Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

U.S. v. BCCI HOLDINGS

July 12, 1999

UNITED STATES OF AMERICA
v.
BCCI HOLDINGS.



The opinion of the court was delivered by: Joyce Hens Green, United States District Judge.

OPINION

At last!  For nearly eight years I have been presiding over
this fascinating, complex, and sobering case arising out of the
collapse of Bank of Credit and Commerce International ("BCCI"),
the largest bank failure in history. The Order that accompanies
this Opinion is the final chapter in the longest-running
forfeiture proceeding in the history of federal racketeering law.
Against the odds, through the combined efforts of the United
States Department of Justice, the Trustees appointed by this
Court, the BCCI Court Appointed Fiduciaries, the Board of
Governors of the Federal Reserve System, and the District Attorney
for New York County, more than $1.2 billion has been realized from
BCCI assets in the United States. Most of that sum has been
forwarded for distribution to the victims of BCCI's collapse.

The worldwide liquidation proceeding conducted by the BCCI Court Appointed Fiduciaries remains ongoing. To date, the Court Appointed Fiduciaries have distributed approximately $4 billion worldwide to innocent depositors and creditors. In two dividends, they have repaid creditors a total of 46 percent on admitted claims. Additional dividends are expected, although the amounts will depend on future recoveries. In contrast to the pessimistic projections of 1991, creditors will certainly receive more than half of their money back.

But today's Final Order of Forfeiture brings to an end the criminal case against the BCCI corporations and its attendant forfeiture proceeding. This Opinion summarizes the landmark events in this case to explain why terminating the forfeiture proceeding at this juncture is appropriate. The United States Government has located all of the BCCI-related assets in this country that it could, all disputes regarding ownership of those assets have been resolved, and, thus, the Court's task is complete.

The Final Order of Forfeiture, and related orders signed today, accomplish the following: (1) declare that the United States has clear title to all property forfeited during this proceeding; (2) authorize the United States Marshals Service to distribute all the assets they hold; (3) provide for the dissolution of the two trusts created by this Court to aid in the liquidation of forfeited assets; (4) transfer certain default judgments obtained by First American Corporation in civil litigation to the Department of Justice for collection; and (5) transfer the stock of First American Corporation to the Court Appointed Fiduciaries to wind up the corporation as they see fit.

After briefly outlining the events leading up to the seizure of BCCI almost exactly eight years ago — July 5, 1991 — this Opinion describes how this case came to be filed here and how the parties entered into their unique Plea Agreement, which triggered this unprecedented forfeiture proceeding. The Opinion then describes the two trusts created to aid in the liquidation of forfeited assets, and the BCCI-related civil cases over which this Court also presided. The final section summarizes the novel legal issues — procedural and substantive — that arose during the course of adjudicating a total of 175 claims by third parties contesting the forfeiture of certain assets. The conclusion acknowledges those individuals singled out by the parties as deserving of recognition for their respective contributions to the recoveries made in this case.*fn1

I. BACKGROUND TO THE BCCI CRIMINAL CASE

BCCI was founded in 1972. The moving force behind its establishment was Agha Hasan Abedi ("Abedi"), a Pakistani banker who envisioned BCCI becoming an international Islamic bank. Abedi's chief lieutenant was Saiyid Mohammad Swaleh Naqvi ("Naqvi"). Abedi remained at the helm of BCCI until 1988, when he suffered a heart attack. Naqvi succeeded him for two years, until the sovereigns of Abu Dhabi took formal control of the bank in 1990.

Abedi established the principal BCCI corporations in Luxembourg and the Cayman Islands. Although formally separate, the BCCI corporations were under the same management and were closely linked in their operations. At its peak, BCCI's coordinated international banking network had more than 400 branches in 69 countries. BCCI's depositors included large corporate interests as well as numerous small businesses and middle class households, particularly in England.

The extent of BCCI's presence in the United States was not generally known until after the bank had been seized. It was known that BCCI had accounts with correspondent banks in New York City and in the other major international money centers. Additionally, BCCI had been allowed to establish "depository agencies" in the United States.*fn2 But, it appeared that BCCI was not providing retail banking services to United States customers in this country.*fn3 There were, however, signs that BCCI sought to infiltrate the United States market.

