Bangl. Bank v. Rizal Commercial Banking Corp.
| Decision Date | 08 April 2022 |
| Docket Number | Index 652051/2020 |
| Citation | 2022 NY Slip Op 31167 (U) |
| Parties | BANGLADESH BANK, Plaintiff, v. RIZAL COMMERCIAL BANKING CORPORATION, MAIA DEGUITO, ANGELA TORRES, LORENZO TAN, RAUL VICTOR TAN, ISMAEL REYES, BRIGITTE CAPINA, NESTOR PINEDA, ROMUALDO AGARRADO, PHILREM SERVICE CORP., SALUD BAUTISTA, MICHAEL BAUTISTA, CENTURYTEX TRADING, WILLIAM GO, BLOOMBERRY RESORTS AND HOTELS, INC..EASTERN HAWAII LEISURE COMPANY, LTD., KAM WONG, WEIKANG XU, DING ZHIZE, GAO SHUHUA, and JOHN DOES, Defendants. |
| Court | New York Supreme Court |
Unpublished Opinion
DECISION + ORDER ON MOTION
The following e-filed documents, listed by NYSCEF document number (Motion 002) 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49 57, 58, 148, 149, 184, 193, 230 were read on this motion to/for DISMISSAL
The following e-filed documents, listed by NYSCEF document number (Motion 006) 100, 101, 102, 103, 104, 105, 106, 107, 108 109, 110, 111, 112, 113, 120, 123, 124, 125, 126, 127, 128 129, 130, 139, 140, 141, 142 were read on this motion to/for DISMISSAL
The following e-filed documents, listed by NYSCEF document number (Motion 007) 114, 115, 116, 117, 118, 121, 131, 132, 133 134, 135, 136, 137, 138, 143, 144, 145, 146, 147 were read on this motion to/for DISMISS
This action arises from an international money laundering scheme where the participants stole more than $101 million from an account plaintiff Bangladesh Bank maintains at the Federal Reserve Bank of New York (New York Fed). Unknown North Korean hackers allegedly infiltrated plaintiffs computer network in Bangladesh and issued multiple unauthorized payment orders to transfer funds from plaintiffs New York Fed account to various bank accounts in the Philippines and elsewhere. (NYSCEF Doc. No. [NYSCEF] 1, Complaint ¶3.) The stolen funds were then laundered through two gambling casinos in the Philippines operated by two of the defendants herein, defendants Bloomberry Resorts and Hotels, Inc. (BRHI) d/b/a Solaire Resort & Casino and Eastern Hawaii Leisure Company, Ltd. (EHL) d/b/a Midas Hotel & Casino. (Id. ¶¶ 25, 25, 262, 271.)
In motion sequence number 002, BRHI moves, pursuant to CPLR 3211 (a) (7) and (8), to dismiss the complaint for lack of personal jurisdiction and for failing to state a cause of action. BRHI also moves under CPLR 327 (a) for dismissal for forum non conveniens.[1]
In motion sequence number 006, EHL moves, pursuant to CPLR 306-b and CPLR 3211 (a) (8), to dismiss the complaint for lack of personal jurisdiction. EHL also moves for dismissal under CPLR 327 (a) for forum non conveniens.
In motion sequence number 007, defendant Kam Sin Wong a/k/a Kim Wong (Wong) moves, pursuant to CPLR 306-b and CPLR 3211 (a) (8), to dismiss on the ground he was not properly served.
The following facts are drawn primarily from the complaint and are assumed to be true for purposes of this motion. (See Kronos, Inc. v AVX Corp., 81 N.Y.2d 90, 92 [1993].)
Plaintiff is the central bank of the People's Republic of Bangladesh. (NYSCEF 1, Complaint ¶ 43.) Plaintiff uses "SWIFT" messages to create and confirm cross-border financial transactions on the "SWIFTLIVE" system via the SWIFT Alliance Access application. (Id. ¶¶ 75 and 131-132.) Since 1972, plaintiff has held its international reserves in a custodial account at the New York Fed and conducts most of its international transactions in United States dollars (USD) through that account. (Id. ¶¶ 45-46.)
Defendant Rizal Commercial Banking Corporation (RCBC) is one of the largest banks in the Philippines. (Id. ¶ 11.) RCBC maintains correspondent U.S. bank accounts at Wells Fargo Bank, N.A. (Wells Fargo), Bank of New York Mellon (BNY) and Citibank, N.A. (Citibank) at branches in New York and Pennsylvania. (Id. ¶¶ 84 and 145.) Defendants Maia Santos Deguito (Deguito), Angela Ruth Torres (Torres), Lorenzo V. Tan (Lorenzo), Raul Victor B. Tan (Raul), Ismael S. Reyes (Reyes), Brigitte R. Capiha (Capiha), Nestor O. Pineda (Pineda), and Romualdo S. Agarrado (Agarrado) are all Philippine nationals and are all current or former RCBC employees (collectively with RCBC, the Bank Defendants). (Id. ¶¶ 12-19.) Deguito is the former branch manager and Torres is a former senior customer relations officer at RCBC's Jupiter branch. (Id. ¶¶ 12-13.)
