United States District Court, D. Maryland
[Copyrighted Material Omitted]
David Ira Salem, Stuart A. Berman, Office of the U.S. Attorney, Greenbelt, MD, for Plaintiff.
Lucius Turner Outlaw, III, Douglas Ryan Miller, Elizabeth Genevieve Oyer, Office of the Federal Public Defender, Baltimore, MD, for Defendant.
Christopher B. Mead, London and Mead, Washington, DC, for Movant.
PETER J. MESSITTE, District Judge.
In this multi-count criminal prosecution, the Government has charged Nader Modanlo with one count of obstructing an official proceeding (the " bankruptcy obstruction" charge). See 18 U.S.C. § 1512(c). It alleges that Modanlo lied to the Bankruptcy Court of this district about his relationship with a Swiss company, " Prospect Telecom AG." Modanlo claims that since the Bankruptcy Court has already rejected all allegations relevant to that relationship, the Government is collaterally estopped from relitigating the criminal bankruptcy obstruction charge now. The Court disagrees, and DENIES Modanlo's Motion to Dismiss Count 11 as Barred by Collateral Estoppel (Paper Nos. 152, 217, 284). This Opinion elaborates upon the Court's earlier oral denial of the Motion.
The range of charges against Modanlo are that (1) he violated the United States trade embargo on Iran, (2) laundered money, and (3) obstructed an official proceeding (the bankruptcy obstruction charge).
The bankruptcy proceedings in question were Modanlo's own bankruptcy as well as that of his wholly-owned company, New York Satellite Industries LLC (" NYSI" ). According to the Government, Modanlo brokered an illegal deal between representatives of the Iranian Government and POLYOT, a Russian state-owned aerospace enterprise company, for the design, construction, and launch of a small, low-earth orbiting satellite and its accompanying ground station. In exchange for brokering the deal, says the Government, Modanlo was paid $10,000,000. Further, Modanlo and his co-conspirators are said to have concealed the Iranian Government's involvement in the deal by forming a Swiss front company known as " Prospect Telecom AG," through which the $10,000,000 was wired to NYSI's bank account in Bowie, Maryland. Although the $10,000,000 was dressed as a legitimate business loan from Prospect Telecom to NYSI, the Government maintains that it was actually a payment for Modanlo's services in brokering the Russia-Iran satellite deal. With respect to the bankruptcy obstruction charge, the Government's core allegation is that Modanlo lied to the Bankruptcy Court about the extent and nature of his relationship with Prospect Telecom and its beneficial owners.
Some context is in order.
When Modanlo ostensibly defaulted on the $10,000,000 loan, Prospect Telecom filed a replevin action against him in the District Court of Maryland in Montgomery County seeking to retrieve the collateral Modanlo had posted for the loan, namely shares in another wholly-owned Modanlo company, Final Analysis Communication Services, Inc. (" FACS" ). Modanlo failed to defend against the replevin action, which led the state court to enter an order requiring him to deliver the FACS shares to Prospect Telecom. At the time, FACS appeared to have significant value because it had received a substantial jury verdict against General Dynamics Corporation in this federal district court. See Final Analysis Communication Services, Inc. v. General Dynamics Corp., 253 Fed.Appx. 307, 311 (4th Cir.2007) (" [T]he jury found that General Dynamics committed an unjustified breach ... and awarded $21.87 million in compensatory damages for each breach and a total of $92.75 million in consequential damages." ).
Modanlo filed his personal Chapter 11 bankruptcy in July 2005. Questions arose during the bankruptcy proceeding regarding Modanlo's transfer of the FACS shares to Prospect Telecom and whether it amounted to an illegal transfer to a creditor outside the bankruptcy proceeding. Accordingly, Bankruptcy Judge Nancy Alquist appointed Christopher Mead, Esquire, an attorney in private practice, to serve as the Chapter 11 Trustee. Mead, a former federal prosecutor, eventually filed a petition as Trustee to place NYSI into Chapter 11 bankruptcy.
From the beginning of his tenure as Trustee, Mead communicated to the Bankruptcy Court his suspicions regarding the bona fides of Modanlo's transfer of the FACS shares to Prospect Telecom, including, for example, the following:
[Modanlo] claimed that Prospect Telecom was an independent entity that had actually loaned NYSI $12 million [sic] and that on behalf of NYSI he would reduce FACS' debt to that entity for that loan as part of the settlement agreement and that represented an arm's-length economic transaction.... And all of that, I believe, was fraudulent, [and] reflected his attempts to pursue his personal self-interest above that of the corporation, and, I mean, it's— a lot of it was just flat lies. I mean, I don't ... know ... how else to explain the
Prospect Telecom deal other than to say this is one of the most blatant frauds I've ever seen engineered in a court and Mr. Modanlo, in my judgment, was the person behind that.
Mead also took his fraud allegation to another level. Having filed an adversary proceeding against Prospect Telecom, he undertook discovery from Prospect Telecom about the NYSI loan, including questioning Modanlo under oath and at length about the transfer of the FACS shares to Prospect Telecom. Modanlo denied all allegations of fraud, and stated that in fact he had no preexisting relationship with Prospect Telecom at the time of the $10 million loan.
During the welter of litigation that characterized the NYSI and Modanlo bankruptcies, the Bankruptcy Court made four rulings that hold special significance for purposes of evaluating the pending Motion to Dismiss: (1) the Court granted Modanlo's motion to dismiss the bankruptcy cases, ending the proceedings; (2) the Court did not grant Mead's motion for the sale of certain legal claims Modanlo and his company had won in the Circuit Court for Montgomery County; (3) the Court entered default judgment against Prospect Telecom in the adversary proceeding Mead filed against Prospect Telecom regarding Modanlo's transfer of the FACS shares; and (4) the Court granted Modanlo's motion for authority to ...