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UNITED STATES v. BCCI HOLDINGS

August 26, 1997

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, AND INTERNATIONAL CREDIT AND INVESTMENT COMPANY (OVERSEAS) LIMITED, Defendants.



The opinion of the court was delivered by: GREEN

 MEMORANDUM OPINION AND ORDER

 Presently before the Court is the United States' motion to dismiss the First Round Petition of the State Trading Organization of the Republic of the Maldives ("STO"), which was filed pursuant to 18 U.S.C. § 1963(l) (1994) ("L-Claim"). For the reasons stated below, the motion to dismiss will be granted, and the L-Claim will be dismissed.

 Background

 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 motion to dismiss STO's L-Claim. *fn1" 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. In New York, the Superintendent of Banks seized BCCI's assets at various New York banks, including those at the Bank of California. 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, 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, as amended, was a list of BCCI accounts, with corresponding numbers, names, and approximate balances, which the United States Marshals Service was directed to seize forthwith. Included among the assets seized pursuant to the amended order was BCCI(O) Male branch's account at Bank of California (No. 91-212381-1121) with a balance of US$ 1,283,092.84 (hereinafter, the "forfeited account").

 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.). *fn2"

 For the purposes of this motion to dismiss, the Court assumes true the facts alleged by STO. On June 11, 1991, Chotiwat Manufacturing Co., Ltd. ("Chotiwat") in Thailand applied for a letter of credit in connection with the sale of frozen fish by Petitioner STO. The letter of credit was issued by Siam City Bank in Thailand, on behalf of Chotiwat, in favor of STO as beneficiary. BCCI(O) Male branch advised the letter of credit. STO completed its contractual obligations and, on June 29, 1991, pursuant to the terms of the letter of credit, STO submitted the required documents to BCCI(O) Male branch for negotiation. *fn3"

 On July 5, 1991, Siam City Bank issued a payment order to its correspondent, Manufacturers Hanover Trust Co. ("Manufacturers"), directing that its account be debited in the amount of $ 966,774.53, "under instructions to forward said funds through BCCI to the account of [STO] with the State Bank of India branch in Male." STO's Opp. at 2-3. Manufacturers then instructed the Bank of California (also in New York) to debit its account in the requested amount and credit BCCI(O) Male's account number 91-212381-1121. The Bank of California complied, issuing a payment order and crediting BCCI(O)'s Male account accordingly. However, due to the intervention of banking regulatory authorities on July 5, 1991, BCCI(O) Male never transferred the funds to the State Bank of India. Petitioner STO alleges that the Bank of California credited BCCI(O) Male's account, but only after banking authorities intervened and froze BCCI's assets, including those held by the Bank of California.

 After this Court entered the First Order of Forfeiture, and the amendment several days later which included the forfeited account at the Bank of California, the United States provided notice by publication and by letter to potential claimants of which it was aware. Through a timely filed L-Claim, STO asserted an interest in the amount due pursuant to the Letter of Credit, US$ 966,774.53, which the Bank of California credited to BCCI(O)'s account. The United States later filed the instant motion, seeking dismissal on the grounds of standing and failure to state a claim upon which relief can be granted.

 Discussion

 BCCI's assets were forfeited pursuant to 18 U.S.C. § 1963, *fn4" 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). *fn5" ...


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