Mazzaro De Abreu v. Bank of America Corp.

• Decision Date: 10 September 2007
• Docket Number: No. 06 Civ. 673(LMM).,06 Civ. 673(LMM).
• Citation: 525 F.Supp.2d 381
• Parties: Eduardo MAZZARO DE ABREU, et al., Plaintiff, v. BANK OF AMERICA CORPORATION, Bank of America, N.A., and Standard Chartered Bank, Defendants.
• Court: U.S. District Court — Southern District of New York

525 F.Supp.2d 381

Eduardo MAZZARO DE ABREU, et al., Plaintiff, v. BANK OF AMERICA CORPORATION, Bank of America, N.A., and Standard Chartered Bank, Defendants.

No. 06 Civ. 673(LMM).

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

September 10, 2007.

COPYRIGHT MATERIAL OMITTED

MEMORANDUM AND ORDER

McKENNA, District Judge.

Defendants Standard Chartered Bank ("Standard Chartered") and Bank of America Corporation and Bank of America, N.A.¹ (collectively "BOA") (all, collectively, "Defendants") move pursuant to Rules 12(b)(6) and 9(b) of the Federal Rules of Civil Procedure to dismiss the complaint filed by 94 individual plaintiffs² ("Plaintiffs") involving an alleged international money laundering scheme perpetrated by third parties who utilized bank accounts established at Standard Chartered and BOA.³ For the reasons set forth below, Defendants' motions to dismiss are GRANTED IN PART and DENIED IN PART.

I. Background

A. Facts⁴

Plaintiffs allege that Defendants "participated in and substantially assisted" a fraud and money laundering scheme perpetrated by Bank of Europe, an offshore bank licensed in Antigua and Barbuda, and its owner, Edemar Cid Ferreira ("Ferreira"), causing "Plaintiffs and others to lose approximately $250 million." (First Amended Complaint ("FAC") ¶¶ 1, 5.) Bank of Europe solicited funds from investors with promises of high rates of return over short investment periods.⁵ (FAC ¶¶ 6, 163.) Furthermore, it "was Bank of Europe's policy to urge participants to leave their money" with Bank of Europe upon maturity of their investments, and not to withdraw their funds. (FAC ¶ 172.) "As the fraud became public and ... began to fall apart, Bank of Europe began ... refus[ing] participants' requests to have their matured funds returned to them." (FAC ¶ 172.) Plaintiffs never got their money back. (FAC ¶ 7; see also ¶¶ 150, 167.)

Bank of Europe was a "shell bank" that required the services of a "correspondent bank" to perform basic banking operations and process transactions on its behalf. (FAC ¶¶ 5, 146.) Standard Chartered served as the correspondent bank for Bank of Europe from 1999 until late 2003. (FAC ¶ 5.) BOA served in the same capacity from November 2003 until the, collapse of Bank of Europe in December 2004. (FAC ¶¶ 5, 133.) Both Defendants processed transactions through their New York locations. (FAC ¶¶ 5, 155.) Bank of Europe instructed Plaintiffs to wire their investment' deposits to a single account belonging to Bank of Europe at the appropriate correspondent bank. (FAC ¶ 169.) Bank of Europe ostensibly was to take the funds, invest them in what it termed the "Loan Participation Program," and return them to the respective participant, along with promised interest at maturity. (FAC ¶¶ 6, 150.)

Instead, Plaintiffs allege, "Ferreira stole ... Plaintiffs' money" with the Defendants' knowledge, and spent it. (FAC ¶¶ 7, 8, 159.) Defendants "improper[ly]" transferred funds in "hundreds of separate documented instances" to various "offshore" companies controlled by Ferreira and to "dozens of vendors [to] which Ferreira owed money." (FAC ¶¶ 9, 133, 159, 174.) With respect to BOA, such transfers allegedly violated its internal policy. (FAC ¶¶ 210, 211.)

Furthermore, Plaintiffs allege that Defendants transferred hundreds of millions of dollars from the Bank of Europe accounts to entities that Defendants allegedly knew were "Brazilian black market currency traders" from 2001 through 2004. (FAC ¶ 36.) Standard Chartered and BOA both have their own proprietary electronic payment systems that required account holders such as Bank of Europe to provide the name of each recipient of electronic payments. (FAC ¶ 24.) Therefore, Plaintiffs allege, Defendants knew the identities of the recipient entities.⁶ (FAC ¶¶ 159, 180.) Transfers of funds occurred "pursuant to instructions from Bank of Europe." (FAC ¶ 23.) Most transfers occurred within three days of receipt of funds by Defendants, and the Bank of Europe accounts "rarely had balances of more than $4 million." (FAC ¶¶ 9, 158, 173, 178.)

