Opinion
No. 04 M 142.
November 1, 2004
MR. JEFFREY H. CRAMER, Assistant United States Attorney, Chicago, IL, Attorney for the United States of America.
GABRIEL BANKER PLOTKIN, Esq., Federal Defender Program, Chicago, IL, Attorney for Rimantas Varatinskas.
MEMORANDUM OPINION AND ORDER
The Government of Lithuania requests the extradition of Rimantas Varatinskas pursuant to the Extradition Treaty Between the Government of the United States of America and the Government of the Republic of Lithuania (signed at Vilnius on October 23, 2001) (the "Extradition Treaty"). Extradition Treaty, Oct. 23, 2001, US-Lithuania, S. Treaty Doc. No. 107-4. Varatinskas is charged, in Lithuania, with committing the crime of misappropriating property of high value belonging to another person that was entrusted to him or left in his care, in violation of Article 183 paragraph 2 of the Criminal Code of the Republic of Lithuania ("Article 183"). This matter comes before this Court pursuant to 18 U.S.C. § 3184 (the "Extradition Statute").
I. Background
On June 2, 2003, a Lithuanian court sitting in Kaunas, Lithuania, issued an arrest warrant charging Rimantas Varatinskas with misappropriation of property of high value belonging to another person that was entrusted to Varatinskas or left in his care, in violation of Article 183 paragraph 2 of the Criminal Code of the Republic of Lithuania. (Extradition Req. at 50.) The Kaunas Court issued the warrant in conjunction with a financial investigation of the Lithuanian joint-stock company "Lietava." (Id.)
The Lietava investigation began in September 1998. (Extradition Req. at 47.) At that time, Lithuanian investigators sought to interview Varatinskas, a former director of Lietava, but he was no longer living in Lithuania. (Id.) On August 4, 1998, Varatinskas had traveled to the United States, where he has remained ever since. (Varatinskas Passport.) Despite Varatinskas's absence and his refusal to participate in the investigation, the Lietava investigation continued and ultimately uncovered accounting discrepancies at Lietava. The results of the investigation, compiled in the February 2002 Lietava Revision ("Lietava Revision"), show that, between November 1994 and February 1995, Varatinskas, then director of Lietava, withdrew six loans, for a total of 1,140,000 Litas from Bank LZUB Rokiskio on behalf of Lietava. (Extradition Req. at 30.) Specifically, the dates and amounts of the loans were: (1) November 11, 1994, for 250,000 Lt., (2) December 6, 1994, for 260,000 Lt., (3) December 13, 1994, for 390,000 Lt., (4) January 10, 1995, for 350,000 Lt., (5) January 13, 1995, for 250,000 Lt., and (6) February 15, 1995, for 250,000 Lt. (Id.) Of the 1,140,000 Lt. borrowed, 1,082,530 Lt. was not credited to Lietava's cash accounts. (Extradition Req. at 33, 50.)
In November 2002, a Lithuanian court issued an arrest warrant for Varatinskas charging him with violating Article 183 and obstructing justice. (Extradition Req. at 50.) That warrant was reaffirmed by the Kaunas Court on June 2, 2003. (Id.) In an effort to have Varatinskas extradited to Lithuania, and pursuant to the Extradition Treaty between the United States and Lithuania, Lithuania presented the United States with a formal request for Varatinskas's surrender accompanied by both the Kaunas Court's warrant and a compilation of evidence assembled during the Lietava investigation, including the Lietava Revision. Responding to Lithuania's request, on June 3, 2004, Judge Levin issued an arrest warrant to have Varatinskas provisionally arrested on behalf of Lithuania. (Warrant for Arrest, June 3, 2004.) That arrest was made on June 3, 2004.
In accordance with 18 U.S.C. § 3190, the evidence submitted to this Court was accompanied by a signed "Certificate to be Attached to Documentary Evidence Accompanying Requisitions in the United States for Extradition" and was properly and legally authenticated on November 4, 2003. The Court refers to this collection of evidence as the Extradition Request ("Extradition Req.") and has numbered the pages of the collection one through fifty-one in the order in which the pages were presented to the Court.