A. Financial General Bankshares Lawsuit

As early as 1978, a group of shareholders of Financial General Bankshares, Inc. — the predecessor of First American Bank in Washington, D.C. — sued BCCI, among others, claiming that it was behind a hostile takeover attempt. Judge Oliver Gasch, of this Court, preliminarily enjoined any further stock purchases by BCCI. In the course of that lawsuit, BCCI retained the services of prominent Washington counsel, Clark M. Clifford ("Clifford") and Robert A. Altman ("Altman"). Shortly after an amended complaint was filed in 1980, BCCI and all but one defendant settled the claims; BCCI subsequently entered into a consent judgment with the Securities and Exchange Commission. See Financial General Bankshares, Inc. v. Metzger, 523 F. Supp. 744, 747 & nn. 4-5 (D.D.C. 1981), vacated on jurisdictional grounds, 680 F.2d 768 (D.C. Cir. 1982).

B. Sale of First American Bank

Not long after BCCI had settled the Financial General Bankshares case, a new proposal was made to sell First American to Credit and Commerce American Investment, B.V. ("CCAI"), a Netherlands shell corporation wholly owned by Credit and Commerce American Holdings, N.V. ("CCAH"), a Netherlands Antilles corporation. The record shareholders of CCAH were wealthy individuals from the Persian Gulf. Although not apparent at the time, it now appears that nearly all of the money required for the purchase had been loaned to the investors by BCCI. Some of these loans were actual extensions of credit while others were false loans created to disguise BCCI's takeover of First American Bank.

In 1981, the Board of Governors of the Federal Reserve System held hearings to determine whether to approve the sale. Some of the proposed investors from the Middle East testified. See, e.g., BCCI Holdings (Luxembourg) S.A. v. Khalil, 1999 WL 432560 *17 (D.D.C. Jun. 23, 1999). Clifford and Altman appeared as counsel in those proceedings. Ultimately, the Federal Reserve approved the sale. Shortly thereafter, Clifford and Altman were chosen by the shareholders to be Managing Directors of the shell corporations, CCAH and CCAI, as well as directors and senior officers of the re-christened First American Corporation, the holding company that controlled the largest bank in the Washington, D.C. area. See generally First American Corp. v. Al-Nahyan, 17 F. Supp.2d 10, 13-14 (D.D.C. 1998).

C. BCCI's Connection to General Noriega

BCCI again came to the fore in 1987 and 1988 in connection with investigations into narcotics trafficking by Panamanian General Manuel Noriega. It was known that Noriega had a banking relationship with BCCI and First American. Federal prosecutors, and then committees of the United States Senate and House of Representatives, investigated allegations that BCCI was laundering Noriega's drug proceeds. BCCI was indicted in the United States District Court in Tampa, Florida and subsequently pled guilty to federal money laundering charges. Certain BCCI employees also were indicted, tried, and convicted on money laundering charges. See United States v. Awan, 966 F.2d 1415 (11th Cir. 1992) (affirming convictions in large part).

D. Seizure of BCCI

Then in 1990 and early 1991, BCCI became the focus of attention in the United States and abroad. In this country, news reports in 1990, and intensifying in early 1991, indicated that the Federal Reserve was investigating rumors that BCCI had secretly been behind the takeover of First American. In December 1990, the Republic of Panama sued BCCI and First American in the United States District Court for the Southern District of Florida, alleging that BCCI illegally owned First American and that both sets of corporate entities had violated federal racketeering laws in laundering proceeds from narcotics trafficking for the benefit of General Noriega.*fn4

Abroad, 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. This included seizure of BCCI's deposit agencies by the Superintendent of Banks of the State of California (since retitled the Commissioner of Financial Institutions of the State of California) and the Superintendent of Banks of the State of New York. In addition, the New York Superintendent of Banks seized BCCI's assets at various New York banks, including those at the Bank of New York ("BNY") and Security Pacific Bank ("SPB"). 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. Responding to the closure of BCCI and the apparent confirmation of its illegal ownership of First American, depositors in BCCI filed putative class action lawsuits in August 1991 against BCCI's auditors, First American and approximately 70 other parties charging RICO violations.*fn5

