Opinion
05 CV 9771 (GBD).
September 28, 2006
MEMORANDUM DECISION AND ORDER
In an action for fraudulent conveyance and civil RICO, defendants Banco de Chile and Hernán Donoso-Lira ("Donoso") separately moved to dismiss the complaint on the grounds, inter alia, that it fails to state a claim upon which relief may be granted.
An examination of the docket sheet fails to reveal that plaintiff ever served defendant Oscar Aitken Lavanchy ("Aiken") with a copy of the summons and complaint.
Plaintiff, Fundación Presidente Allende ("Foundation"), is a Spanish non-profit organization. In 1996, the Foundation initiated a criminal proceeding in Spain referred to as an "acción popular" (popular action) against the former President of Chile, Augusto Pinochet ("Pinochet"). The Spanish action was instituted on behalf of all known and unknown victims of Pinochet's crimes against humanity committed between 1973 and 1990. The Foundation maintains that "[b]y operation of Spanish law, the Foundation is a Plaintiff itself in the civil action adjunct to the criminal prosecutions against Pinochet and is entitled to recover money damages to compensate the victims . . ." (Compl. ¶ 8). On October 19, 1998, the judge presiding over the Spanish criminal proceedings issued an attachment order freezing all bank accounts held directly or indirectly by Pinochet, his family members, or third parties in any country, including the United States. (Id. ¶ 25). Allegedly the attachment order was intended to protect the interests of Plaintiff and other claimants by preventing the dissipation of the assets so that they could serve as reparation to the victims in the civil component of the Spanish case. (Id. ¶ 25). Plaintiff alleges that defendants had knowledge of the attachment order freezing Pinochet's assets. Plaintiff further alleges that, in December of 1998, Pinochet was formally indicted and the "indictment held Pinochet provisionally liable to his victims represented by Plaintiff for undetermined civil damages stemming from the criminal charges." (Id. ¶ 26).
Plaintiff indicates that the order to freeze Pinochet's assets "was delivered to the United States . . . government . . . with the expectation that the order would be given full effect." (Pl.'s Mem. Opp'g Mot. at 2). However, "[t]he issuance of the arrest and asset freezing orders by the Spanish Court in October 1998, . . . created political controversy within the U.S. government" and plaintiff believes that such controversy was the reason "for the United States government's failure to formally domesticate the freeze order." (Id. at 3 n. 9).
Plaintiff alleges that, beginning in 1990, Pinochet began to move a substantial portion of his assets outside of Chile in response to inquiries in Spain regarding human rights violations. Pinochet, with full knowledge of the 1998 attachment order, allegedly orchestrated a scheme to conceal his assets from potential claimants including the victims represented by plaintiff. Defendant Aitken, who purportedly served as Pinochet's financial advisor and personal lawyer, allegedly acted directly, pursuant to Pinochet's orders, to implement Pinochet's plan to secrete his assets. Aitken allegedly utilized defendant Banco de Chile and defendant Donoso, the manager of the New York Branch of Banco de Chile, to assist Aitken's efforts to conceal Pinochet's assets from creditors.
Plaintiff claims that at least twenty-four separate accounts and CDs that contained Pinochet's funds were opened by Banco de Chile either by Pinochet himself, or in the names of his immediate family members or ostensibly unrelated third parties. The bank accounts were allegedly "established to assist Mr. Pinochet to conceal and disguise his assets and to hinder, delay, and defraud creditors, including Plaintiff." (Id. ¶ 39). Plaintiff alleges that, from 1995 through 2004, the aggregate funds transferred in and among these accounts totaled over $7 million, and such transfers were performed by Banco de Chile to assist Pinochet in secreting the assets. Following the issuance of the 1998 attachment and freeze order, Banco de Chile allegedly facilitated a number of transactions transferring funds controlled by Pinochet in order to conceal his assets.
On August 5, 2004, the Chilean Minister of Court ordered that the trust fund monies deposited in Banco de Chile's New York branch be transferred to Chile to be deposited under the Chilean Court's control. Over $6.5 million was thereafter transferred. (Lopez Decl. Ex. 3, 4).