On September 2, 2004, this Court conducted an extradition hearing pursuant to 18 U.S.C. § 3184. At the extradition hearing, the United States argued that the evidence provided by Lithuania creates probable cause that Varatinskas committed the crime that he is accused of, and that Varatinskas should therefore be certified as extraditable to the United States Secretary of State. Varatinskas disagreed and argued that the evidence provided by Lithuania is insufficient to show probable cause so he should not be certified as extraditable.
II. Discussion
The United States arrests and detains Varatinskas pursuant to its Extradition Treaty with Lithuania but whether Varatinskas will be certified as extraditable to the United States Secretary of State depends upon the outcome of the hearing conducted by this Court. Under the Extradition Statute, a hearing must take place to determine that the following conditions are present: (1) this Court has jurisdiction to conduct the extradition hearing and proper jurisdiction over Varatinskas, (2) Varatinskas is sought for a crime for which the Extradition Treaty permits extradition, and (3) there is competent legal evidence to establish probable cause that Varatinskas is the fugitive sought by Lithuania, and Varatinskas committed the offense charged. 18 U.S.C. § 3184. See Bingham v. Bradley, 241 U.S. 511, 516-517 (1916); McNamara v. Henkel, 226 U.S. 520, 523 (1913). If these conditions are present, this Court must certify Varatinskas as extraditable to the United States Secretary of State.
A. Jurisdiction
This Court has jurisdiction to conduct this extradition hearing. The Extradition Statute grants magistrate judges subject matter jurisdiction to hear and decide extradition cases so long as the magistrate judge is "authorized to do so by a court of the United States. . . ." 18 § U.S.C. 1384. The Local Criminal Rules of the Northern District of Illinois specifically grant federal duty magistrate judges "the power to perform all duties set forth in the United States Code and the Federal Rules of Criminal Procedure." N.D. Ill. L. Cr. R. 5.1 (formerly N.D. Ill. Rule 1.70(B)(1)(j)). The Extradition Statute, 18 U.S.C. § 3184, is part of the United States Code and this Court was serving as duty magistrate judge when Varatinskas made his first court appearance and has conducted all relevant proceedings since that time. Furthermore, it is consistent with Article III of the United States Constitution to have a federal magistrate judge conduct this hearing. Ward v. Rutherford, 921 F.2d 286, 287-88 (D.C. Cir. 1990). Varatinskas does not contest this Court's jurisdiction over this matter. Thus, the Court has subject matter jurisdiction over this proceeding.
This Court has proper jurisdiction over Varatinskas. Varatinskas was arrested in Chicago, Illinois on June 3, 2004, and he is now in federal custody within the jurisdiction of the Northern District of Illinois. Varatinskas does not dispute that this Court has jurisdiction over him. Furthermore, Varatinskas does not dispute that he is the fugitive named in Lithuania's complaint, i.e., the fugitive sought by Lithuania for extradition. (Varatinskas's Mem. Contesting Extradition at 4.) Thus, the Court has personal jurisdiction over the fugitive, Varatinskas, as required by 18 U.S.C. § 3184.
B. Sought for Extraditable Crime
Before evaluating the evidence presented by Lithuania, the Court must determine whether a valid extradition treaty exists between the United States and Lithuania and whether that treaty permits extradition for the alleged crime. The Extradition Treaty is in full force and effect and under the terms of the treaty, "[a]n offense shall be an extraditable offense if it is punishable under the laws in both States by deprivation of liberty for a period of more than one year or by a more severe penalty." Extradition Treaty, Art. 2, para. 1. In other words, the principle of "double criminality" applies to this extradition treaty.
Lithuania references the treaty in its formal request for extradition, neither party disputes that the treaty is in full force and effect, and the United States Department of State confirmed for this Court that Extradition Treaty, Oct. 23, 2001, US-Lithuania, S. Treaty Doc. No. 107-4, is in full force and effect.
