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Prior History: Dorchester Fin. Sec., Inc. v. Banco BRJ, S.A., 02 Civ. 7504 (KMW)(KNF), 2003 U.S. Dist. LEXIS 19419 (S.D.N.Y. Oct. 28, 2003) [U.S.A.], noted in 2004 ANNUAL REVIEW 263.

Note: In seeking to raise capital for an insurance project, Dorchester Financial Securities, Inc. (Venturer/Beneficiary) cooperated with Africa Capital Partners Investments Limited (Applicant) to obtain a standby. As explained in the opinion, Applicant provided its assets as security in return for a share of the capital raised. The USD 100 million standby was to be issued by Banco BRJ, S.A. (Bank) in favor of Venturer/Beneficiary. The standby was to be used to obtain loans whose proceeds would be invested by Venturer/Beneficiary. Concerned about the ability of Bank to pay, Venturer/Beneficiary participated in a conference call that was arranged by Applicant with Mr. Quieroz and Mr. Alcazar who identified themselves as Bank's officers in charge of international banking.

Venturer/Beneficiary was informed that USD 500,000 LC fees must be paid in advance. The fee was sent to Bank and transmitted to Applicant on Venturer/Beneficiary's instructions. Applicant's accountant stated that he had called Bank's "main switchboard" which referred him to Quieroz who referred him to someone who provided Applicant's account coordinates.

Subsequently, Venturer/Beneficiary claimed that it received a SWIFT message transmitted by Chase Manhattan Bank purportedly from Bank which was labeled "unauthenticated" and contained a statement that "If authentication is required - do not process!!! Under no circumstances should a financial bearing transaction be processed in response to this message!!!" According to the opinion, the communication stated "[Bank] had issued the letter of credit and would reserve it from the date of issue to the date of expiration or maturity. The message further stated that it was signed by two [Bank] officers, 'Luiz Augusto de Quieroz,' and 'Luiz Alcazar,' and included their individual SWIFT codes".

When Venturer/Beneficiary received a copy of the standby, it was for USD 250 million rather than the USD 100 million agreed on. Venturer/Beneficiary was told that "as long as smaller amounts were sent to any lender . . . the large amount . . . would not become a problem". When Venturer/Beneficiary requested that the standby be issued in smaller amounts, it was required to pay an additional USD 250,000 fee. Ultimately, it paid USD 1 million in fees.

Subsequently, Venturer/Beneficiary was informed that Bank had canceled the LC. Venturer/Beneficiary sued Bank for breach of contract and fraud. Unable to utilize the standbys, Venturer/Beneficiary sued SWIFT and Bank in New York. The U.S. District Court for the Southern District of New York, Wood, J., granted Bank's motion to dismiss.

Venturer/Beneficiary claimed that it had personal jurisdiction over Bank as a result of the arguments provided for appellants of New York law and forum as well as the standby by demand in US dollars addressed to Venturer/Beneficiary in New York. Bank responded that Venturer/Beneficiary had never dealt with it but "personal jurisdiction is lacking because [Venturer/Beneficiary] never actually transacted with [Bank]; rather, it interacted only with persons masquerading as [Bank] officers". It asserted "(a) it has no record of any relationship with [Venturer/Beneficiary] or [Applicant]; (b) it has never issued the type of financial instruments such as the purported letter of credit; (c) the signatures on the documents are forgeries; (d) Luis Alcazar . . . was never an employee of [Bank]; and (e) [Bank] has been the victim of similar frauds, including one that also involves an individual named 'Luis Alcazar,' in criminal and civil cases in Florida and California, respectively".

In light of what the Judge described as "an overwhelming amount of 'direct, highly specific testimonial evidence,' to support these claims, none of which [Venturer/Beneficiary] has sufficiently refuted", the Judge concluded that Bank "was never involved in the events giving rise to this cause of action." In particular, Bank stated that it services the domestic Brazilian market and has never conducted business in the US. The Judge also noted that Venturer/Beneficiary's accountant had warned that it was "unwise" to proceed with the transaction.

As to the agreement, Bank challenged its authenticity, asserting that "[b]oth Augusto and Claudio de Quieroz state that [Bank] has no knowledge of the Agreement, which was signed purportedly on behalf of [Bank] by Alcazar only. They aver that the document is a forgery because: (1) the [Bank] seal on the Agreement is 'not the seal used by [Bank] in October 2001, [which] at that time contained [Bank]'s . . . number of company registry in Brazil'; (2) Alcazar is not an employee of [Bank]; and (3) Alcazar's lack of authority is further illustrated by the fact that [Bank] does not have an 'International Department,' of which Alcazar purports to be the Senior Manager. Augusto de Quieroz further declares that Alcazar 'was an independent broker who presented business opportunities to [Bank] between 1998 and 2000. We never consummated a single transaction that Mr. Alcazar presented to us and we had no relationship with him whatsoever as of the 2001 date of the alleged letter of credit'" (citations omitted).

Regarding the SWIFT message, the Judge stated:

[Bank] also offers evidence to negate the authenticity of the SWIFT message, which purports to bear the signatures of Alcazar and Augusto de Quieroz. Augusto de Quieroz declares that neither he nor anyone else at [Bank] sent the SWIFT message, and that the personal SWIFT code listed on the document is not, nor has ever been, his personal SWIFT code. Claudio de Quieroz similarly avers that [Bank] did not send the message and confirms that the personal SWIFT code listed under Augusto de Quieroz's name is not, nor has ever been, Augusto's SWIFT code or that of any other [Bank] employee.

To contest this evidence, [Beneficiary] offers [expert witness's] "expert testimony," in which [expert witness] states that "the 2-page SWIFT message . . . contains enough identifying information about the sender such as SWIFT codes, bank name inserts and bank location inserts to make a verification. In my opinion [Bank] sent this message . . . [and] either Luis Alcazar or Luiz Augusto de Quieroz or both ordered the message sent to Chase Bank." [Expert witness's] opinion appears to be based on the principle that since "banking practice norms require that a wire transfer clerk send out SWIFT messages for an officer and includes the name of the officers(s) that ordered the message sent," Alcazar and/or Augusto de Quieroz, whose names are listed on that message, are therefore the officers who sent the SWIFT message. This conclusory allegation is insufficient to contest [Bank]'s "direct, highly specific testimonial evidence" that the message is a forgery" (citations omitted).

Regarding the LC, Bank observed:

(1) the "Letter of Credit Number" listed on the copy submitted by [Venturer/Beneficiary] does not conform to the numbering system it uses to issue financial instruments; (2) [Bank] issues instruments in Portuguese only, whereas the letter submitted by [Venturer/Beneficiary] is in English; (3) the font type on the document is different from the one [Bank] uses; and (4) "[Bank] did not issue any kind of financial guarantees in 2001 remotely similar to that in the alleged letter of credit, regardless of dollar amount." Furthermore, both purported signatories to the document, Augusto and Claudio de Quieroz, swear that they did not sign the letter of credit, and that the signatures on the document are forgeries. [Bank] has submitted a number of documents bearing samples of the signatures of both Augusto and Claudio de Quieroz; those signatures do not bear any resemblance to the signatures on the letter of credit submitted by [Venturer/Beneficiary]. [Venturer/Beneficiary] has not offered any evidence to refute the de Quierozs' sworn statements or prove the authenticity of the letter of credit" (citations omitted).

[JEB/chy/ak]

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