In reviewing a complaint for dismissal under Rule 12(b)(6), the Court must accept the factual allegations in the complaint as true and draw all reasonable inferences in plaintiffs' favor.Bolt Elec., Inc. v. City of New York, 53 F.3d 465, 469 (2d Cir. 1995). The complaint should only be dismissed where it appears beyond doubt that plaintiffs can present no set of facts entitling them to relief. Conley v. Gibson, 355 U.S. 41, 46 (1957); Ryder Energy Distrib. Corp. v. Merrill Lych Commodities, Inc., 748 F.2d 774, 779 (2d Cir. 1984).
FRAUDULENT CONVEYANCE AND RELATED CLAIMS
The first three causes of action in the complaint charge fraudulent conveyance and related claims under the New York Uniform Fraudulent Conveyance Act ("UFCA"), N.Y.Debt. Cred. Law ("DCL") §§ 270-288. Count one charges defendant Banco de Chile with fraudulent conveyance. Count two and three charge all defendants with aiding and abetting a fraudulent conveyance and with a fraudulent conveyance conspiracy. Plaintiff is seeking to recover, on these claims, an award of actual "damages in the amount of all funds sent by Pinochet to Banco de Chile," "an amount not less than $7 million." (Id. ¶¶ 82, 92). Additionally, plaintiff seeks to recover at least $100 million in punitive damages. (Id. ¶¶ 83, 94).
Plaintiff contends that Banco de Chile committed a fraudulent conveyance because it "received funds from Pinochet and entities owned or controlled by him as part of transfers that were done with the intent to hinder, delay, or defraud Plaintiff." (Id. ¶ 62). Plaintiff maintains that the transfers and conveyances were "for the benefit of one seeking to avoid an asset freeze order . . ." (Id. ¶ 63). Additionally, plaintiff claims that all the defendants aided and abetted the fraudulent conveyance by "knowingly and intentionally assisting Pinochet, through Banco de Chile, to create and implement schemes and transfers that were intended to hinder, delay and defraud Pinochet's creditors." (Id. ¶ 87). Plaintiff also charges the defendants with "conspiracy to commit fraud and to engage in fraudulent conveyance" claiming "Defendants, acting in concert, conspired to defraud the Plaintiff by attempting to unlawfully conceal the assets of Pinochet, and to hinder, delay, and defraud the attachment or freezing of Pinochet's assets held by Banco de Chile." (Id. ¶ 96).
Even if plaintiff was able to demonstrate its standing to bring such causes of action, the complaint fails to state a cognizable claim under the UFCA. "[T]he UFCA is a set of legal rather than equitable doctrines, whose purpose is . . . to aid specific creditors who have been defrauded by the transfer of a debtor's property." HBE Leasing Corp. v. Frank, 48 F.3d 628, 634 (2d Cir. 1995) (citation omitted). Plaintiff claims to be a creditor of Pinochet, for purposes of the UFCA, even though plaintiff has not obtained a judgment against him. A "creditor" is defined as "a person having a claim, whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent." DCL § 270. Plaintiff seeks to recover monetary damages from Banco de Chile for violating DCL § 276 which provides, "Every conveyance made and every obligation incurred with actual intent . . . to hinder, delay, or defraud either present or future creditors, is fraudulent as to both present and future creditors."
A fraudulent conveyance claim seeking to recover money damages can only be maintained against a person who participates in the fraudulent transfer as either the transferee of the assets or the beneficiary of the conveyance. Stochastic Decisions, Inc. v. DiDomenico, 995 F.2d 1158, 1172 (2d Cir. 1993); Sullivan v. Kodsi, 373 F.Supp.2d 302, 309 (S.D.N.Y. 2005); Lippe v. Bairnco Corp., 229 B.R. 598, 601 (S.D.N.Y. 1999), aff'd, 99 Fed.Appx. 274 (2d Cir. 2004); Thomas Kernaghan Co. v. Global Intellicom, Inc., 1999 WL 717250, at *2 (S.D.N.Y. Sept. 14, 1999); Federal Deposit Ins. Corp. v. Porco, 552 N.Y.S.2d 910, 911 (N.Y. 1990);Constitution Realty, LLC v. Oltarsh, 766 N.Y.S.2d 425, 427 (N.Y.App.Div. 2003). A bank's actions, in connection with the withdrawal and/or transfer of the debtor's assets, cannot give rise to a claim of fraudulent conveyance against it because "the bank was not [acting as] a transferee," but rather "was merely a depository." Wilds v. Lebanon Nat'l Bank, 220 N.Y.S. 480, 484 (N.Y.App.Div. 1927), aff'd, 245 N.Y. 629 (1927); accord Kogan v. Nat'l Bank of N. Am., 402 F.Supp. 359, 361 (E.D.N.Y. 1975) (citations omitted).
