District Attorney v Efargan

[*1] District Attorney v Efargan 2006 NY Slip Op 51462(U) [12 Misc 3d 1186(A)] Decided on June 1, 2006 Supreme Court, New York County Shulman, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on June 1, 2006
Supreme Court, New York County

District Attorney, New York County, Plaintiff-Claiming Authority,

against

Meir Efargan, ELIMOR KOCHAVI, AMIT VOLK a/k/a IZHAK COHEN a/k/a ITHAK COHEN, SABBIR SADEQUE, AMERICANA CATERING INC., AMERICANA LIMOUSINE and CAR SERVICE INC., ALL CONCIERGE SERVICES, INC., UNITED PERSONNEL SERVICES, INC., and PRIORITY INTERNET, INC., Defendants.



401214/05

Martin Shulman, J.

Defendants All Concierge Services, Inc. ("All Concierge"), United Personnel Services, Inc. ("United Personnel") and Priority Internet, Inc. ("Priority Internet") (collectively "movants" or the "corporate defendants") move pursuant to CPLR §§1336 and/or 1312(4) to modify the temporary restraining order ("TRO") issued by this Court on April 8, 2005 to permit movants to utilize restrained funds to pay reasonable counsel fees. Plaintiff-Claiming Authority District Attorney New York County ("plaintiff" or "DA") opposes the motion.

The DA commenced this CPLR Article 13-A civil forfeiture action against the defendants seeking, inter alia, the forfeiture of Twenty Three Million, Five Hundred and Ninety-Two Thousand, Eight Hundred and Ninety-Six Dollars ($23,592,896.00) in defendants' assets or, in the alternative, the entry of a money judgment in that amount plus costs and disbursements of this action. The TRO barred defendants from transferring or otherwise disposing of any assets valued up to the foregoing sum.

By prior decision and order dated November 2, 2005 (the "11/2/05 Order"), this Court inter alia granted the corporate defendants' motion to modify the TRO solely to the extent of directing that restrained funds be released to enable movants to post an undertaking or bond in an amount sufficient to pay various living expenses and counsel [*2]fees of $58,937.50.[FN1] The 11/2/05 Order specifically provides that it "is being issued without prejudice to defendants' right to make future applications pursuant to CPLR §1312(4) if restrained assets are needed to pay for ongoing reasonable living expenses and attorneys' fees. Of course, such future applications must be supported by detailed affidavits and financial disclosure information."

Subsequently, the defendants jointly moved by order to show cause to compel the DA to turn over various information regarding defendants' assets, arguing that such information, which had been seized pursuant to a search warrant, was required so that defendants could complete the financial disclosure forms and affidavits supplied by the DA which are necessary to obtain plaintiff's consent to any future applications for the release of restrained funds. By decision and order dated December 27, 2005 (the "12/27/05 Order"), this Court denied defendants' order to show cause.

In support of the instant motion, the corporate defendants attach the requisite financial disclosure forms which plaintiff supplied, as purportedly completed by Efargan as president of the corporate defendants (Medina Aff. at Ex. E). Movants also contend that no funds could be obtained pursuant to the 11/2/05 Order since the application for a bond was denied (Medina Aff. at Ex. B).[FN2] Finally, counsel for the corporate defendants advises that on January 4, 2006 Supreme Court Criminal Term Justice Richard Carruthers issued a decision and order vacating such defendants' prior guilty pleas entered on default since upholding such pleas "for failure to appear by counsel at a time when the corporation lacked access to its funds to retain counsel would amount to a violation of the Sixth Amendment right." (Medina Aff. at Ex. C).

In opposition to the motion, Plaintiff claims: 1) the completed financial disclosure forms attached as Exhibit E to the motion are woefully deficient;[FN3] 2) no financial disclosure forms were submitted for the individual defendants (Efargan, Kochavi and Volk), whose finances are necessarily intertwined with those of the corporate [*3]defendants;[FN4] 3) defendants have not demonstrated that the restrained funds were legitimately earned; 4) movants' Sixth Amendment rights will not be impaired if the motion to release funds is denied; and 5) movants' counsel's fees are unreasonable. Pointing to the fact that defendants' sales totaled over 23 million dollars, yet only $470,000.00 was discovered in their bank accounts, the DA argues that all of the foregoing must lead to the inevitable conclusion that defendants are secreting their assets.

