The long-running legal battle between the V.I. government and the Epstein estate continued Friday, with attorneys for the co-executors countering the Justice Department’s response to their response to the government’s emergency motion to lift a stay of proceedings in the case.
The stay was ordered by the court so the parties could engage in mediation, but those efforts failed, and on July 22, Attorney General Denise George filed an emergency motion in V.I. Superior Court seeking to lift the stay and allow discovery in the case.
The U.S. Virgin Islands sued the estate in January 2020, alleging that Jeffrey Epstein engaged in a civil conspiracy involving human trafficking, forced labor, and sexual servitude in the USVI. At the time, George said the government would seek punitive damages worth $577 million.
At issue is the defendants’ motion of March 2020, asking the court to vacate criminal activity liens the government placed on Epstein’s estate so funds can be accessed to administer the estate.
George argued in her emergency motion that the depositions of co-executors Darren K. Indyke and Richard D. Kahn and other discovery documents and information are needed first for the government “to have a fair opportunity to make a full record on the Defendants’ pending motion.”
Indyke was the personal lawyer, and Kahn an in-house accountant to Epstein, the wealthy convicted sex offender who was found dead by apparent suicide on Aug. 10, 2019, in a New York jail cell as he awaited trial on sex trafficking charges. His primary residence at the time of his death was his estate on Little St. James island off St. Thomas.
At the center of George’s emergency motion is the Epstein-created “2013 Butterfly Trust,” through which she alleges Indyke and Kahn transferred $13 million to three newly created trusts from which they stood to benefit and, by doing so, diverted money from the estate.
George’s emergency motion also alleges that Indyke and Kahn were involved in defrauding the V.I. government of $80.5 million in unearned tax benefits through Epstein’s Southern Trust Company, an EDC beneficiary and that they “approved, enabled, and justified millions of dollars in payments that fueled the Epstein Enterprise’s sex trafficking.”
In their “sur-reply,” meaning additional reply, in opposition to the motion on Friday, attorneys for Indyke and Kahn reasserted their original response that no discovery is needed for the lien motion to be resolved. Further, the estate’s expenditures are already scrutinized by the Probate Court, Special Master Rosalie Simmonds Ballentine, and by auditors from Ernst & Young, they said, and no expenditures have been disputed.
Moreover, the money in the 2013 Butterfly Trust is separate from the estate, the attorneys — Christopher Allen Kroblin of Kellerhals Ferguson Kroblin PLLC, Marc A. Weinstein of Hughes Hubbard & Reed LLP in New York, and Gordon C. Rhea of Gordon C. Rhea, P.C., in South Carolina — said in the reply.
“The 2013 Butterfly Trust was set up before Epstein died and has never held funds owned by the Estate or to which the Estate is entitled. Discovery on non-Estate entities is not needed for or even relevant to consideration of the Lien Motion,” the reply states. It adds that even if there were a valid basis to protect the assets held by the trust, it was placed under a criminal activity lien in July 2021, thereby preventing any funds from being used, transferred, or otherwise dissipated.
“Accordingly, the Government’s desperate attempt to justify its purported need for discovery on the basis of non-Estate assets fails to withstand even minimal scrutiny,” the reply states.
Moreover, the government has misused its liens on bank accounts to serve as pre-judgment seizures without even attempting to establish probable cause before the court, according to the reply.
The government argued that the Criminally Influenced and Corrupt Organizations Act statute governing the liens applies differently to bank account funds, even though those funds are personal property and the government cannot inhibit the use of personal or real property by issuing such liens, the reply argues. The government can only restrain the use of personal property through a restraining order issued by the court after showing probable cause that the property would, in the event of a conviction, be subject to forfeiture, it said.
“Finally, in another footnote, the Government asserts that ‘defendants now are claiming for the first time (and contrary to the referenced [tentative settlement] agreement) that they would be unable to make substantial payments until years into the future,'” according to the reply.
“Once again, this statement is false and in violation of mediation confidentiality. In fact, as agreed upon with the Government a year ago, Defendants are prepared to make a substantial payment in connection with a settlement within days of execution of a settlement agreement,” it said.
The defendants, in their reply, invite the court to speak with the mediator, attorney David Nichols, for a more complete debriefing of the mediation effort and the remaining issues or, alternatively, to discuss the mediation at a hearing already scheduled for Oct. 4.