Govett American Endeavor Fund Ltd. v. Trueger
| Decision Date | 01 May 1997 |
| Docket Number | No. 95-16498,95-16498 |
| Citation | 112 F.3d 1017 |
| Parties | 97 Cal. Daily Op. Serv. 3187, 97 Daily Journal D.A.R. 5595 GOVETT AMERICAN ENDEAVOR FUND LTD., Plaintiff-Appellant, v. Arthur I. TRUEGER, Berkeley International Capital Corporation; Govett & Company Ltd, a Jersey, Channel Islands Corporation; Berkeley Govett International Limited, a Jersey, Channel Islands Corporation, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
James E. Lyons, Skadden, Arps, Slate, Meagher & Flom, San Francisco, CA; Frank Rothman, Skadden, Arps, Slate, Meagher & Flom, Los Angeles, CA, for plaintiff-appellant.
Joshua R. Floum, Heller, Ehrman, White & McAuliffe, San Francisco, CA; Peter A. Wald, Latham & Watkins, San Francisco, CA, for defendants-appellees.
Appeal from the United States District Court for the Northern District of California, Fern M. Smith, District Judge, Presiding. D.C. No. CV-95-00460-FMS.
Before: GOODWIN, WIGGINS and NOONAN, Circuit Judges.
Opinion by Judge NOONAN; Dissent by Judge GOODWIN.
As the case was dismissed on the pleadings, we accept the allegations of the complaint as true without passing on their truth in fact. We summarize the allegations, supplemented by the agreements submitted by the parties, as follows:
Trueger is a citizen of the United States and a resident of San Francisco, California. From the inception of American Endeavor in 1988 until his resignation in 1993, Trueger was one of its six directors and played a major role in the investments of American Endeavor in question here. He was the chairman of the Board of BGIL and also dominated the affairs of Govett, BGIL, and Berkeley.
Govett is a financial service group, incorporated under the laws of the Bailiwick of Jersey, Channel Islands. Its shares are traded on the London Stock Exchange and through American Depository Receipt facilities on NASDAQ; it engages in substantial activity in California directly and through its affiliates and subsidiaries. BGIL is also organized under the laws of Jersey. It is a wholly-owned subsidiary of Govett. Berkeley is organized under the laws of California and has its principal place of business in San Francisco. It is also a wholly-owned subsidiary of Govett.
American Endeavor is a corporation organized under the laws of Jersey and has its principal place of business in Jersey. It is a closed-end investment fund, scheduled to be dissolved on September 30, 1996. Its shares are traded on the London Stock Exchange. The purpose of American Endeavor is to invest in United States dollar-denominated debt securities, with equity participation features attached. In fact 90% of American Endeavor's assets have been invested in the securities of United States companies.
At the time of its formation in 1988 American Endeavor made an agreement with BGIL, by which BGIL would manage its assets subject to overall policy guidelines from American Endeavor. The agreement (the Management Agreement) provided that BGIL would give investment advice to American Endeavor, but permitted it to obtain investment advice as it chose. On the same day, the Management Agreement was executed, at Trueger's direction BGIL hired Berkeley to provide investment advice (the Consultancy Agreement). Berkeley undertook to identify suitable investment opportunities for American Endeavor in the United States. Govett entered into an agreement with American Endeavor on the same date undertaking to assure that BGIL and Berkeley would discharge all of their obligations (the Undertaking Agreement).
Paragraph 13 of the Management Agreement between American Endeavour and BGIL provided:
(a) The Managers shall not be under any liability or account of anything done or suffered or omitted to be done by the Manager in good faith in accordance with or in pursuance of any request or advice of the Company or the Directors....
(b) The Managers shall not be liable to the Company or any Member for any loss sustained by the Company or any member or in any of the Investments except a loss arising from wilful default or negligence in the performance or non-performance by the Managers or any person designated by them of their obligations or duties hereunder and in particular (but without limitation) this protection shall extend to any loss (not being attributable to wilful default or negligence as aforesaid) sustained by the Company or Member or in any of the Investment as a result of any forged document or signature.
