The Honorable Jed S. Rakoff, of the United States District Court for the Southern… v. United States UNITED STATES COURT OF APPEALS 1 FOR THE SECOND CIRCUIT 2 August Term,…

* The Honorable Jed S. Rakoff, of the United States
District Court for the Southern District of New York, sitting by
designation.
05-6887-cv
DSI Assoc. LLC v. United States
UNITED STATES COURT OF APPEALS 1
FOR THE SECOND CIRCUIT 2
August Term, 2006 3
(Argued: November 15, 2006 Decided: August 2, 2007) 4
Docket No. 05-6887-cv 5
------------------------------------- 6
DSI ASSOCIATES LLC, 7
Movant-Appellant, 8
- v - 9
UNITED STATES OF AMERICA, 10
Plaintiff-Appellee, 11
ALLEGHENY ENERGY, INC., ALLEGHENY ENERGY SUPPLY COMPANY, LLC, 12
MERRILL LYNCH & CO., and MERRILL LYNCH CAPITAL SERVICES, INC., 13
Interested-Party-Appellees. 14
DANIEL L. GORDON, 15
Defendant. 16
------------------------------------- 17
Before: McLAUGHLIN and SACK, Circuit Judges, and RAKOFF, 18
District Judge*. 19
Appeal from an order of the United States District 20
Court for the Southern District of New York (Gerard E. Lynch, 21
Judge) denying a motion to intervene brought by movant-appellant 22
DSI Associates under Federal Rule of Civil Procedure 24 to 23

-- 1 of 25 --

-2-
contest a portion of the forfeiture order that was included in 1
the defendant's sentence. 2
Affirmed. 3
DAVID J. MONZ, Updike, Kelly & Spellacy, 4
P.C. (Barbara A. Frederick, of counsel) 5
Hartford, CT, for Movant-Appellant. 6
BARBARA A. WARD, Assistant United States 7
Attorney for the Southern District of 8
New York (Michael J. Garcia, United 9
States Attorney, and Katherine Polk 10
Failla, Assistant United States 11
Attorney, of counsel), New York, NY, for 12
Plaintiff-Appellee. 13
JOHN GUELI, Shearman & Sterling LLP 14
(Stuart J. Baskin and Ladan F. Stewart, 15
of counsel), New York, NY, for 16
Interested-Party-Appellees Merrill Lynch 17
& Co. and Merrill Lynch Capital 18
Services, Inc. 19
SACK, Circuit Judge: 20
To resolve this appeal, we must determine whether a 21
general creditor may intervene in a criminal forfeiture 22
proceeding to assert its alleged rights to property subject to a 23
criminal order of forfeiture or challenge the underlying validity 24
of the forfeiture order, and if so, how. 25
BACKGROUND 26
On December 19, 2003, the defendant, Daniel L. Gordon, 27
pled guilty in the United States District Court for the Southern 28
District of New York (Gerard E. Lynch, Judge) to three counts of 29
an information (the "Information") charging him with undertaking 30
an elaborate scheme to defraud his employer, Merrill Lynch 31
Capital Services, Inc., and Merrill Lynch & Co. (collectively 32

-- 2 of 25 --

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-
"Merrill Lynch") of many millions of dollars. Count One charged 1
him with wire fraud in violation of 18 U.S.C. § 1343. Count Two 2
charged him with laundering the proceeds of the wire fraud in 3
violation of 18 U.S.C. § 1956(a)(1)(B)(I). And Count Three 4
charged him with conspiring to falsify Merrill Lynch's books and 5
records in connection with the sale of its energy trading unit, 6
Global Energy Markets ("GEM"), in violation of 18 U.S.C. § 371.1
7
The Information also included "forfeiture allegations" relating 8
to the fraudulently obtained money. 9
According to the Information, in or before 2000, 10
Merrill Lynch entered into a $500 million long-term energy call 11
agreement with the Williams Energy Marketing and Trading Company. 12
Merrill Lynch sought insurance to hedge against that obligation. 13
In response, Gordon used an entity he had created and operated, 14
Falcon Energy Holdings, S.A. ("Falcon"), to negotiate a 15
fraudulent energy insurance contract with Merrill Lynch. On or 16
about August 25, 2000, Merrill Lynch entered into the purported 17
11-year energy insurance agreement with Falcon, transferring 18
approximately $43 million, its only payment pursuant to that 19
agreement, to Falcon's bank account, which Gordon had opened for 20
it in Switzerland.2
21

