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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
1997 LC CASE SUMMARIES No. 91-0655 (JHG), 1997 U.S. Dist. LEXIS 14317 (D.D.C. 26 August 1997)
Topics:
Contingent Liability; Government Seizures: BCCI.
Type of Lawsuit:
Claimant filed an "L-Claim" petition to assert its ownership of seized assets.
Parties:
Claimant- Capital Bank
Confirmer- BCCI
Respondent- United States of America
Counsel:
For Respondent/Government- Stefan D. Cassella, J. Christopher Kohn, John T. Stemplewicz, Karen I. Meyer, U.S. Department of Justice.
For Petitioner/Claimant- Gregory B. Craig, Christopher W. Schmeisser, Williams & Connolly.
Underlying Transaction:
Confirmation of LCs.
LC:
Silent as to amount. Silent as to the UCP.
Decision:
The U.S. District Court for the District of Columbia, Green, J., dismissed t h e claimant's L-Claim petition.
Rationale:
The claimant cannot assert a right to amounts that may become due in the future under the letters of credit, as it lacks standing to bring an "L-Claim."
Article
Factual Summary: Following an audit, which found evidence of widespread fraud, the financial condition of the confirmer, BCCI, became suspect and its assets in the United States were frozen. Among the frozen assets were funds from four accounts held with the claimant. The United States subsequently filed an indictment against the confirmer, which pled guilty. Under the plea agreement, the United States seized all of the frozen funds and deposited them for the benefit of the victims of the fraud. The United States then provided a mechanism by which parties who claimed an interest in the seized funds could file an "L-Claim" to recover the assets. The claimant filed such a petition which set forth that "by virtue of its right to set off and due to contingent liabilities arising form letters of credit confirmed but not paid" it was entitled to up to US$ 1,139,910.80. It is unclear whether the petitioner was the beneficiary of such LCs or had acted as the confirmer.
Legal Analysis:
1. Government Seizures:BCCI: To succeed under an "L-Claim" petition, the claimant must establish that it has a right, title or interest in the seized property. Moreover, it must demonstrate that this right was superior to that of the confirmer, thus rendering the seizure invalid. If the claimant has no such superior right, then it lacks standing to file an "L-Claim." Unsecured creditors who do not possess an interest in any specific seized asset and only have a general interest in the seized assets do not meet the above test. Alternatively, the claimant could show that it was a bona fide purchaser of the asset without knowledge of the forfeiture. In answering the claimant's assertion that it was an unfairly punished innocent third party, the court noted that "[when persons and entities do business with criminal enterprises, ... it is an unfortunate fact of life that economic injury may result."
2. Contingent Liability: The court ruled that under the contingent letter of credit liabilities, the claimant was little more than a general creditor. As such, it had no standing to bring this "L-Claim." Additionally the court found that no "purchase" had taken place.
©1998 INSTITUTE OF INTERNATIONAL BANKING LAW & PRACTICE
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.