# BCCI Holdings (Luxembourg) Societe Anon. v. Khalil

> District Court, District of Columbia · June 23, 1999 · 56 F. Supp. 2d 14

URL: https://www.frixlaw.com/law-library/cases/2449201

## Case

- **Full name:** BCCI HOLDINGS (LUXEMBOURG), SOCIETE ANONYME, Et Al., Plaintiffs, v. Abdul Raouf Hasan KHALIL, Et Al., Defendants
- **Court:** District Court, District of Columbia
- **Decided:** June 23, 1999
- **Citations:** 56 F. Supp. 2d 14; 1999 U.S. Dist. LEXIS 9469; 1999 WL 432560
- **Precedential status:** Published
- **Opinion:** Opinion by Green
- **Judges:** Joyce Hens Green
- **Cited by:** 14 later opinions in the Frix Law Library

## Citator (automated)

- **Red flag:** Reversed on other grounds by BCCI Holdings (Luxembourg), S.A. v. Khalil, 214 F.3d 168 (2000).
- Negative treatments: 1
- Distinguished by: 0
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/2449201

## Opinion text

OPINION AND ORDER
JOYCE HENS GREEN, District Judge.
In July 1991, banking regulators around the world seized the corporations collectively known as the Bank of Credit and Commerce International (“BCCI”), uncovering the largest international bank failure in history. Eight years later, the effort to determine how the BCCI debacle happened and who is responsible for the fraud remains ongoing. This lawsuit, brought by the court-appointed Liquidators of the BCCI Group emerged out of that process.
1
*21
The defendants are two individuals, Abdul Raouf Hasan Khalil (“Khalil”) and Syed Ziauddin Ali Akbar (“Akbar”), and two companies owned and controlled by Khalil and Akbar — Capcom Financial Services Limited (“Capcom UK”), and Cap-com Futures Inc. (“Capcom US”). Only Khalil contested this suit; Akbar and the corporations have defaulted.
Khalil is extremely wealthy, and was perhaps the largest depositor in BCCI. In 1987, Khalil withdrew nearly $100 million in deposits and interest from BCCI. The Liquidators did not contest Khalil’s right to the deposited funds. What the Liquidators do claim is that in the late 1970s and early 1980s, BCCI’s former management approached Khalil, offering to pay him handsomely for the use of his name and prestige to disguise three fraudulent schemes. According to the Liquidators, Khalil agreed to:
(1)act as a nominee shareholder of the parent corporation of First American Bank — once the largest bank in Washington, D.C. — to disguise the fact that BCCI had illegally acquired an American bank without proper regulatory approval;
(2) act as a nominee shareholder of BCCI Holdings to disguise the fact that BCCI had considerably less capital and support than was represented to depositors, regulators, and the public; and
(3) allow his name, and that of his companies, to be used by BCCI’s investment arm to disguise BCCI’s risky investments and to give the appearance that certain sizable loans were being serviced when, in truth, they were in default.
The Liquidators further alleged that BCCI directly paid Khalil nearly $30 million for this use of his name and that he reaped substantially more by less direct means. The Liquidators alleged that if Khalil had not allowed his name and prestige to be used to disguise BCCI’s true financial condition, the bank would have been closed down much sooner, preventing significant financial losses to thousands of creditors and depositors.
Separately, the Liquidators also alleged that Khalil conspired with Akbar — a BCCI insider who managed the bulk of BCCI’s assets until 1986 — to create a commodities brokerage, Capcom, through which Khalil and Akbar further siphoned substantial BCCI assets.
2
*22
Shortly after the complaint was filed, Khalil moved for dismissal. That motion was denied.
See BCCI Holdings (Luxembourg) S.A. v. Khalil,
20 F.Supp.2d 1, 7 (D.D.C.1997). After lengthy discovery this case was set down for a bench trial. Khal-il moved for trial by jury under Rule 39(b) of the Federal Rules of Civil Procedure. That motion also was denied.
See BCCI Holdings (Luxembourg) S.A. v. Khalil, 182
F.R.D. 335, 340 (D.D.C.1998). Trial to the Court commenced on January 25, 1999 and continued on January 27, January 28, February 1 and February 11,1999.
This Opinion and Order constitute the Court’s findings of fact and conclusions of law as required by Rule 52(a) of the Federal Rules of Civil Procedure.
3
Any conclusions of law that constitute findings of fact or findings of fact that constitute conclusions of law shall be considered as having been determined accordingly. Having considered all the evidence, arguments, the parties’ proposed findings of fact and conclusions of law, and the entire record in this matter, the Court will enter judgment in the amount of $388,402,534, not including attorneys’ fees or costs, in favor of the Liquidators on Counts I, II, III, V, VI, and VII. The Liquidators did not meet their burden on Count IV. Pursuant to 18 U.S.C. § 1964 (c), the damages are trebled to $1,165,207,602.
I. Dramatis Personae
A. Agha Hasan Abedi
BCCI was the brainchild of Agha Hasan Abedi (“Abedi”), who, in 1972, established what he hoped would become an international Islamic bank. Initially, BCCI grew according to plan. Until taken under control by authorities around the world on
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July 5, 1991, the BCCI Group operated a coordinated international banking network, which at its peak had more than 400 branches in approximately 70 countries. The BCCI Group consisted of a number of corporate entities, including the corporate plaintiffs enumerated herein.
4
The BCCI Group’s international banking network included offices in several of the United States, including the State of New York. Abedi served as the top corporate officer of the BCCI Group from 1973 until 1988, when he suffered a heart attack. Abedi did not testify in this trial. Indeed, the Court heard evidence that Abedi is deceased.
See
Trial Transcript (“Tr.”) (Testimony of Christopher Morris, UK-appointed Liquidator) at 136-37.
5
B. Swaleh Naqvi
Abedi’s chief lieutenant in the bank was Saiyid Mohammad Swaleh Naqvi (“Naqvi”), who succeeded Abedi in 1988. Naqvi remained in the senior executive position in the BCCI Group until 1990, when control of the BCCI Group formally passed to the sovereigns of Abu Dhabi. Naqvi served time in prison in Abu Dhabi before coming to the United States to plead guilty to charges here. He presently is incarcerated in FCI Allenwood, Pennsylvania. As part of his plea agreement, Naqvi agreed to cooperate with regulatory and law enforcement authorities attempting to unravel the intricacies of the rise and fall of BCCI. As with most of the fact witnesses in this case, Naqvi testified by deposition.
See
Fed.R.Civ.P. 32(a)(3) (listing circumstances in which deposition testimony may substitute for live testimony at trial).
6
Naqvi was deposed in this case and in the
First American
case willingly; he did not understand that his plea agreement required him to testify in either case.
C. Imran Imam
Scrivener to the fraud was Imran Mohammed Ahmad Imam (“Imam”). Imam was a BCCI officer who assisted Naqvi from 1977 to 1991. Imam’s principal assignment was to maintain records of transactions. For example, BCCI extended loans to the individuals who became the record shareholders of First American’s parent corporation. Some of these loans were genuine extensions of credit, secured only by the shares; other “loans” were created to disguise BCCI’s direct equity investment in First American. Imam kept detailed records of these transactions. Financing for the record shareholders of BCCI Holdings was done in similar fashion, and Imam kept records concerning the holdings of both the genuine investors and the nominees. Imam testified through deposition in this case. Khalil’s counsel declined the opportunity to attend and cross-examine him.
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D. Ziauddin Akbar
Defendant Akbar was a BCCI officer from approximately 1976 to 1986 and was in charge of BCCI’s Treasury Division from 1982 to 1986. As head of the Treasury Division, Akbar was responsible for managing and investing BCCI’s funds. Additionally, Akbar was the account officer for certain major customers of BCCI, including Khalil. At trial, Khalil and the Liquidators agreed that Akbar was central to most of the schemes alleged in the complaint, a rogue
extraordinaire
principally responsible for establishing shell corporations to engage in sham transactions so as to misrepresent B CCI’s economic situation to the world, gambling BCCI’s assets in the commodities markets and disguising losses therefrom, transferring large sums of money in and out of shell corporations in which he had an undisclosed interest, and other illegal activities. After huge losses in the Treasury operations came to light internally, Akbar left BCCI in 1986. He continued to receive a salary for some time thereafter.
After leaving BCCI, Akbar engaged principally in managing investment and financial trading businesses, acting as both the behind-the-scenes manager of Cap-com — his joint venture with Khalil — as well as manager of his own London-based Futures Advisory Services (“FAS”).
In 1988, authorities in the United States arrested Akbar in connection with allegations that General Manuel Noriega’s drug money was being laundered through BCCI and Capcom. Although other BCCI employees were convicted in connection with those allegations, it appears that Akbar and Capcom U.S. were cleared. However, in September 1993, after BCCI had been seized, Akbar pled guilty to 16 counts of false accounting in the United Kingdom.