-- 3 of 25 --

September 2002, shortly after Gordon terminated the Falcon
contract.
-4-
At about the same time, Gordon incorporated Ostrich 1
Capital Partners, Inc. ("Ostrich"), in the Marshall Islands. On 2
or about September 21, 2000, Gordon transferred approximately $33 3
million from the Falcon account in Switzerland to an Ostrich 4
account at the same bank. Gordon subsequently made several 5
additional transfers from the Falcon account to accounts in the 6
United States, including a total of $30 million to a bank account 7
in New York in the name of Kings Holdings, LLC ("Kings 8
Holdings"), a Delaware corporation, all the outstanding shares of 9
which Gordon owned. These transfers underlie the money 10
laundering charge against Gordon. 11
On or about November 14, 2000, Gordon used funds from 12
Kings Holdings' New York bank account to purchase from the 13
appellant DSI Associates LLC ("DSI") seventy percent of the 14
outstanding shares of Daticon, Inc. ("Daticon"), a private 15
document-management services company located in Connecticut. 16
Kings Holdings acquired 7,923 of the 11,318 outstanding shares of 17
Daticon from DSI for nearly $23 million in cash and an unsecured 18
promissory note of $4 million. Gordon became chairman of 19
Daticon's board of directors and received a salary and other 20
income from the company from sometime in 2000 to sometime in 21
2002. DSI continued to hold thirty percent of Daticon's 22
outstanding shares. 23
The Criminal Investigation and the Promissory Note 24

-- 4 of 25 --

-5-
After learning of Gordon's scheme, representatives of 1
the United States Attorney's office in Manhattan negotiated with 2
representatives of DSI with a view toward finding a neutral third 3
party to purchase all the shares of Daticon -- those held by 4
Kings Holdings and those held by DSI. The government intended to 5
seize Kings Holdings' portion of the proceeds in a forfeiture 6
proceeding as part of its planned criminal prosecution of Gordon. 7
On July 18, 2003, while negotiations with the 8
government were proceeding, DSI filed suit against Kings Holdings 9
and Gordon in Connecticut state court. DSI alleged that the two 10
had defaulted on the unsecured promissory note that was a part of 11
the consideration they paid to DSI for the Daticon stock. At the 12
same time, DSI sought and received an ex parte prejudgment 13
attachment on $5 million worth of Kings Holdings' assets. 14
On August 6, 2003, DSI and Kings Holdings settled their 15
dispute and terminated the Connecticut proceedings. Under the 16
settlement, the prejudgment attachment was vacated and in its 17
place Kings Holdings executed a non-negotiable, unsecured demand 18
promissory note for $2.5 million (the "Settlement Note" or the 19
"Note"). The settlement agreement provided that the Settlement 20
Note could be enforced by a claim against the proceeds of a sale 21
of Daticon, except in the event that the government placed any 22
such proceeds in an escrow account or initiated a forfeiture 23
proceeding against Kings Holdings. The parties had received 24
notice from the government, however, that it intended to initiate 25

-- 5 of 25 --

3 The third party is not, to our knowledge, identified in
the material submitted to us on appeal.
-6-
forfeiture proceedings that would include any Daticon sale 1
proceeds. They therefore agreed that if DSI attempted to collect 2
on the Settlement Note from the proceeds of the sale of Daticon 3
after such a proceeding had been initiated, it would do so within 4
the "context of" the criminal forfeiture proceeding unless the 5
United States Attorney for the Southern District of New York 6
"consented to any other means of collection." Letter Agreement 7
dated Aug. 6, 2003, at 1. 8
In September 2003, pursuant to an arrangement with the 9
government, Kings Holdings and DSI sold their shares of Daticon 10
to a neutral third party3 with the active monitoring and approval 11
of the government. Approximately $22.9 million of the sale 12
proceeds were immediately placed in a government account pending 13
forfeiture proceedings. Approximately $6.5 million of the 14
proceeds were deposited in an escrow account (the "Escrow 15
Account"), to be held there until the end of the following year, 16
to provide for post-acquisition contingencies specified in the 17
purchase agreement, which primarily related to the anonymous 18
third-party purchaser. The remaining $6 million was transferred 19
into a separate escrow account (the "Separate Escrow Account") 20
until December 26, 2003, to be available in the event that post- 21
acquisition challenges arose relating to Gordon's ownership and 22
control of Kings Holdings. If no challenges were made by that 23

