Article

Note: Bloomfield Institutional Opportunity Fund (Lender/Beneficiary) loaned US$3,054,778.13 to Allen Investment Properties, L.L.C. (Borrower/ Applicant). As security for the loan, Borrower/ Applicant provided Lender/Beneficiary with collateral, including a standby letter of credit, purportedly issued by East West Bancorp, Inc. (Bank), in favor of Lender/Beneficiary in the amount of US$5 million.

The loan money was to be used to pay off various outstanding mortgages, including one held by the Lawrence A. Shapiro Revocable Trust (Mortgagee). However, some of the loan money was transferred to the account of Shapiro Lending, Inc. at Bank of America, which had been set up by Borrower/ Applicant's manager Marc Allen, instead of to the account of Mortgagee. When Lender/Beneficiary was informed that Mortgagee had not signed a release indicating that the mortgage that had been paid off, Lender/Beneficiary attempted to contact the person whose signature appeared on the standby, Norman Chang. Unable to reach Chang at the number stated in the standby, Lender/Beneficiary called the main number of Bank and was informed that Chang was not an employee. Afterwards, Lender/ Beneficiary presented documents under the standby, and was informed by the head of Bank's LC department that it "had not issued the Letter of Credit and that [Bank] therefore deemed it counterfeit."

After discovering that required title insurance certificates had also been falsified, Lender/ Beneficiary sued Borrower/Applicant and also Marc Allen, William Allen, and Robert Edwards, who had all personally guaranteed the loan. Lender/Beneficiary also sought to freeze the funds in Allen's Bank of America account. Lender/Beneficiary obtained a temporary restraining order, and moved for a preliminary injunction.

After a hearing on Lender/Beneficiary's motion, the U.S. District Court for the Middle District of Florida, Pizzo, J., recommended that the motion be granted. In an order, U.S. District Judge, Kovachevich, J., adopted the recommendation and enjoined the defendants "from directly or indirectly spending, transferring, secreting, assigning, conveying, destroying, encumbering, liquidating, mortgaging, selling or in any other manner disposing of the money wired to Bank of America Account No. 229031860003, and/or money subsequently removed from such account, pending further order of the Court."

[JEB/pbl]

COPYRIGHT OF THE INSTITUTE OF INTERNATIONAL BANKING LAW & PRACTICE

The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.