United States v. Two Condominiums located at 465 Ocean Drive

Background

The United States filed a civil forfeiture complaint seeking the two Miami Beach condominiums. It alleged that Zachary Apte and Jessica Richman, co-founders of uBiome, Inc., used funds connected to health care fraud, securities fraud, and wire fraud to acquire the properties, and that the transactions involved money laundering.

According to the complaint, Apte and Richman allegedly transferred money from uBiome to their personal accounts, used some of that money to buy a property in Camas, Washington, and later used cash derived mostly from the sale proceeds of that property to buy the Miami condominiums. The government alleged that the condominiums were therefore either traceable to unlawful proceeds or involved in a money-laundering transaction.

Legal Standard

The court applied the pleading rules for civil forfeiture complaints. The complaint had to state a plausible claim for relief and provide facts detailed enough to support a reasonable belief that the government could prove, by a preponderance of the evidence, that the properties were subject to forfeiture. For a tracing theory, the government had to allege the general contours of the chain connecting the properties to unlawful conduct, although it did not need to plead every detail of that chain at the motion-to-dismiss stage.

Verification

The court rejected Apte and Richman’s challenge to the complaint’s verification. A special agent stated that she was familiar with the facts and investigation, had read the complaint, believed its allegations were true, and declared under penalty of perjury that the statement was true and correct. The court held that this satisfied the verification requirement in Supplemental Rule G(2)(a).

Pleading Deficiencies

The court held that the complaint did not adequately plead the forfeiture theories.

For health care fraud, the allegations were detailed enough to support a reasonable belief that Apte and Richman had committed a health care fraud offense. But the complaint did not provide a basic timeline showing that the money transferred to their personal accounts, used for the Camas property, and eventually used for the Miami condominiums came from that fraud. The complaint did not say how long the transfers continued or when uBiome first received money from the alleged scheme.

The securities-fraud theory had similar tracing problems. The complaint did not establish the timing between the alleged fraudulently induced investments and the transfers to Apte and Richman. The court also held that the complaint failed to allege that Apte and Richman used interstate commerce, the mail, or a national securities exchange as required for the alleged securities-fraud offense. The court did not decide whether the complaint also failed to identify specific misrepresentations or omissions.

The wire-fraud theory was also insufficient. The complaint cited the wire-fraud statute but did not expressly allege wire fraud. Even assuming that the alleged transfers could support such a theory, the complaint still did not adequately describe the chain linking any fraudulent wire transfers to the Camas property and then to the Miami condominiums.

The money-laundering theory failed for the same basic reason. Although the allegations described transfers from uBiome to personal accounts and purchases of the Camas property and the condominiums, they did not clearly connect the transactions to proceeds of a particular unlawful activity or show that the condominium purchase was part of a scheme to conceal those proceeds.

Disposition

The court granted Apte and Richman’s motion to dismiss with leave to amend. The government was permitted to file an amended civil forfeiture complaint within 30 days of the order. The court also granted Gabriel Ceriotti’s motions for joinder.