United States v. BCCI Holdings (Luxembourg)

[Editor’s Note: The casebook International Banking Law (V. Gerard Comizio ed., 1st ed. 2015) erroneously gives the title of this case as “BCCI US v. BCCI Holdings.” The correct title is “United States v. BCCI Holdings (Luxembourg).”] The Bank of Credit and Commerce International (BCCI) (defendant) was founded in 1972. In 1990, the sovereigns of Abu Dhabi took control of BCCI. At one time, BCCI and its affiliated entities had more than 400 branches in 69 countries. BCCI kept a low profile in the United States, where it appeared not to provide retail-banking services. However, in 1978, shareholders in Washington, D.C.-based Financial General Bankshares, Inc. (Financial General) sued BCCI and others, claiming that BCCI was attempting a hostile takeover of Financial General. After being preliminarily enjoined from acquiring more Financial General shares, BCCI settled the case. BCCI also entered into a consent judgment with the Securities and Exchange Commission regarding Financial General. Soon thereafter, Credit and Commerce American Investment, B.V. (CCAI) purchased First American Bank (FAB), Financial General’s successor. It later became apparent that BCCI provided most of the financing for CCAI’s acquisition of FAB via real and false loans that were intended to mask BCCI’s role in the transaction. Prominent Washington lawyers Clark Clifford and Robert Altman became the managing directors of CCAI-related shell companies and directors and senior officers of FAB’s successor, First American Corporation (FAC). In 1987 and 1988, federal prosecutors and Congress investigated whether BCCI helped the Panamanian general Manuel Noriega launder drug proceeds. BCCI ultimately pleaded guilty to federal money-laundering charges, and individual BCCI employees were convicted of federal money-laundering charges after trial. Starting in 1990, the Board of Governors of the Federal Reserve System began investigating whether BCCI was behind CCAI’s FAB acquisition. In December 1990, the Republic of Panama sued BCCI and First American in federal court in Florida, asserting that BCCI was First American’s true owner and that BCCI and First American illegally laundered Noriega’s drug money. Around this time, the Bank of England audited BCCI. This audit revealed that BCCI was engaged in a massive and complex international fraud. The Bank of England shared its audit results with other regulators, leading to the freezing of BCCI’s assets in the United Kingdom, the United States, and Luxembourg. As of July 29, 1991, 44 countries had closed BCCI branches in their jurisdictions. BCCI’s depositors filed putative class-action suits against BCCI’s auditors, First American, and many others, alleging violations of the Racketeer Influenced and Corrupt Organizations Act. In addition, five BCCI-related civil cases were filed in the United States District Court for the District of Columbia against, among others, CCAI’s former shareholders, Clifford, Altman, and Clifford and Altman’s law partners. These suits were all resolved via settlement or default judgments against certain defendants. Against this background, the Washington federal court oversaw criminal-forfeiture proceedings regarding BCCI’s seized assets. The forfeiture proceedings resulted in the realization of more than $1.2 billion in assets in the United States for distribution to BCCI’s victims. In addition, fiduciaries appointed by the Washington federal court had already distributed more than $4 billion to innocent depositors and other creditors that were affected by BCCI’s collapse, with additional distributions expected. Due to these efforts, it was expected that BCCI’s creditors would receive more than half their money back. Although further collection efforts remained, the Washington federal court entered a final order of forfeiture in the criminal case regarding BCCI based on its determination that the United States had located all BCCI-related assets within the country. Among other things, the order provided that the United States had clear title to all forfeited property and was authorized to distribute all assets that it held.