U.S. v. Bcci Holdings (Luxembourg) S.A., Crim. Action No. 91-0655 (JHG).

• Decision Date: 13 February 1997
• Docket Number: Crim. Action No. 91-0655 (JHG).
• Citation: 956 F.Supp. 5
• Court: U.S. District Court — District of Columbia
• 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.

956 F.Supp. 5

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. Action No. 91-0655 (JHG).

United States District Court, District of Columbia.

February 13, 1997.

COPYRIGHT MATERIAL OMITTED

Stefan D. Cassella, Daniel C. Stark, Ruth A. Harvey, Bea L. Witzleben, Lloyd H. Randolph, Trial Attorneys, U.S. Dept. of Justice, for Government.

Louis T. Urbanczyk, Miller, Hamilton, Snider, Odom & Bridgeman, (L. Adam Weiner, Asst. Vice President and Counsel, The Pacific Bank, N.A., of counsel), for The Pacific Bank.

MEMORANDUM OPINION AND ORDER

JOYCE HENS GREEN, District Judge.

Presently before the Court is the United States' Motion to Dismiss ("Motion to Dismiss") the Third Party Petition For Hearing to Adjudicate Property Interest of The Pacific Bank pursuant to 18 U.S.C. § 1963(l) (1994) ("L-Claim"). For the reasons expressed below, the motion will be granted and the L-Claim will be dismissed.

Background

The facts regarding the collapse of Bank of Credit and Commercial International ("BCCI")¹ are well known in the financial and legal communities and only a brief background discussion is provided herein. In early 1991, 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 creation and manipulation of fictitious accounts to conceal bank losses, and concealment from regulatory authorities of BCCI's mismanagement and true financial position." Corrigan, Mattingly & Taylor, The Federal Reserve's Views on BCCI, 26 Int'l Law. 963, 970-71 (1992) (based on testimony before the Committee on Banking, Finance and Urban Affairs of the United States House of Representatives on September 3, 1991).

The results of the audit were shared with banking regulators in other countries. Based upon that audit and independent domestic investigations, on July 5, 1991, regulators in the United Kingdom, Luxembourg and the United States froze assets owned or controlled by BCCI. In New York, the Superintendent of Banks took possession of BCCI's assets at various New York banks, prohibiting transfers from those accounts.²

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 of America. See Transcript of Guilty Plea Proceedings, at 7 (Jan. 24, 1992). In accordance with 18 U.S.C. § 1963, this Court then entered an Order of Forfeiture.

Under paragraph 9 of the Plea Agreement, BCCI forfeited all of its property interests in the United States. Pursuant to paragraph 1(e) of the Forfeiture Order, this included BCCI's ownership interests in all real property, tangible and intangible personal property, however held, whether subsequently identified, determined or discovered in the course of the ongoing liquidation proceedings described therein or otherwise identified, determined, or discovered in any manner at any time (excluding property brought into the United States by or on behalf of the Court-Appointed Fiduciaries of BCCI in the course of the management or disbursement of the liquidation estates). Attached to the Order of Forfeiture, as amended, was a list of BCCI accounts, with corresponding numbers, names, and approximate balances, which the United States Marshals Service was directed to seize forthwith.

The Plea Agreement also established the Worldwide Victims Fund and the U.S. Fund. Under the terms of the Plea Agreement, forfeited assets were to be disbursed in equal amounts to the Worldwide Victims Fund and the U.S. Fund. See Plea Agreement ¶ 11(c). The broad purpose of the Worldwide Victims Fund, operated by the Court-Appointed Fiduciaries, is to distribute funds "only to innocent depositors, creditors and other victims of BCCI whose claims are not derived directly or indirectly through violations of United States or other laws concerning narcotics, terrorism, money laundering, crimes of violence, or other acts generally recognized as felonies or similar crimes under the law of countries subscribing to recognized norms of international justice." Id. ¶ 14.

