The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamian judicial system’s highest court yesterday refroze some $2m alleged to be the proceeds of a fraud involving flamboyant “philanthropist” Rudolph Kermit King.

The London-based Privy Council, in overturning a previous Court of Appeal verdict, ruled “there was no reasonable basis” for the latter to uphold the Supreme Court’s original decision to remove restrictions on monies said to have been obtained from “a bold fraud” perpetrated against Boeing, the world-renowned aircraft manufacturer.

The Court of Appeal had denied the bid by the Attorney General’s Office, which was acting on behalf of the US Justice Department, to reinstate the asset freeze because of “material non-disclosure” resulting from the authorities’ failure to resolve discrepancies over the date when a US bank account at the centre of the affair was closed.

However, the Privy Council’s unanimous verdict rejected this reasoning on the basis there “was an obvious error” from a typographical perspective. Noting that this was not a case where there were conflicting or competing dates, it added that the 2015 date give for the account’s closure in the US request for judicial assistance was clearly incorrect as all other evidence revealed it was used for transactions in 2016.

The UK law lords also agreed with the Attorney General’s Office, and its British counsel, that the Court of Appeal had incorrectly applied legal principles involving private commercial disputes to the case rather than recognise “the public interest of The Bahamas” was at stake given this nation’s international legal commitments and treaties to help combat international crime.

And they also dismissed assertions by Mr King and Celebrating Women International (CWI), the entity named as the beneficial owner of the Bahamian bank accounts to which the Boeing fraud proceeds were transferred, that the appeal by the Attorney General’s Office was “moot” because the monies had already been moved following the previous asset freeze removal.

The duo alleged that the funds had been switched from the client account of their attorneys, Monique VA Gomez & Company, to another unidentified Bahamian law firm. However, the Privy Council ruled that “there is no reason” why the funds or any assets acquired with them cannot be refrozen “to prohibit dealing with them”.

Detailing the background to the appeal, the Privy Council said: “The Attorney General of The Bahamas alleges that in December 2015, Boeing, the US aerospace company, was the victim of a bold fraud in the US.

“It is alleged that the fraudsters induced Boeing to transfer $2.289m to an account in the US under their control by falsely representing that the transfer was the repayment of a deposit paid in respect of the purchase of a jet aircraft under a contract which had been cancelled. In fact, the appellant alleges the payment which had been made to Boeing had been made by Fuji Industries for unrelated purposes.”

The $2.289m was, at the alleged instruction of the perpetrators, transferred by Boeing to one of three accounts at Sun Trust Bank “over which the fraudsters had control”. The three accounts had been opened in the name of a Georgia-based company, CWI International Investments. While sharing the same initials, the judgment did not say this entity is connected to Celebrating Women International.

“The funds were then quickly moved in nine tranches into one of the accounts Royal Bank of Canada (RBC) in The Bahamas in the name of the fourth respondent, Celebrating Women International,” the Privy Council added. The funds were switched to the RBC accounts between December 4, 2015, and January 16, 2016, via a cheques.

“The records also showed that between December 4, 2015, and January 16, 2016, various funds from two of the Sun Trust accounts were debited via ATM cash withdrawals and debit/credit card purchases at various locations in The Bahamas,” the Privy Council said of information provided by the US federal authorities.

“During the course of the frauds, the suspects sent a number of e-mails to Boeing and searches revealed that the IP (Internet Protocol) addresses for the relevant accounts showed that they were provided by The Bahamas Telecommunications Company (BTC), located in Nassau.”

The alleged perpetrators used the identities Jonathan Reid and David Valdez-Lopez, but the beneficial owner and signatory on the US-based Sun Trust accounts “was a US citizen who appeared to be the victim of identity theft and had no connection to the fraud”.

The Attorney General’s Office, acting for the US Justice Department under The Bahamas’ mutual legal assistance treaty (MLAT) with the US, persuaded Justice Cheryl Grant-Thompson to issue a restraining order freezing the funds in the RBC accounts on June 20, 2017.

The Order, granted under the Proceeds of Crime Act 2000, “restrained some $2.079m on the ground that there was reason to believe that they were the proceeds of the fraud on Boeing”. An earlier restraining Order, prior to the MLAT proceedings, had been granted to the Commission of Police on May 26, 2016, to aid potential Bahamian criminal proceedings related to money laundering.