Standard Chartered never inquired about the volume or type of activity in Bank of Europe's account. (FAC ¶ 181.) However, in the fall of 2002, Eduardo Viola⁷ ("Viola") of Standard Chartered informed Bank of Europe that it was terminating its relationship as Bank of Europe's correspondent bank for three reasons: (1) Standard Chartered had changed its policy and would terminate its service as a correspondent bank for banks licensed to Conduct only offshore transactions; (2) Standard Chartered was "concerned about getting caught making fraudulent transfers to Ferreira and his offshore companies:" and (3) Standard Chartered did not want "to risk violating the Patriot Act by participating in money laundering." (FAC ¶ 182.) However, Standard Chartered continued its relationship with Bank of Europe for one year, ten months longer than the period dictated by its policy of allowing services for two months following notice, allegedly for the prospect of conducting future business with Ferreira.⁸ (FAC ¶¶ 183, 186.) Standard Chartered generated "substantial fees" due to the "unusually large volume of transfers" from the. Bank of Europe account. (FAC ¶ 186.)

After closing its account at Standard Chartered near the end of 2003, Bank of Europe began using BOA as its correspondent bank. (FAC ¶ 169.) Like Standard Chartered, BOA was collecting "substantial fees" as the correspondent bank for Bank of Europe. (FAC ¶ 193.) In addition, BOA allegedly had the same desire to establish a long-term relationship with Ferreira in order to generate potentially substantial business.⁹ (FAC ¶ 186.) To this end, Paolo Ferreira ("Ferreira"), a BOA employee assigned to manage the relationship with Bank of Europe, allegedly suggested to Bank of Europe that it "more effectively could conceal the fraud by opening a separate bank account" in the name of another company owned by Ferreira. This would "mask the frequency with which Bank of Europe transferred large sums of its clients' money." (FAC ¶ 192.) Bank of Europe ultimately declined to do so. (Id.) Furthermore, Ferreira requested and received from Bank of Europe addresses of some of the recipient accounts. (FAC ¶ 190.) Perreira and Alphonso Guevara ("Guevara"), his coworker also assigned to the Bank of Europe account, shared a joke with an unidentified representative of Bank of Europe regarding the financial advantages of being related to one of Bank of Europe's beneficiaries. (FAC ¶ 190.) According to Plaintiffs, BOA had knowledge that "from the beginning of BOA's tenure" as Bank of Europe's correspondent bank, "transfers from the Bank: of Europe account were helping Ferreira steal Plaintiffs money" through four named BOA employees: Perreira; Guevara; the superior to whom they reported, Stephen J. Todaro ("Todaro"); and the head of BOA's Sao Paolo office, Henrique B. Larroude ("Larroude"); as well as "additional" unidentified BOA employees. (FAC ¶¶ 188, 189.)

A few weeks after the Central Bank of Brazil, that country's monetary authority, took control over Banco Santos, another financial institution controlled by Ferreira, BOA informed Bank of Europe that it would be "closing its correspondent bank account on January 15, 2005." (FAC ¶ 194.) On February 8, 2005, the Antiguan High Court of Justice ordered Bank of Europe, in receivership since December 2004, placed into liquidation. (FAC ¶ 199.) In June 2005, the Federal Public Ministry of Brazil indicted Ferreira for "money laundering, conspiracy, tax evasion, and providing false audits" involving Banco Santos. (FAC ¶ 200.)

B. The Instant Litigation

Plaintiffs, investors through Bank of Europe, seek damages from both Standard Chartered and BOA for their actions as Bank of Europe's correspondent banks. Count I alleges that Defendants aided and abetted fraud. (FAC ¶ 39.) Count II alleges that Defendants aided and abetted a breach of fiduciary duty. (Id.) Count III alleges that Defendants committed acts of commercial bad faith. (Id.) Count TV alleges that Defendants were unjustly enriched. (Id.) Defendants here move to dismiss all four counts for failure to state a claim under which relief may be granted.

II. Discussion

A. Rule 12(b)(6) Standard

Standard Chartered and BOA move pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss all four counts contained in the First Amended Complaint. A complaint should be dismissed if it "fail[s] to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). In evaluating a complaint, a court must read the complaint generously, accepting the truth of, and drawing all reasonable inferences from, well-pleaded factual allegations. See Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir.1993). The complaint must provide "plausible grounds" for the allegations with "enough fact to raise a reasonable expectation that discovery will reveal evidence" to support them.¹⁰ Bell Atlantic Corp. v. Twombly, ___ U.S. ___, ___, 127 S.Ct. 1955, 1965, 167 L.Ed.2d 929 (2007). The issue on a motion to dismiss is not whether a plaintiff is likely ultimately to prevail, "but whether the claimant is entitled to offer evidence to support the claims." Weisman v. LeLandais, 532 F.2d 308, 311 (2d Cir.1976) (per curiam).

B. Rule (9)(b) Standard

Standard Chartered and BOA move pursuant to Federal Rule of Civil Procedure 9(b) to dismiss the first three of four counts contained in the First Amended Complaint. Rule 9(b) provides that the circumstances of fraud must "be alleged with particularity," requiring "reasonable detail as well as allegations of fact from which a strong inference of fraud reasonably may be drawn." National Council of Young Israel v. Wolf, 963 F.Supp. 276, 281 (S.D.N.Y.1997) ("Young Israel"). The rule also provides that "condition of mind of a person may be averred generally." Fed.R.Civ.P. 9(b). A more general standard of scienter is applicable because "a plaintiff realistically cannot be...