-- 6 of 25 --

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-
date, the money would be transferred from the Separate Escrow 1
Account to a government account awaiting forfeiture. 2
On October 15, 2003, after making a demand for payment 3
in full of the Settlement Note, DSI filed another complaint in 4
Connecticut state court based on the Note. DSI applied to the 5
court for a second ex parte prejudgment attachment order against 6
the sale proceeds that had been put into escrow funds in the 7
amount of $2.5 million, plus interest. That day, the Connecticut 8
court entered a prejudgment attachment for $2.5 million against 9
the Separate Escrow Account.4 On December 26, 2003, when no 10
claims other than those embodied in the court's attachment order 11
on the $6 million Separate Escrow Account funds had been made, 12
that amount less the $2.5 million that remained the subject of 13
the prejudgment attachment was paid into the government account. 14
The $2.5 million apparently remains in the Separate Escrow 15
Account. 16
Gordon's Guilty Plea, Forfeiture, 17
and Ancillary Proceedings 18
Meanwhile, on December 19, 2003, Gordon pled guilty to 19
all three charges contained in the Information. Pursuant to a 20
written plea agreement, he agreed to forfeit the $43 million he 21

-- 7 of 25 --

-8-
initially received pursuant to the fraudulent scheme, as well as 1
any interest in property derived from proceeds traceable to the 2
wire fraud offense or involved in the money laundering offense. 3
On February 20, 2004, as part of Gordon's sentence, the district 4
court entered a Preliminary Order of Forfeiture requiring the 5
defendant to forfeit $43 million and any right, title, and 6
interest in specific property described in the Preliminary Order. 7
Title 21 U.S.C. §§ 853(n)(1) and (2) set forth the 8
procedure for asserting, in an ancillary proceeding, a third- 9
party claim with respect to property subject to a criminal order 10
of forfeiture: 11
(1) Following the entry of an order of 12
forfeiture under this section, the United 13
States shall publish notice of the order and 14
of its intent to dispose of the property in 15
such manner as the Attorney General may 16
direct. The Government may also, to the 17
extent practicable, provide direct written 18
notice to any person known to have alleged an 19
interest in the property that is the subject 20
of the order of forfeiture as a substitute 21
for published notice as to those persons so 22
notified. 23
(2) Any person, other than the defendant, 24
asserting a legal interest in property which 25
has been ordered forfeited to the United 26
States pursuant to this section may, within 27
thirty days of the final publication of 28
notice or his receipt of notice under 29
paragraph (1), whichever is earlier, petition 30
the court for a hearing to adjudicate the 31
validity of his alleged interest in the 32
property. . . . 33
21 U.S.C. § 853(n)(1), (2). 34

-- 8 of 25 --

-9-
Pursuant to section 853(n)(1), the government sent 1
notice to counsel for Merrill Lynch, Allegheny, and DSI, as 2
"person[s] known to have alleged an interest in the property that 3
is the order of forfeiture." 21 U.S.C. § 853(n)(1). Under the 4
statute, the recipients of the notice had thirty days in which to 5
"petition the court for a hearing to adjudicate the validity of 6
his alleged interest in the property." Id. § 853(n)(2). 7
The substantive portion of section 853(n) provides: 8
(6) If, after the hearing, the court 9
determines that the petitioner has 10
established by a preponderance of the 11
evidence that-- 12
(A) the petitioner has a legal right, 13
title, or interest in the property, and 14
such right, title, or interest renders 15
the order of forfeiture invalid in whole 16
or in part because the right, title, or 17
interest was vested in the petitioner 18
rather than the defendant or was 19
superior to any right, title, or 20
interest of the defendant at the time of 21
the commission of the acts which gave 22
rise to the forfeiture of the property 23
under this section; or 24
(B) the petitioner is a bona fide 25
purchaser for value of the right, title, 26
or interest in the property and was at 27
the time of purchase reasonably without 28
cause to believe that the property was 29
subject to forfeiture under this 30
section; 31
the court shall amend the order of forfeiture 32
in accordance with its determination. 33
(7) Following the court's disposition of all 34
petitions filed under this subsection, or if 35
no such petitions are filed following the 36
expiration of the period provided in 37
paragraph (2) for the filing of such 38
petitions, the United States shall have clear 39
title to property that is the subject of the 40
order of forfeiture and may warrant good 41

