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UNITED STATES v. BCCI HOLDINGS

August 19, 1993

UNITED STATES OF AMERICA
v.
BCCI HOLDINGS (LUXEMBOURG), S.A., BANK OF CREDIT AND COMMERCE INTERNATIONAL, S.A., BANK OF CREDIT AND COMMERCE INTERNATIONAL (OVERSEAS) LIMITED, INTERNATIONAL CREDIT AND INVESTMENT COMPANY (OVERSEAS) LIMITED, Defendants.



The opinion of the court was delivered by: JOYCE HENS GREEN

 Presently pending are the United States' motions to dismiss the petitions for hearings to adjudicate interests in forfeited property filed by The Central Bank of Paraguay ("Paraguayan branch"), Raymond Davies on behalf of all BCCI depositors in Sierra Leone ("Davies"), Carlos F. Sanchez Fabrega as Liquidator of BCCI (Overseas) Limited (en Liquidacion) in Panama1 ("Panamanian branch"), Andre Forde and Michel Chavaux, Administrators of BCCI (Overseas) Limited in France and Monaco ("French branch"), The Government of the People's Republic of Bangladesh and Bangladesh Bank2 ("Bangladesh"), Hussein Abdel Rahim et al., Joint Official Liquidators for BCCI (Overseas) Limited, Sudan ("Sudanese branch"), Antonio dos Santos Ramos and Antonio Maria Ho as the Liquidation Commission for BCCI (Overseas) Limited, Macau Branch3 ("Macanese branch"), and Abdullah Soydas, as Liquidator of BCCI (Overseas) Limited, Istanbul, Izmir and Mersin, Turkey ("Turkish branch"). *fn4" Upon consideration of the motions to dismiss, all filings relating thereto, and oral argument presented at the June 22 and 23, 1993 hearings, the motions to dismiss the petitions filed by branches of BCCI (Overseas) Limited are granted and the motions to dismiss the petitions filed by Bangladesh are denied.

 BACKGROUND

 On July 5, 1991, bank regulators in the principal jurisdictions in which the four corporate defendants *fn5" were organized or did business jointly instituted a worldwide shutdown of the banks upon the belief that they were insolvent and had engaged in numerous criminal activities. Subsequently, courts in the respective domiciles of the defendants appointed liquidator to collect all BCCI assets located throughout the world and to distribute the assets to lawful creditors band depositors of BCCI on a global basis.

 On January 24, 1992, this Court, following findings of fact and conclusions of law with supporting reasons made in open court, accepted the pleas of guilty of made by the court-appointed liquidators on behalf of the BCCI entities and the plea agreement between them and the United States of America. Thereupon, and in accordance with 18 U.S.C. § 1963, an Order of Forfeiture was entered. Paragraph 1(e) of the Order provides that the corporate defendants named in this action shall forfeit to the United States ownership interests in all property located in the United States, including, without limitation, real property and all tangible and intangible personal property, however held, whether subsequently identified, determined or discovered in the course of the ongoing liquidation proceedings described therein or otherwise identified, determined, or discovered in any manner at any time, but not property that may be brought into the United States by or on behalf of court-appointed fiduciaries of BCCI in the course of the management or disbursement of the liquidation estates as described in the plea agreement. Attached to the January 24, 1992 Order as Exhibit A was a list of specific BCCI accounts, with corresponding numbers, names, and approximate balances, which the United States Marshals Service was directed to seize forthwith. Because the government was unable to verify certain information concerning additional forfeitable accounts at the time the Order of Forfeiture was entered, the Court issued a supplemental Order on January 31, 1992 which directed immediate seizure of the specific assets listed therein. In accordance with the plea agreement, approximately half of the forfeited funds will be placed in a Worldwide Victims and Creditors Compensation Fund maintained by the court-appointed liquidators of the corporate defendants. The remaining half will be used by the United States to reimburse federal banking agencies' insurance funds and to minimize the risk of loss arising from BCCI's illegal acquisitions of certain United States banks.

 In satisfaction of 18 U.S.C. § 1963(l)(1), and to inform third parties of potential rights to seek recovery of assets declared forfeited, the United States published notice of the Order of Forfeiture, as amended, during the period between February 13, 1992 and March 27, 1992 in eleven major United States newspapers including the Wall Street Journal, the New York Times, the Chicago Tribune, and the Los Angeles Daily Journal. See Government's Compliance with Order of May 8, 1992, filed May 12, 1992. In addition, personal notice was sent to over 340 persons and entities as late as April 3, 1992. Id.

