U.S. v. Bcci Holdings (Luxembourg), S.A.

• Decision Date: 22 April 1997
• Docket Number: Crim. A. No. 91-0655 (JHG).
• Citation: 961 F.Supp. 287
• 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. Court of Appeals — District of Columbia Circuit

961 F.Supp. 287

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.

Crim. A. No. 91-0655 (JHG).

United States District Court, D. Columbia.

April 22, 1997.

COPYRIGHT MATERIAL OMITTED

U.S. Dept. of Justice, Stefan D. Cassella, Deputy Director, Asset Forfeiture Office, Karen I. Meyer and John T. Stemplewicz, for Government.

Joseph Baio, Benito Romano, Wilkie Farr & Gallagher, Washington, DC, for American Express Bank, Ltd.

MEMORANDUM OPINION AND ORDER GRANTING MOTION FOR SUMMARY JUDGMENT

JOYCE HENS GREEN, District Judge.

Presently before the Court is the United States' Motion for Summary Judgment ("Motion for Summary Judgment") regarding the Petition of American Express Bank, Ltd., Pursuant to 18 U.S.C. § 1963(l) (1994) ("L-Claim"). This Court previously held that American Express Bank's exercise of its state law right of set off was sufficient to establish standing to assert a third-party claim under the criminal forfeiture provisions of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), Pub.L. No. 91-452, 84 Stat. 941 (1970), as amended, codified at 18 U.S.C. § 1961 et seq. See United States v. BCCI Holdings (In re Petition of American Express Bank), 941 F.Supp. 180 (D.D.C.1996). Because there is no genuine dispute regarding any material fact and the United States is entitled to judgment as a matter of law, the Motion for Summary Judgment will be granted, and American Express Bank's L-Claim will be dismissed.

Background

The Court's previous opinion provided a detailed review of the historical background underlying the collapse of BCCI, see In re Petition of American Express Bank, 941 F.Supp. at 182-83, and only the facts material to the Motion for Summary Judgment will be repeated here. The following facts are not in dispute.

American Express Bank's L-Claim arises from a series of foreign currency exchange transactions with BCCI and from an uncollateralized loan that American Express Bank made to BCCI on April 25, 1991. The currency transactions were to be completed on or before July 5, 1991, but before the transactions were concluded, banking regulators froze BCCI's assets, including those at American Express Bank. On July 5, 1991, Michael Lesser, the Assistant Deputy Superintendent of the Foreign Commercial Banks Division of the New State Banking Department advised an official at American Express Bank that the Superintendent had taken possession of BCCI's businesses and property.¹ Mr. Lesser then transmitted to American Express Bank copies of the closing orders. At the time of the seizure, BCCI owed American Express Bank approximately $13,000,000 as a result of the foreign currency transactions. In addition, on July 8, 1991, BCCI's obligation came due to pay $10,052,743 on the uncollateralized loan of April 25, 1991.

On July 8th, with its accounts frozen by New York regulators, BCCI failed to pay American Express Bank the amounts due. American Express Bank then "exercised its right of set off as to the $22,848,928 in obligations owed to it by BCCI." Affidavit of Farhad Subjally ¶ 4 (July 21, 1992). On July 15, 1991, American Express Bank set off $500,000 more arising from foreign currency obligations, and on July 23, 1991, the bank set off $188,375 "arising from the need to secure cover in the open market." Id; see L-Claim ¶ 24.

In the year prior to the massive worldwide intervention seizing BCCI's assets, BCCI's financial and legal troubles were well publicized. Between January 1990 and July 8, 1991, more than 65 articles appeared in the Wall Street Journal and the New York Times.² These articles were saturated with reports of BCCI's fraudulent conduct including its guilty plea to money laundering charges and allegations of widespread corruption.³ See, e.g., "BCCI Unit Is Tied to Suit Alleging Insurance Fraud," Wall St. J., June 14, 1991; "The Americas: Peru — Another Link in the BCCI Money Laundering Chain?," Wall St. J., May 17, 1991; "Links Between First American, BCCI Spur Fed Speculation of Criminal Acts," Wall St. J., Feb. 22, 1991; "Noriega-Linked Bank Admits Laundering," Wall St. J., Jan. 17, 1990; "2 Foreign Bank Units Plead Guilty to Money Laundering," N.Y. Times, Jan. 17, 1990.

