 2000).    "Errors of law or fact may

7    constitute such abuse."    SG Cowen Sec. Corp. v. Messih, 224 F.3d

8    79, 81 (2d Cir. 2000).    We review de novo whether a party has

9    standing to petition the district court for a hearing under 21

10   U.S.C. § 853(n), and, of course, all questions of statutory

11   interpretation.9   United States v. Ribadeneira, 105 F.3d 833, 834

12   (2d Cir. 1997) (per curiam).

13             II. DSI's Motion to Intervene under Rule 24



     Gordon, 2005 WL 2759845, at *2, 2005 U.S. Dist. LEXIS 24897, at
     *5-*6. The district court noted that other courts "have stated
     that such failure constitutes waiver of a party's right to assert
     an interest in forfeited property," id. at *2, 2005 U.S. Dist.
     LEXIS 24897, at *5, but did not rely on the untimeliness in
     denying the motion, see Fed. R. Crim. P. 32.2 Advisory Committee
     Notes, subdivision (c) ("[I]f a third party has notice of the
     forfeiture but fails to file a timely claim, his or her interests
     are extinguished, and may not be recognized when the court enters
     the final order of forfeiture."). The government does not argue
     on appeal that DSI's untimely petition acts as a waiver of its
     right to intervene. "Issues not sufficiently argued in the
     briefs are considered waived and normally will not be addressed
     on appeal." City of Syracuse v. Onondaga County, 464 F.3d 297,
     308 (2d Cir. 2006) (quoting Norton v. Sam's Club, 145 F.3d 114,
     117 (2d Cir. 1998)) (internal quotation marks omitted).
          9
             Our case law, and that of other circuits, generally
     characterizes our inquiry as one that determines whether a third
     party has "standing" to initiate an ancillary proceeding under
     section 853(n), and we use the term here accordingly. That
     inquiry, however, appears to be identical to one "on the merits"
     to determine whether a third party meets the statute's
     requirements.
                                    -15-
1    A. Title 21 U.S.C. § 853

2               1. Section 853 is the Exclusive Means for
3               Third Parties to Intervene in Forfeiture
4               Proceedings.

5               It is well established that third parties may not

6    intervene during criminal forfeiture proceedings to assert their

7    interests in the property being forfeited.   See 21 U.S.C.

8    § 853(k);10 United States v. McHan, 345 F.3d 262, 269 (4th Cir.

9    2003) (observing that section 853 "provides that, until this

10   sentence of forfeiture is entered, no party claiming an interest

11   in the forfeited property may intervene in the criminal case");

12   see also United States v. Gilbert, 244 F.3d 888, 910 (11th Cir.

13   2001) ("By specifically barring third-parties from intervening in

14   the criminal trial [through the analogous Racketeer Influenced

15   and Corrupt Organizations Law ("RICO") provision], 18 U.S.C.

16   § 1963(k), it is clear that Congress intended section 1963(l)

17   proceedings to provide the exclusive means for third-parties to

18   assert their claims to forfeited property.").11   Rule 32.2 of the

19   Federal Rules of Criminal Procedure, which pertains to procedures

20   related to criminal forfeiture, also prohibits a third party from

21   "object[ing] to [a] final [forfeiture] order on the ground that




          10
               See supra note 7.
          11
            In Ribadeneira, we concluded that the two criminal
     forfeiture provisions, 18 U.S.C. § 1963 (forfeiture under RICO,
     18 U.S.C. § 1962), and 21 U.S.C. § 853 (other criminal
     forfeitures) "are so similar in legislative history and in plain
     language as to warrant similar interpretation." Ribadeneira, 105
     F.3d at 835 n.2.
                                    -16-
1    the third party had an interest in the property."   Fed. R. Crim.

2    P. 32.2(c)(2).

3              It is similarly well settled that section 853(n)

4    provides the exclusive means by which a third party may lay claim

5    to forfeited assets -- after the preliminary forfeiture order has

6    been entered.    We have recognized that

 7             [a]n ancillary proceeding [under § 853(n)] is
 8             evidently the only avenue for a post-indictment
 9             third-party claim to forfeited property, because
10             the statutory scheme bars commencement of "an
11             action at law or equity against the United States
12             concerning the validity of [a third party's]
13             alleged interest in the property . . . subsequent
14             to the filing of an indictment or information
15             alleging that the property is subject to
16             forfeiture under this section."