 On March 19, 1992, the French, Panamanian, and Paraguayan branches of BCCI Overseas filed separate petitions seeking the return of funds forfeited from accounts held in their names at institutions in New York. Although all three concede that they were not separately incorporated, they claim to be separate juridical entities under the laws of their domiciles. Accordingly, the branches argue that they are third parties to this litigation, that they are not bound by the plea agreement entered by their parent, and that funds held in their name were not owned by BCCI Overseas and cannot be forfeited absent specific proof tracing the assets to illegal activities. The Macanese, Sudanese, and Turkish branches filed similar petitions on April 12, 1992, May 11, 1992, and June 10, 1992 respectively.

 Unlike the above-mentioned petitions, the April 27, 1992 and April 3, 1992 claims of Raymond Davies and Bangladesh were not filed on behalf of branches of BCCI Overseas; Davies' petition was filed on behalf of all depositors of the Sierra Leonean branch and Bangladesh's petition was submitted on behalf of the sovereign nation itself. Bangladesh seeks to recover the funds held in branch accounts based on allegations that it had the right to hold all foreign exchange acquired by the branches, that the branches could not dispose of foreign exchange without its express permission, and that the branches have not received such permission with respect to the forfeited assets.

 In accordance with a briefing schedule set by the Court, the government filed motions to dismiss the petitions based on theories that as mere branches of one of the corporate defendants, none of the claimants had standing to appear before this Court and that none of the petitioners could satisfy the substantive prerequisites for court-ordered relief. Additionally, the government contended that the Paraguayan branch's petition was defective because it sought to recover an interest in assets which were not yet seized. The government further contended that no petition filed by a liquidator, including the claim filed by Mr. Davies, could assert derivative claims of depositors and that the petitions of the Sudanese and Turkish branches were filed out of time.

 On June 24, 1992, the government filed a Motion to Amend Order of Forfeiture to Include Additional Property, seeking forfeiture and seizure of assets in newly discovered bank accounts held in the names of the corporate defendants, proceeds from the sale of a condominium purchased with resources provided by a corporate defendant, money remaining in a "BCCI Legal Fund" established by one of the corporate defendants for the defense of its employees' legal interests, a bankruptcy distribution to one of the corporate defendants, and assets held at various New York financial institutions in the name of ICIC Investments Ltd., a sibling corporation of defendant ICIC (Overseas) Ltd. The Court granted the government's motion and issued an Order of Forfeiture on July 29, 1992. The United States subsequently provided notice of the Order to potential claimants. *fn6"

 In response to the July 1992 Order of Forfeiture, Bangladesh filed a second petition asserting interests in newly forfeited and seized property held in the names of Bangladesh branches of BCCI Overseas. The government subsequently filed a motion to dismiss Bangladesh's new petition, which became ripe on June 18, 1993. Although the new Order of Forfeiture also directed the seizure of property held in the name of the Paraguayan branch, that branch failed to file a second petition in response to the Order and apparently believed that its first petition sufficiently raised a claim to those assets.

 Hearings on the government's motions to dismiss what the government termed the "branch petitions" were scheduled in a May 12, 1993 Order which provided, "The litigants shall be prepared to present both legal arguments and relevant factual evidence, including testimony and/or documentation relating to the nature of the relationship between the petitioners and Bank of Credit and Commerce International (Overseas) Limited." Five days later, the government filed a motion in limine seeking an Order excluding the presentation of, inter alia, factual evidence and testimony of foreign law. The government claimed that such evidence and testimony were irrelevant to resolution of the motions to dismiss. After considering oppositions filed by some of the petitioners, the government's motion in limine was granted. The Court, however, warned, "In the event that the legal arguments contained in the government's motions to dismiss are rejected, additional hearings will be scheduled and the petitioners will be allowed to present relevant evidence in support of their c1aims." May 27, 1993 Order Modifying May 12, 1993 Order Setting Hearings on "Branch" Petitions at 3.

 All petitioners were invited, though not required, to participate in oral argument scheduled for June 21, 22, and 23, 1992. All petitioners addressed herein except for the French ...


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