An emergency motion filed by the V.I. government in its lawsuit against Jeffrey Epstein’s estate is “legally meritless,” should be denied, and liens on the estate vacated, lawyers for the estate and its executors said in a response filed Wednesday.
Attorney General Denise George filed the emergency motion on July 22 asking that the Superior Court lift a stay of proceedings in the case and order the executors to submit to requests for evidence “regarding their transfer of Estate assets in an effort to shield Estate assets from claims and to personally enrich themselves.”
In an 18-page response Wednesday, attorneys for the estate and Darren K. Indyke and Richard D. Kahn, its executors, posit that the emergency motion should be vacated, saying the government “concocted a faux emergency, disregarded its procedural obligations, and filed a legally meritless, factually misleading, and inflammatory motion to take discovery” of Indyke and Kahn.
Indyke was the personal lawyer and Kahn an in-house accountant to Epstein, the disgraced financier and 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.
The U.S. Virgin Islands sued Epstein’s estate in January 2020, alleging that he engaged in a civil conspiracy involving human trafficking, forced labor and sexual servitude in the USVI. At the time the suit was announced, George said the government would seek punitive damages worth $577 million.
The stay of proceedings in the case was ordered on July 7 to enable mediation, but according to George’s motion, that came to “a surprisingly abrupt end,” with the mediator’s acknowledgement on July 21 that efforts to reach a resolution were not moving forward. In their response, Indyke and Kahn said the court should not assume that it was their side that requested the mediator to declare an “impasse.”
At issue is Indyke and Kahn’s motion asking the court to vacate criminal activity liens the government placed on Epstein’s estate so they can access funds to administer the estate. George argued in her emergency motion that “their depositions and other discovery documents and information are necessary for the Government to have a fair opportunity to make a full record on the Defendants’ pending motion.”
However, Indyke and Kahn’s lawyers said that “the Government’s Motion is anything but an emergency.”
According to their response, the motion “is falsely premised on a purported ‘critical’ need for discovery ‘to make a full and fair record’ on Defendants’ pending motion to vacate the Government’s criminal activity liens (the ‘Lien Motion’), yet it comes two years after the Government opposed the Lien Motion without requesting to take discovery for purposes of that motion.”
The government made no mention for need of discovery at a hearing on June 30, or an “emergency” concerning the co-executors’ alleged “dissipation” of estate assets or any purported conflict of interest, according to the response. “Rather, it simply asked to defer argument on the Motion until after mediation, and agreed to lift the liens to permit the Estate to pay its expenses through September 2022,” it states.
At the center of George’s emergency motion is the 2013 Butterfly Trust. It says that records obtained from third parties reveal that in September 2020, several months after the government filed its civil action, the Epstein-created 2013 Butterfly Trust — which received a wire transfer of more than $13 million in April 2020 — transferred money to three newly created trusts.
“Indyke, Kahn and their spouses were the ultimate beneficiaries for two of the three trusts. The investment advisor for the 2013 Butterfly Trust in written disclosures to financial institutions explained that the decision ‘to decant the assets of the 2013 Trust was based in large measure on the fact that the assets … would be insulated from claims and demands of the beneficiaries of, and third-party claimants against, of the other new trusts,’ which would include the Government’s claims,” according to the motion.
George asserted in her emergency motion that the information provides good cause for lifting the stay of proceedings, and for discovery of Indyke and Kahn and the handling of assets subject to the liens, before the hearing on their motion to vacate the criminal activity liens.
However, in their response Wednesday, Indyke and Kahn’s lawyers assert that the “2013 Butterfly Trust, cited as having been ‘kept secret’ from the Government, is not a new development. The Government raised this issue with, and received explanations from, defense counsel more than a year ago, and at various times since. The Government now falsely claims an emergency in order to avoid what the Court described as ‘the handwriting on the wall’ with respect to the Lien Motion, and further to punish Defendants for not kowtowing to its demands in settlement negotiations, which the Government improperly and misleadingly characterize in their Motion.”
Indyke and Kahn’s lawyers assert that the government’s motion also ignores the fact that oversight of the estate has been strictly supervised by the Probate Court, a Special Master appointed for the estate, and an Ernst and Young audit team.
“The Government offers the old and tired argument that ‘[t]he Estate’s value alone has plummeted over 75% in two years,’ but that same argument was made at the March 9, 2022 conference and rebutted by Defendants’ counsel. … As Defendants’ counsel explained then, the decrease in the Estate’s value was primarily the result of payments of approximately $180 million in estate and income taxes and $150 million to victims of Epstein’s abuse. … All other expenses have been reviewed and approved by the Government,” the response states.
Additionally, it says, “on July 30, 2021, the Government issued a criminal activity lien on the 2013 Butterfly Trust, demonstrating that the Government has been focused on this trust for at least a year. The Government cannot credibly claim that there is now an emergency after having been aware of the ‘substantial evidence’ cited in its Motion for months or years yet having never before claimed discovery was needed to address Defendants’ Lien Motion. Nor can the Government claim (and indeed it has not) that assets from the 2013 Butterfly Trust (even assuming such assets were relevant to the Estate, which they are not) can be or have been dissipated since the Government issued its lien on that Trust in July 2021.”
Rather, the emergency motion was filed to avoid or delay the court’s potential decision to vacate the criminal activity liens, and to punish Indyke and Kahn for not agreeing to all the government’s demands in settlement discussions by making false allegations about them, the response states.
Moreover, “the Motion was filed in the middle of the sixty-day period the Court allotted for mediation. The only explanation for the timing of the Motion is that it was intended to punish the Co-Executors for not relenting to the Government’s refusal to provide finality. That explanation is supported by the fact that The New York Times and other major media outlets were alerted to the Motion’s filing and asked for comment even before Defendants’ counsel became aware of it. The Government’s obvious and improper goal was to trash the Co-Executors publicly and in national newspapers in order to pressure them to settle,” the response states.
The defendants are requesting that the government’s motion be stricken from record, and the government sanctioned for misconduct unless it withdraws the motion voluntarily. If it is not stricken, it should be denied on the merits, they said. Further, the liens should be vacated “because the Government is misusing the liens, treating them as pre-judgment restraints rather than for the purposes authorized” by V.I. Code.
The court had not ruled on the matter as of Wednesday, though the Attorney General’s Office filed a “Notice of Availability,” stating that the government and the defendants would be available for a status conference on Aug. 10 or 12 any time after noon.