Akbar was released from prison in the United Kingdom during the pendency of this litigation and returned to Pakistan. Akbar was deposed in Pakistan in both this case and in First American. Those deposition transcripts were introduced at trial.
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*25
E. Abdul Khalil
Defendant Khalil is a citizen and resident of Saudi Arabia. He has been married for 36 years to Taheya Badeeb, with whom he lives in Jeddah, Saudi Arabia along with their two sons, daughter, and grandchildren. Khalil was educated in Saudi Arabia and Cairo, Egypt, where he studied history. Khalil developed a passion for museums and antiquities which he has pursued throughout his adult life.
When growing up, Khalil stood out as one of the brightest students in his class. After he completed school, he was one of a select group recruited to be trained in electronics and air traffic control at Dhar-an Air Force Base in Saudi Arabia. While at the base, Khalil alone was selected to work with United States Air Force personnel. Through that contact, Khalil learned English.
8
Upon completion of his training, Khalil served as an air traffic controller for the Civil Aviation Department of Saudi Arabia and an instructor of air traffic control. He also was recruited to perform air traffic control duties during Saudi Arabia’s war with Yemen. After 22 years of service, Khalil retired and entered the real estate business. For reasons not entirely clear from the record, the real estate market in Saudi Arabia surged in such a way as to allow phenomenal profits — such as a 400 million riyal return on a 14 million riyal investment (plus the cost of improvements) within a short period. Through such dealings, Khalil became extremely wealthy.
As is detailed below, Khalil deposited millions of dollars, in various currencies, in BCCI in the late 1970s and early 1980s. He withdrew those deposits, plus interest, in 1987, but he maintained contact with BCCI beyond that period. After BCCI was seized, Khalil came to London voluntarily to be interviewed by the SFO in connection with its investigation of Akbar. Unlike most of the other persons closely associated with BCCI, Khalil was not criminally charged, either in the United Kingdom or the United States. However, the Board of Governors of the Federal Reserve did bring an administrative enforcement action against Khalil in connection with his record shareholding in the parent corporation of First American. Although, in September 1992, Khalil granted Federal Reserve investigators an interview in his home in Saudi Arabia, and although, in June 1997, Khalil did travel to the United States to be deposed in
First American,
Khalil has not formally been served with the Federal Reserve’s administrative charges, which remain pending.
At present, Khalil is in poor health. He spends considerable time working on his projects, including a huge museum filled with more than 60,000 antiquities, which he and his family have donated to the poor. Another project, Altayebat City, consists of classrooms, shops and 20 different museums to train, educate, clothe and feed the poor.
Due to poor health, Khalil’s deposition in this case was postponed, and was taken well after discovery had closed. Because it appeared likely that Khalil would be unable to appear at trial, the Liquidators videotaped the deposition to allow the Court to see, hear and observe Khalil’s demeanor. Most of the 800-page tran
*26
script was admitted into evidence, along with the videotaped version in CD-ROM format.
9
The Court regrets that Mr. Khalil was unable to testify in person at trial.
F. Kamal Adham and Sayed Jawhary
Khalil’s success in school and in the civil service brought him to the attention of Sheikh Kamal Adham (“Adham”). Adham had been an advisor to, and was a relative of, King Faisal. Adham came to work for the King’s son, Prince Turki, who served as chief of the Foreign Liaison Bureau and Chief of Intelligence. Adham recruited Khalil to work in the Foreign Liaison Bureau as Adham’s personal assistant, gathering and analyzing news media articles from other countries regarding Saudi Arabia.
10
Khalil also started his own communications company designing satellite communications systems for the government of Saudi Arabia while working at the Foreign Liaison Bureau. Khalil worked in the Saudi Government with Adham for 16 years.
Another close associate of Adham and Khalil was Sayed Jawhary (“Jawhary”).
11
Jawhary is a resident of Saudi Arabia, who has worked for Adham as a financial advis- or since 1957. At relevant times, Jawhary also provided financial advice to BCCI, for which he was well compensated. Jawhary did not disclose the existence or terms of this side arrangement to either Adham or Khalil.
Adham, Khalil, and Jawhary had a number of business deahngs in common. On occasion, Khalil undertook real estate transactions on Adham’s behalf. The three kept each other apprised of investment opportunities. It was Adham who suggested to Khalil that he deposit money with BCCI. Also at Adham’s invitation, Adham, Khalil and Jawhary became record shareholders of Credit and Commerce American Holdings, N.V. (“CCAH”), the ultimate parent corporation of First American Bank.
12
First American operated in multiple states in the United States, with its principal place of business being the District of Columbia.
G. Capcom
Khalil, through Akbar, invited Adham and Jawhary to become record shareholders in defendant Capcom UK, a United Kingdom corporation incorporated in 1984 which was at all relevant times a broker-dealer in futures, options and commodities. In addition to being a shareholder, Khalil also was a director of Capcom UK.
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Capcom UK formed a subsidiary in the United States, Capcom US, to trade on the Chicago Board of Trade. Capcom U.S. is an Illinois corporation incorporated in 1985, which was at all relevant times a broker-dealer in futures, options and commodities. At relevant times, defendant Capcom UK was the registered owner of 82 percent of the shares of Capcom US. Capcom UK also formed another wholly-owned subsidiary, Brenehase Limited, which was incorporated in the United Kingdom.
After the collapse of BCCI, Adham and Jawhary pled guilty to charges brought by the United States and the State of New York for their respective roles as nominee shareholders in BCCI’s acquisition of First American. In lieu of incarceration, Adham agreed to pay a fine of $105 million and Adham and Jawhary agreed to cooperate with law enforcement authorities in their investigations of BCCI’s collapse.
H. The BCCI Liquidators
On July 5, 1991, banking regulators in the United Kingdom, Luxembourg, and the United States froze assets owned or controlled by BCCI Holdings, BCCI SA, BCCI Overseas, and ICIC Overseas. By the end of July 1991, officials in 44 countries had closed down BCCI branches and operations in their jurisdictions.
13
Commencing in January 1992, the various plaintiff companies were placed into full liquidation and the Court Appointed Fiduciaries were appointed. BCCI Holdings was placed into liquidation in June 1992. ICIC Overseas was placed into liquidation in April 1992 and ICIC Holdings was placed into liquidation in July 1993.
14
In denying Khalil’s motion to dismiss, this Court recognized the validity of the Liquidators’ appointments and their powers to act on behalf of the plaintiff corporations in this case.
See Khalil,
20 F.Supp.2d at 4-5 . For the reasons previously cited, and for those advanced by the Liquidators at trial, the Court holds that the Liquidators have standing to bring this action.
I. Additional Witnesses
The Court also received deposition testimony from a number of former officers, directors, or employees of Capcom. Khalil also presented deposition testimony from prosecutors in the United Kingdom con
*28
cerning their opinion of Khalil’s and Akbar’s relative culpability.
The Court also received live testimony from Christopher Morris, one of the English Liquidators; John Gilkes, an English forensic accountant assisting the Liquidators; Dr. Audrey Giles, the Liquidators’ expert in forensic document examination; Richard Small, Assistant Director of Banking Supervision and Regulation for the Board of Governors of the Federal Reserve System; and Irving Beimler, the Liquidators’ expert in credit and lending.
J. Documentary Evidence
To prove their case, the Liquidators relied at trial on B CCI’s records documenting Khalil’s relationship with the bank. Although the corrupt former management of BCCI used the bank to carry out fraudulent schemes
from
an early point in its history, in many other respects BCCI operated as a normal business. Account ledgers were maintained. Deposits, withdrawals, wire transfers, and other transactions were documented in the normal course of business. The BCCI Group followed industry custom in its numerous dealings with banks in the United States and around the world. Large, prestigious accounting firms audited the records of the various BCCI entities, and certified to the public for many years that all was above board. Indeed, among other reasons, it is because BCCI operated as a normal business in so many respects that it took banking regulators around the world so long to discover the massive fraud that was masked by the surface normalcy.
Some of BCCI’s records concerning Khalil, and Khalil-owned companies, document real transactions as they occurred. The parties agree that many other BCCI records concerning Khalil evidence sham transactions. It appears that the former management of BCCI relied primarily on use of Khalil’s name and the names of Khalil-owned companies to disguise fraudulent transactions in the Treasury Division. On documents reflecting false transactions, and occasionally on those reflecting real transactions, Khalil’s name was often signed by Akbar or another BCCI employee. At trial Khalil objected on authenticity grounds to most of the Liquidators’ exhibits. The Court admitted the exhibits into evidence provisionally on condition that the Liquidators lay a foundation for their admission. That was done.
To distinguish appearances from economic reality, the Liquidators relied on two experts. Dr. Audrey Giles (“Giles”) testified as to which signatures on key documents appeared to be Khalil’s genuine signature. Khalil did not offer a competing expert, and the Court finds Dr. Giles’ testimony to be credible and unrebutted.