"Double criminality" requires that an extraditable offense be a crime under the laws of both contracting countries. This does not mean that the United States and Lithuania need to refer to a crime by the same name and impose the same punishment in order for the offense to be extraditable. Collins v. Loisel, 259 U.S. 309, 312 (1922). Rather, "double criminality" requires that the underlying acts of the Article 183 crime be punishable in both the United States and Lithuania. Id.; In the Matter of Extradition of Manzi, 888 F.2d 204, 207 (1st Cir. 1989). Neither party disputes that Lithuania's Article 183 is the equivalent of embezzlement in the United States. Embezzlement is defined as "the fraudulent appropriation of property by a person to whom such property has been entrusted, or into whose hands it has lawfully come." United States v. Bailey, 734 F.2d 296, 303 (7th Cir. 1984). The elements of embezzlement are:
"(1) a trust or fiduciary relationship, (2) that the property claimed embezzled is embraced within the meaning of the statute, (3) that it came into the possession or care of accused by virtue of his employment, (4) it is property of another, (5) that his dealing therewith constituted a fraudulent conversion or appropriation of same to his own use, and (6) such was with the intent to deprive the owner thereof."Id. (internal citations omitted). The underlying acts of Article 183 and embezzlement are the same as both require: (1) property (2) entrusted to, or left in the care of, (3) another person and that person (4) misappropriated, or fraudulently appropriated, the property. Finally, because embezzlement on the scale alleged in this case may carry a prison sentence of more than one year in the United States and up to ten years in Lithuania, the final requirement under Article 2, paragraph 1 of the Extradition Treaty is met. See Extradition Req. at 8; 720 ILCS 5/16-1 (making theft of over $100,000 a Class 1 Felony in Illinois). Thus, all of the requirements of "double criminality" are met and Varatinskas may be found extraditable under the Extradition Treaty.
The parties estimate the value of 1,082,530 Lt. to be approximately $250,000. (Varatinskas's Mem. Contesting Extradition at 9 n. 7); (Gov't Mem. Resp. Def.'s Mem. Contesting Extradition at 1.)
In accordance with the doctrine of "speciality," this extradition proceeding focuses on the crime of embezzlement only. See 18 U.S.C. § 3184. Though the parties mentioned other possible crimes at the September 2, 2004 hearing and in their briefs, Varatinskas is charged with embezzling funds from Lietava and Lithuania provided evidence and references to its criminal code for that crime of embezzlement only. (Extradition Req. at 6-8.)
C. Probable Cause
1. Law
The Court reviews the accusations and evidence provided by Lithuania in order to determine if probable cause exists. The probable cause determination is established by federal law and is similar to a preliminary hearing under Rule 5.1 of the Federal Rules of Criminal Procedure. Ward, 921 F.2d at 287. This is not a hearing to determine whether the evidence is sufficient to justify conviction, as that is the role of Lithuania's courts. Eain v. Wilkes, 641 F.2d 504, 508 (7th Cir. 1981). Rather, the purpose of this hearing is to decide whether the evidence provided would justify Varatinskas's apprehension and commitment for trial if the conduct had been committed in the United States. Ward, 921 F.2d at 287; Eain, 641 F.2d at 508. Probable cause exists where there is sufficient evidence to "cause a person of ordinary prudence and caution to conscientiously entertain a reasonable belief of the guilt of the accused." In the Matter of Extradition of Fulgenico Garcia, 188 F. Supp. 2d 921, 932 (N.D. Ill. 2002). In making the probable cause determination, the Court looks to the totality of the circumstances and makes a practical common sense decision whether there is a fair probability that the suspect committed the crime. Id.; In re Extradition of Okeke, No. 96-7019P-01, 1996 WL 622213, at *5 (D.N.J. Sept. 5, 1996). Finally, when reviewing Lithuania's supporting documents, the Court engages in a liberal reading of the evidence, in a manner favoring extradition. Manzi, 888 F.2d at 205.