The purpose of the U.S. Fund is more specific. In addition to allowing for reimbursement of the costs of investigation and prosecution of BCCI, bank insurance and other matters, the U.S. Fund is also available to provide "restitution to victims of BCCI, which may include remission to the Court Appointed Fiduciaries in accordance with 18 U.S.C. § 1963(g) for the purpose of facilitating an increase in assets available for distribution by the Court-Appointed Fiduciaries to innocent worldwide victims of BCCI." Id. ¶ 12(f). As a result of BCCI's guilty plea and the subsequent criminal forfeiture proceedings, the United States has "recovered nearly $800 million, virtually all of which has been, or will be, distributed to the victims of the fraud." Testimony of Stefan Cassella before the Judiciary Committee of the House of Representatives (July 22, 1996), 1996 WL 410099, *5 (F.D.C.H.).³

Among the assets seized pursuant to the Order of Forfeiture of January 24, 1992, was account # 07012001 held by Security Pacific International Bank ("SPIB") on behalf of BCCI (Overseas) Cayman ("BCCI Cayman"). On the date it was forfeited to the United States, the account balance totaled $4,124,192.31 and included the $305,198.99 at issue in the instant L-Claim (hereinafter referred to as "forfeited funds").

The following facts are alleged in the L-Claim. The Pacific Bank maintains numerous fiduciary accounts on behalf of Cushman & Wakefield ("C & W"), a property management company. L-Claim ¶ 1. Among those accounts was one labeled "C & W, as Agent for Minos Management Company, number 1150-708510." Id. ¶ 2. Prior to November 13, 1991, C & W directed The Pacific Bank to transfer funds from account number 1150-708510 to SPIB in favor of BCCI Cayman, account number 07012001, for further credit to Minos Management, account number 02000770. Id. ¶ 3. On or about November 13, 1991, C & W modified its instructions to provide that all wire transfers were to be sent to Chase Manhattan Bank instead of SPIB for credit to BCCI Cayman. Id. ¶ 4.

On two occasions thereafter bank personnel failed to follow C & W's new instructions. On or about December 27, 1991, the bank transferred by wire $234,650.62 to SPIB "for credit to BCCI's Grand Cayman Division, account number 07012001." Id. ¶ 6. And, on or about January 22, 1992, the same error occurred, resulting in a transfer of $70,548.37 to SPIB "for credit to BCCI Cayman account number 07012001." Id. ¶ 7.

The beneficiary, Minos Management, never received credit for the funds, totaling $305,198.99, which, pursuant to The Pacific Bank's instructions, as the originator's bank, were deposited into BCCI Cayman's (the beneficiary's bank's) account at SPIB. Id. ¶¶ 8-9. On January 24, 1992, the Court entered the First Order of Forfeiture, which included BCCI Cayman account number 07012001 at SPIB. The Pacific Bank contends that on or about February 20, 1992, it became aware that BCCI Cayman account number 07012002, among others at SPIB, had been forfeited to the United States. Id. ¶ 9. Thereafter, The Pacific Bank petitioned for an amendment to the Order of Forfeiture, explaining it had repaid C & W for the loss and asserting its interest in the forfeited funds. Id. ¶ 10.

The United States has moved to dismiss the L-Claim, arguing that The Pacific Bank lacks standing to assert a claim, because it is a general unsecured creditor of BCCI. On the merits, the government contends that the petitioner has failed to state a claim upon which relief can be granted because The Pacific Bank lacks a legal interest in a specific asset as required by 18 U.S.C. § 1963(l)(6)(A), and it is not a bona fide purchaser for value under 18 U.S.C. § 1963(l)(6)(B).

Discussion

Title 18, United States Code, Section 1963 sets forth an orderly procedure by which third parties seeking to recover interests in forfeited property may obtain judicial resolution of their claims. The provision granting standing to parties seeking to amend an order of forfeiture to exclude certain property states:

Any person other than the defendant, asserting a legal interest in property which has been ordered forfeited to the United States pursuant to this section may, within thirty days of the final publication of notice or his receipt of notice under paragraph (1), whichever is earlier, petition the court for a hearing to adjudicate the validity of his alleged interest in the property. The hearing shall be held before the court alone, without a jury.

18 U.S.C. § 1963(l)(2).

Section 1963(l)(6) sets forth the substantive elements that a third party must establish to obtain amendment of an order of forfeiture. This section provides:

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, title, 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...