Jurisdiction & Liability: The twin defenses of offshore defendants

SOURCE: OffshoreAlert

MIAMI, FL: March 15, 2007

When the Bank of Bermuda (Cayman) Ltd. was sued in the United States in 2000 on behalf of victims of a Ponzi scheme known as Cash 4 Titles, it did what almost all offshore-based defendants do - it challenged jurisdiction.

The result was equally as predictable, i.e. the U. S. District Court for the Southern District of Florida ruled that it did indeed have jurisdiction over the bank, notwithstanding the fact that the financial institution was headquartered in a foreign country and had no subsidiaries in the U. S.

Among the reasons given by U. S. District Court Judge Paul C. Huck were:

The Bank had once used the Florida court system to sue a Florida resident;
Bank officers visited Florida, spent money, and then claimed it back as business expenses when they returned offshore;
The Bank maintained a mailing address in Florida; and
The Bank “engages in routine bank services such as mailing of checks and wiring funds into Florida”.

After losing the jurisdiction argument, the Bank was then forced to contemplate its chances of success on the merits of the case by denying liability. Presumably, the Bank did not didn’t like them too much because it quickly entered into a settlement agreement with the plaintiffs that required it to pay damages of up to $67.5 million.

The U. S. courts are no less strict about jurisdiction when it comes to criminal actions, as evidenced by the numerous offshore-based bankers, financial services providers, and gaming operators who have been indicted and had arrest warrants issued against them in the U. S. at one time or another, including St. Kitts & Nevis-based financial services provider Robin Cotterell, who was acquitted; British/Costa Rica-based gaming boss David Carruthers, who is awaiting trial; and offshore bankers Malcolm West, Thierry Nano, and Richard Downes.

In recent years, U. S. courts are littered with examples of offshore auditors, administrators, banks, and financial services providers having to pay substantial damages to victims of schemes perpetrated by their clients or, even worse, having criminal charges brought against them.

In order to help offshore-based businesses and individuals better understand their exposure to financial and criminal penalties, a special session entitled ‘Liability & Jurisdiction: Who is Liable When Fraud is Committed & How Do Courts Determine Jurisdiction’ will be held during the 5th OffshoreAlert Financial Due Diligence Conference in Miami, Florida on April 24-25, 2007.

Among the panelists are attorney Lawrence Kellogg, who helped negotiate the Bank of Bermuda settlement on behalf of Cash 4 Titles victims; Susan Yashar, Assistant Director of the U. S. Securities and Exchange Commission’s Office of International Affairs; and Melvyn Weiss, Senior & Founding Partner of Milberg Weiss & Bershad, one of the most-feared class action law firms in the United States.

More information about this and other topics to be discussed at the 5th OffshoreAlert Due Diligence Conference can be viewed online at http://www.offshorealertconference.com/OACV/agenda.asp.