Extradition proceedings are not criminal proceedings and there are significant differences between the two. Procedurally, the Federal Rules of Criminal Procedure and Federal Rules of Evidence do not apply to extradition hearings and there is no provision for discovery. Fed.R.Crim.P. 1(a)(5)(A); Fed.R. Ev. 1101(d)(3); Messina v. United States, 728 F.2d 77, 80 (2d Cir. 1984); Melia v. United States, 667 F.2d 300, 302 (2d Cir. 1981). Furthermore, the Fourth, Fifth and Sixth Amendments to the United States Constitution do not apply in the extradition context. See Neely v. Henkel, 180 U.S. 109, 122 (1901); Jhirad v. Ferrandina, 536 F.2d 478, 485 n. 9 (2d Cir. 1976); United States ex rel. Bloomfield v. Gengler, 507 F.2d 925, 928-29 (2d Cir. 1974); Simmons v. Braun, 627 F.2d 635, 636 (2d Cir. 1980). Thus, in the extradition context there is no indictment requirement, no right of the accused to confront witnesses who testify against him, no right to a speedy trial and no bar against double jeopardy. Jhirad, 536 F.2d at 485 n. 9; Gengler, 507 F.2d at 928-29; Simmons, 627 F.2d at 636. Substantively, the rules of evidence are quite different in the extradition context as well. Hearsay is admissible evidence in the extradition context. Fed.R. Ev. 1101(d)(3); Collins, 259 U.S. at 317. Furthermore, the accused is not allowed to introduce evidence which conflicts with the evidence submitted by the requesting state or establishes an alibi. Collins, 259 U.S. at 316; Hooker v. Klein, 573 F.2d 1360, 1368 (9th Cir. 1978). Rather, the accused is limited to explaining the evidence offered against him. Hooker, 573 F.2d at 1368.
While Lithuania does not bear a heavy burden at this hearing, extradition will be denied if the Court finds that Lithuania's charges against Varatinskas are mere conclusory allegations unsupported by substantive evidence. Fulgencio Garcia, 188 F. Supp. 2d. at 932; United States v. Fernandez-Morris, 99 F. Supp. 2d 1358, 1366 (S.D. Fla. 1999); In the Matter of Extradition of Lehming, 951 F. Supp. 505, 514 (D. Del. 1996). This Court's role is to provide independent judicial review of the extradition process and it will not rubber stamp an extradition request that lacks competent evidence sufficient to establish probable cause. Lehming, 951 F. Supp. at 514.
2. Probable Cause Discussion
Lithuania charges Varatinskas with embezzling funds from the joint-stock company Lietava. Lithuania bases its charge of embezzlement on the fact that 1,082,530 Lt. withdrawn by Varatinskas from LZUB Rokiskio were not credited to Lietava's cash accounts. The Lithuanian prosecutors claim that:
"Mr. Rimantas Varatinskas withdrew in total 1140000,00 litas out of which 1082530,00 litas was not brought in the income statement, also he did not present any documents to justify the use of the funds. Thus, Mr. Rimantas Varatinskas has appropriated the property of the Joint-Stock company "Lietava" on a large scale which was in his responsibility and inflicted the material damage to the Joint-Stock company "Lietava" for the sum of 1082530,00 litas. Therefore, there is evidence to suggest that the suspect committed an act defined by the Article 183, paragraph 2, of the Criminal Code of the Republic of Lithuania."
(Extradition Req. at 50.) As discussed above, in order to establish a prima facie case of embezzlement, the U.S. equivalent of Article 183, Lithuania must present some competent evidence that the funds were entrusted to, or left in the care of, Varatinskas, and that he fraudulently converted or misappropriated those funds with the intent to deprive Lietava. Misappropriation, in this case, would be the dishonest application of Lietava's property to Varatinskas's own use. See Bailey, 734 F.2d at 303-04; Black's Law Dictionary 1019 (8th ed. 2004). Fraudulent conversion, in this case, would be the conversion of Lietava assets into Varatinskas assets by use of fraud, either in obtaining or in withholding assets. See Bailey, 734 F.2d at 303-04; Black's Law Dictionary 357 (8th ed. 2004). Varatinskas concedes that the Lietava Revision provides competent evidence that he withdrew funds on behalf of Lietava and that those funds have yet to be repaid. (Varatinskas's Mem. Contesting Extradition at 8.) Varatinskas argues that the evidence before the Court does not support allegations of fraudulent conversion, misappropriation or intent to deprive. (Id.)