15
The Court finds that all of the signatures Dr. Giles testified to have been more likely Khalil’s than not, were in fact Khalil’s signatures. The Liquidators also relied on John Gilkes (“Gilkes”), who sifted through numerous documents recovered from BCCI and checked these against available outside sources to separate fact from fiction in the story told by the BCCI documents.
II. Khalil’s Deposit Relationship With Bcci
In or about 1975, Sheik Adham told Khalil he had a “very good bank” in England, and suggested to Khalil that he put his money in BCCI because the real estate
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market in Saudi Arabia was “quiet.” Khalil’s practice up to that point, like many living in Saudi Arabia, had been to keep his substantial wealth in cash, primarily in Saudi currency, locked in a strong room inside his house. Khalil testified that one reason that Saudis generally do not use banks is that the Koran places restrictions on followers of Islam from keeping interest earned on deposits. In any event, in or about 1977, Khalil began his banking relationship with BCCI. While in London, Khalil signed account opening forms, but did not deposit any funds at that time. Approximately three weeks later, representatives of BCCI came to Khalil's house in Jeddah to collect the first deposit.
The details of how much Khalil deposited with BCCI are of critical importance. The Liquidators alleged that Khalil took from BCCI far more than that to which he was entitled. Khalil countered that his relationship with BCCI was economically detrimental, and that money he admits receiving from BCCI — nearly $100 million in deposits and $27.5 million in direct payments — -was due and owing to him. At the root of this dispute is a disagreement over the amount Khalil initially placed with BCCI and where it was kept.
On this important point, Khalil’s recollection of the details changed between his deposition in the
First American
case and his deposition in this case. In this case, Khalil testified that a representative of BCCI who worked in Adham’s office in Jeddah came to pick up his first deposit:
Q: So you give a gentleman from the representative office in Jeddah?
A: Yes.
Q: 10 suitcases?
A: 10 suitcases.
Q: Saudi riyal cash?
A: 50 million more or less, total.
Q: Did you count the money before you put it in the suitcases?
A: It is there. Always when I sell something I take money from the people so I do accounting. I have three different suitcase. If this is the big—
THE INTERPRETER: 150 notes.
A: If this big one, you know, you don’t have big size, maybe you can put $10 million, maybe 50 maybe I can put 7 million. Maybe if it’s smaller I put five million in the suitcase, because it takes size like that. So I already count it. It is there. He’s been most of the day counting the money there.
Q: Were you with him when he counted the money?
A: Oh, yes, oh, yes.
Khalil Dep.
(BCCI),
Nov. 16, 1998, at 22-23.
16
In his
First American
deposition, taken 18 months earlier, Khalil had testified that it was Akbar who came to take the first deposit, that the money was not prepacked, but put into Samsonite suitcases in Akbar’s presence, that there were 11 suitcases instead of 10, and that he would have deposited more, but he ran out of suitcases.
E.g.,
Khalil Dep. (FAC), June 4, 1997, at 11, 28, 41, 44-48, 69-70, 73-76. Khalil testified that he made one or two comparably large deposits via suitcase, along with periodic deposits in smaller amounts.
E.g.,
Khalil Dep.
(BCCI)
at 100-01. There are some discrepancies between his two depositions regarding these additional deposits.
In other respects, Khalil’s testimony concerning his deposits was largely the same in both depositions. For example, Khalil testified that although all the cash deposited came from money in his house, some of it belonged to partners whose identity he could not reveal.
See, e.g.,
Khalil Dep.
(BCCI),
Nov. 16, 1998, at 30-33. Khalil stated that money placed in term deposit accounts was jointly owned by these unnamed partners, and that mon
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ey placed in current accounts belonged solely to Khalil. Whether these partners in fact existed is immaterial because in any event Khalil had sole authority to transact business with these funds.
Also, in both depositions Khalil testified that his first deposit was to be divided to pay for BCCI shares he had agreed to purchase, to be placed in term deposits (a.k.a. deposit accounts), and a substantial sum to be placed “in the hand” of Akbar, which would be immediately available to pay expenses as Khalil may from time to time direct.
At trial, Khalil acknowledged through his counsel that the BCCI documents reflecting the total amounts deposited by Khalil show his deposits falling far short of the amount Khalil withdrew and received from- BCCI. Khalil’s first line of defense was that the Court should disregard those records as being fabricated, falsified, and incomplete. Along these lines, Khalil asserted that he had deposited more with BCCI than the records reflect. The only evidence offered to support this assertion was his own testimony.
The Court cannot agree with Khalil’s assertion. It is telling that Khalil’s counsel, when offering Khalil’s version of how much he placed with the bank, was forced to argue from stray recollections by Naqvi and Akbar,
e.g.,
Khalil’s Prop. Findings ¶ 13, because Khalil — who well remembered sums involved in real estate transactions more than 20 years past — testified as to having only a vague recollection and no independent records to establish that he had placed more with BCCI than is shown in the records on which plaintiffs rely.
The Court finds that at the time Khalil handed over suitcases of cash, he received a receipt.
See
Khalil Dep.
(FAC),
June 4, 1997, at 69-70. The Court also finds that Khalil kept his own record of the amount deposited. Before the money was turned over, it was counted in a day-long exercise. Even if there had been no receipt, Khalil knew precisely how much he had placed with BCCI. That amount was reflected on the account statements Khalil received from BCCI, which he closely monitored. Although on certain occasions, Khalil complained that the amount he had deposited, or the amount of interest credited to his account, was not accurately reflected, the statements were adjusted at or near the time Khalil made such complaints.
When Khalil withdrew his deposits from BCCI, he presented his account statements to Naqvi. Naqvi suspected that the account statements, which had been prepared at Akbar’s direction,
overstated
the amount Khalil had with the bank, but Naqvi was in no position to argue with Khalil.
See
Naqvi Dep., Mar. 27, 1998, at 74-76; Tr. (Akbar) at 456-58. Instead, Naqvi directed that Khalil receive the amount reflected on the account statements Khalil had presented to Naqvi. There was no unaccounted-for surplus.
See also
Tr. (Akbar) at 470.
Realizing the Court may find that many of the BCCI documents bear sufficient in-dicia of reliability to be both admissible and entitled to evidentiary weight — as has been done here — Khalil’s fall back defense was that even if the Liquidators’ numbers were accurate, those figures do not account for the fund Khalil placed “in the hand”
of
Akbar, which, according to Khal-il’s counsel, was a sizable fund kept outside BCCI.
Khalil’s testimony was quite inconsistent on this critical point. On a few occasions, Khalil presented testimony suggesting that the money in Akbar’s hand was kept outside BCCI. For example, when asked about a document he penned:
Q: .... Does that refresh your recollection, sir, that in fact you had current accounts at BCCI?
A: Just a moment. I don’t have current account.
17
I have money with Mr.
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Akbar. And this is now he’s not putting — because he’s not putting the money in the BCCI. He’s putting the money outside the BCCI....
Khalil Dep.
(BCCI)
at 212;
see also id.
at 214 (“[T]his is my money with Mr. Akbar putting in another bank.”).
However, on closer inspection, this issue was a red herring. Most portions of Khal-il’s testimony demonstrate that he knew the money “in Akbar’s hand” was kept in BCCI current accounts.
18
For example:
Q: .... Now, the first time that you put money in the bank somebody came to your home, collected suitcases and put all that money in deposit accounts at BCCI?
A: .... They do like this. They put little deposit. They pay for the shares of the BCCI. They open account from the money in the hand of Mr. Akbar, okay. Because he needs to pay the expenses.
Khalil Dep.
(BCCI)
at 52.
‡ ‡ ‡ ‡
Q: What did [Akbar] do with that money?
A: Which money?
Q: The money that he came and took?
A: He took it to the bank. He took it and he divide it, some in the deposit, some in his hand.
Id.
at 54.
19
Not only did Khalil testify that all of his money was deposited in BCCI, but he also did not introduce any records of his own, or from any bank other than BCCI, showing that the money “in the hand” of Akbar was kept outside BCCI. It also is highly improbable that Khalil would have entrusted Akbar with funds to be kept somewhere other than BCCI when Khalil was hardly acquainted with Akbar at the time he made his first deposit with BCCI. On the contrary, Khalil understood that BCCI was his agent and that Akbar worked for BCCI, at least as to funds in his deposit and current accounts.
See
Khalil Dep.
(BCCI)
at 80.
On balance, the Court finds that Khalil’s references to money “in the hand” of Akbar refer to funds kept in current accounts at BCCI. The memorandum accounts kept by Akbar at BCCI accurately tracked Khalil’s actual deposits with BCCI. There was no fund kept outside BCCI.
III. Khalil’s Nominee Ownership of BCCI Shares
The Court also cannot credit Khalil’s testimony that he actually paid for any of the BCCI shares registered in his name. BCCI shares were not publicly traded, they were sold through private placements on an invitation-only basis. In the late 1970s, Abedi sought new shareholders in BCCI to finance the bank’s expansion. Abedi approached his friend Adham to help recruit investors. Adham presented the “investment” opportunity to Khalil, who agreed in principle to invest.