-- 9 of 25 --

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-
title to any subsequent purchaser or 1
transferee. 2
Id. § 853(n)(6),(7). 3
Merrill Lynch and Allegheny filed timely petitions in 4
response to the section 853(n) notice, asserting a prior superior 5
interest in some of the forfeited property. See id. 6
§ 853(n)(6)(A). On June 10, 2005, the district court endorsed a 7
Stipulation and Order of Settlement that provided for Merrill 8
Lynch and Allegheny to split the final amount forfeited -- except 9
for $10 million to be kept by the government5 -- in return for 10
the withdrawal of their petitions. The stipulation also provided 11
that Merrill Lynch and Allegheny would divide equally the $2.5 12
million that remained in escrow pending resolution of the 13
Connecticut state court proceeding if and when those funds were 14
transferred from the Separate Escrow Account into the government 15
account. 16
On October 24, 2005, the district court sentenced 17
Gordon to 42 months' incarceration and entered a Final Order of 18
Forfeiture. 19
DSI's Motion to Intervene 20

-- 10 of 25 --

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-
On September 29, 2004, more than five months after the 1
thirty days in which to petition for relief under section 853(n) 2
had elapsed, DSI moved to intervene in Gordon's criminal 3
forfeiture proceeding pursuant to Rule 24 of the Federal Rules of 4
Civil Procedure. DSI proffered two principal arguments in 5
support of its motion: (1) the original $4 million promissory 6
note used by Kings Holdings as consideration for the Daticon 7
shares (subsequently reduced to the Settlement Note) was not 8
tainted by the fraudulent scheme and therefore could not be 9
forfeited because the district court did not have jurisdiction 10
over the proceeds derived from, or traceable to, the equivalent 11
proportion of Daticon stock;6 and (2) the district court did not 12
have authority to enter an order forfeiting to the United States 13
property that was the subject of the Connecticut court 14
attachment. DSI conceded, however, that it was statutorily 15
barred from intervening in the criminal proceeding under the 16
terms of 21 U.S.C. § 853(k), which provides that, except as set 17
forth in section 853(n), no party claiming an interest in 18
property subject to forfeiture under section 853 may intervene in 19
a trial or appeal of a criminal case involving such forfeiture, 20
or bring an action against the government concerning the validity 21

-- 11 of 25 --

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-
of the party's alleged interest in the property, after an 1
indictment or information alleging that the property is subject 2
to such forfeiture has been filed.7 DSI further conceded that, 3
as a general unsecured creditor, it did not have standing to 4
petition the court through the ancillary proceeding provided for 5
in section 853(n). 6
The district court addressed the merits of the motion 7
and denied it. First, it observed that despite the fact that 8
Kings Holdings paid for the Daticon shares with approximately $23 9
million in cash that was traceable to the defendant's criminal 10
conduct and a $4 million promissory note, DSI received all of the 11
Daticon shares due to it and therefore retained "no legally[] 12
cognizable interest in any portion of the [Daticon] shares," or 13
the proceeds thereof, because it was, as it readily admitted, a 14
general creditor with no specific claim on any of the forfeited 15

-- 12 of 25 --

-13-
property. United States v. Gordon, 2005 WL 2759845, at *2-*3, 1
2005 U.S. Dist. LEXIS 24897, at *7 (S.D.N.Y. Oct. 13, 2005). As 2
a general creditor, and as DSI and the government agreed, DSI did 3
not have standing to initiate a section 853(n) proceeding to 4
protect their interests. 5
Second, the district court pointed out that although 6
the Fifth Amendment's Due Process Clause requires that any person 7
who claims a legal interest in property subject to forfeiture 8
receive notice and an opportunity to be heard, due process does 9
not require "that persons claiming merely that they would be 10
advantaged in some way if the defendant were allowed to keep more 11
of his assets should be allowed to intervene to object to the 12
forfeitability of assets admittedly belonging to the defendant." 13
Id. at *3, 2005 U.S. Dist. LEXIS 24897, at *8. Assuming without 14
deciding that Federal Rule of Civil Procedure 24 was applicable 15
to Gordon's criminal proceeding, the district court therefore 16
concluded that DSI "ha[d] no right to intervene under Rule 24(a) 17
[of the Federal Rules of Civil Procedure], section 853(n), or any 18
other provision of law." Id., 2005 U.S. Dist. LEXIS 24897, at 19
*8-*9. 20
Third, the district court also denied DSI permissive 21
intervention under Rule 24(b), concluding that such intervention 22
would constitute an unwarranted interference in the 23
"expeditious . . . adjustment of rights as between the defendant 24
and the Government," which lies at the core of the criminal 25

