(e) Financial institution fraud
Finally, Khalil also conspired to, and did, commit bank fraud
in violation of 18 U.S.C. § 1344. That section prohibits engaging
in or attempting to engage in a pattern or course of conduct
designed to deceive a federally chartered or insured financial
institution into releasing property with intent to victimize the
institution by exposing it to actual or potential loss. United
States v. Stavroulakis, 952 F.2d 686, 694 (2d Cir. 1992). The
financial institution need not incur loss nor must the defendant
personally benefit from the scheme to defraud. See United States
v. Goldblatt, 813 F.2d 619, 624 (3d Cir. 1987); see also United
States v. Moede, 48 F.3d 238, 242 (7th Cir. 1995).
Khalil and his co-conspirators defrauded the First American
banks, a financial institution within the meaning of
18 U.S.C. § 20, by concealing the material fact that First American's
capitalization was being illegally diverted from BCCI through
nominee loans, that First American's shares were pledged to
secure purported loans to the nominee shareholders and that First
American was illegally owned by a foreign banking group. Khalil,
in conspiracy with Akbar and BCCI's senior officers, knowingly
presented false testimony to the Board of Governors of the
Federal Reserve Bank. In addition, the Liquidators established
that Khalil knowingly participated in the misrepresentation of
the First American investment as loans to Khalil, thereby
falsifying BCCI's own books and records. This scheme was
undertaken with specific intent to defraud and exposed First
American to risk of loss.
2. Relatedness and Continuity
To form a "pattern" of racketeering activity, the
aforementioned predicate acts need be "related" and "continuous."
The indicia of relatedness between predicate acts include common:
purpose, result, participants, victims, and methods of
commission. H.J., Inc., 492 U.S. at 240, 109 S.Ct. 2893. The
concept of continuity is primarily a temporal one. Pyramid
Securities, Ltd. v. International Bank, 726 F. Supp. 1377, 1382
(D.D.C. 1989), aff'd, 924 F.2d 1114 (D.C.Cir. 1991). Continuity
is measured by a "commonsense" approach, H.J., Inc., 492 U.S.
at 241, 109 S.Ct. 2893, focusing on the number and variety of
predicate acts, the number of victims, the number of
perpetrators, the presence of separate schemes, and the
occurrence of distinct injuries. See Edmondson & Gallagher v.
Alban Towers Tenants Ass'n, 48 F.3d 1260, 1264-65 (D.C.Cir.
1995); Edison Elec. Inst. v. Henwood, 832 F. Supp. 413, 417-18
In this case, the aforementioned acts of racketeering had the
same or similar unlawful purposes, results, participants and
victims and were not isolated events. The common theme of these
multiple racketeering acts was illegally to acquire and maintain
an interest in and control of the First American enterprise,
nominally for Khalil and other nominee shareholders, by using
BCCI Group funds to conceal the existence of that control, and to
use that control for the benefit of the co-conspirators. These
acts were essential elements of the unlawful scheme, were carried
out within 10 years (and beyond), and constituted a pattern of
racketeering in violation of § 1962(b).
Khalil agreed to participate in the nominee conspiracy, and he
took no affirmative steps to withdraw from the scheme. Rather,
Khalil specifically agreed to allow BCCI to continue to hold
First American shares in his name until December 1988. Even after
that time, he knew that the shares remained in his name, and he
took no steps to remedy the situation or to bring the nominee
scheme to the attention of the authorities. The Liquidators met
their burden to prove that Khalil directly violated § 1962(b).
3. Proximate Cause
Because Count I is a civil RICO claim, § 1964(c) requires that
show injury caused "by reason of" Khalil's violation of §
1962(b).*fn34 The statute's "by reason of" phrase incorporates
the principle of proximate causation. See Holmes v. Securities
Investor Protection Corp., 503 U.S. 258, 265-68, 112 S.Ct. 1311,
117 L.Ed.2d 532 (1992). The damage must be caused by the
violation of § 1962 as opposed to by the predicate acts alone.
See Lightning Lube, Inc. v. Witco, 4 F.3d 1153, 1190 (3d Cir.
1993). Thus, at trial, the Liquidators had the burden to
demonstrate injury flowing proximately from Khalil's acquisition
of his nominal interest in, and actual control over, First
American through a pattern of racketeering activity. Danielsen
v. Burnside-Ott Aviation Training Center Inc., 941 F.2d 1220,
1231 (D.C.Cir. 1991).
The parties agree that a defendant's acts proximately cause
plaintiffs injuries when such acts are a substantial factor in
the sequence of responsible causation, and where the plaintiffs
injury was reasonably foreseeable or anticipated as a natural
consequence of those acts. See First American Corp. v.
Al-Nahyan, 17 F. Supp.2d 10, 22 (D.D.C. 1998); see also In re
American Express Co. Shareholder Litig., 39 F.3d 395, 399 (2d
At trial, the Liquidators proved that BCCI's investment in
First American was economically detrimental. BCCI invested a
total of $556,108,245, through its nominees, to acquire First
American. After the Liquidators entered a guilty plea on behalf
of BCCI to the criminal charges pending in this Court, BCCI's
interests in First American were forfeited to the United States.
From the liquidation of First American, $277,884,166 has been
paid to the Liquidators. See Tr. (Gilkes) at 322-28. This being
a negative return on investment, the Liquidators claim that the
$278,224,079 loss is proximately attributable to Khalil's
participation in the nominee scheme. Additionally, the
Liquidators claim that the opportunity cost of BCCI's illegal
investment in First American was $334,818,884.
However, the Court cannot find that these losses were
proximately caused by Khalil's participation in the nominee
scheme. Although it was foreseeable at the time Khalil
participated in the scheme that BCCI was exposing itself to
criminal liability which could result in the forfeiture of its
First American holdings, too many intervening factors, such as
changing market conditions over a considerable period of time and
numerous independent decisions by First American management, led
to these losses that the Liquidators seek to attribute to Khalil.
See Powers v. British Vita, P.L.C., 57 F.3d 176, 189 (2d Cir.
1995); First Nationwide Bank v. Gelt Funding Corp.,
27 F.3d 763, 769-72 (2d Cir. 1994).
On the other hand, other losses were directly attributable to
Khalil's acquisition of a nominal interest in First American
through a pattern of racketeering activity. For example, the
$27.5 million paid to Khalil, although extorted from BCCI, was a
transaction cost proximately imposed on BCCI by virtue of its use
of nominees to accomplish the illegal acquisition of, and
maintain its control over, First American. Additionally, payment
of Khalil's expenses for his services as a nominee also were
proximately caused by the pattern of racketeering activity by
which Khail and BCCI acquired their respective interests in First
In addition to alleging a direct violation of § 1962(b), Count
I also charged Khalil with conspiracy to violate § 1962(b).
Subsection (d) makes it unlawful "to conspire to violate any of
the provisions of subsection (a), (b), or (c) of this section."
18 U.S.C. § 1962(d). "A conspiracy
is a partnership in crime." Pinkerton v. United States,
328 U.S. 640, 644, 66 S.Ct. 1180, 90 L.Ed. 1489 (1946). To be liable
under § 1962(d),
[a] conspirator must intend to further an endeavor
which, if completed, would satisfy all of the
elements of a substantive criminal offense, but it
suffices that he adopt the goal of furthering or
facilitating the criminal endeavor.
Salinas v. United States,