By Mike Masnick
July 08, 2019 "Information Clearing House" - About a month ago we covered the basics of the lawsuit by which the US government was seeking to keep pretty much all of Kim Dotcom's assets, despite the fact that Dotcom himself hasn't been tried -- and, in fact, it hasn't even been determined if he can be extradited to the United States (a country he's never visited). This week, that case took another step, with the judge, Liam O'Grady, who had already ruled that Kim Dotcom could be considered a "fugitive," more or less finalizing the theft of Dotcom's assets by declaring a default judgment in favor of the US. This isn't the end of the process (not by a longshot), but it highlights just how the US government can use some ridiculous procedures to steal millions in assets from someone who hasn't been shown to be guilty of anything.
As we discussed last time, the story of the raid on Kim Dotcom's rented home in New Zealand, the seizure of all of his cars, money, bank accounts, computers, servers, etc. is well known. That was part of a case for which Kim Dotcom was indicted (under what appears to be questionable legal reasoning -- but that's a separate issue). As has been widely reported, that case is still on hold while Dotcom fights extradition from New Zealand. The extradition fight will finally go to a New Zealand court later this summer. Once that's done, if Dotcom loses, he'll be sent to the US, where he'll face a criminal trial based on the indictment.
But this is actually separate from all of that. You see, when the US government grabbed or froze all of Dotcom's assets, they did so using an asset seizure procedure. Asset seizure is allowed in such cases, but the government then has to give that property back. What the government really wanted to do is keep all of Dotcom's tens of millions of dollars worth of assets -- and in order to do that it has to go through a separate process, known as civil asset forfeiture. It's technically a civil (not criminal) case, but (and here's the part that people find most confusing), it's not actually filed against Kim Dotcom at all, but rather against his stuff that the government already seized. Yes, it's technically an entirely separate lawsuit, that was only filed last summer (two and a half years after the government seized all of his stuff and shut down his company), entitled United States Of America v. All Assets Listed In Attachment A, And All Interest, Benefits, And Assets Traceable Thereto. And, as we noted last time, Attachment A is basically all of Kim Dotcom's stuff.
Federal Rule of Civil Procedure 55 permits the court to grant a motion for default judgment when the well-pled allegations of the complaint establish plaintiff's entitlement to relief, and where a defendant has failed to plead or defend as provided by the rules.... In the civil forfeiture context, default judgment is permitted where no potential claimant has filed a response to the complaint... This whole process is known as an "in rem" proceeding -- meaning a lawsuit "against a thing" rather than against a person. And the "case" basically says all this stuff should be "forfeited" to the US government because it's the proceeds of some criminal activity. You would think that in order for such civil asset forfeiture to go forward, you'd then have to show something like a criminal conviction proving that the assets in question were, in fact, tied to criminal activity. You'd be wrong -- as is clear from what happened in this very case. Once the Justice Department effectively filed a lawsuit against "all of Kim Dotcom's money and stuff," Dotcom did what you're supposed to do in that situation and filed a challenge to such a ridiculous situation. And here the DOJ used the fact that Dotcom was fighting extradition to argue that he was a "fugitive." Judge O'Grady agreed with that last month, and that resulted in the decision earlier this week to then declare a "default judgment" in favor of the DOJ, and giving the US government all of Kim Dotcom's stuff.
A "default judgment?" As you know if you regularly read Techdirt, that's usually what happens when a defendant simply ignores a court case filed against him. As the court notes in this ruling, for that to happen in a civil asset forfeiture case, it means no one tried to block the claim:
But, wait, you say: Kim Dotcom did file a complaint about the asset forfeiture, so how could a default judgment happen here? That's where the whole "fugitive" bit comes in. Because Dotcom won't come to the US, he's been deemed a fugitive, and thus the Judge simply hands over all of his stuff to the US government. And thus, without any sort of criminal conviction at all, the US gets to steal millions of dollars from Dotcom.
A defendant in default, and a claimant who fails to assert a claim in rem, is deemed to have admitted all of the plaintiff's well-pled allegations of fact, which then form the basis for the judgment in the plaintiff's favor.
If that sounds insane, you're absolutely right. And, again, it is entirely possible that when all of this is over, Kim Dotcom will be found guilty of "criminal conspiracy." If that's the case, then at that point it's reasonable to discuss whether the government should get to keep all of his stuff. But it seems an absolute travesty of concepts like due process for the government to be able to take all of his money and stuff based on purely procedural reasons having to do with a separate criminal case that hasn't even been tried yet.
The process isn't over yet. Dotcom can still appeal this ruling, though the real problem is with the civil asset forfeiture process, rather than how it was applied in this particular case. Dotcom also has other options for the assets that are in New Zealand and Hong Kong, in using the local courts in those places to try to block the transfer of those assets to the US government. Not knowing enough about the law in either place, it's difficult to say what the chances of success of such a strategy would be. Either way, this seems like a classic case demonstrating how the civil asset forfeiture process appears to be little more than legalized theft by the US government.
United States v. All Assets Listed in Attachment A. The subject property is located in Hong Kong and New Zealand and was seized pursuant to restraining orders issued by this court and registered in foreign courts.
http://www.informationclearinghouse.info/51888.htm
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