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Abedi sought genuine capital infusions, but he also needed some investors to act as nominee purchasers of BCCI shares. Abedi wanted to give the appearance of new capital being placed with BCCI without diluting his control. Abedi envisioned that ultimately only a large institutional investor would be able to provide for BCCI’s continued viability. • Naqvi explained the “special arrangements” that BCCI offered to prospective shareholders such as Khalil until such time as an institutional investor could be found:
Mr. Abedi wanted to make sure that a significant percentage of the shares is held by such holders who would be willing to sell those shares or transfer those shares to this new structure, whenever it takes place.
So he wanted to have special arrangements with some of the shareholders to ensure that a good sized block of shares remain available to him for the purpose of this restructuring. And in one of those reviews, Mr. Abedi asked me [Naqvi] that if we will find out from Mr. Raouf Khalil whether he will hold part of his — part of the shares in his name under an arrangement which is like this nominee arrangement you have described.
Naqvi Dep. at 19. Naqvi deputized Akbar to discuss the nominee proposal with Khal-il. Khalil knowingly agreed to serve, and did serve, as a nominee in conspiracy with senior officers of BCCI to act as a registered shareholder of BCCI Holdings.
The Court finds that when Khalil first deposited money with BCCI, Khalil had an understanding with Adham that some of his funds would be used to purchase BCCI Holdings shares. However, the Court infers from the evidence that shortly thereafter, Akbar approached Khalil with the nominee proposal. Khalil, Akbar, and Abedi reached an agreement by which BCCI would advance Khalil loans on a non-recourse basis to finance the purchase of those BCCI Holdings shares that Khalil was to own beneficially and, in addition, Khalil would allow BCCI to “purchase” additional shares in his name in which he would have no beneficial interest. This agreement was entered into before any of Khalil’s genuine accounts had been debited for the purchase of BCCI Holdings shares. At no time were Khalil’s funds used for the purchase of the BCCI Holdings shares owned beneficially by Khalil.
Although shares were accounted for in BCCI’s books as either “beneficially” owned by Khalil or nominee shares, BCCI funded all of the share purchases in Khal-il’s name and Khalil had no commercial risk with respect to any of the shares. Naqvi subsequently learned of this new financing arrangement and accepted it as consistent with his and Abedi’s overall agreement with Khalil. At no time did Khalil repay the loans taken in his name to pay for his beneficial BCCI Holdings shares.
Khalil became a record shareholder of BCCI Holdings in 1979. Senior management made its first designated nominee purchase of BCCI Holdings shares in Khalil’s name in June 1980. Thereafter, periodically during the 1980s, BCCI management purchased additional shares in Khalil’s name. Imam recorded some of these as “beneficial” shares and others as nominee shares. In or around May 1985, Khalil and Akbar each signed a schedule which listed the “beneficial” and nominee purchases, and the loans taken out against each portion.
See
Naqvi Dep. 27-33 & Pis.’ Ex. 1489; Tr. (Giles) at 62-64; Pis.’ Ex. 1489A.
Shares were purchased in the name of Khalil on the following occasions in the following amounts:
Date # of Shares Share Price Principal Cost
Oct. 1,1979 20,000.0 $125.00 $ 2,500,000
Dec. 21,1979 4,000.0 $125.00 $ 500,000
*33
June 27,1980 40,000.0 $125.00 $ 5,000,000
Dec. 29,1980 10,315.8 $125.00 $ 1,289,475
Dec. 31,1981 10,526.3 $200.00 $ 2,105,260
Dec. 31,1981 6,666.6 $200.00 $ 1,333,320
Dec. 29,1982 21,054.0 $ 40.00 $ 842,160
Dec. 29,1982 13,334.0 $ 40.00 $ 533,360
Dec. 27,1984 34,386.0 $ 40.00 $ 1,375,440
Dec. 27,1985 51,579.0 $ 40.00 $ 2,063,160
April 14,1989 57,748.0 $ 40.00 $ 2,309,920
TOTAL $19,852.095
To make these purchases appear real, senior management of BCCI created loans from BCCI Group companies for both the “beneficial” and nominee share purchases. The accounting for these share purchases as loans was false. These were paper transactions, backed by transfers of funds from one part of the BCCI Group to another. To effect the share purchases, funds were transferred by wire from accounts in the Cayman Islands to accounts in the United States, and were then transferred to accounts in Luxembourg. The Court credits Gilkes’ testimony demonstrating that these transfers were accomplished using wire transfer facilities in the United States. In addition, instructions related to the transfers were sent by wire and United States mail.
Khalil incurred no genuine, collectible debt in relation to the “loans” used to finance his share purchases, and BCCI obtained no genuine, collectible right to payment on the “loans” created to finance these share purchases. With respect to the nominee shares, Khalil had no obligation to repay the loans. With respect to the beneficial shares, BCCI could not collect on the loans financing those shares, but Khalil agreed that the profit he would take from the proceeds of any sale of such shares would be only the difference between the share price and the loan amounts as to those beneficial shares. However, if at the time of sale the share price was less than the outstanding loan amount, Khalil would not be obliged to repay the difference.
Khalil signed documents which gave all rights over both the “beneficial” and nominee shares to ICIC, and which applied the proceeds of any sale to pay off the outstanding loans. Khalil also signed transfer deeds in blank.
The effect of Khalil’s service as a nominee was to inflate falsely the share capital of BCCI. By agreeing to act as a nominee, Khalil understood that he was enabling BCCI to misrepresent to regulators, auditors and prospective depositors that BCCI Holdings had support through the investment of share capital by a wealthy investor when in fact that investment had not been made and the share capital, which supported the banking activity of the group, was in fact fictitious. BCCI records gave the appearance that Khalil had borrowed $19,852,095 from BCCI to purchase his BCCI Holdings shares.
IV. Transactions Done In Khalil’s Name
Shortly after Khalil agreed to hold BCCI Holdings shares as a nominee, his agreement with BCCI management expanded. Abedi still sought new sources of capital to fund the bank’s expansion. One potential source of income was to increase the bank’s trading operations. New financial instruments, certain kinds of futures and options, had been introduced into the London markets. Akbar, as a senior officer in BCCI’s Treasury operations had become the bank’s lead trader. From the evidence, the Court infers that Akbar had
*34
met with early success in the markets, and he was eager to manage a larger pool of funds for trading purposes. He also was eager to share in some of the returns he was providing to the bank.
Akbar proposed that BCCI management approach certain customers. As Naqvi testified, “the basic arrangement was that ... the customers may be asked to permit the bank to trade in their name, the bank will provide all the funds, and the bank will take all the risks.” Naqvi Dep. at 36. With Naqvi and Abedi’s authorization, Akbar approached Khalil to discuss this proposal.
The Court finds that Akbar did approach Khalil, but with two proposals. The first was the nominee arrangement outlined in Naqvi’s testimony. The second proposal was Akbar’s own. He proposed that he and Khalil
form
a partnership to invest the funds in Khalil’s current accounts, the funds put in his hand, in commodities, futures, and options. With great assurance, Akbar promised Khalil returns ranging from double to triple the interest that he could earn from BCCI. Khalil was interested in both arrangements, but he did not want to assume any of the risk.
A. The Khalil-Akbar Partnership
As to the Akbar-Khalil partnership, each agreed that Akbar could trade with Khalil’s funds, profits would be split evenly between the two of them, and Khalil’s capital would be guaranteed. Khalil was attracted to Akbar’s entrepreneurial energy but recognized the risks of allowing him too free a rein. Shortly after he had agreed to both the Treasury nominee arrangement and the Khalil-Akbar partnership, Khalil consulted with Abedi and Naqvi concerning Akbar’s trustworthiness. They told Khalil to trust Akbar “more than the bank.” And, as it turned out, he did. The Khalil-Akbar partnership became incorporated as Capcom UK in 1984. As will be seen, Akbar, with Khalil’s knowledge and agreement, siphoned virtually all the start-up capital from BCCI, and Akbar managed Capcom UK’s affairs from behind the scenes until 1987.
Akbar did not fully disclose the terms of the Khalil-Akbar partnership to Naqvi and Abedi.
20
Akbar was a schemer on par with Abedi himself. Akbar sensed that down the line Khalil could be a willing patron to finance Akbar’s grander schemes. To disguise the extent of the profits he had earned with Khalil’s funds, Akbar told Naqvi that Khalil was demanding an increase in his fee for acting as a nominee for the Treasury trading. Naqvi agreed that Akbar should pay Khalil off.
See
Naqvi Dep. at 55.
The Liquidators sought to show that a total of $1,261,968, divided into three payments, was deposited in Khalil’s accounts in 1980 and 1981 as a pay-off. However, Gilkes was only able to document that two of the three payments were made, and
he
referred to no documents showing that these funds had come from BCCI assets. In the absence of such evidence, the Court finds that the $1.2 million Khalil received actually came from trading profits.