E. Appointment of BCCI Liquidators

Upon closure, courts in Luxembourg and the Cayman Islands appointed provisional Liquidators to take control of the BCCI corporations. These Liquidators subsequently were permanently appointed,*fn6 and are hereafter referred to as "the Liquidators" or "Court Appointed Fiduciaries." The Court Appointed Fiduciaries were under immediate pressure to determine the extent of the fraud, the true amount of BCCI's assets, and what payment, if any, the innocent depositors and creditors would receive from the liquidation. From the information available in 1991, BCCI was hopelessly insolvent, with a "black hole" quantified by the Court Appointed Fiduciaries at approximately $10 billion. Unlike in the United States, where most bank deposits are federally insured up to $100,000, the depositors in BCCI had no such governmental safety net. It was predicted that the victims of the BCCI collapse would receive a return of between zero and ten cents on the dollar.

With such a bleak outlook, the prospects for an orderly winding up of the BCCI corporations were not great. To avoid internecine conflict, the English, Luxembourg, and Cayman Islands Liquidators agreed to pool whatever assets they could recover from their respective BCCI corporations to be distributed equitably among all of BCCI's creditors and depositors. But, in other countries with so-called "ring-fenced branches" of BCCI, local liquidators who were liquidating individual BCCI offices on a piecemeal basis with preference for local creditors, threatened to create a chaotic worldwide scramble for assets, further depleting BCCI's resources and creating inequalities among the victims.

F. Filing of This Case

Further complicating the task of the Court Appointed
Fiduciaries was the legal jeopardy facing BCCI. From July through
November 1991, BCCI's affairs were investigated by banking
regulators, federal prosecutors, and prosecutors from New York
County. These investigations led to administrative charges filed
by the Federal Reserve seeking a $200 million civil penalty, an
indictment in New York County, and this case, triggered by the
November 15, 1991, filing of a three-count indictment charging
BCCI with conspiracy, wire fraud and racketeering. Three
individuals also were charged in the case:  Abedi, Naqvi, and
Ghaith R. Pharaon, a wealthy investor in BCCI and participant in
many of BCCI's fraudulent schemes.

The Court Appointed Fiduciaries and the United States authorities — the Department of Justice, the Federal Reserve and the District Attorney of New York County, collectively — met in November 1991 to seek a resolution that would both vindicate law enforcement interests in punishing the wrongdoers while maximizing the return to the innocent victims of BCCI's fraud. As a product of those discussions, the United States filed a superseding criminal Information that included a forfeiture allegation under federal racketeering law. See Fed. R. Crim. P. 7(c)(2); 18 U.S.C. § 1963. The Court Appointed Fiduciaries proposed to plead guilty on behalf of the BCCI corporations to the Information, and obtained expedited approval from their appointing courts to do so.

II. BCCI PLEA AGREEMENT

The parties presented the Plea Agreement to this Court on December 19, 1991. Under the Agreement, all BCCI assets found in the United States were to be forfeited pursuant to the RICO forfeiture provision, 18 U.S.C. § 1963.*fn7

That section renders forfeitable any property interest that the defendant acquires or maintains in the course of a RICO violation or that the defendant obtains with proceeds from a RICO violation. See 18 U.S.C. § 1963(a). In the Plea Agreement, the parties agreed that BCCI had been engaged in a pattern of racketeering activity from 1977 to 1991.

With regard to forfeited assets, the Plea Agreement
established the Worldwide Victims Fund and the U.S. Fund.
Forfeited assets were to be disbursed in equal amounts to the
Worldwide Victims Fund and the U.S. Fund. See Plea Agreement
¶ 11(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. ¶ 14.
The purpose of the U.S. Fund was 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 was 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. ¶ 12(f).

