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Chalabi v. Hashemite Kingdom of Jordan

September 19, 2007

AHMAD CHALABI, ET AL., PLAINTIFFS,
v.
THE HASHEMITE KINGDOM OF JORDAN, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Louis F. Oberdorfer United States District Judge

AMENDED MEMORANDUM OPINION

Currently pending is the Defendants' Motion to Dismiss the Complaint in its Entirety [dkt. #9]. The calendar committee of this court transferred this motion to the undersigned for resolution. For the reasons stated below, that motion is GRANTED.

I. BACKGROUND

A. Plaintiff's Claims

Plaintiff Ahmad Chalabi is a citizen of the Republic of Iraq. Compl. ¶ 14. He moved to Jordan in 1977. ¶ 25. That same year, he founded Petra Bank, "a bank organized under the laws of the Hashemite Kingdom of Jordan, having its principal place of business in Amman, Jordan." ¶ 15. Chalabi was Petra Bank's General Manager and Chairman of its Board of Directors until 1989, when it was taken over by the Defendants. Chalabi left Jordan in 1989 and returned to Iraq.

By 1989, Petra Bank had become the second largest bank in Jordan, with capital of approximately 30 million Jordanian Dinars, then approximately $90 million. ¶ 26. Petra International Banking Corp. ("PIBC") is Petra Bank's 70-percent-owned Washington, D.C., subsidiary, which it founded to gain further access to international corporate customers. Petra Bank maintained a residence within the District of Columbia, which was used by bank employees who made business trips to the United States on a daily basis to collect upon the checks deposited in Petra Bank. The volume of this activity in the U.S. was approximately $12 million daily. Petra Bank also opened and confirmed letters of credit through several American banks in amounts as great as $40 million daily. ¶ 27.

The Defendants are the Hashemite Kingdom of Jordan, which the Complaint concedes is a sovereign state, ¶ 8; the Central Bank of Jordan, "an agency or instrumentality of Jordan . . . charged with the regulation and oversight of the business of banking in Jordan," ¶ 19; Muhammed Saeed El-Nabulsi, the former Governor of the Central Bank being sued in his official capacity, ¶¶ 8, 20; and Mudhar Badran, the former Prime Minister of Jordan, also being sued in his official capacity, ¶¶ 8, 21. The Complaint expressly acknowledges that "all the defendants are foreign states" within the meaning of the United States Foreign Sovereign Immunities Act. ¶ 8.

In sum, the Complaint accuses the Defendants of taking money from Petra Bank, falsely making the bank appear insolvent, seizing it unlawfully, falsely charging Chalabi with embezzlement, ruining his reputation in the diplomatic community, and continuing to loot both the banks' remaining assets. It alleges that Jordan convicted Mr. Chalabi as a punishment for his opposition to Mr. Hussein and fear that he would disclose information about illegal Jordanian arms sales to Iraq: "In retaliation for Ahmad Chalabi's tireless efforts to unseat Saddam Hussein from power in Iraq . . . defendants combined and conspired to destroy Ahmad Chalabi in his business and property and his influence, and thus his ability to continue with his efforts against Saddam Hussein and Jordan's complicity with him." ¶ 2.

Chalabi alleges several specific retaliatory actions. In August 1989, the Central Bank of Jordan announced that it had discovered financial fraud at Petra Bank. Acting under its regulatory authority, it seized and liquidated Petra Bank, and placed it in receivership. Chalabi argues that these actions were based on the allegedly "false pretense" that the bank was in serious financial trouble. ¶ 2. Based on the "contrived Bank failure," Jordan issued an order for Chalabi's detention. Chalabi asserts that this detention order was part of an unsuccessful "plot to have him kidnaped by members of the Iraqi Mukhabarat (Saddam's notorious intelligence agency)." ¶ 3. Jordan filed allegedly "false embezzlement charges against Chalabi in Jordan's military courts," leading to a "sham trial." Chalabi was convicted of embezzlement and sentenced in absentia to 22 years in prison. ¶4. Chalabi asserts that this conviction prevented him from returning to Jordan and timely discovering the extent to which the Defendants were perpetrating fraud on the banks.

Chalabi further asserts that the defendant "continued the activities of Petra Bank in the United States . . . but . . . did so in a fraudulent manner not calculated to protect and preserve the Bank, but, rather, to loot it and to gain money for themselves and others under false and fraudulent pretenses, while blaming Chalabi for its losses." ¶49. The Complaint also alleges that the Defendants took certain actions in connection with the seizure and liquidation of Petra Bank that "ultimately" caused the ruination of the Banks, resulting in the loss of 30 jobs in the District of Columbia. ¶¶ 2, 55, 66. Chalabi also alleges that these actions "caused the disruption or cessation of hundreds of millions of dollars worth of banking activity involving both Petra Bank and PIBC throughout the United States, including bank deposits, bank letters of credit, bank confirmation letters of credit, bank acceptances, bank loans, bank loan guarantees, and VISA and travelers' check payments." ¶10. In particular, Chalabi alleges that the defendants established a sham "Liquidation Committee," which brought a lawsuit in the United States "to ensure that [the Banks'] U.S. assets were transferred to the control of the Liquidation Committee in Jordan." ¶ 67; In re Hourani, 180 B.R. 58 (Bankr. S.D.N.Y. 1995). Finally, the Complaint alleges that Defendants have used U.S. mails and wires "to disseminate [Chalabi's] conviction." It also alleges that, "[m]ore recently," in diplomatic communications, the Kingdom requested the U.S. Government's assistance in extraditing Chalabi to Jordan and falsely implicated Chalabi in leaking sensitive U.S. intelligence information to Iran, "which caused the United States to order a destructive and damaging raid on Chalabi's home and offices in Bagdad." ¶¶ 6, 77, 78.

Based the on the foregoing allegations, Chalabi invokes the Racketeer Influenced and Corrupt Organizations Act ("RICO"), §18 U.S.C. 1961 et seq., (Count I); common law fraud (Count II); conversion (Count III); interference with contract rights (Counts IV, V, VIII); and interference with prospective economic advantages (Counts VI, VII, IX). Counts V, VIII, VII and IX are derivative claims on behalf of Petra Bank and PIBC .*fn1

B. Defendants' Motion to Dismiss

All Defendants filed a motion to dismiss for lack of jurisdiction under Rules 12(b)(1) and (2) of the Federal Rules of Civil Procedure. In the alternative, they move for dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure, for three reasons: (1) the Act of State Doctrine renders Chalabi's claims non-justiciable, (2) the claims are barred by the statute of limitations; and (3) the derivative claims on behalf ...


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