17   De Almeida v. United States, 459 F.3d 377, 381 (2d Cir. 2006)

18   (quoting 21 U.S.C. § 853(k)) (alterations and emphasis in

19   original); see also Libretti v. United States, 516 U.S. 29, 44

20   (1995) ("Once the government has secured a stipulation as to

21   forfeitability, third-party claimants can establish their

22   entitlement to a return of the assets only by means of the

23   hearing afforded under 21 U.S.C. § 853(n).").12


          12
             Our conclusion is shared by those of our sister Circuits
     that have addressed this question. See United States v.
     Lazarenko, 476 F.3d 642, 648 (9th Cir. 2007) ("The law appears
     settled that an ancillary proceeding constitutes the only avenue
     for a third party claiming an interest in seized property.");
     United States v. Soreide, 461 F.3d 1351, 1354 (11th Cir. 2006)
     ("[U]nder 21 U.S.C. § 853(n)(6), third party petitioners can
     establish their interest in forfeited property in only two
     ways.") (internal quotation marks and citation omitted); United
     States v. Puig, 419 F.3d 700, 703 (8th Cir. 2005) ("A § 853(n)
     ancillary proceeding is the only avenue by which a third-party
     claimant may seek to assert an interest in property that has been
     included in an indictment alleging that the property is subject
     to forfeiture."); McHan, 345 F.3d at 269("The petition authorized
                                    -17-
1              2. DSI Lacks Standing Under 21 U.S.C.
2              § 853(n).

3              As the district court pointed out, "[w]hile DSI's claim

4    derives from the purchase of the shares [of Daticon], as a matter

5    of law, having failed to retain a security interest in the

6    shares, DSI is simply a general creditor of Kings [Holdings], and

7    its claim to any specific property Kings [Holdings] may possess

8    is no greater than that of any other such creditor."     Gordon,

9    2005 WL 2759845, at *3, 2005 U.S. Dist. LEXIS 24897, at *7.    DSI

10   does not assert otherwise.   As a general creditor of Kings

11   Holdings and Gordon, DSI does not possess a "legal right, title,

12   or interest in the property" that was forfeited as required for

13   standing under section 853(n)(6)(A), nor can it show that it was

14   a bona fide purchaser for value of any such right, title or

15   interest, as required for standing under section 853(b)(6)(B).

16   See Ribadeneira, 105 F.3d at 836.     Without possessing such an

17   interest "in" a "particular, specific asset" that is, or is part



     by § 853(n) is the exclusive avenue through which a third party
     may protect his interest in property that has been subject to a
     forfeiture order."); United States v. Wade, 255 F.3d 833, 837
     (D.C. Cir. 2001) ("A third party's only avenue for protecting his
     interest is the procedure set forth in 21 U.S.C.
     § 853(n) . . . ."); United States v. Lavin, 942 F.2d 177, 187
     (3rd Cir. 1991) (Becker, J.) ("Congress instead defined two
     rather limited categories of third parties who are entitled to
     petition the courts for a hearing to adjudicate the validity of
     their interests in the forfeited property."); United States v. De
     Ortiz, 910 F.2d 376, 383 (7th Cir. 1990) ("[O]nce the district
     judge had ordered the money forfeited . . ., the money remained
     subject to forfeiture unless and until that order was vacated and
     a § 853(n) hearing was held."); see also United States v. Harris,
     246 F.3d 566, 574-75 (6th Cir. 2001) (quoting with approval the
     Third Circuit's approach in Lavin).

                                    -18-
1    of, the forfeited property, DSI does not meet the statutory

2    requirements for initiating an ancillary proceeding under section

3    853(n).   Id. at 835-37; see also United States v. Schwimmer, 968

4    F.2d 1570, 1580-81 (2d Cir. 1992) (holding that general creditors

5    lack standing under 18 U.S.C. § 1963(l)(6), the analogous

6    forfeiture statute under RICO, 18 U.S.C. § 1962).

