ACLI INTERN. COMMODITY SERV. v. Banque Populaire Suisse

• Court: U.S. District Court — Southern District of New York
• Writing for the Court: SOFAER
• Citation: ACLI INTERN. COMMODITY SERV. v. Banque Populaire Suisse, 609 F. Supp. 434 (S.D. N.Y. 1984)
• Decision Date: 20 November 1984
• Docket Number: No. 82 Civ. 1058 (ADS).,82 Civ. 1058 (ADS).
• Parties: ACLI INTERNATIONAL COMMODITY SERVICES, INC., and A.C. Israel Enterprises, Inc., Plaintiffs, v. BANQUE POPULAIRE SUISSE, Advicorp Advisory and Financial Corporation, S.A., and Naji Robert Nahas, Defendants.

609 F. Supp. 434

ACLI INTERNATIONAL COMMODITY SERVICES, INC., and A.C. Israel Enterprises, Inc., Plaintiffs, v. BANQUE POPULAIRE SUISSE, Advicorp Advisory and Financial Corporation, S.A., and Naji Robert Nahas, Defendants.

No. 82 Civ. 1058 (ADS).

United States District Court, S.D. New York.

November 20, 1984.

Rogers & Wells, New York City, for plaintiffs; William R. Glendon, Guy C. Quinlan, James M. Lane, New York City, of counsel.

Arnold & Porter, Washington, D.C., Gilbert, Segall and Young, New York City, for defendant Banque Populaire Suisse; Brooksley Born, Alexander E. Bennett, Lawrence V. Stein, Douglas L. Wald, Daniel R. Waldman, Washington, D.C., Bernard J. Rosenthal, Richard A. Setterberg, New York City, of counsel.

Breed, Abbott & Morgan, New York City, for defendant Naji Robert Nahas; Noah Nunberg, Thomas W. Kelly, New York City, of counsel.

OPINION AND ORDER

SOFAER, District Judge:

A.C. Israel Enterprises, Inc., and ACLI International Commodity Services, Inc. (collectively, "ACLI"), instituted this action for fraud against Banque Populaire Suisse ("the Banque"), its alleged agent Advicorp Advisory and Financial Corporation, S.A. ("Advicorp"), and Naji Robert Nahas ("Nahas"). Plaintiffs seek $20,100,000 in damages. ACLI alleges that defendants conspired to evade limits set by ACLI and the Commodity Exchange, Inc. ("Comex") on the extent to which any individual customer may trade in silver futures contracts. ACLI claims resulting losses of over $28 million, of which only $8 million has been repaid.

As part of its business as a commodities broker, ACLI places orders on Comex, a silver futures market, for customers wishing to trade in silver futures contracts. If an ACLI customer fails to make payment on orders executed on its behalf, ACLI is liable for the default under Comex rules. Amended Complaint ¶ 11 ("Complaint") ACLI seeks to limit potential losses when trading in the fluctuating silver futures market by imposing limits on the number of futures contracts which any one customer may hold. Id. ¶ 13. These restrictions help ensure that "no one customer will unduly expose ACLI in the event of default." Id. ACLI also requires each of its customers to agree in writing that no one other than the customer has any interest in its account. Id. ¶ 12. This helps lessen the risk that a customer is "using nominee accounts to conceal his ownership and/or control of futures contracts in excess of the number ACLI would otherwise permit him to trade." Complaint ¶ 12. Comex also sets its own limits on the number of silver futures contracts held by any individual.

ACLI claims that Advicorp, acting as an investment advisory service to the Banque, introduced a series of eleven accounts to ACLI. Beginning on January 23, 1979, an account was opened for Litardex Traders, Inc. with Mr. Nahas listed as its president. ACLI Memo in Opposition to Banque Motion to Dismiss the Complaint at 5 ("ACLI Memo I"). Then, ACLI contends, on February 14, 1979, another account was introduced to ACLI in New York in the Banque's name; ACLI also asserts that between February 15, 1979 and January 21, 1980, the Banque and Advicorp introduced nine other accounts to ACLI's affiliate in Geneva, Switzerland, to be approved by ACLI in New York, in the names of Rene Maret, Jean-Jacques Bally, Paul Bisoffi, Pierre-Alain Hirschi, Antoine Achkar, Selim Gabriel Nassif, Emir Fayez Chehab, Francisco Javier Benedi-Garcia, and the corporation Imovest Inter, S.A. Complaint ¶¶ 20-21.

In September 1979, the Commodities Futures Trading Commission (CFTC) issued a "Special Call" to the Banque to determine on whose behalf the Banque was trading. When the Banque refused to provide this information, the CFTC brought suit against the Banque under the Commodity Exchange Act ("the Act"), 7 U.S.C. §§ 9 and 13b (1976). In the Matter of Banque Populaire Suisse, Comm.Fut.L.Rep. (CCH) ¶ 21,255 (CFTC 1981). As a result of that action, the Banque was ordered in 1981 to cease and desist from further violation of the Act and was suspended from trading on all United States contract markets for 90 days. Id. at 25,257. ACLI asserts that it was unaware of the CFTC's investigation of the Banque.

