In the matter of Re Codelco (1999)
In the Codelco matter, the plaintiff was a Chilean state-owned copper mining, refining and selling company, which traded in futures. D, the head of its futures trading department was investigated for improper trading activities. During the investigation, it was discovered that he had received very large sums of money by way of bribes in respect of trading which he had carried on contrary to Codelco’s interest and involving employees of two of the world’s largest metals brokerage firms.
D had accepted bribes in the millions of dollars for having entered Codelco into metals futures contracts which were very favourable to the co-conspirators but highly unfavourable to Codelco. When prosecuted in Chile, D was convicted of fraud, imprisoned and ordered to pay damages to Codelco. Codelco brought proceedings in a number of jurisdictions including the Cayman Islands, to recover the damages owed to it which totalled around USD 180 million.
In the Cayman proceedings, Codelco sought and succeeded in obtaining a declaration that money frozen in bank accounts within the Cayman Islands and which were connected to D, were actually held by D on trust for it. Under Cayman law, D could not be permitted to profit from his wrongdoing, by receiving bribes or other unlawful payments. In Equity, D had not only immediately become a debtor to Codelco (his employer to whom he owed a fiduciary duty) for the sums received, but also a constructive trustee of the unlawful payments or any property acquired with them. D was therefore liable to account to Codelco for all sums received.
Kuwaiti Investment Authority
The Kuwaiti Investment Authority ('the K.I.A.') initiated a worldwide quest to recover a judgment worth USD 800 million from its former director. The director, a Sheik, a member of the Royal Family, had been in charge of the K.I.A. established from around 1990, with the mission of diversifying Kuwaiti investments under the looming threat of Iraqi invasion at the time. In breach of his duty of faith to his country and people, The Sheik with assistance of others defrauded the K.I.A. of hundreds of millions of dollars which made its way into trusts in the Channel Islands, the Bahamas, the Cayman Islands and into properties in England.
Early restraint orders were obtained freezing the trust assets in Cayman. Orders were also made requiring early disclosure of information about them. Eventually the K.I.A. succeeded in its main action brought in England (the K.I.A. was based in London and the fraud primarily committed there).
The judgment was obtained in the amount of USD 800 million and the K.I.A. sought its enforcement.
It elected to seek early recourse in the Bahamas where the Sheik is domiciled and there obtained an order of the Bahamian Court adjudging him to be a bankrupt on the basis that the judgment liability of USD 800 million exceeded his known assets. The K.I.A. next sought and obtained orders from the Grand Court of the Cayman Islands in recognition and enforcement of the Bahamian bankruptcy judgment.18 Trusts which had been maintained by him in the Cayman Islands were made to surrender their assets – more than $30 million – in partial satisfaction of the English judgment.
Montesinos-Torres
A Judicial Letter of Request from Peru was acted upon to get orders of restraint upon certain bank accounts alleged to contain the proceeds of official corruption. This was achieved by invoking the powers given to the Cayman Grand Court under the Proceeds of Criminal Conduct Law (now succeeded by the Proceeds of Crime Law 2008). What began simply as a letter of request to “lift the bank, financial and stock market secrecy procedures, as well as to execute a preventive attachment in the form of a restraining order” on all and any bank accounts held in Grand Cayman in the name of Vladimiro Montesinos-Torres or in the name of several other related parties; ended in the repatriation of some $44 million dollars to Peru, without a trial between the parties having to take place.
Montesinos-Torres, a member of the Directorate of the Peruvian National Intelligence Service (SIN) was alleged to have carried out acts “contrary to his functional duties in exchange for high economic benefits”. He was a fugitive at the time of the request, thereby rendering to be unlikely, the prospect of a conviction and a civil trial to recover the proceeds, based on his proven guilt. However, because the accounts had been frozen and would likely have remained so indefinitely while he was at large, others, including his wife, whose names were linked to the accounts; agreed to the repatriation of the funds to Peru. In effect, what the Peruvian Government sought and obtained, was an order enforcing the Preventive Seizure Warrant which had been issued by the Peruvian Court in the same matter. The proceeds of official corruption were frozen and repatriated to Peru pursuant to the request from that country in 2001.
Cruz Londono
In the matter of Cruz Londono the MLAT request originally sought the restraint of Cayman Islands bank accounts in the name of that member of an infamous Columbian cartel on the basis that there were intended to be criminal proceedings instituted against him for drug trafficking in which a confiscation order over the proceeds (some potentially held in the bank accounts) was likely to be made.
No criminal proceedings were instituted against him since he was believed to be in Columbia, which had no extradition arrangement with the United States. In May 1994, the U.S. Government obtained instead an external confiscation order from the New York court, in which the defendant was named in rem as being “all funds on deposit in any accounts maintained by persons known to be linked to L or in his name”. Funds were stipulated as located in, among other places, London and Grand Cayman. Pursuant to similar statutory regimes in both places, the English and Cayman Islands courts made orders restraining the respective accounts and ultimately enforcing the in rem order of the New York court by the forfeiture of the accounts.
Re Leon and Four others
The persons involved were Columbian businessmen who had received US dollars illegally through the Columbian pesos black market currency exchange in circumstances which showed that the money also represented the proceeds of drug-trafficking operations in the United States and Europe.
Although the named persons were not themselves involved in the drug trafficking, the U.S. Department of Justice had obtained a warrant of arrest in rem against the proceeds in their accounts and the Cayman authorities were requested to “arrest, seize and restrain the defendants’ property” to prevent its dissipation pending criminal proceedings in the United States against certain named drug-traffickers. The property was described as “all funds in all foreign accounts representing proceeds of narcotic drugs and money laundering” and the relevant Cayman accounts and the drug money in each were listed. The Cayman Court, in granting the restraint order reaffirmed the jurisdiction to enforce the in rem warrant.
In the matter of Falcone
A request was received from the French Government (and an earlier request from the Swiss Government) based on allegations against Mr. Falcone for having corruptly obtained arms contracts from the Angolan Government and for having paid bribes to Angolan officials. The request was refused based on in the fact that there were no proceedings instituted in France against Mr. Falcone which could lead to his conviction and the Court could only grant a restrain order where such proceedings have been (or will be within 21 days) instituted and which could lead to a confiscation order.
The other reason for the refusal of assistance in the Falcone matter and which involved the earlier letter of request of the Swiss Investigating Magistrate, seeking evidentiary assistance, was the failure to satisfy the requirements of the Evidence Order to the effect that there must already be proceedings instituted.
In re: United States of America v Abramo et al
The defendants having been successfully prosecuted on an indictment charging them with securities fraud and money laundering, the forfeiture order was enforced and the proceeds of the account returned to the victims. A similar outcome was achiedved in the much more litigious matter of In Re MacCorkle (1998), another request from Florida.
Other relatively high-profile cases linked with asset recovery efforts in the Cayman Islands include:
