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BCCI HOLDINGS v. KHALIL

January 15, 1997

BCCI HOLDINGS (LUXEMBOURG), SOCIETE ANONYME, et al., Plaintiff,
v.
ABDUL RAOUF HASAN KHALIL, et al., Defendants.



The opinion of the court was delivered by: GREEN

MEMORANDUM OPINION AND ORDER

 Presently before the Court is Defendant Abdul Raouf Hasan Khalil's motion to dismiss. This case is one of many suits stemming from the worldwide collapse of the Bank of Credit and Commerce International ("BCCI"). *fn1" In this case, the Court Appointed Fiduciaries *fn2" for BCCI have alleged that the plaintiffs suffered harm as a result of a complex multinational conspiracy involving Defendants Khalil, Akbar, Capcom Financial Services Limited ("Capcom UK"), Capcom Futures Inc. ("Capcom US") and two corrupt former BCCI executives. For the reasons stated below, the motion will be denied.

 I. Background

 For the purposes of this motion to dismiss, the Court assumes true, as she must, the facts alleged in the plaintiffs' complaint. This suit has been brought on behalf of the BCCI Group by its Court Appointed Fiduciaries. On July 5, 1991, banking regulators worldwide intervened to assume control of the operations and assets of the BCCI Group. On various dates in 1992 and 1993, courts in Luxembourg and the Cayman Islands appointed liquidators for the BCCI Group entities, empowering those liquidators to sue on behalf of each entity and its creditors and depositors for the benefit of the liquidation estate. Complaint PP19-25.

 The plaintiffs have sued four defendants:

 
1. Defendant Abdul Raouf Hasan Khalil ("Khalil") is a citizen of Saudi Arabia, who has served as Executive Administrator to the Chief of Intelligence and as Deputy Chief of Intelligence for Saudi Arabia. Id. at P26. Khalil is alleged to be a current record shareholder of BCCI Holdings and to have been so since 1979. "Khalil was, in whole or in part, a nominee shareholder in BCCI Holdings, receiving non-recourse advances from plaintiffs or related companies to purchase some or all of his shares in BCCI Holdings." Id. The plaintiffs further allege that Khalil became a record shareholder of CCAH, the ultimate parent of First American Bankshares in 1982, and he continues to be a record shareholder today. Id. at P28. They allege that he held these shares as a nominee for corrupt former BCCI managers after receiving non-recourse advances to purchase the shares. Based on his nominee ownership of shares in CCAH, Khalil has been charged with violations of U.S. banking laws by the Board of Governors of the Federal Reserve.
 
2. Defendant Syed Ziauddin Ali Akbar ("Akbar") is a citizen of both the United Kingdom and Pakistan. Id. at P29. Akbar was a BCCI employee from 1976 to 1986 and served as head of the Treasury Division from 1982 to 1986. He was responsible for managing and investing BCCI's funds and he was responsible for the accounts of major BCCI customers, such as Khalil. The plaintiffs allege that Akbar controlled Capcom UK and Capcom U.S. Id. Akbar and Capcom UK have been indicted by grand juries in the U.S. District Court for the Middle District of Florida for money laundering, racketeering and other offenses. Id. at P33. When the instant complaint was filed, Akbar was incarcerated in the United Kingdom.
 
3. Defendant Capcom UK is a United Kingdom corporation, which was incorporated in 1984 and financed by the plaintiffs. Id. at P30. The plaintiffs aver that "its nominal business purpose was to engage as a broker-dealer in futures, options and commodities." Id. Capcom UK has been fined and suspended form certain trading activities in the United Kingdom, but continues to operate as a dealer in foreign exchange. Capcom UK has been indicted in the United States and, on April 30, 1992, the U.S. District Court for the Middle District of Florida declared Capcom UK in contempt of court for failure to appear to answer the criminal charges stemming from its August 1991 indictment. Id. at P35. The Court imposed a $ 5,000/day fine, which continues to accrue. Id.
 
4. Defendant Capcom US was an Illinois corporation that was incorporated in 1985 and a subsidiary (or under the control) of Capcom UK. Id. at P31. "Capcom U.S.'s nominal business purpose was to engage in brokerage in futures, options and commodities on the Chicago exchanges." Id. Capcom US has ceased trading after being fined and suspended by U.S. regulators. Id. at P32. On April 16, 1992, Capcom US filed voluntary articles of dissolution, but is still subject to suit under Illinois law. Id.

 The plaintiffs allege that, beginning in or around 1977 until the present, the defendants conspired with Agha Hassan Abedi ("Abedi") *fn3" and Swaleh Naqvi ("Naqvi"), *fn4" who adversely dominated the BCCI Group, id. at P40, to "manipulate plaintiffs' balance sheets to conceal large losses and to conceal fraudulent activity by" Abedi and Naqvi. Id. at PP1-3. In connection with their scheme, the defendants are alleged to have diverted in excess of $ 100 million through fraudulent transactions. Id. at PP2&5.

 To perpetuate the fraud, Khalil served as a nominee shareholder, inflating the plaintiffs' apparent capitalization and concealing from banking regulators the secret ownership of First American. Id. at PP3, 48-59 & 60-61. In April of 1981, Khalil is alleged to have met with Robert A. Altman and Clark M. Clifford to prepare a false statement shares that would be submitted to the Federal Reserve regarding Khalil's proposed purchase of CCAH. Id. at PP60-64. Additionally, the defendants used Khalil's accounts to conceal losses, generate false profits on the plaintiffs' balance sheets and to hide high-risk commodities investments and profiteering under guaranteed no-risk arrangements for Khalil. Id. at PP84-96. Defendants Akbar and Khalil are alleged to have created and used Defendants Capcom UK and Capcom US as mechanisms to plunder the plaintiffs. Id. at PP4 & 99-134.

 The plaintiffs allege that Khalil obtained at least $ 29.5 million for allowing his name and accounts to be used as a nominee, including his service as a nominee for First American shares. Id. at PP65-66 & 148. Of this amount, Khalil is alleged to have extorted $ 15 million "for his having acted as a nominee in various fraudulent schemes with Akbar, Abedi and Naqvi, including the nominee ownership in CCAH." Id. at P149.

 The Complaint alleges seven counts. Count I alleges racketeering under RICO based on Khalil's acquisition of a nominee interest in First American. Id. at PP168-181. The predicate acts constituting the pattern of racketeering include wire and mail fraud, financial institution fraud and money laundering. Id. at PP175-180. Based upon the defendants' alleged acts of wire and/or mail fraud and money laundering, Count II charges racketeering in connection with the manipulation of BCCI balance sheets through fraudulent nominee transactions perpetrated through U.S. bank accounts and U.S. wires. Id. at PP168-181. Counts III and IV allege RICO violations based upon the defendants' operation of Capcom US and Capcom UK in carrying out fraudulent transactions on U.S. futures and commodities exchanges, resulting in the diversion of funds from the plaintiffs to Defendants Khalil and Akbar. Id. at PP195-221. In Counts V, VI and VII, the plaintiffs allege common law counts of fraud, conversion and unjust enrichment based ...


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