Plaintiff claims that in the fall of 1979, ACLI and Comex had also become concerned about the large number of silver futures contracts acquired by the Banque, and that Comex had become concerned about Nahas' contracts as well. They claim to have begun imposing restrictions on the Banque and Nahas' trading in October and November of 1979. By late November, ACLI asserts that it had begun liquidating the silver futures positions held in the Banque's name, and that the Banque had transferred most of its account to ContiCommodity Services, Inc. ACLI Memo I, at 7.

ACLI alleges that the Banque, Advicorp, and Nahas devised a scheme, at some undetermined date, whereby they would use the remaining ten accounts carried by ACLI to continue trading in greater amounts than permitted. ACLI claims that the ten account holders, although representing that they were acting as individuals and that no one else had any interest in their accounts, were in reality "nominees" of Nahas, the Banque, and Advicorp and that these three entities actually controlled all of the accounts. Complaint ¶ 25.

From January to March 1980, the price of silver dropped from roughly $50 per ounce to less than $11 per ounce. Despite representations allegedly made by Advicorp's officers Jean-Jacques Bally and Pierre-Alain Hirschi that Advicorp's customers were solvent, the ten accounts defaulted in an aggregate amount of over $28 million, and ACLI was required to pay Comex that amount. Complaint ¶ 29. ACLI contends that had it "been aware that these accounts were mere nominees" of Nahas, the Banque, and Advicorp, opened for the purpose of exceeding position limits, ACLI would not have accepted these accounts and thus would not have lost $28 million. Id. It further claims that through its introduction of the ten "nominee" accounts, Advicorp was the "vehicle for the fraudulent trading" and that the Banque in turn had extensive control of Advicorp's activities. ACLI Memo in Opposition to Banque Motion for Summary Judgment or a Separate Trial at 4, n.*. ("ACLI Memo II").

After learning of Nahas' involvement with these ten accounts, ACLI asserts that it entered into settlement negotiations with Nahas' representatives to recover the debit balances on these ten accounts receivable. Complaint ¶ 30. ACLI's representatives at the negotiations included Henry Maringer, its President and Chief Operating Officer; Herbert Stoller, an attorney from the law firm of Curtis, Mallet-Prevost, Colt & Mosle; and Jean-Louis Blomme, head of ACLI's London office. Julius Katz, now ACLI's Chairman of the Board and in 1980 its Senior Vice President, was periodically consulted, as was A.C. Israel. At the end of May 1980, Chester Grant of the law firm of Rogers & Wells replaced Herbert Stoller and his firm. Representing Nahas were Irwin R. Robinson and Joseph Getraer, both attorneys from Rosenman, Colin, Freund, Lewis & Cohen; and Professor Ibrahim Fadlallah, also an attorney. The Banque played no part in any of the negotiations.

Mr. Blomme of ACLI testified that on March 26, 1980 he was assured by Nahas' representatives that ACLI "would not suffer any loss because of the silver situation." Blomme Tr. 25, reprinted in ACLI Memo II, at 4. ACLI further alleges that on April 12 an agreement was reached which would have resulted in ACLI's receiving full compensation. Id. ACLI thereafter submitted to Nahas' representatives a draft agreement which would have settled the ten accounts. See Banque Memo in Support of Motion for Summary Judgment or Separate Trial at 7 ("Banque Memo"). A meeting was convened on April 16, 1980, the substance of which is in great dispute. ACLI claims that Nahas falsely represented that he was unable to honor the settlement agreement, because "he did not have sufficient assets to pay more than $8 million in settlement." ACLI Memo in Opposition to Banque Motion for Accelerated Separate Trial at 3 ("ACLI Memo III"). ACLI's attorney Stoller claims he was told that it was beyond Nahas' "financial capabilities to perform, that there were many claims against Mr. Nahas ..." (Stoller Tr. 119-20, reprinted in ACLI Memo II, at 25), and that "there wasn't enough to go around" (Stoller Tr. 124, reprinted in Second ACLI Memo at 26). Nahas' attorney, Robinson, denies that he ever represented that $8 million was all Nahas was capable of paying, but rather said that $8 million was all Nahas was willing to pay. Robinson asserts that at most he stated that Nahas "was not prepared" to offer ACLI more than $8 million.

During the negotiations, ACLI contends that it undertook an investigation into Nahas' assets but could obtain no reliable information. Allegedly persuaded that Nahas' representations were accurate, and relying on them, ACLI agreed to settle for $8 million. On April 28, 1980, a written agreement was executed between ACLI and Compania Financiera Caldas, S.A. ("Caldas"), a Panamanian corporation apparently owned or controlled by Nahas. ACLI states that the agreement was made with Caldas rather than Nahas because Nahas did not want his name to appear on the settlement documents.

ACLI agreed to "sell, transfer and assign" to Caldas "all the commodity futures account deficit balances (i.e., accounts receivable) owed to ACLI by the following persons and corporations: Antoine Achkar, Selim Gabriel Nassif, Emir Fayez Chehab, Litardex Traders, Inc., Imovest Inter, S.A., Jean-Jacques Bally, Paul Bisoffi, Pierre-Alain Hirschi, Rene Maret." Banque Memo, Ex. 1 (punctuation added). These nine individuals were referred to collectively as the "Debtors." Banque Memo, Ex. 1. Originally, Francisco Javier Benedi-Garcia was also included on this list, but his name was later deleted. Id.

In exchange for transferring the accounts receivable, ACLI was to...