U.S. v. Bcci Holdings, Luxembourg, S.A.
| Decision Date | 12 July 1999 |
| Docket Number | No. Crim.A. 91-0655(JHG).,Crim.A. 91-0655(JHG). |
| Citation | 69 F.Supp.2d 36 |
| Parties | UNITED STATES of America v. BCCI HOLDINGS (LUXEMBOURG), S.A., Bank of Credit and Commerce International, S.A., Bank of Credit and Commerce International (Overseas) Limited, and International Credit and Investment Company (Overseas) Limited, Defendants. |
| Court | U.S. District Court — District of Columbia |
Stefan D. Cassella, U.S. Department of Justice, Criminal Division, Asset Forfeiture Sec., Washington, DC, Bea Louise Witzleben, U.S. Department of Justice, Commercial Litigation Branch, Washington, DC, Matthew Steven Bode, U.S. Department of Justice, Criminal Division, Washington, DC, Kevin Gerard Matthews, U.S. Department of Justice, Fraud Section, Criminal Division, Washington, DC, Gerald Mann Stern, U.S. Department of Justice, Special Counsel Financial Inst. Fraud, Washington, DC, Robert Dalton, Michele Crawford, Lloyd Randolph, Ruth Harvey, Karen Meyer, DOJ attorneys.
At last! For nearly eight years I have been presiding over this fascinating, complex, and sobering case arising out of the collapse of Bank of Credit and Commerce International ("BCCI"), the largest bank failure in history. The Order that accompanies this Opinion is the final chapter in the longest-running forfeiture proceeding in the history of federal racketeering law. Against the odds, through the combined efforts of the United States Department of Justice, the Trustees appointed by this Court, the BCCI Court Appointed Fiduciaries, the Board of Governors of the Federal Reserve System, and the District Attorney for New York County, more than $1.2 billion has been realized from BCCI assets in the United States. Most of that sum has been forwarded for distribution to the victims of BCCI's collapse.
The worldwide liquidation proceeding conducted by the BCCI Court Appointed Fiduciaries remains ongoing. To date, the Court Appointed Fiduciaries have distributed approximately $4 billion worldwide to innocent depositors and creditors. In two dividends, they have repaid creditors a total of 46 percent on admitted claims. Additional dividends are expected, although the amounts will depend on future recoveries. In contrast to the pessimistic projections of 1991, creditors will certainly receive more than half of their money back.
But today's Final Order of Forfeiture brings to an end the criminal case against the BCCI corporations and its attendant forfeiture proceeding. This Opinion summarizes the landmark events in this case to explain why terminating the forfeiture proceeding at this juncture is appropriate. The United States Government has located all of the BCCI-related assets in this country that it could, all disputes regarding ownership of those assets have been resolved, and, thus, the Court's task is complete.
The Final Order of Forfeiture, and related orders signed today, accomplish the following: (1) declare that the United States has clear title to all property forfeited during this proceeding; (2) authorize the United States Marshals Service to distribute all the assets they hold; (3) provide for the dissolution of the two trusts created by this Court to aid in the liquidation of forfeited assets; (4) transfer certain default judgments obtained by First American Corporation in civil litigation to the Department of Justice for collection; and (5) transfer the stock of First American Corporation to the Court Appointed Fiduciaries to wind up the corporation as they see fit.
After briefly outlining the events leading up to the seizure of BCCI almost exactly eight years ago — July 5, 1991 — this Opinion describes how this case came to be filed here and how the parties entered into their unique Plea Agreement, which triggered this unprecedented forfeiture proceeding. The Opinion then describes the two trusts created to aid in the liquidation of forfeited assets, and the BCCI-related civil cases over which this Court also presided. The final section summarizes the novel legal issues—procedural and substantive —that arose during the course of adjudicating a total of 175 claims by third parties contesting the forfeiture of certain assets. The conclusion acknowledges those individuals singled out by the parties as deserving of recognition for their respective contributions to the recoveries made in this case.1
BCCI was founded in 1972. The moving force behind its establishment was Agha Hasan Abedi ("Abedi"), a Pakistani banker who envisioned BCCI becoming an international Islamic bank. Abedi's chief lieutenant was Saiyid Mohammad Swaleh Naqvi ("Naqvi"). Abedi remained at the helm of BCCI until 1988, when he suffered a heart attack. Naqvi succeeded him for two years, until the sovereigns of Abu Dhabi took formal control of the bank in 1990.
