8:17am PT by Eriq Gardner
Feds Face Resistance in Bid to Delay 1MDB Forfeiture Cases for Criminal Investigation
The financier of Wolf of Wall Street and others whose assets have been tied up as part of a U.S. government crackdown on foreign corruption are slamming a proposed delay in the 1MDB forfeiture cases.
Earlier this month, federal prosecutors explained the need to pause civil litigation. With claims being made on assets including Hollywood films, a catalogue of EMI songs, a Picasso painting once given to Leonardo DiCaprio, real estate in Beverly Hills, London and New York, and more, the feds sought permission to prioritize their ongoing criminal investigation into an alleged conspiracy to launder money misappropriated from a Malaysian public fund.
Prosecutors wrote that a stay is warranted "because proceeding with civil discovery will have an obvious adverse effect on the related criminal investigation.... Any disclosures by the government beyond those in the complaint will reveal details of the underlying investigation to which the potential targets and subjects are not entitled."
Red Granite, which provided funding for such films as Wolf of Wall Street, Dumb and Dumber To, and Daddy's Home, has been in settlement talks with the U.S. government over claims those films were funded by corruption.
"Red Granite remains hopeful that its role in these cases will be resolved, and that there will be no need to litigate this action," the company states in a brief opposing the delay. "In the event that a negotiated resolution is not imminent, however, Red Granite has a strong interest in clearing its name promptly."
Matthew Schwartz, a partner at Boies Schiller who is representing Red Granite, expands on the opposition in several of the other 1MDB cases.
He writes that no discovery requests have yet been made on the government and that "it is difficult to imagine how any investigation could be harmed by disclosure of the underlying evidence."
Schwartz adds that the government's request is "without precedent" and a violation of his clients' due process rights. He'd prefer to move forward with jurisdictional challenges and the primary defense that his clients are merely downstream recipients of funds and represent an innocent owner of assets. The attorney also notes how the government's investigation has been on the front pages for nearly two years now with the government holding press conferences, issuing press releases and possibly leaking details to the media.
He's not alone in voicing objection.
The attorney representing a trust called JW Nile (BVI) Ltd., which is tied to the family of a Malaysian financier named Jho Low, is also in court over a stake in EMI Music Publishing, whose assets include Police's "Every Breath You Take," The Temptations' "My Girl" and Queen's "Bohemian Rhapsody."
JW Nile fought hard for the opportunity to oppose the government's seizure.
"First, the Government paralyzed Claimants’ original trustees from filing claims by insinuating that the mere filing of claims could lead to criminal liability and refusing to dispel that notion," writes attorney Jeremy Matz at Bird Marella. "Next, the Government spent many months trying to thwart Claimants from appearing in the case in order to protect their assets, claiming that permitting Claimants to do so would delay and hinder the discovery process on which the Government said it was so eager to embark. These efforts included the Government’s attempt to block Claimants from filing claims through the appointment of new trustees. The Government claimed that allowing such claims would 'delay this Court’s proceedings' and hinder the Government’s ability to pursue discovery."
Matz then moves in for his most cutting remark.
"Now, the Government’s effort to indefinitely stay all discovery — and almost everything else about this case too — exposes the reality that the Government has no interest in exchanging information with Claimants, respecting Claimants’ substantive and procedural rights, or moving this case forward at all towards a resolution," he writes. "It is now apparent that the Government was crying wolf about potential delays in discovery in order to bolster its efforts to win by default without presenting its case on the merits."
The government has suggested it is prepared to privately show information about its criminal investigation to the judge in order to win a delay. That could be the next step when prosecutors reply.