This partnership between prosecutors and defendants was not universally welcomed. The Plea Agreement was opposed by competing BCCI branch liquidators, as well as various creditors, hoping to obtain preferential access to BCCI's assets in the United States. This Court considered hundreds of pages of submissions from objecting non-parties before accepting the Plea Agreement on January 24, 1992.*fn8 Ultimately, this Court accepted the Plea Agreement, finding:

  [T]he plea agreement now before the Court reflects on a truly
  global measure extraordinary efforts and amazing cooperation
  of a multitude of signatories representing a myriad of
  jurisdictions to fully settle actions against the corporate
  defendants, which had operated in 69 countries around the
  globe, and through that plea resolution, to locate and
  protect all realizable assets of BCCI for the ultimate
  benefit of the depositors, creditors, United States financial
  institutions, and other victims of BCCI. The promise of the
  plea agreement is that those extraordinary efforts, that
  amazing cooperation, shall continue.

Transcript at 5-6 (January 24, 1992). In accordance with 18 U.S.C. § 1963, this Court then entered an Order of Forfeiture. See United States v. BCCI Holdings (Luxembourg) S.A., 1992 WL 100334 (D.D.C. 1992).*fn9

III. FORFEITURE PROCEEDING

Neither the parties nor the Court anticipated that the Plea Agreement and Order of Forfeiture would become a crucible for modern forfeiture law. Congress had amended RICO to include the forfeiture provision in 1984. See First American, 17 F. Supp.2d at 21; Terry Reed, Criminal Forfeiture Under the Comprehensive Forfeiture Act of 1984, 22 Am. Crim. L. Rev. 747, 750-76 (1985) (discussing legislative history of § 1963). In general terms, § 1963(l) establishes the procedure for a third party to assert that property should not be forfeited to the United States either because the third party had an interest in the property superior to that of the defendant at the time of the RICO violation or that the third party is a bona fide purchaser for value of the property with no knowledge that the property was subject to forfeiture. See 18 U.S.C. § 1963(l).

Because of the diversity of assets identified in the forfeiture proceeding, and the number of parties affected, this Court was called upon to adjudicate objections to forfeiture of specific assets based on such diverse legal grounds as the United States Constitution, international treaties, principles of federalism, principles of international comity, federal bankruptcy and interpleader law, and state common law principles. At the time these issues were raised, there was little judicial precedent to guide this Court in adjudicating the claims of third-party objectors.

In total, there were rulings on 175 claims filed pursuant to 18 U.S.C. § 1963(l) ("L claims"). As is discussed in detail in section VII below, these required the Court to interpret the criminal RICO statute in entirely new contexts, apply new provisions of Article 4A of the Uniform Commercial Code, and resolve numerous issues of first impression in banking and insolvency law. This Court, moreover, presided over a most unusual RICO proceeding, in which the criminal defendants (through the Court Appointed Fiduciaries) invested significant resources to provide assistance to the United States in the identification and realization of forfeitable assets, and in litigation of L claims by creditors seeking repayment from BCCI funds in the United States.

A. Procedure for Amending the Order of Forfeiture

The purpose of the preliminary Order of Forfeiture was to identify the property of the defendants that would be forfeited as part of the defendants' sentence, and to allow the Government to commence the ancillary proceeding to resolve any third-party claims. See Fed. R. Crim. P. 32(d)(2). The preliminary order of forfeiture was final as to BCCI once entered but remained "preliminary" as far as other parties were concerned until all properly-filed third party claims were adjudicated.

In this case, the Court determined that the Preliminary Order of Forfeiture would contain a generic description of the forfeited property — i.e. all assets of the defendants found in the United States, with certain specified exceptions — and would set forth a schedule of the specific assets known to exist at the time the preliminary order was entered. 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, United States v. BCCI Holdings (Luxembourg) S.A., 1992 WL 34142 (D.D.C. Jan. 31, 1992), which directed immediate seizure of the specific assets listed therein.

RICO affords the Government the opportunity to conduct
post-conviction discovery "to facilitate the identification or
location of property declared forfeited."  See 18 U.S.C. § 1963(k).
With substantial cooperation from the Court Appointed
Fiduciaries, the Department of Justice conducted such discovery
and identified substantial additional assets traceable to BCCI.