-- 13 of 25 --

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-
forfeiture provisions. Id., 2005 U.S. Dist. LEXIS 24897, at *8- 1
*9. 2
Finally, the district court observed that DSI's motion 3
to intervene was not its only recourse in pursuing satisfaction 4
of the Settlement Note. Section 853(i) confers broad discretion 5
on the Attorney General to take any action "to protect the rights 6
of innocent persons which is in the interest of justice." Id., 7
2005 U.S. Dist. LEXIS 24897, at *10 (quoting 21 U.S.C. 8
§ 853(i)(1)) (emphasis and internal quotation marks deleted). 9
The district court further noted that the government had 10
specifically invited DSI to pursue such discretionary relief. 11
Id., 2005 U.S. Dist. LEXIS 24897, at *10. 12
DSI appeals. 13
DISCUSSION 14
On appeal DSI argues that it has standing to intervene 15
under Rule 24 of the Federal Rules of Civil Procedure. It 16
contends that the district court exceeded its statutory 17
forfeiture authority by including the untainted portion of the 18
proceeds of the Daticon stock sale in the forfeited property. It 19
further argues that to the extent that section 853(n) ancillary 20
proceedings provide the exclusive means of pursuing its interest 21
in the proceeds of the Daticon stock sale, the statute violates 22
the Due Process Clause of the Fifth Amendment of the 23
Constitution.8
24

-- 14 of 25 --

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-
I. Standard of Review 1
We review the denial of a motion to intervene under 2
Rule 24 of the Federal Rules of Civil Procedure, whether as of 3
right under Rule 24(a) or by permission under Rule 24(b), for 4
abuse of discretion. See In re Holocaust Victim Assets Litig., 5
225 F.3d 191, 197 (2d Cir. 2000). "Errors of law or fact may 6
constitute such abuse." SG Cowen Sec. Corp. v. Messih, 224 F.3d 7
79, 81 (2d Cir. 2000). We review de novo whether a party has 8
standing to petition the district court for a hearing under 21 9
U.S.C. § 853(n), and, of course, all questions of statutory 10
interpretation.9 United States v. Ribadeneira, 105 F.3d 833, 834 11
(2d Cir. 1997) (per curiam). 12
II. DSI's Motion to Intervene under Rule 24 13

-- 15 of 25 --

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-
A. Title 21 U.S.C. § 853 1
1. Section 853 is the Exclusive Means for 2
Third Parties to Intervene in Forfeiture 3
Proceedings. 4
It is well established that third parties may not 5
intervene during criminal forfeiture proceedings to assert their 6
interests in the property being forfeited. See 21 U.S.C. 7
§ 853(k);10 United States v. McHan, 345 F.3d 262, 269 (4th Cir. 8
2003) (observing that section 853 "provides that, until this 9
sentence of forfeiture is entered, no party claiming an interest 10
in the forfeited property may intervene in the criminal case"); 11
see also United States v. Gilbert, 244 F.3d 888, 910 (11th Cir. 12
2001) ("By specifically barring third-parties from intervening in 13
the criminal trial [through the analogous Racketeer Influenced 14
and Corrupt Organizations Law ("RICO") provision], 18 U.S.C. 15
§ 1963(k), it is clear that Congress intended section 1963(l) 16
proceedings to provide the exclusive means for third-parties to 17
assert their claims to forfeited property.").11 Rule 32.2 of the 18
Federal Rules of Criminal Procedure, which pertains to procedures 19
related to criminal forfeiture, also prohibits a third party from 20
"object[ing] to [a] final [forfeiture] order on the ground that 21

