Article

Prime Bank Instrument Scams.

Type of Lawsuit:

Action by investor against trustee of alleged scamsters for breach of contract, breach of fiduciary duty, conversion, and fraud.

Principals:

Plaintiff- Dennis Kerrigan

Defendant/Trustee- A. William Villei

Third Party Defendants- Lester Taubman; Shirley Taubman; Aladdin Acceptance, Inc.

False Instruments:

Standby Letters of Credit and Prime Bank Guarantees

Activities:

1) In 1993, Aladdin Acceptance, Inc. through its officers, the Taubmans, agreed with Villei that he was to use accounts in the name of Villei International Trust at National Westminster Bank and Barclays Bank in the British Virgin Islands as a trust account for US$ 10 billion transactions in Prime Bank Instruments.

2) On 31 August 1993, Aladdin agreed to deliver $20 billion in standby letters of credit to Hammani Enterprises, Ltd. and, on behalf of Hammani, Interfina wired $250,000 to a Villei account.

3) On 31 August 1993, Aladdin also agreed with Kerrigan to provide bank securities and to transfer $250,000 to the Villei account as a performance bond which was to be returned if there was no "movement" within ten banking days.

4) It was unclear if the $250,000 was transferred pursuant to the Hammani agreement or the Kerrigan agreement or what was the relationship between Hammani and Kerrigan.

5) In a prior motion, Kerrigan alleged that Villei was using trust funds to pay his attorney.

Decision:

The U.S. District Court for the Eastern District of Pennsylvania, Reed, J., denied cross motions for summary judgment.

Notes:

1. During this time, an additional $250,000 was wired to a new account established at Dresdner Bank in Kassel, Germany from National Australia Bank in Melbourne, Australia which was returned by Dresdner because the intended transactions violated various regulatory advisories.

2. Although not a party to the trust agreement, the court concluded that Kerrigan was anticipated as a third party beneficiary and, as a result, could maintain an action on the contract.

3. On the issue of fraud, the court noted that under Pennsylvania law a claim of fraudulent misrepresentation cannot be maintained simultaneously with one for breach of contract. The court permitted the claim to stand, however, as to allegations that Villei held himself out as an attorney with special abilities, expertise, knowledge, and qualifications to act as a trustee, while noting that they had not been established on the summary judgment record.

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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.