Abedi established the principal BCCI corporations in Luxembourg and the Cayman Islands. Although formally separate, the BCCI corporations were under the same management and were closely linked in their operations. At its peak, BCCI's coordinated international banking network had more than 400 branches in 69 countries. BCCI's depositors included large corporate interests as well as numerous small businesses and middle class households, particularly in England.
The extent of BCCI's presence in the United States was not generally known until after the bank had been seized. It was known that BCCI had accounts with correspondent banks in New York City and in the other major international money centers. Additionally, BCCI had been allowed to establish "depository agencies" in the United States.2 But, it appeared that BCCI was not providing retail banking services to United States customers in this country.3 There were, however, signs that BCCI sought to infiltrate the United States market.
As early as 1978, a group of shareholders of Financial General Bankshares, Inc. — the predecessor of First American Bank in Washington, D.C. — sued BCCI, among others, claiming that it was behind a hostile takeover attempt. Judge Oliver Gasch, of this Court, preliminarily enjoined any further stock purchases by BCCI. In the course of that lawsuit, BCCI retained the services of prominent Washington counsel, Clark M. Clifford ("Clifford") and Robert A. Altman ("Altman"). Shortly after an amended complaint was filed in 1980, BCCI and all but one defendant settled the claims; BCCI subsequently entered into a consent judgment with the Securities and Exchange Commission. See Financial General Bankshares, Inc. v. Metzger, 523 F.Supp. 744, 747 & nn. 4-5 (D.D.C.1981), vacated on jurisdictional grounds, 680 F.2d 768 (D.C.Cir.1982).
Not long after BCCI had settled the Financial General Bankshares case, a new proposal was made to sell First American to Credit and Commerce American Investment, B.V. ("CCAI"), a Netherlands shell corporation wholly owned by Credit and Commerce American Holdings, N.V. ("CCAH"), a Netherlands Antilles corporation. The record shareholders of CCAH were wealthy individuals from the Persian Gulf. Although not apparent at the time, it now appears that nearly all of the money required for the purchase had been loaned to the investors by BCCI. Some of these loans were actual extensions of credit while others were false loans created to disguise BCCI's takeover of First American Bank.
In 1981, the Board of Governors of the Federal Reserve System held hearings to determine whether to approve the sale. Some of the proposed investors from the Middle East testified. See, e.g., BCCI Holdings (Luxembourg) S.A. v. Khalil, 56 F.Supp.2d 14, 38 (D.D.C.1999). Clifford and Altman appeared as counsel in those proceedings. Ultimately, the Federal Reserve approved the sale. Shortly thereafter, Clifford and Altman were chosen by the shareholders to be Managing Directors of the shell corporations, CCAH and CCAI, as well as directors and senior officers of the re-christened First American Corporation, the holding company that controlled the largest bank in the Washington, D.C. area. See generally First American Corp. v. Al-Nahyan, 17 F.Supp.2d 10, 13-14 (D.D.C.1998).
BCCI again came to the fore in 1987 and 1988 in connection with investigations into narcotics trafficking by Panamanian General Manuel Noriega. It was known that Noriega had a banking relationship with BCCI and First American. Federal prosecutors, and then committees of the United States Senate and House of Representatives, investigated allegations that BCCI was laundering Noriega's drug proceeds. BCCI was indicted in the United States District Court in Tampa, Florida and subsequently pled guilty to federal money laundering charges. Certain BCCI employees also were indicted, tried, and convicted on money laundering charges. See United States v. Awan, 966 F.2d 1415 (11th Cir.1992) ().
Then in 1990 and early 1991, BCCI became the focus of attention in the United States and abroad. In this country, news reports in 1990, and intensifying in early 1991, indicated that the Federal Reserve was investigating rumors that BCCI had secretly been behind the takeover of First American. In December 1990, the Republic of Panama sued BCCI and First American in the United States District Court for the Southern District of Florida, alleging that BCCI illegally owned First American and that both sets of corporate entities had violated federal racketeering laws in laundering proceeds from narcotics trafficking for the benefit of General Noriega.4
Abroad, the Bank of England received troubling information about BCCI's financial condition and integrity. In response, it commissioned a special audit, which "disclosed evidence of a complex and massive fraud at BCCI, including substantial loan and treasury account losses, misappropriation of funds, unrecorded deposits, the...
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