To establish a prima facie case of embezzlement, Lithuania must present some evidence Varatinskas used or retained possession of Lietava's property. Evidence of enrichment of the accused may permit an inference of misappropriation. In Jhirad v. Ferrandina, the Second Circuit Court of Appeals found that India established a prima facie case of embezzlement when it provided evidence that the accused had the authority to withdraw government funds, that the accused did withdraw government funds on numerous occasions, and that, shortly following many of those withdrawals, the accused deposited closely equivalent sums of money into his personal bank accounts. 536 F.2d at 482. Thus, where there is a temporal connection between personal enrichment of the accused and the withdrawal or retention of funds, it may be reasonable to infer both misappropriation and the intent to deprive the rightful owner of his property. Id. See also Koskotas v. Roche, 931 F.2d 169, 176-77 (1st Cir. 1991) (finding probable cause of misappropriation where funds were used to open bank accounts in accused name and accused used the accounts); Polo v. Horgan, 828 F. Supp. 961, 966 (S.D. Fla. 1993) (finding probable cause where a fiduciary authorized to spend clients' money only on short-term time deposits spent clients' money on art and jewelry); In the Matter of Extradition of Pazienza, 619 F. Supp. 611, 613-14 (D.C.N.Y. 1985) (finding probable cause where loans withdrawn on behalf of company were cashed then placed in personal accounts and used for buying private boat).
Lithuania does not present direct evidence that Varatinskas retained or diverted funds into his own accounts or for his own use. The evidence provided by Lithuania never mentions Varatinskas's bank accounts, assets or expenditures, and there is no indication that Varatinskas was personally enriched. Furthermore, the evidence contains no affidavits or depositions of Lietava accountants, directors, or shareholders claiming that Varatinskas misappropriated funds.
Lithuania asks the Court to infer the elements of embezzlement from circumstantial evidence. Lithuania claims that Lietava's failure to record the LZUB Rokiskio loans in its cash accounts is sufficient evidence to create probable cause for embezzlement. (Gov't Mem. Resp. Def.'s Mem. Contesting Extradition at 2.) Where the accused alone had access to the funds at the time the funds went missing misappropriation may be inferred. United States v. Hill, 40 F.3d 164, 167 (7th Cir. 1994) (refusing to overturn jury finding of embezzlement where evidence included proof that only accused had ability to possess and cash checks); United States v. Powell, 413 F.2d 1037, 1038 (4th Cir. 1969) (misappropriation and intent may be inferred from circumstantial evidence of embezzlement where accused alone had access to funds when substantial, unexplained shortage in funds was discovered). Lithuania's argument would be persuasive if Varatinskas alone had access to or custody of the LZUB Rokiskio funds. The evidence before the Court suggests otherwise.
The Lietava Revision suggests that Lietava had access to the noncredited 1,082,530 Lt. withdrawn on its behalf. Lithuanian investigators interviewed Lietava Director G. Jankauskas, who claims that Lietava received and used borrowed funds not credited to Lietava's cash accounts. (Extradition Req. at 34-35.) According to Jankauskas, Lietava used the LZUB Rokiskio loans to: (1) repay a 100,000 Lt. loan from Ukio Bankas, Ukmerge branch on Feb. 13, 1995; (2) purchase 330,000 Lt. in shares of UAB "Sporto prekes"; and (3) fund construction projects, salaries and expenses that were handled off-the-books. (Extradition Req. at 35.) Lithuanian investigators could not find documentation of these transactions in Lietava's records, but they acknowledge that Lietava borrowed 100,000 Lt. from Ukio Bankas on Oct. 21, 1994, and that the loan was repaid on February 13, 1995, during the period of time when the alleged embezzlements occurred. (Extradition Req. at 34-35.)