However, the Commissioner of Police’s restraining Order was discharged by Justice Grant-Thompson on April 10, 2018, on the grounds of delay in prosecuting the Bahamian proceedings. And, following an application by Celebrating Women International and others, she later removed the MLAT restraint on June 19, 2019.

Justice Grant-Thompson ruled that the MLAT freeze was “an abuse of process as it was based on the same facts, and sought to relitigate the same issues, as the domestic restraint order and no sufficient nexus had been shown between the fraud and the named [defendants]”.

The Attorney General’s Office appealed the discharge to the Court of Appeal but, following an objection by Mr King and Celebrating Women International the latter ruled that “there had been material non-disclosure” by the authorities and their case was dismissed without the merits being heard.

Damian Gomez KC, who represented the two respondents before the Court of Appeal, had successfully argued that the non-disclosure arose from the instructions sent to the Attorney General’s Office by US federal prosecutors.

These detailed that the Sun Trust account, which received and then transferred the alleged Boeing fraud proceeds to The Bahamas, had been closed on January 23, 2015. This date was almost 12 months prior to the December 11, 2015, to January 9, 2016, period when the $2m was alleged to have been transferred from that facility to the Nassau-based RBC accounts.

The former minister of state for legal affairs told the Court of Appeal that, if the January 23, 2015, date was accurate, it would have been impossible to transfer the $2m-plus as alleged to the RBC account since the Sun Trust facility was long closed. As a result, Mr Gomez asserted there was “no nexus between the alleged offence” and the $2m-plus.

The Attorney General’s Office, though, in evidence pointed to a witness statement by one of its attorneys, Ashley Sturrup, which confirmed that the Sun Trust accounts actually closed in 2016. However, the UK attorneys for Mr King and Celebrating Women International argued that this breached “the duty of fair presentation” by not drawing the discrepancies in the date to the court’s attention.

However, the Privy Council said the reference to 2015 in the MLAT request submitted by the US Justice Department “was so obviously an unintentional error”. And the statements for Celebrating Women International’s RBC accounts confirmed the Sun Trust accounts were still active in 2016 as this was when they received payments from the cheques drawn on the latter.

“This is not a case where there is a conflict between two competing dates and it is unclear which is correct. On the contrary, it is apparent on the face of the material before the court that the date given by the Department of Justice as the date of the closure of the account could not be correct,” the Privy Council ruled.

“In such circumstances, where it is clear beyond argument that the statement was an obvious error, there was no obligation for counsel to draw it to the attention of the court. The Board concludes, therefore, that there was no reasonable basis on which the Court of Appeal could have concluded that what occurred here was a material non-disclosure or a breach of the duty of fair presentation.”

The Privy Council also agreed with arguments advanced by the Attorney General’s Office that the Court of Appeal had wrongly applied commercial law principles to a public interest case. “Here the public interest of The Bahamas is clearly engaged because it appears that the fraud was carried out from The Bahamas and the proceeds of the fraud were transferred to that jurisdiction,” it said.

“In addition, there are present here additional considerations of public interest relating to the treaty commitments of The Bahamas under the MLAT Treaty with the US and to international co-operation to combat crime.... The Board considers, therefore, that the Court of Appeal misdirected itself as to the correct approach in law to the consequences of material non-disclosure in a restraint order case.”

Mr King and Celebrating Women International also sought to argue that the appeal was “moot”, and would “serve no practical or useful purpose”, as the funds had been unfrozen and moved from Monique VA Gomez & Company’s client account to another Bahamian law firm which was not named.

“The Board is unable to accept that the present appeal is moot. The funds having been transferred to another law firm in The Bahamas, there is no evidence of further dissipation. In these circumstances, there is no reason why a restraint order cannot be made which applies to the funds, if they are still in that other account, or to any assets purchased with the funds,” the Privy Council added.

“In either case the funds in the new account or any assets purchased with the funds remain ‘realisable property’ ... given that they are directly or indirectly a tainted gift in the hands of Celebrating Women International. A restraint order can be made in respect of any ‘realisable property’ to prohibit dealing with them.”

In reimposing the asset freeze, the Privy Council ordered that the case go back before the Court of Appeal for a hearing on its merits.