US v. BCCI HOLDINGS (LUXEMBOURG), SA, Cr. No. 91-0655 (JHG).

• Citation: 833 F. Supp. 9
• Decision Date: 19 August 1993
• Docket Number: Cr. No. 91-0655 (JHG).
• 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, International Credit and Investment Company (Overseas) Limited, Defendants.

833 F. Supp. 9

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, International Credit and Investment Company (Overseas) Limited, Defendants.

Cr. No. 91-0655 (JHG).

United States District Court, District of Columbia.

August 19, 1993.

Stefan D. Cassella, Richard W. Sponseller, Laurie J. Sartorio, U.S. Dept. of Justice, Wash., DC, for Government.

William S. Lerach, Dennis Stewart, Milberg Weiss Bershad Specthrie & Lerach, San Diego, CA, Kevin P. Roddy, Milberg Weiss Bershad Spechtrie & Lerach, Los Angeles, CA, for defendants.

ORDER DISMISSING THE MARCH 11, 1992 AND SEPTEMBER 11, 1992 PETITIONS OF SHRICHAND CHAWLA, LEO D. CURRAN, WILLY HERMANS AND RED CIRCLE INVESTMENT, LTD., JALEH KHORASSANCHY, AMIT PANDYA, SOHA, INC., IDRISS DEVCO, INC. AND S & L GENTRADE, INC.

JOYCE HENS GREEN, District Judge.

Presently pending are the United States' motions to dismiss the petitions for hearings to adjudicate interests in forfeited property filed by Shrichand Chawla, Leo D. Curran, Willy Hermans and Red Circle Investment, Ltd., Jaleh Khorassanchy, Amit Pandya, Soha, Inc., Idriss Devco, Inc., and S & L Gentrade, Inc. (the "petitioners" or "claimants"). Upon consideration of the motions to dismiss, all filings relating thereto, and oral argument presented at the May 14, 1993 hearing, the motions are granted and the petitions are dismissed.

BACKGROUND

On January 24, 1992, this Court, following findings of fact and conclusions of law with supporting reasons made in open court, accepted the pleas of guilty of the four corporate defendants (collectively "BCCI") and the plea agreement between them and the United States of America. Thereupon, and in accordance with 18 U.S.C. § 1963, an Order of Forfeiture was entered. Paragraph 1(e) of the Order provides that the corporate defendants named in this action shall forfeit to the United States ownership interests in all property located in the United States, including, without limitation, real property and all 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, but not property that may be brought into the United States by or on behalf of court-appointed fiduciaries of BCCI in the course of the management or disbursement of the liquidation estates as described in the plea agreement. Attached to the January 24, 1992 Order as Exhibit A was a list of specific BCCI accounts, with corresponding numbers, names, and approximate balances, which the United States Marshals Service was directed to seize forthwith. Because the government was unable to verify certain information concerning additional forfeitable accounts at the time the Order of Forfeiture was entered, the Court issued a supplemental Order on January 31, 1992 which directed immediate seizure of the specific assets listed therein.

In satisfaction of 18 U.S.C. § 1963(l)(1), and to inform third parties of potential rights to seek recovery of assets declared forfeited, the United States published notice of the Order of Forfeiture, as amended, during the period between February 13, 1992 and March 27, 1992 in eleven major United States newspapers including the Wall Street Journal, the New York Times, the Chicago Tribune, and the Los Angeles Daily Journal. See Government's Compliance with Order of May 8, 1992, filed May 12, 1992. In addition, personal notice was sent to over 340 persons and entities as late as April 3, 1992. Id.

The claimants filed their first petition to amend the Order of Forfeiture on March 11, 1992. In that three page submission, they claimed to represent a class of over one million BCCI depositors in an action styled Hamid v. Price Waterhouse & Co., Case No. CV-89-6538, which was then pending in the United States District Court for the Central District of California. Third Party Petition for Hearing to Adjudicate Property Interest (18 U.S.C. § 1963) ("Petition") at 1. The third amended complaint filed in the California case alleged that the plaintiffs lost billions of dollars due to racketeering and fraud committed by the 76 named defendants, including Price Waterhouse, Ernst & Young, Abu Dhabi, Clark Clifford, Robert Altman, and Manuel Noriega. To describe the interests which the claimants seek to recover in this case, the petition incorporated by reference the Hamid complaint and merely stated:

The nature and extent of Petitioner's right, title, or interest in the subject property, which are superior to BCCI's claims at the time of the commission of the acts which gave rise to the guilty plea and forfeiture under 18 U.S.C. § 1963(1), the time and circumstances of Petitioner's acquisition of the right, title, or interest in the property, additional facts supporting the claims and the relief sought are alleged in detail in the attached Third Amended Complaint.

