U.S. v. Bcci Holdings (Luxembourg), S.A., Misc. Action No. 96-0367 (JHG).

• Decision Date: 26 August 1997
• Docket Number: Misc. Action No. 96-0367 (JHG).
• Citation: 980 F.Supp. 496
• Parties: UNITED STATES of America, Plaintiff, v. BCCI HOLDINGS (LUXEMBOURG), S.A., Bank of Credit and Commerce International, S.A., Bank of Credit and Commerce International (Overseas) Ltd, and International Credit and Investment Company (Overseas) Limited, Defendants.
• Court: U.S. District Court — District of Columbia

980 F.Supp. 496

UNITED STATES of America, Plaintiff, v. BCCI HOLDINGS (LUXEMBOURG), S.A., Bank of Credit and Commerce International, S.A., Bank of Credit and Commerce International (Overseas) Ltd, and International Credit and Investment Company (Overseas) Limited, Defendants.

Misc. Action No. 96-0367 (JHG).

United States District Court, District of Columbia.

August 26, 1997.

As Amended September 16, 1997.

Herbert J. Miller, Martin D. Minsker, William H. Jeffress, Jr., Timothy J. Preso, Washington, DC, on the brief from Miller Cassidy, for Clifford & Altman.

Stephen J. Brogan, Mary Ellen Powers, David E. Powers, David E. Miller, Washington, DC, on the joint brief of the Trustee and First America.

Jones, Day, Reavis & Pogue, Washington, DC, for First American Corp. and First American Bankshares, Inc.

Sol Neil Corbin, Corbin, Silverman & Sanseverino, L.L.P., New York City, for Harry W. Albright Jr. Trustee.

In re Application for Relief from Trustee's First Distribution Plan Proposed Pursuant to the 1994 Procedural Order in United States v. BCCI Holdings, 91-CR-0655 (JHG)

ORDER

JOYCE HENS GREEN, District Judge.

Presently before the Court is the Application filed by Clark M. Clifford and Robert A. Altman pursuant to Local Rule 307.1 ("Clifford & Altman's App." or the "Application") [Docket No. 1], seeking relief from the Trustee's First Distribution Plan, which was proposed pursuant to the Procedural Order entered by this Court in 1994, see Order of Dec. 21, 1994, United States v. BCCI Holdings (Luxembourg), S.A., et al., No. 91-CR-0655 (JHG) (D.D.C.) [BCCI Docket No. 1328]. Except with respect to the property sought now by Messrs. Clark M. Clifford ("Clifford") and Robert A. Altman ("Altman") in their Application, the Court has approved the Trustee's First Distribution Plan. See Order of Nov. 25, 1996 [BCCI Docket No. 1766], as amended by Order of Dec. 18, 1996 [BCCI Docket No. 1781]. While the Trustee has proposed transferring the specific property that Clifford and Altman seek into the Court Registry Investment System ("CRIS"), to be held in escrow pending resolution of the disputed issues regarding ownership, the Court has ordered that no such transfer be effected until Clifford and Altman were provided yet another opportunity to be heard. Order of December 18, 1996; see Order of Aug. 22, 1996, United States v. BCCI Holdings, No. 91-CR-0655 (JHG) (D.D.C.) [BCCI Docket No. 1721], ordering, inter alia, that motion be filed as In re Motion of Clifford & Altman, Misc. A. No. 96-0266 (holding, among other things, that Clifford and Altman waived any objection to the Procedural Order by failing to object prior to or at the public hearing on December 19, 1994), appealed, Sept. 20, 1996, oral argument set for Oct. 23, 1997 (D.C.Cir.).

Upon consideration of Clifford & Altman's Application, the joint opposition of the Trustee and First American Corporation ("FAC") and First American Bankshares ("FAB") (hereinafter FAB and FAC will be referred to collectively as "First American") [Docket No. 4], the opposition of the United States [filed in the BCCI Docket as No. 1799], the opposition of the Court-Appointed Fiduciaries for BCCI Holdings, et al. [Docket No. 17], Clifford & Altman's Reply [Docket No. 14], the joint surreply of the Trustee and First American [Docket No. 18], Clifford & Altman's Response to the Surreply [Docket No. 19] and the exhibits attached to these filings, the motion will be denied.¹

In their Application, Clifford and Altman request that the Court order the Trustee to distribute to them $3.5 million of proceeds of stock to which they are the registered share-holders and $372,000 of proceeds payable for debentures, plus interest, "which the [T]rustee has refused to pay, in contravention of the applicable orders outstanding in BCCI Holdings." Clifford & Altman's App. at 2. Their request stems from claims they have asserted to funds that are currently in the Trustee's possession on account of the liquidation of Credit and Commerce American Holdings, N.V. ("CCAH") and its former subsidiaries. The claims arise from two debentures issued by CCAH, one each to Clifford and Altman in December 1990, and from their status as "record shareholders" of CCAH stock (amounting to approximately 1.243% of the CCAH liquidation proceeds). Such claims are currently among the factual disputes in proceedings before the Board of Governors of the Federal Reserve and this Court. See infra.