At the time, the applicable rules were silent as to how and when the Court may amend its Order of Forfeiture to include newly-discovered property subject to forfeiture. With approval from the Court, each time the Government identified another group of assets subject to forfeiture, it would move the Court to amend the Preliminary Order to add the newly-discovered property. On six occasions beginning January 31, 1992 and continuing until December 22, 1998, the court amended the Preliminary Order to include a Supplemental List of Forfeited Property that described additional assets that the Government has subsequently located.*fn10

On each occasion, the Court made a preliminary finding, by a preponderance of the evidence, that the property discovered by the Government and included on the Supplemental List of Forfeited Property was, in fact, subject to forfeiture under § 1963(a). And on each occasion, the Court conducted an ancillary proceeding in which third parties could petition to amend the order of forfeiture to recognize their legal interests in the forfeited property.*fn11 See United States v. BCCI Holdings (Luxembourg) S.A. (Petition of Bank of California International), 980 F. Supp. 522 (D.D.C. 1997) (the preliminary order may be amended as often as necessary to include additional property subject to forfeiture that the Government may identify through post-trial discovery).

The procedure adopted by this Court has been ratified by the Proposed Rule 32.2 of the Federal Rules of Criminal Procedure, which is likely to take effect on December 1, 2000.*fn12

B. Liquidation of Uncontested Forfeited Property

The property listed in the Preliminary Order of Forfeiture (January 24, 1992) and in the First Supplemental List of Forfeited Property (January 31, 1992), consisted primarily of deposits in various bank accounts. These assets, and many others that were subsequently added to the Preliminary Order, were entrusted to the U.S. Marshals Service to collect, invest, and disburse pursuant to subsequent orders of the Court. In a number of instances, where the forfeited asset was residential real property, for example, or undeveloped land, the Marshals Service liquidated the property in accordance with its normal procedures in forfeiture cases.

In several instances, it appeared that the storage and maintenance costs associated with a particular asset could be mitigated by authorizing the Marshals to dispose of the property in an interlocutory sale. In these instances, the defendants had no objection to the interlocutory sale, but the property was the subject of a third-party claim that was then pending in the ancillary proceeding. To minimize unnecessary costs to the Government, while protecting the rights of the third-party claimants, the Court issued an order to show cause why the property could not be reduced to cash, with the cash becoming the subject of the third-party claim. In each instance where this procedure was employed, the third-party claimants offered no objection to the interlocutory sale, and the property was then liquidated by the Marshals. In all of these instances, the U.S. Marshals Service provided outstanding service to the Court, the Government, the Court Appointed Fiduciaries and the victims of the defendants' fraud. The Marshals managed an inventory of over $1 billion in assets, including some that presented peculiar problems of investment and liquidation, as well as expertise in the fields of securities and bankruptcy law. The Marshals Service demonstrated a level of competence and imagination in resolving nettlesome issues for which it should feel justly proud.

IV. APPOINTMENT OF TRUSTEES

Not all of BCCI's assets in the United States, however, were amenable to liquidation by the Marshals Service. For example, the Plea Agreement confirmed that BCCI had a controlling interest in CCAH, the ultimate parent corporation of First American Corporation. It became necessary to determine the extent of that interest and find a means of liquidating that interest. In addition, the United States had obtained the loan portfolios and real property interests of the BCCI agencies in New York and California, which required the assistance of an expert qualified to collect the outstanding loans and to liquidate ongoing businesses, including various hotels, apartment complexes and real-estate development projects.

Section § 1963(e) gives the Court broad powers to take such action
as is necessary "to protect the interest of the United States in
the property ordered forfeited."  The Court interpreted that
subsection to authorize the appointment of two Trustees: one to
take control of First American and liquidate BCCI's interest
therein, and another to liquidate the assets obtained from the
BCCI agencies in New York and California.

A. First American Trustee

As it turned out, BCCI's interest in First American Corporation amounted to only slightly more than 61 percent of the corporate stock. Early in the forfeiture proceeding, the Court Appointed Fiduciaries, the Department of Justice, the Board of Governors of the Federal Reserve System and the New York County District Attorney, and others, requested that the Court appoint a Trustee to take control of First American.