Between July 5, 1991, when banking regulators intervened on an international scale, and July 8th, at least ten articles from the New York Times and the Wall St. Journal were devoted to the seizure of BCCI and the freezing of its assets. See, e.g., "Regulators World-Wide Close Down BCCI Branches in a Coordinated Move," Wall St. J., July 8, 1991; "Huge Foreign Bank Faces Possible Collapse," N.Y. Times, July 8, 1991; "A Well Tarnished Bank," N.Y. Times, July 7, 1991; "Scandal Reveals Holes In Rules For Foreign Banks," N.Y. Times, July 7, 1991; "BCCI: Big Money and Mysteries" N.Y. Times, July 6, 1991; "7 Nations Charge `Fraud' and Seize a Banking Empire," N.Y. Times, July 6, 1991; "Warnings Reportedly Given," N.Y. Times, July 6, 1991; "Reaction from the Fed," N.Y. Times, July 6, 1991.

On November 15, 1991, a three-count Indictment charging BCCI with conspiracy, wire fraud and racketeering was filed in this Court. On January 24, 1992, following findings of fact and conclusions of law with supporting reasons made in open court, this Court accepted the pleas of guilty of the four corporate defendants, collectively known as BCCI, and the Plea Agreement between them and the United States. See Transcript of Guilty Plea Proceedings (Jan. 24, 1992). In accordance with 18 U.S.C. § 1963, the Court then entered an Order of Forfeiture (as amended on January 31, 1992), which required American Express Bank to surrender BCCI's property at American Express Bank.

On February 14, 1992, pursuant to the Order of Forfeiture, as amended, American Express Bank transferred over $119 million to the United States Marshals Service. This amount represented what American Express Bank contended was the balance (or net) in BCCI's account after the bank set off the $23,537,303 at issue here for debts that BCCI owed. After withholding the set off amount, American Express Bank filed a motion for a temporary restraining order and requested a hearing.

The Court granted American Express Bank's request for a hearing, but rejected its arguments at that hearing. Thereafter, American Express Bank transferred the remaining amount of $23,537,303 to the United States Marshal, and then petitioned this Court to amend the Order of Forfeiture as to that set off amount.

Through its five-count L-Claim, American Express Bank now claims title to, and seeks the return of, $23,537,303, contending that it owned this sum pursuant to lawful set offs taken against BCCI before the Order of Forfeiture was entered. In Count I, the bank contends that the set off amount is its property and, therefore, the set off amount is not subject to forfeiture.⁴ In Counts II and III, the petitioner stakes its entitlement to the set off amount by claiming, under 18 U.S.C. § 1963(l)(6)(A), that its rights were vested or superior to BCCI's (Count II) and by contending that, under 18 U.S.C. § 1963(l)(6)(B), it was a bona fide purchaser for value reasonably without cause to believe at the time of purchase that the property was subject to forfeiture (Count II). Count IV seeks protection from conflicting demands made to the petitioner by BCCI's regulators throughout the world to the set off amount⁵ and Count V contends that the Order of Forfeiture violated American Express Bank's constitutional rights.⁶

On September 20, 1996, this Court denied the United States motion to dismiss. See In re Petition of American Express Bank, 941 F.Supp. at 189. While the Court held that American Express Bank's exercise of its state law statutory right of set off was sufficient to establish standing, the Court did not reach the merits of the motion to dismiss, offering the petitioner a hearing pursuant to 18 U.S.C. § 1963(l)(5). Id. However, the petitioner consented to a procedure in which the United States would first file its motion for summary judgment. If the L-Claim survived summary judgment, a hearing would be held. On October 23, 1996, a Scheduling Order was issued, and on January 29, 1997, the motion for summary judgment became ripe.⁷

Discussion

BCCI's assets were forfeited pursuant to 18 U.S.C. § 1963,⁸ which sets forth an orderly procedure by which third parties seeking to recover interests in forfeited property may obtain judicial resolution of their claims. It permits any person, other than the defendant, claiming a legal interest in forfeited property to petition the Court for a hearing to adjudicate the validity of that interest. 18 U.S.C. § 1963(l)(2).⁹ Section 1963(l)(6) sets forth the substantive elements that a third party must establish to obtain amendment of an order of forfeiture:

If, after the hearing, the court determines that the petitioner

has established by a preponderance of the evidence that —

(A) the petitioner has a legal right, title, or interest in the property, and such right, title, or interest renders the order of forfeiture invalid in whole or in part because the right, title, or interest was vested in the petitioner rather than the defendant or was superior to any right, file, or interest of the defendant at the time of the commission of the acts which gave rise to the forfeiture of the property under this section; or

(B) the petitioner is a bona fide purchaser for value of the right, title, or interest in the property and was at the time of purchase reasonably without cause to believe that the property was subject to forfeiture under this section;

the court shall amend the order of forfeiture in accordance with its determination.

18 U.S.C. § 1963(l)(6).

A petitioner must first establish standing. Only by establishing standing and alleging the...