Paragraph 23 of the Management Agreement provided This Agreement shall be governed by and construed in accordance with the laws of Jersey and the parties hereto hereby submit to the non-exclusive jurisdiction of the Royal Court of Jersey.
Paragraph 6.1 of the Consultancy Agreement between BGIL and Berkeley provided
The Consultant further undertakes that in performing its duties it shall comply with all relevant laws, and will procure, as far as is practicable that the Company and the Manager will comply with the provisions of any applicable United States Federal or State legislation.
Paragraph 9.3 provided
This Agreement is governed by and shall be construed in accordance with, the laws of Jersey and the parties hereby submit to the non-exclusive jurisdiction of the Royal Court of Jersey.
The Undertaking Agreement between Govett and American Endeavor provided:
This undertaking shall be governed by Jersey law.
Trueger, Berkeley and BGIL formed an enterprise or group of individual organizations associated in fact and directed by Trueger which induced American Endeavor to invest in companies in the United States that secretly paid them kickbacks for arranging American Endeavor's investment in them and misappropriated the assets of American Endeavor for the purpose of enriching themselves. Trueger, Berkeley and BGIL directed American Endeavor to invest more than $8 million in convertible debentures issued by Integral Systems Inc., a software company with its principal place of business in Walnut Creek, California, without disclosing their control of, and fees received from, this entity. Berkeley and BGIL furnished American Endeavor with a memorandum proposing an investment in the debt and stock of American Marketing International Inc. and AMI Acquisition Corporation, whose principal place of business is in Southern California, and intentionally omitted from the memorandum that they would receive a $450,000 fee from the subjects of the investment. Berkeley and BGIL sent a memorandum to American Endeavor relative to American Endeavor's investment in the debentures and stock of Evans Rents, a California corporation with its principal place of business in Compton, California; they intentionally omitted from this memorandum that they were being paid a fee of $914,000 for recommending the investment. Berkeley and BGIL recommended by memorandum an investment by American Endeavor in the debentures and stock of Franchise Enterprises, Inc., a company located in North Carolina; they intentionally omitted from this memorandum that they would receive a fee from this company of $2.2 million and they also omitted from this memorandum that Franchise Enterprise, Inc. had received a qualified opinion from its auditors.
By these and other illegal acts the defendants engaged in a pattern of crimes as defined by 18 U.S.C. § 1961(5). In furtherance of their racketeering they also committed wire fraud in violation of 18 U.S.C. § 1343. They also committed violations of § 10 of the Securities Act of 1933 and of § 12(2) of the Securities Act of 1934; and these acts of securities fraud were predicate acts of racketeering under 18 U.S.C. § 1961(1)(d). The fees that they secretly accepted were also bribes taken in violation of California Penal Code § 641.3 and constituted further predicate acts of racketeering.
The defendants further committed common law fraud against American Endeavor and breached their fiduciary duty to American Endeavor; BGIL breached its professional duty as investment advisor to American Endeavor; Berkeley breached its duty as investment consultant to BGIL and American Endeavor; Govett breached its duty of care to American Endeavor. BGIL breached its contract with American Endeavor and Govett breached its contract with American Endeavor. All the defendants made negligent misrepresentations to American Endeavor. All of the defendants are guilty of converting fees that were the property of American Endeavor. All the defendants are liable to American Endeavor for unjust enrichment. All the defendants are accountable to American Endeavor. The total damages are not less than $20 million, tripled.
Such are the allegations of American Endeavor.
American Endeavor filed a complaint containing these allegations in the district court on February 8, 1995. The defendants moved to dismiss. The law of the Balliwick of Jersey was supplied in a declaration by Sir Peter Crill, formerly the Bailiff or Chief Justice of the Royal Court of Jersey and currently a Commissioner of the Royal Court. He was...
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...law against a variety of organized criminal endeavors involving security fraud, wire fraud, and bribery. Govett Am. Endeavor Fund Ltd. v. Trueger, 112 F.3d 1017, 1021-22 (9th Cir.1997). Moreover, we have often affirmed RICO convictions involving bribery of state officials, see, e.g., Jackso......
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