In re Third Round Petition of Banco Central Del Uruguay
MEMORANDUM OPINION AND ORDER
Presently pending is the United States' Motion to Dismiss ("Motion to Dismiss") the Verified Petition of Banco Central del Uruguay ("Banco Central"), which was filed pursuant to 18 U.S.C. § 1963(l) ("L-Claim"). The government has moved to dismiss the L-Claim due to lack of standing and for failure to state a claim. For the reasons expressed below, the Motion to Dismiss will be granted.
The facts surrounding BCCI's collapse are well known in the financial and legal communities, but certain facts bear repeating to set the stage for resolving the instant motion to dismiss Banco Central's L-Claim.
In early 1991, the Bank of England received troubling information about BCCI's financial condition and integrity. In response, it commissioned a special audit, which "disclosed evidence of a complex and massive fraud at BCCI, including substantial loan and treasury account losses, misappropriation of funds, unrecorded deposits, the creation and manipulation of fictitious accounts to conceal bank losses, and concealment from regulatory authorities of BCCI's mismanagement and true financial position." Corrigan, Mattingly & Taylor, The Federal Reserve's Views on BCCI, 26 Int'l Law. 963, 970-71 (1992) (based on testimony before the Committee on Banking, Finance and Urban Affairs of the United States House of Representatives on September 3, 1991).
The results of the audit were shared with regulators in other countries, and, on July 5, 1991, banking regulators in the United Kingdom, Luxembourg and the United States, froze assets owned or controlled by BCCI. The assets were frozen in the United States included those at Capital Bank of Miami, which is relevant to the instant L-Claim. By July 6th, eighteen countries had shut down BCCI's operations in their jurisdictions, and, as of July 29, 1991, forty-four countries had closed down BCCI branches.
On November 15, 1991, a three-count Indictment, which included charges of conspiracy, wire fraud and racketeering against BCCI, was filed in this Court. 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 the four corporate defendants, collectively known as BCCI, and the Plea Agreement between them and the United States of America. See Transcript of Guilty Plea Proceedings at 7 (Jan. 24, 1992). In accordance with 18 U.S.C. § 1963, this Court then entered an Order of Forfeiture.
Under paragraph 9 of the Plea Agreement and pursuant to the Order of Forfeiture, BCCI forfeited all of its property interests in the United States. Pursuant to paragraph 1(e) of the Forfeiture Order, the corporate defendants forfeited to the United States their 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 (excluding property 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).
Attached to the First Order of Forfeiture was a listing of 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 First Supplemental Order on January 31, 1992, which directed immediate seizure of the specific assets listed therein.
The Plea Agreement also established the Worldwide Victims Fund and the U.S. Fund. Under the terms of the Plea Agreement, forfeited assets were to be disbursed in equal amounts to the Worldwide Victims Fund and the U.S. Fund. See Plea Agreement P11(c). The broad purpose of the Worldwide Victims Fund, operated by the Court-Appointed Fiduciaries, is to distribute funds "only to innocent depositors, creditors and other victims of BCCI whose claims are not derived directly or indirectly through violations of United States or other laws concerning narcotics, terrorism, money laundering, crimes of violence, or other acts generally recognized as felonies or similar crimes under the law of countries subscribing to recognized norms of international justice. Id. P14.
The purpose of the U.S. Fund is more specific, but no less compensatory. In addition to allowing for reimbursement of the costs of investigation and prosecution of BCCI, bank insurance and other matters, the U.S. Fund is also available to provide "restitution to victims of BCCI, which may include remission to the Court Appointed Fiduciaries in accordance with 18 U.S.C. § 1963(g) for the purpose of facilitating an increase in assets available for distribution by the Court-Appointed Fiduciaries to innocent worldwide victims of BCCI, and which may include claims related to the failure of CenTrust, if any." Id. P12(f). As a result of BCCI's guilty plea and the subsequent criminal forfeiture proceedings, by July 1996, the United States had "recovered nearly $ 800 million, virtually all of which has been, or will be, distributed to the victims of the fraud." Testimony of Stefan Cassella before the Judiciary Committee of the House of Representatives (July 22, 1996), 1996 WL 410099, *5 (F.D.C.H.).