7               3. Rule 24 Does Not Provide an Alternative
8               Means to Intervene.

9               DSI asserts, however, that it is not attempting to

10   employ a section 853(n) petition here.    It is not looking to

11   "recover an alleged interest in forfeited property," Ribadeneira,

12   105 F.3d at 834, i.e., in its alleged interest in the funds

13   traceable to untainted shares of Daticon, for which section

14   853(n) would provide the proper mechanism.    Instead, DSI

15   contends, its motion to intervene seeks to challenge the validity

16   of the forfeiture order as it was applied to those funds.

17              DSI cannot prevail, however, by reframing its argument

18   as one challenging the underlying validity of the forfeiture

19   order rather than the district court's denial of its efforts to

20   assert its property interest in the funds traceable to untainted

21   shares of Daticon.   In either case, DSI is contending that the

22   remaining funds owing under the Settlement Note belong to it, not

23   Gordon.   And the argument that the district court does not have

24   the authority to order those funds forfeited because they belong

25   to DSI is effectively the same argument as an assertion that DSI

26   has a superior interest in those funds.    Both are forbidden by

27   section 853(k) unless they fall within the exception carved out
                                    -19-
1    by section 853(n).13   See also Fed. R. Crim. P. 32.2 Advisory

2    Committee Note ("Th[e ancillary] proceeding does not involve

3    relitigation of the forfeitability of the property; its only

4    purpose is to determine whether any third party has a legal

5    interest in the forfeited property.")   DSI's attempt to

6    participate in the forfeiture proceeding is thus foreclosed by

7    its acknowledged inability to meet the requirements of section

8    853(n).   It may not bypass this procedure by employing the

9    Federal Rules of Civil Procedure, or, indeed, any other

10   mechanism.14

11   B.   Due Process



          13
             DSI relies on United States v. Reckmeyer, 836 F.2d 200,
     206, 208 (4th Cir. 1987) (commenting that "[s]erious due process
     questions would be raised . . . if third parties asserting an
     interest in forfeited assets were barred from challenging the
     validity of the forfeiture" and therefore construing the
     ancillary proceeding "to provide a means by which third persons
     who raise challenges to the validity of the forfeiture order
     could have their claims adjudicated"). There, the Fourth Circuit
     determined that general creditors have a legal interest in the
     debtor's property, but that such creditors have standing under
     section 853(n) only if they can show a legal interest in the
     particular property subject to forfeiture. Id. at 205-06. But
     DSI does not assert that it has standing under section 853(n).
     See also Ribadeneira, 105 F.3d at 836 n.4 ("We do not intend here
     to embrace the holding of Reckmeyer, which granted standing to
     unsecured creditors claiming under § 853 where all (as opposed to
     a part) of the assets of the debtor's estate have been
     forfeited.").
          14
             We therefore need not address whether a motion to
     intervene under the Federal Rules of Civil Procedure can ever be
     appropriate in a criminal proceeding. See United States v.
     White, 980 F.2d 836, 845 (2d Cir. 1992) (Kearse, J., dissenting)
     ("Although the Federal Rules of Civil Procedure do not apply to a
     criminal proceeding of their own force, there is no
     jurisprudential reason why a promulgating body cannot adopt some
     of those rules for application to criminal proceedings."
     (referring to Fed. R. Crim. P. 49(d) as doing so)).
                                    -20-
1              DSI contends that if, as we have here and elsewhere