-- 16 of 25 --

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-
the third party had an interest in the property." Fed. R. Crim. 1
P. 32.2(c)(2). 2
It is similarly well settled that section 853(n) 3
provides the exclusive means by which a third party may lay claim 4
to forfeited assets -- after the preliminary forfeiture order has 5
been entered. We have recognized that 6
[a]n ancillary proceeding [under § 853(n)] is 7
evidently the only avenue for a post-indictment 8
third-party claim to forfeited property, because 9
the statutory scheme bars commencement of "an 10
action at law or equity against the United States 11
concerning the validity of [a third party's] 12
alleged interest in the property . . . subsequent 13
to the filing of an indictment or information 14
alleging that the property is subject to 15
forfeiture under this section." 16
De Almeida v. United States, 459 F.3d 377, 381 (2d Cir. 2006) 17
(quoting 21 U.S.C. § 853(k)) (alterations and emphasis in 18
original); see also Libretti v. United States, 516 U.S. 29, 44 19
(1995) ("Once the government has secured a stipulation as to 20
forfeitability, third-party claimants can establish their 21
entitlement to a return of the assets only by means of the 22
hearing afforded under 21 U.S.C. § 853(n).").12
23

-- 17 of 25 --

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-
2. DSI Lacks Standing Under 21 U.S.C. 1
§ 853(n). 2
As the district court pointed out, "[w]hile DSI's claim 3
derives from the purchase of the shares [of Daticon], as a matter 4
of law, having failed to retain a security interest in the 5
shares, DSI is simply a general creditor of Kings [Holdings], and 6
its claim to any specific property Kings [Holdings] may possess 7
is no greater than that of any other such creditor." Gordon, 8
2005 WL 2759845, at *3, 2005 U.S. Dist. LEXIS 24897, at *7. DSI 9
does not assert otherwise. As a general creditor of Kings 10
Holdings and Gordon, DSI does not possess a "legal right, title, 11
or interest in the property" that was forfeited as required for 12
standing under section 853(n)(6)(A), nor can it show that it was 13
a bona fide purchaser for value of any such right, title or 14
interest, as required for standing under section 853(b)(6)(B). 15
See Ribadeneira, 105 F.3d at 836. Without possessing such an 16
interest "in" a "particular, specific asset" that is, or is part 17

-- 18 of 25 --

-19-
of, the forfeited property, DSI does not meet the statutory 1
requirements for initiating an ancillary proceeding under section 2
853(n). Id. at 835-37; see also United States v. Schwimmer, 968 3
F.2d 1570, 1580-81 (2d Cir. 1992) (holding that general creditors 4
lack standing under 18 U.S.C. § 1963(l)(6), the analogous 5
forfeiture statute under RICO, 18 U.S.C. § 1962). 6
3. Rule 24 Does Not Provide an Alternative 7
Means to Intervene. 8
DSI asserts, however, that it is not attempting to 9
employ a section 853(n) petition here. It is not looking to 10
"recover an alleged interest in forfeited property," Ribadeneira, 11
105 F.3d at 834, i.e., in its alleged interest in the funds 12
traceable to untainted shares of Daticon, for which section 13
853(n) would provide the proper mechanism. Instead, DSI 14
contends, its motion to intervene seeks to challenge the validity 15
of the forfeiture order as it was applied to those funds. 16
DSI cannot prevail, however, by reframing its argument 17
as one challenging the underlying validity of the forfeiture 18
order rather than the district court's denial of its efforts to 19
assert its property interest in the funds traceable to untainted 20
shares of Daticon. In either case, DSI is contending that the 21
remaining funds owing under the Settlement Note belong to it, not 22
Gordon. And the argument that the district court does not have 23
the authority to order those funds forfeited because they belong 24
to DSI is effectively the same argument as an assertion that DSI 25
has a superior interest in those funds. Both are forbidden by 26
section 853(k) unless they fall within the exception carved out 27

-- 19 of 25 --

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-
by section 853(n).13 See also Fed. R. Crim. P. 32.2 Advisory 1
Committee Note ("Th[e ancillary] proceeding does not involve 2
relitigation of the forfeitability of the property; its only 3
purpose is to determine whether any third party has a legal 4
interest in the forfeited property.") DSI's attempt to 5
participate in the forfeiture proceeding is thus foreclosed by 6
its acknowledged inability to meet the requirements of section 7
853(n). It may not bypass this procedure by employing the 8
Federal Rules of Civil Procedure, or, indeed, any other 9
mechanism.14
10
B. Due Process 11