The complaint fails to establish that defendants had any dominion or control over the assets, or derived any benefit from the conveyance. There are no factual allegations in the complaint to give rise to the inference that Banco de Chile benefitted, in any way, from the conveyance. Plaintiff does not allege that Banco de Chile's transfers of Pinochet's assets were so that they could divert the funds for the bank's own use. On the contrary, the complaint alleges that Banco de Chile's actions were taken in accordance with the instructions it received from its customers. The factual allegations in the complaint, accepted as true, merely establish that the transfer of the assets was undertaken for the benefit of Pinochet to further his scheme of secreting his assets from his creditors. Thus, the complaint fails to state a cognizable claim for fraudulent conveyance against Banco de Chile.
The pleadings are also legally insufficient to support the remaining related causes of action. A fraudulent conveyance conspiracy claim cannot survive absent a showing that defendants had control over the transferred assets or that they benefitted from the conveyance. See, UFCW Local 174 Commercial Health Care Fund v. Homestead Meadows Food Corp., 2005 WL 2875313, at *3 (S.D.N.Y. Nov. 1, 2005). No such allegation has been made in the case at bar. Moreover, a creditor cannot seek monetary damages against a party on an aiding and abetting theory of fraudulent conveyance. See, Geren v. Quantum Chemical Corp., 832 F.Supp. 728, 737 (S.D.N.Y. 1993); Atlanta Shipping Corp., Inc. v. Chemical Bank, 631 F.Supp. 335, 348 (S.D.N.Y. 1986), aff'd, 818 F.2d 240 (2d Cir. 1987).
The first three causes of action must be dismissed as to all defendants.
RICO AND RICO CONSPIRACY CLAIMS
The remaining two causes of actions charge all defendants with civil RICO, in violation of 18 U.S.C. § 1962(c), and civil RICO conspiracy, in violation of 18 U.S.C. § 1962(c), (d).
The civil RICO claim is not ripe for adjudication. A RICO cause of action does not begin to accrue until the amount of damages become clear and definite, and it is established that the collection of the claim or judgment against the debtor has been successfully frustrated. First Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763 (2d Cir. 1994); Bankers Trust Co. v. Rhoades, 859 F.2d 1096 (2d Cir. 1988); Stochastic Decisions, supra. Absent a judgment against Pinochet, the damages sought to be recovered on the RICO claim are purely speculative. Only after a judgment is secured against Pinochet in the Spanish action and efforts to satisfy that judgment have proved unsuccessful could an actionable RICO cause of action arise.
Since the substantive RICO claim cannot be maintained, the conspiracy claim, premised thereon, must necessarily fail as well. See, Discon Inc. v. NYNEX Corp., 93 F.3d 1055, 1064 (2d Cir. 1996) (Where "the prior claims do not state a cause of action for substantive violations of RICO, the present claim does not set forth a conspiracy to commit such violations."), vacated on other grounds, 525 U.S. 128 (1998); Casio Computer Co. Ltd. v. Sayo, 2000 WL 1877516, at *23 (S.D.N.Y. Oct. 13, 2000) ("Where no cause of action for substantive violation of RICO is stated, the RICO conspiracy claim cannot stand because it will not constitute a conspiracy to commit such violations."); Black Radio Network, Inc. v. NYNEX Corp., 44 F.Supp.2d 565, 581 (S.D.N.Y. 1999) ("A RICO conspiracy must fail [ ] if the substantive [RICO] claims themselves are deficient.").
CONCLUSION
Defendants Banco de Chile and Hernán Donoso-Lira's respective motions to dismiss the complaint are granted. The complaint is hereby dismissed in its entirety as to all defendants.
Since the complaint is dismissed for failure to state a cause of action upon which relief may be granted, movants' additional grounds for dismissal need not be addressed.
Although there has been no showing that defendant Aitken was properly served with process, or has otherwise appeared in this action, dismissal of the complaint against him is warranted because the complaint fails to state any legally cognizable claims.
SO ORDERED.