See
Tr. (Akbar) at 496-97.
B. The Treasury Nominee Scheme
As to the BCCI Treasury proposal, Khalil agreed to, and did, serve as a nominee for transactions undertaken by the BCCI Treasury Division. Naqvi and Abedi guaranteed that Khalil’s deposits would not be at risk. Khalil and Akbar agreed that as to BCCI Treasury trading done in the name of Khalil or Khalil-owned companies, Khalil would receive approximately one percent of the total amount invested in his name as a nominee fee. Naqvi and Abedi later ratified this agreement.
*35
C. Khalil-Owned Companies and Unreimbursed Expense Outlays
A number of the fraudulent transactions undertaken by Treasury were done either in Khalil’s name or in the name of a company owned by him. Capcom UK was the formal incorporation of the Khahl-Akbar partnership. Additional companies, wholly owned by Khalil, came into being as a tax vehicle for Khalil to purchase real property. For example, not long after Khalil began his banking relationship with BCCI, he decided to purchase a home in London known as Moneorvo Close. As part of what Khalil termed the “VIP service” offered to important customers of the bank, BCCI assisted Khalil in the purchase by providing a lawyer to handle the closing and an inspection company to inspect the premises.
In addition, Akbar arranged transportation to and from the airport, made hotel reservations for Khalil and his family, and paid Khalil’s staff and utility bills for the new residence. At Khalil’s direction, Akbar had furnished and decorated Moneorvo Close so that the house would be inhabitable when Khalil and his family arrived.
21
There is no dispute that Khalil authorized Akbar to set up an offshore company, Maram Trading Company (“Maram”), to hold title to Moneorvo Close for tax purposes. Maram was a Cayman Islands corporation owned by Khalil and named for his daughter.
Khalil subsequently purchased three other homes in the same manner. Another company, Khalil Investment and Trading Company, a Panamanian corporation, was incorporated by Akbar at the request of Khalil. Of the three additional homes, Sunningdale in Berkshire, England and Lakeside Village in Rockwall, Texas, were purchased in the name of Khalil Investment and Trading Co.
(Id.
at 46, 69, 71, 292, 295). Seadunes, a home in New Smyrna Beach, Florida, was purchased in the name of Maram Trading Company. Khalil also acquired an interest in a property called Potato Patch in Vail, Colorado. For that acquisition he used a company, owned by him, called KINTRA Universal Company, Limited.
As to his first acquisition, Moneorvo Close, Khalil paid the bulk of the actual purchase price from his own funds. However, as part of the “VIP service” for acting as a nominee, BCCI paid a small portion of the purchase price and the ancillary expenses. As Khalil’s leverage over the bank increased, BCCI came to pay nearly all costs related to the subsequent transactions.
See generally
Tr. (Gilkes) at 214-28 & exhibits referenced therein. In all, BCCI advanced $2,249,352 of its own funds in connection with these property transactions as payment to Khalil for his services as a nominee. Khalil did not repay this sum because he had no obligation to repay.
Building on these real estate transactions in which Khalil had a beneficial interest, BCCI Treasury also used companies nominally owned by Khalil to purchase properties from BCCI at inflated prices. For example, in 1981, BCCI sold a Hong Kong property it had acquired on December 15th for $1,833,890 to a company nominally owned by Khalil for $3,962,580. The resulting $2.1 million was recorded as a profit in BCCI’s 1981 year-end books. These transactions were accomplished through the use of international and United States wire facilities.
D. Commodities Trading
As is the case with most gamblers, Akbar’s lucky streak in the markets ran out. In 1983, at Akbar’s direction, BCCI’s Treasury division acquired significant posi
*36
tions in silver and copper on the belief that prices of the metals would continue to rise. In fact, prices dropped, and BCCI was forced to take delivery of significant amounts of metal at above-market prices. Under normal business practices, if BCCI had been holding this metal at the end of the year, or had sold it at market price during the year, it would have recorded tremendous losses. Doing so would have shaken the confidence of the bank’s real investors and almost certainly would have invited increased regulatory scrutiny that would have led to the bank’s closure.
Rather than record these losses, BCCI transferred the silver at above-market prices to two entities, Euro Commodities Limited and Notan Trading, which were controlled by Akbar and wholly-funded from BCCI’s Khalil-related nominee accounts. Although all of the funds for these “purchases” came from internal BCCI sources, the transactions were recorded as sales. Consequently, at the close of 1983, BCCI’s books showed a much smaller loss than the bank had actually suffered.
E. Circular Transactions
In addition, Gilkes testified as to how the BCCI Treasury division carried out a number of other fraudulent transactions done in the name of Khalil, or one of his companies. One type of transaction was a circular routing transaction done to disguise the fact that BCCI was servicing many of its own loans, giving the appearance that non-performing loans were viable assets. As an example:
(1) On June 26, 1985, BCCI created two loans on its books and transferred a total of $82 million to Capcom UK’s subsidiary, Brenchase, by means of two U.S. dollar checks;
(2) that same day Brenchase placed the money with its parent company Cap-com UK;
(3) the next day, June 27, the $82 million plus interest was returned by Capcom UK to Brenchase;
(4) Brenchase then divided the money into two parts: $42 million was sent back to Capcom UK by U.S. dollar check, which then paid the money to BCCI, thus giving the appearance that non-BCCI funds were coming into the bank;
(5) the $40 million which remained at Brenchase was then transferred by international and United States wire to BCCI;
(6) the $42 million sent from Capcom UK to BCCI was used to service an account at BCCI that had been previously used to forward money to Capcom UK that was never repaid;
(7) the $40 million that was transferred from Brenchase to BCCI was used to create that false impression that substantial commercial loans were performing when they were not.
See
Tr. (Gilkes) at 286-88; Pis.’ Exs. 1514-22, 2409-11, 2429-30, 2436-39, 2444-45 BCCI engaged in similar circular routing transactions with the Bank of India and the State Bank of India. Each such transaction had the effect of hiding non-performing assets and creating false profits on the books of BCCI.
See
Tr. (Gilkes) at 289-96; Pis.’ Exs. 17-18.
F. Akbar’s Authority
A great deal of testimony was devoted to whether Khalil had authorized Akbar to undertake any of these activities, and if so, the extent of that authority. Khalil maintained that he gave Akbar only a formal power of attorney in relation to the creation of companies for the purpose of purchasing real property for Khalil’s own use and to finalize such purchases. Akbar certainly had apparent authority to transact a far wider range of business in the name of Khalil and Khalil-owned companies, both with BCCI’s funds and with Khalil’s funds. It may well be that some of the “power of attorney” forms bearing Khalil’s name that were introduced into evidence were in fact signed by Akbar. This does not lead to
*37
the legal conclusion that these documents were “forged.”
On the contrary, the Court finds that in or about 1980 Khalil authorized Akbar, in both his capacity as a BCCI employee and as Khalil’s partner, to undertake a broad range of activities in Khalil’s name, and in the name of Khalil-owned companies,
see, e.g.,
Jawhary Dep.
(FAC)
at 914-15. This authority included, but was not limited to, creating BCCI accounts in Khalil’s name and the name of his companies in which Khalil had no beneficial interest or obligation, and using such accounts to engage in fraudulent wire and mail transfers, to purchase and sell real property, and to trade in commodities, futures, and options. Akbar was further authorized to sign such documents in Khalil’s name as Akbar deemed necessary to carry out these activities.
Akbar kept Khalil apprised of the progress of the overall scheme. Contrary to Khalil’s testimony that he could never find Akbar when he needed him, the Court finds that Akbar consulted with Khalil by telephone on a frequent basis.
See
Deposition of Lorna Wisdom at 20-21. However, unlike with his deposits, in which Khal-il’s own funds were at issue, Khalil willfully and deliberately kept himself ignorant of the details as to how Akbar exercised that authority.
E.g.,
Khalil Dep.
(FAC)
at 5-6, 102-03, 119; Tr. (Akbar) at 462, 489-90, 496. His capital had been guaranteed, and he knew that he would be held harmless if any of the transactions turned out to be to BCCI’s detriment. The scale of these transactions increased steadily.
E.g.,
Tr. (Akbar) at 477. Over time, Khalil was paid millions of dollars pursuant to this agreement.
V. First Amerioan Share Nominee Arrangements
Khalil also was instrumental in facilitating another aspect of Abedi’s grand design. Abedi badly wanted BCCI to pro-ride banking services in the United States. He wanted to tap into the profitability of the United States market, and he believed entry into the United States would allow him to ultimately regularize and legitimize BCCI’s operations worldwide. Abedi expected that some day he would allow the bank to come under a respected regulatory authority. He hoped that BCCI could acquire a controlling interest in an American bank and then come to an arrangement with the Federal Reserve.