Petition at 2. Unfortunately, the third amended complaint, which exceeds 475 pages¹, sheds little light on the nature and extent of the legal interest asserted, especially since the defendants in this case were not parties to the Hamid litigation.

Because the California complaint was based on charges of racketeering and fraud, the government characterized the petitioners as tort claimants and addressed their claim in its Motion to Dismiss Petitions of BCCI Tort Petitioners, which also addressed claims filed by Banco Central de Reserva del Peru ("Peru"),² the Republic of Panama, and Lee Scarfone, Patricia Scarfone, ALSA International, Inc., and Banditball, Inc. ("the Scarfones").³ The court-appointed fiduciaries for the four corporate defendants subsequently filed a memorandum of law addressing the same claims. The petitioners filed an opposition to the government's motion in which they argued that they should be considered depositors, rather than tort claimants, who were fraudulently induced to place money with BCCI. More specifically, the petitioners contended that because BCCI solicited deposits to be used for undisclosed legal purposes, the debtor/creditor contracts they entered were illegal and void ab initio. The depositors claimed that since they never passed title to their deposited funds to BCCI, those funds could not lawfully be forfeited to the United States. Memorandum on Behalf of Class Depositor/Petitioners' in Opposition to the Government's Motion to Dismiss Third Party Petitions for Hearing to Adjudicate Property Interest, filed June 22, 1992, at 12. The government filed a reply to the opposition, noting that the opposition constituted a "last minute attempt to rewrite their L-claims," Government's Reply to Oppositions to Motion to Dismiss Petitions of BCCI Tort Petitioners at 24, and citing reasons why the petitioners' new theory should be rejected.

On June 24, 1992, the government filed a Motion to Amend Order of Forfeiture to Include Additional Property, seeking forfeiture and seizure of assets in newly discovered bank accounts held in the names of the corporate defendants, proceeds from the sale of a condominium purchased with resources provided by a corporate defendant, money remaining in a "BCCI Legal Fund" established by one of the corporate defendants for the defense of its employees' legal interests, a bankruptcy distribution to one of the corporate defendants, and assets held at various New York financial institutions in the name of ICIC Investments Ltd., a sibling corporation of defendant ICIC (Overseas) Ltd. The Court granted the government's motion and issued an Order of Forfeiture on July 29, 1992. The United States subsequently provided notice of the Order to potential claimants.⁴

The claimants filed their second petition on September 11, 1992, which was identical to the first except that it sought to recover funds forfeited in July 1992. The government filed a motion to dismiss the petitioners' "Round Two" claim, which also addressed second petitions filed by Peru and the Scarfones. The petitioners filed an opposition and the government submitted a reply. Oral argument on both motions was heard on May 14, 1993.

DISCUSSION

As an initial matter, the Court has serious doubts about the claimants' standing to file a petition on behalf of the more than one million BCCI depositors worldwide. Although the Hamid case was filed as a class action, no class was ever certified and the case has been dismissed by the District Court. In addition, no motion for class certification has been filed with this Court. Nonetheless, in light of the legal conclusions made below relating to the merits of the claims and because the time which putative class members could file individual petitions to amend the January 24, 1992 and July 29, 1992 Orders of Forfeiture has expired, the petitions will be treated, for purposes of resolving the government's motions to dismiss, as having been filed by a class of worldwide depositors.

Title 18, United States Code, § 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 ..., whichever is earlier, petition the court for a hearing to adjudicate the validity of his alleged interest in the property.

18 U.S.C. § 1963(l)(2). Section 1963(l)(6) sets forth the substantive elements which a third party must establish to successfully obtain amendment of an order of forfeiture and provides in full:

If, after the hearing, the

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