The US District Court for the Southern District of Florida last week upheld a judgment achieved by a Milbank team for the firm’s client, the Central Bank of Mongolia (“BOM”). That victory capped a series of judgments in favor of the Central Bank, each in the amount of $69 million plus attorneys’ fees, on RICO, fraud and civil theft claims.
The Court ruled that the defendants, by means of false statements and misrepresentations, induced the Central Bank to issue letters of credit in the amount of US$55 million in the favor of an entity they controlled. The defendants had represented to the BOM that the letters of credit would be used to fund an affordable housing project in Ulaanbaatar. Instead, the defendants, who are located in Florida and Canada, used the letters of credit in connection with the sale of sunflower oil in Iran. Before the Central Bank became aware of the fraud, the defendants had utilized $23 million of the letters of credit.
A pivotal point in the case occurred in March 2009, when the Court granted Milbank’s motion to seize the computers of several of the defendants for court-supervised forensic examination. This followed the failure of several defendants to produce evidence that they were required to preserve under spoliation rules. This forensic examination resulted in Milbank obtaining thousands of deleted emails and documents, including many damning admissions by the defendants.
The Court found that the defendants formed a criminal enterprise that engaged in frauds not only in Mongolia but also elsewhere in Asia, Africa and the Middle East. For example, the defendants had caused central banks in at least four countries in addition to Mongolia to issue financial instruments for purported humanitarian projects. The defendants also fleeced private victims with promises of high returns, using a variation of a well-known “High Yield Investment Program” scam.
The judgments against several of the defendants were entered after they invoked the Fifth Amendment and refusals to answer any questions at their depositions. The Court also granted summary judgment on the Central Banks’ RICO, fraud and civil theft claims against a defendant who had not invoked the Fifth Amendment. We are not aware of any other case in which a plaintiff has succeeded on a motion for summary judgment on a RICO claim. The final victory for the Central Bank came last week, when the Court denied a Canadian defendant’s application to void the default judgment against him for an alleged failure of proper service in Canada under the Hague Convention, lack of personal jurisdiction and improper venue.
The Milbank team consisted of Michael Nolan, Win Brown, Teddy Baldwin and Erin Culbertson. Milbank now is working with specialists to locate assets of the defendants in the US and abroad.
