In re Sia

• Decision Date: 25 August 2006
• Docket Number: Bankruptcy No. 98-04912.,Adversary No. 00-00102.
• Citation: 349 B.R. 640
• Parties: In re Sukamto SIA fka Sukarman Sukamto, Debtor. Guido Giacometti, Chapter 7 Trustee, Plaintiff, v. Arton Bermuda Limited, a British Virgin Island Corporation; Johanes Sjah Aka Johanes Syah; Suwardi Sukamto; Kwan Lim Chui Aka Paul Chui; Vincent Wee; USB AG; Electra Global, Ltd., a British Virgin Islands Corporation; Promax Global, Ltd., a British Virgin Islands Corporation, Defendants.
• Court: U.S. Bankruptcy Court — District of Hawaii

349 B.R. 640

In re Sukamto SIA fka Sukarman Sukamto, Debtor Guido Giacometti, Chapter 7 Trustee, Plaintiff, v. Arton Bermuda Limited, a British Virgin Island Corporation; Johanes Sjah Aka Johanes Syah; Suwardi Sukamto; Kwan Lim Chui Aka Paul Chui; Vincent Wee; USB AG; Electra Global, Ltd., a British Virgin Islands Corporation; Promax Global, Ltd., a British Virgin Islands Corporation, Defendants.

Bankruptcy No. 98-04912.

Adversary No. 00-00102.

United States Bankruptcy Court, D. Hawaii.

August 25, 2006.

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Noah Fiddler, Honolulu, HI, for Debtor.

Alika L. Piper, Carisa L. K. Hee, Stephen M. Gelber, Gelber, Gelber, Ingersoll & Klevansky, Jared N. Kawashima, Jeannie H. Jang, Ke-Ching Ning, Stephen A. Jones, Valerie M. Kato, Ning Lilly & Jones, Honolulu, HI, Colin Cohen, Boase Cohen & Collins, Wanchai, Hong Kong, Imran Hamid Khwaja, Michelle Jeganathan, William John Munden Ricquier, Tan Rajah & Chean, Singapore, for Plaintiff.

MEMORANDUM OPINION CONCERNING UBS AG'S MOTION TO DISMISS TRUSTEE'S SECOND AMENDED AND SUPPLEMENTAL COMPLAINT AND, IN THE ALTERNATIVE, FOR A MORE DEFINITE STATEMENT FILED ON MAY 11, 2006

LLOYD KING, Bankruptcy Judge.

I. INTRODUCTION

This is an adversary proceeding in bankruptcy. Plaintiff ("trustee") is the trustee in the underlying bankruptcy case, in which the debtor is Sukamto Sia ("Sia"), an individual. The remaining active defendants are UBS AG ("UBS"), a Swiss banking institution doing business in various countries, including Singapore and the United States, and subject to the jurisdiction of the Federal Deposit Insurance Corporation, and Vincent Wee ("Wee"), an individual employed at the Singapore branch of UBS at some, but not all, relevant times.

Before the court is the motion of UBS to dismiss 10 of the 11 counts in Plaintiff's Second Amended and Supplemental Complaint("second amended complaint") Wee has filed a joinder in the UBS motion. The second amended complaint alleges that UBS and Wee assisted the debtor, Sia, in money laundering and in concealing and misappropriating property from creditors and from the bankruptcy estate. This was done by means of bank accounts and banking transactions in the names of fictitious and actual entities, which were either owned or controlled by Sia.

The motion was heard on June 22, 2006. Plaintiff was represented by Ke-Ching Ning and Stephen A. Jones, of Ning Lilly & Jones. UBS was represented Walter C. Davison, Derek R. Kobayashi, and Donna H. Kalama, of Goodsill Anderson Quinn & Stifel. Wee was represented by David C. Farmer, who appeared telephonically.

II. BACKGROUND

Sia, a resident of Singapore, commenced the underlying bankruptcy case by filing a voluntary chapter 11 reorganization petition on November 6, 1998. Sia was a chapter 11 debtor in possession pursuant to 11 U.S.C. §§ 1101(1) and 1107, until February 10, 1999, when plaintiff was appointed reorganization trustee. The case was converted to a chapter 7 liquidating bankruptcy on June 4, 1999. After conversion to chapter 7, plaintiff continued as liquidation trustee.

The trustee in bankruptcy, plaintiff in this adversary proceeding, filed an earlier adversary proceeding, objecting to Sia's discharge in bankruptcy. (Adversary Proceeding No. 00-00016, in the United States Bankruptcy Court for the District of Hawaii.) On October 24, 2000, a stipulated judgment was entered, denying Sia a discharge in bankruptcy. (Dkt. No. 54, A.P. No. 00-00016.)

During the course of the bankruptcy case, Sia was arrested at a meeting of creditors, convicted of bankruptcy fraud, served a prison sentence, and, upon his release, was deported from the United States. A condition of his release from prison was payment of $2,000,000 to the trustee, That sum was paid.

Both before and during his incarceration, Sia repeatedly relied on his constitutional privilege against self-incrimination. Other proceedings related to the underlying bankruptcy case indicate that Sia used' many entities and bank accounts in foreign countries to control his assets and to frustrate the efforts of creditors and the trustee in bankruptcy to locate those assets.¹ The difficulties and complexities of administration of the Sia estate have presented the trustee with unusual challenges.