The question arose whether § 1963(e) authorized the appointment of a trustee to manage the assets of a third party corporation in which the defendant had only a partial interest. Section 1963(d) authorizes courts to issue pre-trial restraining orders to preserve the availability of property for forfeiture. This Court determined that if a third party's property could be restrained pre-trial to preserve the Government's interest in the property subject to forfeiture, then the court could appoint a trustee post-conviction to manage and liquidate third-party property so that the United States could realize its 61 percent interest. See United States v. BCCI Holdings (Luxembourg) S.A. (Application of Clifford and Altman), 980 F. Supp. 496 (D.D.C. 1997). On a related point, the Court held that she may require the non-forfeitable portion of the corporate property to be held in escrow to preserve the status quo until competing third-party claims were resolved in a separate case. Id. Finding the appointment of a Trustee was authorized and appropriate, the Court appointed Harry W. Albright, Jr., an eminent individual with extensive banking and governmental experience, as Trustee of First American Corporation ["First American Trustee"] on June 23, 1992. See United States v. BCCI Holdings (Luxembourg) S.A., 1993 WL 332461 (D.D.C. Aug. 19, 1993) (clarifying Order Appointing Trustee).

1. Early Stages of the Trusteeship

The purpose of the trusteeship was twofold. First, it would serve to sever all BCCI ties to First American Corporation through its off-shore parent companies (CCAH and CCAI) some of whose shareholders were accused of being BCCI nominees. Second, the appointment of a court-supervised federal RICO trustee, untainted by the BCCI affair, was to instill depositor confidence in First American and its subsidiaries and stabilize its deposit base in anticipation of First American's liquidation under the First American Trustee's supervision.

The Order Appointing Trustee directed the First American Trustee to collect and hold the shares of FAC stock and, with Court approval, to sell or otherwise dispose of such shares or to cause the Board of Directors of FAC and its wholly owned subsidiary, First American Bankshares, Inc. ("FAB"), to sell or otherwise dispose of all assets owned or controlled by FAC within one year and at the best price under the circumstances. See Order Appointing Trustee at 3. At the conclusion of that liquidation process, the Department of Justice and the Federal Reserve were to certify to the Court which portion of the CCAH stock had been owned by BCCI.

As with the Court Appointed Fiduciaries, the First American Trustee faced a bleak situation. News reports linking First American to BCCI had led to a run on deposits in the latter half of 1991. The Federal Reserve estimated that the total depositor and creditor liabilities of First American would exceed its assets upon liquidation by as much as $300 million. It was expected that the Federal Deposit Insurance Corporation ("FDIC") would ultimately be liable for that amount. Additionally, First American was a defendant in the above-mentioned civil lawsuits brought by BCCI depositors and the Republic of Panama, each seeking treble damages under RICO.

Compounding difficulties, the Trustee, as the sole shareholder, inherited a Board of Directors, which on the eve of the Trustee's appointment had voted to give management an extraordinary compensation package, notwithstanding the bank's dire straits.*fn13 It also became apparent that the Trustee and the existing Board and First American management team had conflicting views as to how First American's assets should be sold and whether First American should sue those who were instrumental in BCCI's illegal takeover of the bank.*fn14 The First American Trustee, concerned by the insistence of some Board members that the compensation plan be adopted without change and by the conflict over strategy, reconstituted the First American Board of Directors in November 1992.

2. Sale of First American's Banking Assets

The Order Appointing Trustee required that First American's assets
be sold "provided that the sale takes place expeditiously, but in
any event within one year from the date of this Order or such
further time as the Court may permit. . . ."  See United States
v. BCCI Holdings (Luxembourg) S.A, 1993 WL 332461 *2 (quoting
Order Appointing Trustee at 3). Acting with diligence and
dispatch, the Trustee and the reconstituted First American Board
held an auction, after which the stock of Metro was sold to First
Union Corp. ("First Union") in a "whole bank" transaction. See
United States v. BCCI Holdings (Luxembourg) S.A., 1993 WL 229568
(D.D.C. June 16, 1993) (approving transaction).

Upon the completion of the sale of FAB's remaining assets,*fn15 the proceeds totaled $480,048,000 in cash; the specter of a $300 million shortfall dissipated. However, First American's assets remained encumbered by $264 million in potential liabilities consisting ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.