However, in the late 1970s and early 1980s, Abedi believed that BCCI was not in a position to seek and obtain Federal Reserve approval to purchase a significant interest in an American bank. Consequently, Abedi and Naqri concocted a nominee scheme to take over what was later named First American Corporation, a regional bank holding company that controlled what was once the largest bank in the Washington, D.C. area. Under the nominee scheme, wealthy individuals from the Middle East would purport to own the shares of CCAH, the shell corporation that became First American’s parent. Some of these investors, such as Adham, would beneficially own some shares — often through loans supplied by BCCI — and also own additional shares as a nominee for BCCI.
Sometime in late 1980 or early 1981, Abedi again asked Adham to help recruit investors. Adham again approached Khal-il. As part of his agreement to serve as a nominee for BCCI for a variety of purposes, Khalil also agreed to serve as a nominee in the acquisition and maintenance of control of the shares of CCAH. Khalil was one of several nominees who participated in the scheme.
To carry out the scheme, BCCI created CCAH, which wholly owned CCAI, also a shell. CCAI came to own First American Corporation, which, in turn owned First American Bank, which owned the retail banks with whom many residents and businesses in the Washington, D.C. metropolitan area did their banking. Ownership of CCAH meant ownership of First American.
*38
In order for CCAH to gain ownership of First American, approval of the Federal Reserve Board was necessary. In April 1981, some of the proposed owners, including Khalil, flew to Washington, D.C. to testify before the Board. Prior to testifying, Khalil had done no due diligence concerning his “investment.” The parties agree that Khalil knew very little about First American when he appeared at the Federal Reserve hearing.
Khalil’s own testimony as to the circumstances of his acquisition of First American shares confirms his nominee status. Financial information on Khalil had previously been supplied to United States regulators through BCCI, although Khalil asserts that he did not know financial information was filed
on his
behalf. Khalil testified in this case that he knew virtually nothing about the bank he was purporting to acquire an interest in when he appeared in Washington in 1981. He did not know what percentage of the bank he was acquiring or precisely how much he was supposed to be investing.
See
Khalil Dep.
(BCCI)
at 379-84, 400, 407, 417. Khalil asserts that he gave Abedi discretion, within a specified range, to decide how much would be invested on his behalf and what percentage would be acquired.
Khalil understood that the CCAH shares BCCI was purchasing in his name were being counted on to form the majority interest in First American, although Khalil testified that he heard it from Ad-ham instead of a BCCI officer. Khalil did not negotiate or discuss a voting trust or some other form of shared control by which “his” shares would be used to consolidate control. Moreover, Khalil knew that this transfer of control required regulatory approval, which is why he flew to Washington.
Khalil flew to Washington with Akbar. On the eve of his Federal Reserve testimony, Khalil met with Clark Clifford and Robert Altman, partners in the law firm of Clifford & Warnke. From the record in this case, it is unclear whom Clifford and Altman represented in their dealings with Khalil. Khalil testified that when he arrived at Clifford & Warnke’s offices, he waited while Adham met with Clifford and Altman. Then, Khalil was given a prepared statement to read to the Federal Reserve. Khalil was asked to rehearse the statement with Clifford, who coached Khalil on his delivery. Khalil read the statement and did not claim that it was inaccurate in any way. Khalil delivered the statement, as prepared, to the Federal Reserve.
22
On the basis of the testimony of Khalil and the other nominees, along with documentation supplied by BCCI, the Federal Reserve approved the sale of First American. The Federal Reserve was unaware that BCCI would be the beneficial owner of a controlling interest in First American.
*39
Had the Federal Reserve known that BCCI was behind the takeover of First American, transfer of control would not have been approved.
The initial transfer of CCAH shares took place in 1982. Khalil tells an improbable tale to explain how he actually purchased his shares. According to Khalil, he authorized Abedi to buy between $5 million and $8 million of CCAH stock. Khalil testified that after the initial purchase, he received a statement from BCCI showing that $14,832,000 had been taken from his accounts to purchase between 4 and 5 percent of CCAH. Khalil testified that he was angry that Abedi had greatly exceeded the authorized amount. However, Khalil did not introduce this bank statement into evidence, nor did any witness who spoke with Khalil at the time testify that Khalil was upset. On the contrary, on the return flight from Washington in April 1981, Khalil acknowledged his nominee status to Akbar. At later times Khalil again acknowledged his nominee status with respect to CCAH shares in his name to both Akbar and Naqvi.
The documentary record also demonstrates that Khalil was a nominee for BCCI. Three blocks of shares were purchased in Khalil’s name. There was an initial purchase of 8,240 shares in the tender offer of March 1982, and rights shares purchases of 1,667 shares in August 1982 and 3,343 shares in November 1983, amounting to a total purchase of 13,250 shares registered in Khalil’s name. None of the memorandum account statements kept by Akbar that were introduced, nor any of the account statements produced by Khalil, show that any of his deposit or current accounts were debited to pay for any of these purchases. Rather, the documents show that BCCI created false loans from BCCI Group entities to carry out the nominee purchases. The nominees, including Khalil, had no obligation to repay the loans; BCCI’s investment was concealed through the nominee lending. The total amount of BCCI’s direct investment in the shares of First American through the nominee scheme was $556,108,245.
For the initial purchase, BCCI routed funds for the shares purchased in Khalil’s name through the Swiss bank account of another nominee shareholder, Sayed Ja-whary. BCCI created a false $30 million loan to Khalil in BCCI Overseas, Grand Cayman. Those funds were then sent to a false current account in Khalil’s name at BCCI, S.A., London. Most of these funds were subsequently transferred by wire from BCCI to United Overseas Bank, Geneva, to the credit of Adham’s and Ja-whary’s actual accounts. The funds sent to United Overseas Bank were then returned by wire to BCCI where they were pooled with funds for other nominees as well as beneficial shareholders and transferred to the ICIC Call Deposit Account, which was the collection account for the First American tender offer at BCCI Overseas. These funds were then remitted by wire to BCCI Overseas’ account at Bank of New York and then to First American’s account at Chase Manhattan. There was no commercial purpose for such a roundabout routing of funds, which concealed from the auditors and regulators the fact that the BCCI Group had supplied the funds for the purchase of shares in Khalil’s and others’ names.
23
Khalil knew that the funds for purchase of the shares in his name had been routed through the Swiss account. Jawhary testified that he told Khalil that Jawhary’s Swiss account had been used to route funds and that “Khalil said fine.” Jawhary Dep.
(BCCI)
at 12-13.
BCCI management carried out the second and third nominee purchases in Khal-il’s name in similar fashion. The second purchase of shares in the name of Khalil occurred in August 1982. A loan of $12,-060,000 was drawn down in the name of
*40
another nominee at BCCI Overseas, Grand Cayman. The funds were transferred from BCCI Overseas by wire to First American’s account at Chase Manhattan Bank in New York in August 1982. The transfer included $8,000,600 for shares in the name of Khalil and $9,059,400 for other nominees. Again, United States and international wires were used to effect the transaction. The third purchase of shares in Khalil’s name occurred in November 1983. A loan of $6,868,415 was drawn down in the name of Khalil at ICIC Overseas, Grand Cayman, which was aggregated with other loans drawn down at ICIC in the name of other nominees and remitted by wire to First American’s account at State Bank of Albany in New York.
In total, $24,201,015 was paid by the BCCI Group to finance nominee shares for Khalil. These transactions were all recorded in BCCI’s books as loans. BCCI documented its ownership interest in First American in detail. With immaculate penmanship, Imam tracked on a regular basis BCCI’s internal carrying costs on these nominee loans.
24
The accounting for these nominee purchases as loans was false; the financing did not represent genuine and collectible loans made to Khalil, and the purported loans were never repaid by Khalil.
In support of his claim that he was the beneficial owner of his CCAH shares, Khalil testified concerning a 1984 trip he made to Washington, D.C. area, where Khalil’s son, Khalid, lived. Khalil entered a First American branch in Falls Church, Virginia and attempted to cash $100,000 in travelers checks. The teller explained that he only had permission to cash up to $3,000, and that authorization from a supervisor would be required. Khalil stated that he was a shareholder of the bank. The branch manager telephoned Altman, who authorized the transaction.
See
Khal-il Dep.
(BCCI)
at 352. Within the same week, Khalil visited Altman in his office to hear a report on First American’s progress. Khalil testified that during the meeting Altman showed him his CCAH share certificates but told Khalil that the certificates could not be delivered to him for another 18 months.
The evidence does not support this version of events. The Court finds that Khal-il did travel to Washington, D.C. in 1984, and that he did meet with Altman. Although Khalil was a nominee owner of First American, he expected First American to extend to him the same “VIP service” he received from BCCI. Khalil sought information concerning First American’s success so that he could value his service to BCCI as a nominee. Altman did not have the CCAH share certificates; Imam did.
See
Imam Dep. at 74-75;
cf.
Khalil Dep.