Jankauskas's claims that Lietava conducted significant operations off-the-books and that Varatinskas did not have sole access to the funds are supported by Lietava's willingness to assume responsibility for the six LZUB Rokiskio loans. (Extradition Req. at 35.) The Lietava Revision not only contains evidence that Lietava used the loans, but it gives no indication that Lietava ever denied receiving the six loans or disputed its responsibility for repaying them. To the contrary, Lithuanian investigators determined that between December 30, 1994, and February 27, 1997, Lietava paid LZUB Rokiskio 739,666 Lt. in interest, late-fees and penalties on its loans. (Id.) Additionally, between January 14, 1997, and December 11, 1997, Lietava repaid 233,644 Lt. of its LZUB Rokiskio loans. (Id.) And on December 11, 1997, Lietava transferred another 10,000 Lt. to LZUB Rokiskio for repayment of loans. (Id.) Finally, when, on May 20, 1997, a Lithuanian economic court found that Lietava owed LZUB Rokiskio 3,833,883 Lt. in loans, interest, late fees and penalties, LZUB Rokiskio and Lietava (then under Jankauskas) entered into a three year repayment plan that was set to run from June 1997 until June 2000. (Id.)
Lithuania argues that Lietava's continued repayment of the six loans is irrelevant to Varatinskas's case because Lietava was legally obligated to repay the loans. (Gov't Mem. Resp. Def.'s Mem. Contesting Extradition at 4.) Lietava may have had a legal obligation to repay its loans but its failure to cry foul on May 20, 1997, when a Lithuanian economic court found that the joint-stock company was almost four million Litas in debt, is telling. The Court finds both Lietava's silence in the face of this massive, multi-million Litas judgment against it, and Lietava's attempts to repay the loans, significant. Just as there is no evidence in the record that suggests Varatinskas retained the six loans, there is no evidence in the record that suggests Lietava reported the six loans missing.
Lithuania's circumstantial evidence is insufficient to justify trying Varatinskas for embezzlement. While all parties acknowledge some discrepancies in Lietava's cash accounts, there is no evidence that Varatinskas diverted or retained funds intended for Lietava. Separate and apart from the necessary elements of misappropriation or fraudulent conversion, there is insufficient evidence to conclude that Varatinskas even had exclusive control over the funds in question, as the Lietava Revision suggests that Lietava may have received the LZUB Rokiskio funds, used those funds, and willingly accepted its obligation to repay those funds. Furthermore, the timing of events also undermines the circumstantial argument. The Court is aware that Varatinskas left Lithuania a month or two before the Lietava investigation began. However, Varatinskas obtained his visa to travel to the United States about three months before the investigation began, (Extradition Req. at 47), and remained in Lithuania for over three and a half years after withdrawing the LZUB Rokiskio loans. Given the lack of blatantly suspicious behavior and the lack of incriminating evidence, even a liberal interpretation of the Lietava Revision does not support allegations of embezzlement.
The object of this Extradition hearing is to evaluate Lithuania's evidence and to determine if the evidence presented would be sufficient to justify Varatinskas's apprehension and commitment for trial in the United States. In this case, Lithuania simply asks the Court to assume too much. In attempting to establish a prima facie case of embezzlement, Lithuania does not ask this Court to make the reasonable, common sense leap from misappropriation, or possibly even exclusive control of another's property, to fraudulent misappropriation and criminal intent. Rather, Lithuania asks the Court to infer from cash account discrepancies at Lietava that funds were withheld from Lietava, then to infer from an inference of withheld funds that Varatinskas had exclusive control over those funds, then to infer from an inference of exclusive control that Varatinskas misappropriated those funds for his own uses, and then to infer from an inference of misappropriation that Varatinskas had the requisite intent to deprive Lietava of the funds. Such compounded inferences reflect a lack of evidence and do not suggest a fair probability that Varatinskas embezzled Lietava funds. Because Lithuania does not present sufficient evidence to establish a prima facie case of embezzlement, and because the evidence that Lithuania does offer is not enough to warrant the substantial leap from a civil dispute involving possible accounting irregularities to criminal embezzlement on a large scale, the Court will not certify Varatinskas as extraditable to the United States Secretary of State.