By way of background, Applicant Clifford was the Chairman of First American from 1981 to 1991 and the Chairman of FAB from 1982 to 1991. He was also a Managing Director of both CCAH and Credit and Commerce American Investment ("CCAI"). Applicant Altman was President and a Director of First American from 1981 to 1991, and he was a member of the Board of Directors of FAB and a Managing Director of both CCAI and CCAH.

Through the use of numerous nominees, BCCI² owned a controlling interest in CCAH, which is a Netherlands Antilles corporation and a bank holding company within the meaning of the Bank Holding Company Act, 12 U.S.C. § 1841 et seq. CCAI, a wholly owned subsidiary of CCAH, is also a Netherlands Antilles corporation and a bank holding company. CCAH and CCAI were formed in 1978 to acquire control and ownership of Financial General Bankshares, a bank holding company that subsequently was renamed and became FAB, which was wholly owned by FAC.

Clifford was the registered shareholder to 2,395 shares of CCAH stock (representing approximately 0.828 percent of total corporate equity), and Altman was the registered shareholder to 1,197 shares (representing approximately 0.414 percent of total corporate equity).

To put the instant Application in perspective, a brief procedural overview is appropriate. On January 24, 1992, following acceptance of the guilty plea by the corporate defendants, this Court entered an Order of Forfeiture pursuant to 18 U.S.C. § 1963(e), declaring that all U.S. assets of BCCI, the corporate defendants, were forfeited to the United States. See BCCI Docket No. 27. In paragraph 1(c), the Order of Forfeiture specifically stated that the forfeiture applied to "the net proceeds from the future sale or other disposition or transfer of any stock, security or other interest in First American Bankshares, Inc., but not the stock, security or other interest itself."

On June 23, 1992, after having held a public hearing on June 16th, the Court appointed Harry W. Albright Jr. as trustee and sole shareholder of FAC, the parent of FAB. See Order of June 23, 1992, United States v. BCCI Holdings, 91-CR-0655 (JHG) (D.D.C.) [BCCI Docket No.352] ("Appointing Order"). The Appointing Order, in part, stated:

"The Trustee shall exercise all rights, titles, powers, and privileges of a shareholder of FAC, including to the extent permitted by applicable law of the state of incorporation of the relevant corporation, the right to exercise exclusively any and all voting rights and other rights or benefits attached to, derived from, or otherwise attributable to the FAC shares."

Appointing Order at 3-4.

The Appointing Order also provided that CCAI — the intermediate holding company between CCAH and FAC — would transfer its stock in FAC to the Trustee, thereby cutting off CCAI and its parent, CCAH, from any legal or beneficial ownership in FAC. The Appointing Order specifically provided that the Trustee would be empowered to sell, or cause the sale of, the stock or assets of FAC and its subsidiaries. At the same time, the Appointing Order provided that the Trustee would pay or provide payment for bona fide creditors of CCAH and CCAI before making any distribution of the liquidation proceeds. Id. at 6-7. As a consequence, the Appointing Order was the functional equivalent of a dissolution of CCAH and CCAI, which required approval of 75% of the record shareholders of CCAH under Netherlands Antilles law. In issuing the Appointing Order, the Court was aware that because BCCI did not beneficially own 100% of the stock of CCAH, the appointment of a Trustee to hold 100% of the stock of FAC would have a consequential effect on non-forfeited property. No CCAH record shareholder, including Clifford and Altman, objected to the Appointing Order or otherwise challenged this Court's jurisdiction to enter such an order.

The fact that neither Clifford and Altman nor any other CCAH record shareholder challenged the Appointing Order was unsurprising. On May 12, 1992, over a month prior to the public hearing of June 16, 1992, the United States had submitted to CCAH shareholders, which included Clifford and Altman, the proposal which, in all material respects, became the Appointing Order. By an affirmative vote of 79%, CCAH record shareholders, including Clifford and Altman (representing only 1.243% of the voting stock), approved the proposal.³

While the Appointing Order provided for the payment of "bona fide debts of FAB, FAC, CCAI and CCAH as are required by binding contract or law" prior to the forfeiture of proceeds to the United States, see Appointing Order at 6-7, it did not provide a specific mechanism for resolving disputed claims.⁴ The Appointing Order merely provided that any proceeds not forfeited to the United States would be paid, pursuant to court order, to "the parties entitled to that property." Id. at 7-8. In the Order of August 19, 1993, the Court clarified the Appointing Order by stating:

The phrase "such bona fide debts of FAB, FAC, CCAI and CCAH as are required by binding contract or law to be paid," appearing on page 7 of the Order Appointing Trustee means "such debts as are valid, binding and legally enforceable under normal principles of indebtedness." The Trustee may raise affirmative defenses recognized under normal principles of commercial law in response to claims made by creditors seeking proceeds from the sale or other disposition of First American shares or assets.

Order of August 19, 1993, at 15 [BCCI Docket No. 909]...