(BCCI)
at 835 (testifying in regard to Capcom share certificates that “if you have the real shares why you give it to other people.”).
It was illegal for the BCCI Group to acquire or maintain its beneficial interest in First American without approval by the Federal Reserve. By participating in the nominee scheme, through which BCCI acquired a controlling interest in violation of United States banking laws, Khalil and his co-conspirators subjected BCCI to criminal liability and substantial financial loss.
VI. Term Deposits
Khalil closely watched BCCI’s treatment of his term deposits. He had instructed
*41
BCCI to roll over his term deposits and to find him the best interest rates available. He expected BCCI to provide him with above-market rates.
E.g.,
Khalil Dep.
(BCCI)
at 187, 209-10. Early on he detected problems with his account statements. He found that the interest payments were not as great as expected or not at the agreed-upon rate. In his terms, BCCI staff was “playing with the interest” or doing “monkey business.”
25
Although Khalil appears to have been aware of all such discrepancies, he chose to point out only the more egregious to Akbar, who grudgingly had them corrected.
E.g.,
Khalil Dep.
(BCCI)
at 90-91, 197-98. He purported to cancel his previous instructions to Akbar, but in fact, his relations with the bank remained unchanged.
The Court finds this conduct to be further corroboration of Khalil’s nominee status. Khalil understood that the BCCI Group needed him more than he needed them, and that by acting as nominee, Khal-il had additional leverage over the bank. As a result he expected to receive above-market interest on his genuine deposits, and he expected to receive additional payments and profits for his service as a nominee. Had Khalil been only a genuine depositor, he certainly would have withdrawn his money from BCCI rather than tolerate regular discrepancies in his account statements. However, the fact that Akbar and others tried to cheat on their agreement by providing less interest than had been agreed troubled Khalil, but did not cause him to leave the bank. The potential payoffs of staying outweighed the annoyance of having to monitor Akbar and bring him back into line from time to time.
VII. Growth op Capcom
In the mid-1980s, a number of events transpired that changed Khalil’s relationship with BCCI. These began in 1984 and were triggered by Akbar’s deteriorating relations with Abedi and Naqvi. Akbar consulted with Naqvi on a daily basis, but Naqvi began to lose trust in Akbar. Naqvi’s suspicions were well founded.
The newest development was the founding of Capcom UK (initially named Hourc-harm Ltd.) in April 1984. When Khalil and Akbar agreed to start Capcom UK, they agreed to siphon funds from the BCCI Group to capitalize and support the new venture. Khalil testified that he and Akbar, as partners, controlled 67 percent of Capcom UK shares, though that was not reflected in the records of Capcom. Akbar did not become a registered shareholder of Capcom until 1987, but he nevertheless created and controlled the operations of Capcom UK from “behind the curtains.” Khalil was a director of Capcom UK and consulted regularly with Akbar concerning the company.'
In furtherance of this conspiracy, Akbar — as head of treasury for the BCCI Group — created loans in the books of BCCI in the name of Khalil and Khalil-related companies, including Maram Trading Company. These funds were transferred from BCCI accounts (at times using U.S. bank accounts and using international and United States wire facilities) to Cap-com UK as capital and as trading funds. These funds were converted to the use of Capcom UK and were not repaid to the BCCI Group.
Capcom began trading in September 1984. To the surprise of many in the
*42
London trading community, it appeared as if Capcom had become a large presence in the market almost overnight. At Akbar’s direction, BCCI used Capcom extensively as a broker. In addition, between October 1984 and December 1984 Akbar caused BCCI to transfer a total of $100 million to Capcom UK. Neither Naqvi nor Abedi authorized these transfers. These funds were initially debited to an overdraft account in the name of Khalil at BCCI Overseas, Grand Cayman. The debits to this account falsely represented that Khalil was liable to repay the amounts advanced. In fact, he was held harmless as to any debits to the account and the accounting for the transfers therefore falsified the books and records of the BCCI Group. The funds were transferred to Capcom by BCCI Overseas using international and United States wire facilities and United States bank accounts. In addition, the transfers were confirmed using international and United States wire facilities and the United States mail. The liability for these transfers was subsequently transferred from the Khalil overdraft account to a loan account in the name of a Khalil-owned company, Maram Trading Company.
Flush with cash, Capcom UK expanded into the growing commodities futures market at the Chicago Board of Trade by incorporating Capcom U.S. in May 1985. Capcom UK was the record shareholder of 82 percent of Capcom U.S. stock. One month later, Akbar caused BCCI to transfer approximately $25 million to Capcom UK, debiting an account in the name of Maram Trading Company. These funds were transferred to Capcom UK by wire using United States bank accounts and international and United States wire facilities. Akbar disguised the true nature of this transfer by making it appear as if Paten Holding Company — a Panamanian shell company that Akbar had set up through a Swiss lawyer — had advanced the funds as non-recourse loans to the shareholders of Capcom UK. Khalil executed a loan agreement and memorandum of deposit purportedly evidencing a loan from Paten Holding to him secured by shares in Capcom UK. Jawhary and Adham also executed loan agreements in favor of Pa-ten Holding. When received, the funds were accounted for by Capcom UK as share capital.
VIII. The $12.5 Million Payment to Khalil
Around this same period, mid-1985, while Akbar was literally looting the BCCI treasury, Naqvi first became aware of sizable losses Akbar had been incurring in the Treasury operations. Akbar warned Khal-il that Akbar’s position with the bank had become shaky. Whatever allegiances Akbar may have had for BCCI were quickly evaporating, and Akbar placed a higher premium on his lucrative partnership with Khalil. Khalil understood that many of BCCI’s Treasury losses had occurred in connection with accounts in his name. BCCI was scrambling to find a way to disguise these losses from its external auditors. This gave Khalil additional leverage over the bank. At the same time, Khalil had become nervous about the safety of his deposits. Akbar had revealed to Khalil that in addition to the Treasury losses and the large amounts being diverted to Capcom, BCCI also was faced with enormous non-performing loans that had been advanced to the Gokal brothers in India.
Khalil told Akbar that he wanted to close out his accounts at BCCI and that he expected to be paid his share of the “profits” from the trading operations, notwithstanding his knowledge of the serious losses that BCCI’s Treasury had experienced. Akbar found himself caught in the middle. His position with BCCI would erode considerably if he did not have Khalil’s accounts to manage. However, it was more important to him to keep Khalil happy.
Akbar approached Naqvi and advised him of Khalil’s intention to close his accounts and receive an unspecified amount of “profit.” Naqvi recognized the bank’s vulnerability. With the losses in Treasury,
*43
the additional loss of significant deposits would leave the bank with precarious liquidity. Moreover, as to the issue of Khalil’s desire for “profits” from BCCI’s trading in Khalil’s name, Naqvi explained that “because there was no written agreement with Mr. Khalil of my earlier understanding that the compensation would be about 1 percent of the amount invested, it became an open issue.” Naqvi Dep. at 59.
Suspicious of Akbar’s divided loyalties, Naqvi nonetheless deputized Akbar to find a way to keep Khalil as a depositor and to settle the “profit” issue. To prevent Khalil from exploiting the uncertainty concerning Khalil’s share of trading profits in the future, Akbar was directed to memorialize any settlement agreement with Khalil. Akbar and Khalil negotiated the sum of $12.5 million. By letter from Akbar to Khalil dated August 16, 1985, and countersigned by Khalil, the $12.5 million payment would represent $2.5 million in realized trading profits and $10 million “from the future profits of trading account (50%).”
See
Pis.’ Exs. 1546, 1547. The portion of that line struck out was done so at Khalil’s direction. He expressly reserved the issue of payment for his nominee service with respect to BCCI Holdings shares for a separate negotiation.
Akbar had also drafted a line in the letter that read: “For the purpose of trading, I am taking time to time, a loan from the Bank in your name which will be adjusted at the close of the trading business. This is for your information only.” It is undisputed that Khalil signed the letter with this line left intact. Pis.’ Ex. 1546. It is further undisputed that during the course of the meeting with Akbar, after signing the letter, Khalil directed that the line referencing loans taken in his name also be struck out. Pis.’ Ex. 1547.
Akbar, being a double agent in this negotiation, quickly acquiesced to both edits. When Akbar informed Naqvi of the outcome, Naqvi was staggered by the sum. He testified that he considered the payment to be “extortion,” but he felt he had no choice but to ratify the agreement.
See
Naqvi Dep. at 70. On August 20, 1985, BCCI issued a check in the amount of $12,500,000 in favor of Mr. Abdul Raouf Khalil.
Khalil admits that he directed that portions of Akbar’s August 16, 1985 letter be crossed out, he admits that he signed the letter, and he admits that he received a check for $12.5 million. Khalil’s characterization of this transaction, however, is quite improbable.
See
Khalil Dep.