2    concluded, section 853(n) provides the exclusive means by which a

3    third party can challenge a forfeiture order in court, yet DSI

4    does not have standing to intervene under that section, DSI has

5    been deprived of a property interest without a meaningful

6    opportunity to be heard in violation of the Fifth Amendment's Due

7    Process Clause; in other words, that the failure of section 853

8    to provide general creditors with such an opportunity to be heard

9    renders the statutory scheme unconstitutional.15   This argument

10   depends on three premises: first, that DSI has a property

11   interest at stake that is subject to the requirements of due

12   process; second, that the forfeiture order deprives it of that

13   property interest; and third, that the deprivation has been

14   imposed without due process of law.   As for the first, we assume

15   without deciding that DSI, through its attachment under

16   Connecticut law of the Settlement Note or otherwise, has a

17   property interest sufficient for it to invoke the Due Process


          15
             After oral argument, the government submitted a letter
     pursuant to Rule 28(j) of the Federal Rules of Appellate
     Procedure to bring to our attention the Ninth Circuit's opinion
     in United States v. Lazarenko, 469 F.3d 815, as amended, 476 F.3d
     642 (9th Cir. 2007). There, a third party attempted to set an
     immediate hearing on the propriety of the forfeiture order and
     challenge the preliminary order of forfeiture prior to the
     commencement of an ancillary proceeding under section 853(n).
     The court determined, however, that the third party did not have
     standing to do so because it could not allege sufficient injury-
     in-fact, id. at 650, and because it asserted a premature
     generalized grievance, id. at 652. Here, however, the district
     court had conducted ancillary proceedings under section 853(n) at
     the time DSI filed its motion to intervene. And DSI appeals a
     judgment of the district court denying its motion. DSI therefore
     has satisfied the standing concerns deemed dispositive in
     Lazarenko.
                                    -21-
1    Clause.16   As for the second, we conclude that, whether or not it

2    does, DSI has not been deprived of any such property interest --

3    at least not yet.     We therefore do not reach the third question,

4    whether, should the deprivation occur, it will violate the due

5    process guaranty.17

6                Section 853(n) may be DSI's exclusive path to challenge

7    the forfeiture order before the judicial entity which entered the

8    order, but it is not DSI's only course of action available under

9    the statute within which it may assert its interest in the

10   forfeited property.    Under section 853(i), the Attorney General

11   maintains discretion to "take any . . . action to protect the

12   rights of innocent persons which is in the interest of justice

13   and which is not inconsistent with the provisions of this

14   section."   21 U.S.C. § 853(i)(1).   This non-judicial remedy

15   confers upon the Attorney General the authority to rectify



          16
             Property interests "are created and their dimensions are
     defined by existing rules or understandings that stem from an
     independent source such as state law -- rules or understandings
     that secure certain benefits and that support claims of
     entitlement to those benefits." Bd. of Regents v. Roth, 408 U.S.
     564, 577 (1972). While state law creates the underlying
     substantive interest the plaintiff seeks to vindicate, "federal
     constitutional law determines whether that interest rises to the
     level of a 'legitimate claim of entitlement' protected by the Due
     Process Clause." Memphis Light, Gas & Water Div. v. Craft, 436
     U.S. 1, 9 (1978) (citations omitted).
          17
             We therefore need not determine whether DSI actually
     received the required opportunity to be heard in the district
     court in this instance. We note, however, that, notwithstanding
     its untimely motion, Judge Lynch permitted DSI to submit a brief
     in support of its argument and carefully considered the merits of
     DSI's contention. That its challenge ultimately failed in this
     case is not a result of a deprivation of an opportunity to be
     heard by the district court.
                                    -22-
1    precisely the situation presented here:   A third party that

2    possesses an interest in forfeited property yet does not meet the

3    standing requirements of section 853(n) may petition the Attorney

4    General for redress in the "interest of justice."   As the Third

5    Circuit explained:

 6             Congress did not intend section 853(n) to
 7             serve as a vehicle by which all innocent
 8             third parties who are aggrieved by an order
 9             of criminal forfeiture can petition for
10             judicial relief. Rather, it seems to us that
11             Congress, in enacting section 853(n)(6)(A)
12             and (B), intended to accord standing to only
13             two narrow classes of third parties, and
14             intended to require all other third parties
15             to petition the Attorney General for relief.
16   United States v. Lavin, 942 F.2d 177, 185 (3rd Cir. 1991) (citing