The Court later amended the Order of Forfeiture to include additional assets, including property set forth in Second and Third Supplemental Lists of Forfeited Property. See Order of Forfeiture of July 29, 1992 (Second Order of Forfeiture); Order of Forfeiture of August 19, 1993 (Third Order of Forfeiture). Attached to the Third Order of Forfeiture, which is relevant to the L-Claim presently before the Court, was the Third Supplemental List of Forfeited Property aggregating $ 101,302,465.54 and including the funds credited to account # 0902205153, in the name of BCC Credit and Finance (Uruguay), S.A. ("BCC Uruguay") at Capital Bank, which is the account that Banco Central now seeks.
On May 10, 1993, the government filed a motion for a Third Order of Forfeiture. See Docket No. 746. In relevant part, that motion provided: "After investigation, the government has determined that BCC Trinidad & Tobago, BCCI Brazil, and BCC Uruguay were subsidiaries of BCCI Holdings (Luxembourg), S.A. and that, in light of the relationship between those subsidiaries and the convicted defendants, the assets are subject to forfeiture." Id. at 9-10 (citing Dalton Decl. at 8-11, 19-20). In sum, the government contended that BCC Uruguay was a wholly owned subsidiary of BCCI and, as such, was controlled to such a degree that this Court should disregard the corporate form. Upon reviewing the government's motion and supporting attachments, the Court found the evidence satisfactory (at least as to BCC Uruguay) and granted the motion. In entering the Third Order of Forfeiture, this Court expressly stated that "for the reasons set forth in the government's motion and the accompany declarations and exhibits, the Court finds that all property listed in the government's proposed Third Supplemental List, except property held by BCC (Misr) S.A.E., is the property of the corporate defendants." Third Order of Forfeiture at 2 (emphasis in original, footnote omitted). As to BCC (Misr) S.A.E., the Court rejected the government's offer of proof, concluding that the government had not yet satisfactorily established that BCC (Misr), a separately incorporated entity, was the alter ego of the defendants. Id. at 2 n.1. The Court made no such finding with respect to BCC Uruguay and therefore forfeited to the United States the account held in the name of BCC Uruguay at Capital Bank in Miami. See id. at Ex. A, page 1 (account # 0902205153 in the amount of US $ 375,728.87).
In compliance with 18 U.S.C. § 1963(l)(1) and to inform third parties of their potential rights to seek recovery of assets declared forfeited in the Third Order of Forfeiture, the United States published notice of the Order of Forfeiture, as amended, during the period September 3, 1993, and September 27, 1993 in eleven major newspapers including the Wall Street Journal, the New York Times, the Chicago Tribune, the Los Angeles Daily Journal, the Washington Post, and the International Herald Tribune. See United States' Notice to the Court (filed Sept. 21, 1993). In addition, personal notice was sent to over 523 persons and entities. Id. at Ex. 2, at 11. In response, the Banco Central filed the instant petition.
Banco Central claims an interest in the forfeited account and, for the purposes of this motion, the Court assumes true the facts pled in its Verified Petition. Banco Central is the financial and monetary authority of the Republic of Uruguay. L-Claim at 2. BCC Uruguay was a financial institution formed and operating under the laws of Uruguay and which was subject to the regulatory authority of Banco Central. Id. On July 8, 1991, Banco Central intervened and took over the operations of BCC Uruguay; BCC Uruguay is no longer in operation but exists solely for the purposes of liquidation. Id. Consequently, and under the law of Uruguay, Banco Central is entitled to exercise and pursue any and all legal rights of BCC Uruguay, which was not a named defendant in the underlying criminal case. Id.
The United States has moved to dismiss Banco Central's petition on the grounds of standing and failure to state a claim. Banco Central filed a brief in opposition but did not request oral argument or appear at the hearing offered to all Third Round claimants.
BCCI's assets were forfeited pursuant to 18 U.S.C. § 1963,
which sets forth an orderly procedure by which third parties seeking to recover interests in forfeited property may obtain judicial resolution of their claims. It permits any person, other than the defendant, claiming a legal interest in forfeited property to petition the Court for a hearing to adjudicate the validity of that interest. 18 U.S.C. § 1963(l)(2).
Section 1963(l)(6) sets forth the substantive elements that a third party must establish to obtain amendment of an order of forfeiture:
If, after the hearing, the court determines that the petitioner has established by a preponderance of the evidence that--
(A) the petitioner has a legal right, title, or interest in the property, and such right, title, or interest renders the order of forfeiture invalid in whole or in part because the right, title, or interest was vested in the petitioner rather than the defendant or was superior to any right, title, or interest of the defendant at the time of the commission of the acts which gave rise to the forfeiture of the property under this section; or