Defendant Philrem Service Corp. (Philrem) is a Philippine corporation with a principal place of business in Makati City, Manila, Philippines. (Id. ¶ 20.) Philrem held a money transmittal license from the Central Bank of the Philippines. (Id.) Defendants Salud Bautista (Salud) and Michael Bautista (Michael) (together, the Bautistas), both Philippine nationals, co-own Philrem. (Id. ¶¶ 21-22.)
Defendant Centurytex Trading (Centurytex) is a Philippine corporation with a principal place of business in Manila. (Id. ¶ 23.) Defendant William So Go (Go), a Philippine national, owns Centurytex. (Id. ¶ 24.)
BRHI is a corporation organized under Philippine law and maintains its principal place of business in Manila. (Id. ¶ 25.) BRHI operates the Solaire Resort & Casino (the Solaire) in Manila. (Id. ¶¶ 25 and 262.)
EHL is part of a Chinese corporation registered to do business in the Cayagan Special Economic Zone and Freeport Enterprise and maintains a principal place of business in Manila. (Id. ¶ 26.) EHL operates the Midas Hotel & Casino (the Midas). (Id.) Wong, a Philippine national, owns EHL and is a signatory on one of its bank accounts at nonparty Philippine National Bank (PNB). (Id. ¶¶ 27 and 271.) Wong is a close friend of Lorenzo, RCBC's President and CEO. (Id. ¶¶ 14 and 155.) EHL and Wong operate a gambling junket at the Midas. (Id. ¶¶ 107 and 310.) A "junket" is a "highly profitable VIP business in casinos ... sometimes with their own dedicated playing rooms at casinos or chips that are unique to that junket." (Id. ¶ 266.)
Defendants Weikang Xu (Xu), Ding Zhize (Ding) and Gao Shuhua (Gao) are Chinese nationals residing in China. (Id. ¶¶ 28-30.) Gao has experience running gambling operations and foreign gaming junkets; he convicted previously in China for running illegal gambling operations. (Id. ¶ 122.) Ding operates junkets including the "Sun City" junket, the "Gold Moon" junket and the "Lau Ka Wai" junket. (Id. ¶ 266.). Gao is a co-investor in EHL. (Id. ¶ 271.)
Plaintiff alleges because North Koreans cannot engage in international banking, the hackers and defendants selected the Philippines, with its lax anti-money laundering laws, as the location to launder the stolen funds. (Id. ¶¶ 117-120.) In advance of the theft, the Bank Defendants opened several accounts at RCBC including a Philippine peso account under Go's name in July 2014 and a USD account under Go's name for Centurytex (the Centurytex Account) on February 5, 2016. (Id. ¶¶ 85-86, 88 and 110.) On May 15, 2015, RCBC opened five USD accounts each with $500 deposits under the names of Michael Francisco Cruz (Cruz), Jessie Christopher M. Lagrosas (Lagrosas), Alfred Santos Vergara (Vergara), Enrico Teodoro Vasquez (Vasquez) and Ralph Campo Picache (Picache). (Id. ¶¶ 90-94.) The five accounts (collectively, the Fictitious Accounts) were created at the request of Wong and the John Doe defendants and sat dormant until February 5, 2016. (Id. ¶¶ 89-90.) On December 8, 2015, RCBC opened five Philippine peso accounts under Cruz, Lagrosas, Vergara, Vasquez and Picache, but these accounts were not used. (Id. ¶¶ 108-109.)
RCBC allegedly failed to follow internal procedures and basic anti-money laundering procedures in opening these accounts. (Id. ¶¶97 and 113.) For instance, RCBC admitted that Go's signature on the account opening forms for the peso account and the Centurytex Account did not match, and that a fake address had been used to open the peso account. (Id. ¶ 86.) Plaintiff alleges that similar red flags should have alerted RCBC to issues with the Fictitious Accounts. (Id.) The opening paperwork was executed at a casino, and casinos were exempt from the reporting requirements under Philippine anti-money laundering laws.[2] (Id. ¶ 107.) Each fictitious account holder's driver's license was fake, and RCBC admitted that the signatures on the account opening forms did not match the signatures on the fake licenses. (Id. ¶¶ 98-99.) The contact information for the fictitious account holders was false, with four of the five form "Thank You" letters returned to RCBC as undeliverable. (Id. ¶ 102.) RCBC's policy required it to act if such form letters were returned, but no action was taken. (Id. ¶ 103.) The fictitious account holders had similar employment backgrounds, and RCBC admitted that it did not conduct any employment verification reviews. (Id. ¶ 101.) Nevertheless, Deguito, Torres, Agarrado and others approved opening the accounts. (Id. ¶ 104.)
In January 2015, the North Korean hackers began infiltrating plaintiffs computer network by sending "spear-phishing" emails to plaintiffs employees. (Id. ¶¶ 124 and 126.) Links in each email contained malware which allowed the hackers access to plaintiffs network onto which they installed other forms of malware. (Id. ¶¶ 125 and 128.) By January 29, 2016, the North Korean hackers were able to access the SWIFTLIVE system using plaintiffs login credentials. (Id. ¶¶ 131-132.)
After the close of business in Bangladesh on February 4, 2016, the hackers accessed the SWIFTLIVE system from plaintiffs network and sent 36 payment orders directing the transfer of nearly $1 billion from plaintiffs New York Fed account to various recipients. (Id. ¶ 137.) The New York Fed rejected 35 orders because of missing routing information for correspondent U.S. bank accounts through which the funds could be transferred out of the...
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