CPLR §1312(4) provides as follows: Upon motion of any party against whom a provisional remedy granted pursuant to this article is in effect, the court may issue an order modifying or vacating such provisional remedy if necessary to permit the moving party to obtain funds for the payment of reasonable living expenses, other costs or expenses related to the maintenance, operation, or preservation of property which is the subject of any such provisional remedy or reasonable and bona fide attorneys' fees and expenses for the representation of the defendant in the forfeiture proceeding or in a related criminal matter relating thereto, payment for which is not otherwise available from assets of the defendant which are not subject to such provisional remedy. Any such motion shall be supported by an affidavit establishing the unavailability of other assets of the moving party which are not the subject of such provisional remedy for payment of such expenses or fees.

In its 11/2/05 Order, this Court, citing to Morgenthau v. A.S. Goldmen & Co., Inc., N.Y.L.J., October 4, 1999, p. 28, col. 4, affd 283 AD2d 212, 724 NYS2d 306 (1st Dept., 2001), recognized the crucial requirement of complete financial disclosure as a prerequisite to modifying a TRO issued pursuant to CPLR §1312.

While sensitive to the plight of the movants and their counsel, this Court must nonetheless conclude that ordering the unsecured release of restrained funds is inappropriate on this record. The corporate defendants have failed to proffer thorough affidavits supported by comprehensive information from which this Court could conclude that movants have no unrestrained assets that are available to pay attorneys' fees. Similarly, the movants have not offered any meaningful evidence detailing the purported legitimate source of their assets.

This Court noted in the 12/27/05 Order that "[t]he DA's financial disclosure form does not require exactitude. Significantly, neither this Court nor the DA will find it prejudicial or perjurious if defendants indicate their uncertainty of any information provided in defendants' respective affidavits or on their disclosure forms. Further, [*4]defendants are free to estimate the amount of funds held in any account they hold." Here, the corporate defendants have summarily answered "n/a" to almost all of the questions posed on the financial disclosure forms, or have left many items blank. As noted by plaintiff, the movants improperly altered the financial disclosure forms submitted for each corporation by removing the affirmation as to the accuracy of the information submitted, replacing same with three separate supplemental affidavits sworn to by Efargan on February 7, 2006 which aver that the financial disclosure forms "may contain unintentional omissions".

While movants allege that they have no access to their financial records seized pursuant to executed search warrants, they offer no indication that the financial data required to fully respond to the disclosure statements cannot be obtained from any other source, such as their accountant. Nor have the corporate defendants disputed the amounts which the DA claims the defendants processed through credit card transactions, or otherwise attempted to explain the whereabouts of any such funds.

Finally, the Court disagrees with the movants' position that the finances of the individual defendants Efargan, Kochavi and Volk are irrelevant to this inquiry. Each of these defendants was indicted, along with the corporate defendants, for the felony crimes of promoting prostitution and money laundering. Given that these defendants have not refuted their involvement with the corporate defendants, it stands to reason that their finances may be interconnected with those of the movants, regardless of whether or not they were officers or shareholders of the corporate defendants.

As the corporate defendants have failed to establish their entitlement to a modification of the TRO, the Court need not address the argument that their Sixth Amendment rights have been impaired, or the DA's argument that movants' counsel fees are unreasonable. Accordingly, it is hereby

ORDERED that defendants All Concierge Services, Inc.'s, United Personnel Services, Inc.'s and Priority Internet, Inc.'s motion is hereby denied.

The foregoing constitutes the Decision and Order of this Court. Courtesy copies have been provided to counsel.

Dated: New York, New York

June 1, 2006 Hon. Martin Shulman, J.S.C. Footnotes

Footnote 1: While co-defendants Meir Efargan ("Efargan") and Elimor Kochavi ("Kochavi") joined in the corporate defendants' prior motion, they have not joined in the instant motion. The sum of $58,937.50 represented counsel fees of $18,437.50 for Efargan's counsel, $22,275.00 for Kochavi's counsel and $18,225.00 for movants' counsel.

Footnote 2: The letter dated November 29, 2005 from The Blaikie Group (Medina Aff. at Ex. B) states that Efargan's bond application had been denied by their sureties since the financials did not meet the minimum requirements.

Footnote 3: Among the deficiencies cited by plaintiff are the following: 1) with the exception of listing bank accounts in the names of each corporate defendant, all responses were listed as "unknown" or "n/a"; 2) basic information such as corporate addresses were omitted; and 3) movants removed the statement at the end of the financial disclosure form which recites that, under penalty of perjury, inter alia, the form has been read, the information therein is true and correct and the affiant has made a diligent search of his/her financial records. See Miner Aff. at ¶¶17-22.

Footnote 4: Plaintiff finds the individual defendants' failure to join this motion to be an indication that they are hiding assets. As the individual defendants were unable to obtain a bond for the release of funds pursuant to the 11/2/05 Order, the DA specifically questions how they are existing without access to any financial resources. See Miner Aff. at ¶¶16(c)-(e) and 23-25.