The original complaint in this adversary proceeding was filed on November 3, 2000. That complaint sought recovery of a $2,000,000 deposit made by Sia toward the purchase of a Gulfstream aircraft. By order dated October 6, 2000, in the Sia bankruptcy case (Dkt. no. 1054), Sia was ordered to turn over that deposit, and other property, to the trustee. Sia had not complied with the order by the date of filing of the original complaint. That complaint alleged that an interest in the deposit was not listed in Sia's bankruptcy schedules, and that Sia testified untruthfully at his bankruptcy meeting of creditors that the deposit had been forfeited. UBS and Wee were not named defendants in the original complaint.

A first amended complaint was filed on May 6, 2002, with an expanded list of defendants, including UBS and Wee. In the first amended complaint, the Gulfstream deposit was still the focal point, with added allegations that UBS and Wee were active participants in Sia's efforts to conceal the $2,000,000 deposit from the bankruptcy trustee and creditors.

Before the April 12, 2006, filing of the second amended complaint, there were contempt proceedings against the incarcerated Sia. Faced with the possibility of additional prison time, Sia caused $2,000,000 to be paid to the trustee. Upon completion of his original prison sentence, Sia was released from prison and deported from the United States. Payment of $2,000,000 to the trustee resolved the effort to recover the Gulfstream deposit, except for collateral requests for interest, fees, costs, and punitive damages. Those remain pending. (Second amended complaint, ¶ 29)

The second amended complaint greatly expands the subject matter of this litigation. The focus is now upon certain of Sia's banking and alleged money laundering transactions, which are supposed to have involved Wee, or UBS, or both of them. Some discovery has been conducted by the trustee, who has a pending motion to compel discovery. The trustee has been unable to take the deposition of Defendant Wee.

III. FACTS

The second amended complaint, which is the subject of this motion to dismiss, was filed on April 12, 2006. For purposes of the motion to dismiss, the facts alleged in that pleading must be assumed to be true.

According to the second amended complaint, the Singapore High Court, on October 24, 1998, issued an injunction freezing Sia's assets, whether in his name or not, up to a total value of $17,649,601.64. Sia and persons having notice of the injunction are prohibited from removing, dealing with, disposing of, or diminishing the value of such assets.

Shortly thereafter, on November 6, 1998, Sia filed his voluntary chapter 11 petition in Honolulu, Hawaii.

When Sia filed his voluntary chapter 11 petition, Wee was employed in Singapore by a Bank of America branch, known as the Private Bank. After Sia filed his bankruptcy petition, in November, 1998, UBS acquired the Private Bank. The date is given only as an unspecified date during the first half of 1999. With that acquisition, Wee became an employee of UBS. It is not alleged that UBS had any dealings involving Sia before acquiring the Private Bank. Because the date of UBS' acquisition of the Private Bank is not stated with specificity, it is unclear just which banking transactions involved UBS. However, the complaint asserts that, at relevant times, Wee and UBS were aware of both the Singapore High Court's injunction and the automatic stay of 11 U.S.C. § 362(a) in Sia's United States bankruptcy case.

The activities of which plaintiff complains include:

In 1999, defendants assisted Sia in the postpetition laundering of $1.25 million through an account in the name of Skymaster. (¶ 24, second amended complaint)

In May, 2000, Wee provided Sia's girlfriend with a banker's introduction letter, on UBS letterhead, falsely stating that she was a valued customer of UBS, with access to substantial funds. This letter was used to facilitate laundering $1 million through an account in her name at the Bellagio Casino in Las Vegas. (¶ 30, second amended complaint)

Wee, in May, 1998, and April, 1999, assisted Sia in his concealment scheme by withdrawing large cash sums from Sia alias accounts, for Sia's use. (¶ 33, second amended complaint)

Sia needed the assistance of a bank and bank officials to create the various accounts necessary to his concealment scheme. (¶ 40, second amended complaint)

Other accounts used in the scheme may be identified by further discovery. (¶ 22, second amended complaint) There are 11 counts in the second amended complaint, numbered I through XII, but lacking a count X. The motion does not seek dismissal of count IV. The counts are:

I — Avoidance of unauthorized postpetition transfers (11 U.S.C. § 549)

II — Avoidance of prebankruptcy fraudulent transfers (11 U.S.C. § 544 and Haw.Rev.Stat. Ch. 651C)

III — Recovery from transferees (11 U.S.C. § 550)

IV — Turnover of property of the estate (11 U.S.C. § 542) and an Accounting

V — Conspiracy to conceal and to, divert property of the estate

VI — Conspiracy to convert property of the estate

VII — Money had and received

VIII — Unjust enrichment

IX — Constructive trust

X — The second amended complaint does not contain a count X.

XI — Avoidance of postpetition fraudulent transfers (Haw.Rev.Stat. Ch. 651C)

XII — Aiding and abetting fraud against the bankruptcy estate

IV. DISCUSSION

A. Overview

As the title, "Second Amended and Supplemental Complaint" suggests, the focus of this litigation has changed. Originally, the trustee sought to recover Sia's $2 million deposit toward the purchase of an airplane. Sia caused $2...