17   21 U.S.C. § 853(i)) (emphasis in original); see also United

18   States v. BCCI Holdings (Luxembourg), S.A., 46 F.3d 1185, 1192

19   (D.C. Cir.), cert. denied sub nom. Chawla v. United States, 515

20   U.S. 1160 (1995) (concluding that the statutory scheme for RICO

21   forfeiture proceedings "directs parties without an interest in

22   specific property to seek relief from the Attorney General, not

23   the court adjudging the forfeiture").   Indeed, the District of

24   Columbia Circuit has similarly noted that while section 853 was

25   intended to provide certain third parties with additional due

26   process protections, "general creditors seem precisely the type

27   of innocent persons Congress had in mind" when it included the

28   non-judicial mechanism set forth by section 853(i) "to protect

29   the rights of innocent persons."   Id. at 1192 (quoting 18 U.S.C.

30   § 1963(g)(1)) (internal quotation marks omitted).



                                   -23-
1             As the district court rightly noted, DSI has not

2   demonstrated that any such a request would be futile.    Indeed,

3   the government, which received $10 million from the forfeiture,

4   specifically invited DSI to pursue this avenue of relief.

5             Perhaps at some future time DSI will be able to

6   establish that it has exhausted all possible avenues for relief.

7   If so, it might be able to argue persuasively that the

8   availability of a remedy through the executive branch under

9   section 853(i), and whatever other avenues it might pursue,18 is


         18
            We note that DSI has failed to demonstrate that Gordon
    is without assets not subject to forfeiture that could satisfy
    the Note. Cf. Reckmeyer, 836 F.3d at 206 (noting that in that
    case, unlike this one, the parties had agreed that the forfeiture
    order seized all of the defendant's known assets). It is not
    clear to us that DSI, as a general creditor, is unable to pursue
    Gordon personally for the payment of the money associated with
    the Note.

         And while the issue was not briefed to us, we further note
    that DSI has not demonstrated that there was a procedural bar
    preventing it from converting its inchoate interest in the form
    of a state court prejudgment attachment into a "legal interest"
    under section 853(n) by "obtain[ing] some judgment and
    secur[ing] . . . those funds." United States v. Schwimmer, 968
    F.2d 1570, 1581 (2d Cir. 1992). Under Connecticut law, it
    appears that DSI might perfect the prejudgment attachment by
    obtaining a judgment lien on the property in which it claims to
    have an interest. See Hartford Provision Co. v. United States,
    579 F.2d 7, 10 n.3 (2d Cir. 1978) (noting that Connecticut
    follows "ancient and well-accepted principles" relating to
    attachments on personal property, such that levying an attachment
    creates a lien of an inchoate nature which "awaits the judgment
    of the court for its consummation.") (quoting Pratt v. Law, 13
    U.S. [456, 497] (1815)). If it did so, DSI would "no longer [be]
    merely a general creditor." Schwimmer, 968 F.2d at 1581. It
    might then have a security interest that would confer upon it
    standing to make a claim under section 853(n). See also
    Reckmeyer, 836 F.2d at 205 ("Unsecured creditors may reduce their
    claims to judgment and thereby acquire a lien on all of the
    debtor's assets. This enforcement mechanism provides for the
    judicial enforcement of a legally cognizable right."). Upon
    successful completion of perfecting a judgment in state court,
                                   -24-
1   insufficient to satisfy the Due Process clause.   But inasmuch as

2   it has yet to demonstrate that it has finally been deprived of

3   property, we need not determine whether any such deprivation

4   would be constitutionally permissible.

5                              CONCLUSION
6             We conclude that the district court acted within its

7   discretion in denying DSI's motion to intervene, and that the

8   denial did not violate the Fifth Amendment's Due Process Clause.

9   The order of the district court is therefore affirmed.




    DSI might then file a Rule 60(b) motion to reopen the ancillary
    forfeiture proceeding in the district court and litigate its
    claim as to its property interest within the statutory scheme
    created by Congress. See United States v. Puig, 419 F.3d 700,
    702 (8th Cir. 2005) (citing Fed. R. Crim. P. 32.2(c) Advisory
    Committee Notes) (noting that a third-party claimant may file a
    Rule 60(b) motion to reopen the ancillary proceeding allowed by
    21 U.S.C. § 853(n)).
                                   -25-