-- 20 of 25 --

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-
DSI contends that if, as we have here and elsewhere 1
concluded, section 853(n) provides the exclusive means by which a 2
third party can challenge a forfeiture order in court, yet DSI 3
does not have standing to intervene under that section, DSI has 4
been deprived of a property interest without a meaningful 5
opportunity to be heard in violation of the Fifth Amendment's Due 6
Process Clause; in other words, that the failure of section 853 7
to provide general creditors with such an opportunity to be heard 8
renders the statutory scheme unconstitutional.15 This argument 9
depends on three premises: first, that DSI has a property 10
interest at stake that is subject to the requirements of due 11
process; second, that the forfeiture order deprives it of that 12
property interest; and third, that the deprivation has been 13
imposed without due process of law. As for the first, we assume 14
without deciding that DSI, through its attachment under 15
Connecticut law of the Settlement Note or otherwise, has a 16
property interest sufficient for it to invoke the Due Process 17

-- 21 of 25 --

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-
Clause.16 As for the second, we conclude that, whether or not it 1
does, DSI has not been deprived of any such property interest -- 2
at least not yet. We therefore do not reach the third question, 3
whether, should the deprivation occur, it will violate the due 4
process guaranty.17
5
Section 853(n) may be DSI's exclusive path to challenge 6
the forfeiture order before the judicial entity which entered the 7
order, but it is not DSI's only course of action available under 8
the statute within which it may assert its interest in the 9
forfeited property. Under section 853(i), the Attorney General 10
maintains discretion to "take any . . . action to protect the 11
rights of innocent persons which is in the interest of justice 12
and which is not inconsistent with the provisions of this 13
section." 21 U.S.C. § 853(i)(1). This non-judicial remedy 14
confers upon the Attorney General the authority to rectify 15

-- 22 of 25 --

-23-
precisely the situation presented here: A third party that 1
possesses an interest in forfeited property yet does not meet the 2
standing requirements of section 853(n) may petition the Attorney 3
General for redress in the "interest of justice." As the Third 4
Circuit explained: 5
Congress did not intend section 853(n) to 6
serve as a vehicle by which all innocent 7
third parties who are aggrieved by an order 8
of criminal forfeiture can petition for 9
judicial relief. Rather, it seems to us that 10
Congress, in enacting section 853(n)(6)(A) 11
and (B), intended to accord standing to only 12
two narrow classes of third parties, and 13
intended to require all other third parties 14
to petition the Attorney General for relief. 15
United States v. Lavin, 942 F.2d 177, 185 (3rd Cir. 1991) (citing 16
21 U.S.C. § 853(i)) (emphasis in original); see also United 17
States v. BCCI Holdings (Luxembourg), S.A., 46 F.3d 1185, 1192 18
(D.C. Cir.), cert. denied sub nom. Chawla v. United States, 515 19
U.S. 1160 (1995) (concluding that the statutory scheme for RICO 20
forfeiture proceedings "directs parties without an interest in 21
specific property to seek relief from the Attorney General, not 22
the court adjudging the forfeiture"). Indeed, the District of 23
Columbia Circuit has similarly noted that while section 853 was 24
intended to provide certain third parties with additional due 25
process protections, "general creditors seem precisely the type 26
of innocent persons Congress had in mind" when it included the 27
non-judicial mechanism set forth by section 853(i) "to protect 28
the rights of innocent persons." Id. at 1192 (quoting 18 U.S.C. 29
§ 1963(g)(1)) (internal quotation marks omitted). 30

-- 23 of 25 --

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-
As the district court rightly noted, DSI has not 1
demonstrated that any such a request would be futile. Indeed, 2
the government, which received $10 million from the forfeiture, 3
specifically invited DSI to pursue this avenue of relief. 4
Perhaps at some future time DSI will be able to 5
establish that it has exhausted all possible avenues for relief. 6
If so, it might be able to argue persuasively that the 7
availability of a remedy through the executive branch under 8
section 853(i), and whatever other avenues it might pursue,18 is 9

-- 24 of 25 --

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-
insufficient to satisfy the Due Process clause. But inasmuch as 1
it has yet to demonstrate that it has finally been deprived of 2
property, we need not determine whether any such deprivation 3
would be constitutionally permissible. 4
CONCLUSION 5
We conclude that the district court acted within its 6
discretion in denying DSI's motion to intervene, and that the 7
denial did not violate the Fifth Amendment's Due Process Clause. 8
The order of the district court is therefore affirmed. 9

-- 25 of 25 --