(BCCI)
at 300-21. For example, Khalil testified that this $12.5 million payment was for the BCCI Holdings shares in his name, notwithstanding his admission that he directed that the reference to BCCI shares be struck out. Even on small points his testimony is internally inconsistent. He did not dispute that his meeting with Akbar occurred on August 16th, the date of the letter. Yet, he testified that he received the check during his meeting with Akbar, even though the check was not issued until August 20th. The Court finds that this $12.5 million was payment to Khalil from BCCI for Khahl’s service as an all-purpose nominee.
IX. Khalil Withdraws Most of His Deposits From BCCI
The spring of 1986 was the breaking point on a number of fronts. Akbar made his last raid on the BCCI treasury.’ Between January and April 1986, funds in the amount of $136 million were transferred from BCCI to Capcom by United States wire using United States bank accounts. These funds were never returned to BCCI.
At that same time, Naqvi came to appreciate the full extent of the losses in Treasury. Naqvi did not realize that some of these “losses” were funds Akbar had embezzled through Capcom, but it was clear that the bank was hemorrhaging funds at an unsustainable rate. Naqvi knew he had to rein in Akbar without doing so in a way that would lead Akbar to expose the bank’s true financial condition to the world.
See
*44
Naqvi Dep. at 179. Instead, Akbar left BCCI on his own accord.
Shortly thereafter, Akbar resurfaced at his own brokerage company, Futures Advisory Services (“FAS”), located down the hall from Capcom UK’s offices. Akbar recruited his secretary, Lorna Wisdom, and other BCCI Treasury personnel to join him either at FAS or Capcom. Akbar directed Capcom’s affairs from his FAS office. Akbar continued to collect a salary from BCCI until 1987.
Akbar’s departure from BCCI spurred Khalil into action. In May 1986, with his partner and account manager out of the bank, and with the bank appearing to be in serious financial trouble, Khalil decided to withdraw his deposits from BCCI. Because Akbar was gone, Khalil dealt directly with Naqvi. Naqvi tried, but failed, to persuade Khalil to stay with the bank. Khalil presented Naqvi with his most recent account statements and demanded that nearly all the funds be paid to him; Khalil agreed to keep approximately 10 million Saudi riyals in a BCCI account. Khalil directed that $87 million and (pounds)3 million be transferred to Khalil’s new accounts at Adham’s bank, Allied Arab Bank.
See
Pis.’ Ex. 1745. Khalil also raised with Naqvi the issue of the BCCI shares in Khalil’s name.
Without access to Akbar’s records, Naqvi- agreed to pay out the amount reflected on the account statements presented by Khalil. However, to protect against a subsequent approach by Khalil to collect more in the way of deposits, Naqvi drafted language by - which Khalil agreed that these payments, along with the instructions concerning the 10 million riyals, represented a full accounting of Khalil’s deposits with BCCI.
See
Naqvi Dep. at 82 & Pls.’ Ex. 1737.
When Naqvi and Khalil took up the subject of BCCI shares, Khalil was primarily concerned with getting the shares out of his name. Khalil had become concerned about his public association with the bank, whose financial straits were becoming more apparent. Naqvi explained that it would take time. Khalil agreed to allow BCCI to keep the shares in his name for another 18 months. Khalil signed transfer deeds in blank and an agreement with ICIC authorizing the sale of shares in his name at any price ICIC may direct.
See
Pis.’ Exs. 43 & 1747.
X. The $15 Million Payment to Khalil/The $17 Million “Loan”
A. $15 Million Payment
The summer of 1987 again brought a flurry of activity. Khalil requested another meeting with Naqvi. They met first on June 25, 1987. In that meeting, Khalil announced that he was withdrawing his remaining deposits and that he expected to receive another substantial payment — a parting gift, as it were — for his service as a nominee. Khalil also wanted assurance that the loan accounts in relation to both the BCCI and CCAH shares in his name would be closed. According to Naqvi, Khalil “was there to explore and exploit the situation at the time of his total separation of relationship with BCCI.” Naqvi Dep. at 90. Naqvi elaborated:
[Tjhere were so many other parties who were exploiting and blackmailing BCCI that I had become familiar of the manner, the tone, the approach, which underlies an extortion claim. And this was the situation which I was facing with Mr. Raouf Khalil the second time, sir.
Id.
at 97.
Naqvi inferred, and the Court finds, that Khalil had been briefed by Akbar in preparation for this meeting, and that Akbar conspired with Khalil regarding the amount that Khalil should seek to extract from Naqvi.
See
Naqvi Dep. at 89-92. After some negotiation, Naqvi agreed to make a flat payment of $15 million in full and final settlement of all investments in Khalil’s name. Under the agreement, Khalil waived any right to additional profits from the BCCI Holdings shares that had been treated as “beneficial” shares in
*45
the books and records of BCCI. Acknowledging Naqvi’s request for additional time to transfer both the BCCI and CCAH shares, Khalil agreed that these could be kept in his name for an additional two years. Khalil also agreed to sign audit confirmations to assist Naqvi with the auditors.
A follow-up meeting took place on July 2, 1987 for the purpose of documenting the $15 million agreement. Imam corroborated the timing of the July 1987 meeting and his preparations to assist Naqvi in discussing the loans and investments held in Khalil’s name. Documents signed by Naqvi and Khalil during the July 1987 meeting corroborate that the $15 million was a fixed payment in respect of both First American and BCCI Holdings shares held in Khalil’s name. Imam prepared the documents relating to the transaction and brought them into the meeting between Naqvi and Khalil. Khalil signed the documents during the meeting and they were returned to Imam shortly thereafter. Dr. Giles authenticated Khalil’s signature on these documents.
Khalil signed an instruction letter directing that the $15 million be paid, via New York bank accounts and wires, to his account in the name Tahia Trust at Libra Bank. On July 3, 1987, the $15 million payment was wired from BCCI Overseas, Grand Cayman via bank accounts in New York. Advice of the payment was communicated from New York to Grand Cayman by United States mail. Khalil conceded that payment was made to the account designated in Pis.’ Ex. 1891, and that the account was his.
B. $17 Million “Loan”
In the June 1987 meeting, Khalil also addressed a separate issue. Previously, because of pressure from the auditors, BCCI had stopped using Capcom as its broker. Prior to the June 1987 meeting, Akbar had been contacting BCCI, seeking a $17 million loan for one of his companies. BCCI had resisted. At the June 25, 1987 meeting, Khalil asked that BCCI renew its relationship with Capcom. Naqvi explained that he could not authorize that. Khalil then pressed Naqvi to extend the loan Akbar had been seeking. Naqvi agreed to advance $17 million from BCCI to General Securities Corporation (“GESS”), a corporation owned jointly by Khalil and Akbar, which had an account at Capcom. The $17 million payment was made on June 25,1987.
XI. Restructuring of Capcom U.S. Shareholding
Khalil was acutely aware of Naqvi’s vulnerabilities in their meetings in the summer of 1987 because Khalil faced his own exposure with Capcom. Khalil’s trust in Akbar, such as it was, was on the wane. Khalil had agreed to the opening of Cap-com U.S. in 1985. Akbar reported to Khalil on a regular basis, but many of the day-to-day details of Capcom’s business had been left to Akbar.
The opening of Capcom U.S. had invited scrutiny from the Chicago Board of Trade and other regulators in the United States. The Board of Trade had found that Cap-com UK’s ownership of Capcom U.S. did not provide sufficient security. Either Capcom UK would have to increase its share capital or any shareholder with a 5 percent or greater stake in Capcom U.S. would need to provide a personal guarantee. Khalil did not want to provide such a guarantee. At the same time, circumventing such a regulation by using nominee shareholders troubled him. Many of the Capcom shareholders already were nominees, including Jawhary and Adham. Having just used his own nominee status to extract a $15 million pay-off from BCCI, Khalil knew exactly how a nominee might exploit that position with him.
Moreover, at this time of increased scrutiny, Khalil met with evasive responses from Akbar when he sought specifics about the various real and fictitious arrangements that Akbar had made regarding Capcom. The Court infers that Jawhary
*46
also advised Khalil that if regulators were ever to investigate Capcom’s internal affairs, the records should reflect that directors, such as Khalil, had sought to bring the company under control.
Thus, when Khalil visited London in June 1987 to meet with Naqvi, he also had a separate meeting in Capcom UK’s headquarters with Akbar and Jawhary. Khalil focused attention on the ownership of Pa-ten Holding, which, on paper, had advanced $17 million to the Capcom UK shareholders on a non-recourse basis to fund a capital increase. In this case, Khal-il testified that he and Akbar were equal owners of Paten. But the evidence is clear that in June 1987, Khalil was “furious” with Akbar,
see
Jawhary Dep.
(BCCI)
at 158, and wanted the record to reflect that he was the sole owner of Paten. Akbar protested; Jawhary simply wanted the matter resolved. Minutes of this meeting were prepared and signed by the participants, including Khalil.
See
Pis.’ Ex. 1878. At the meeting it was agreed that Khalil was the sole beneficial owner of Paten Holding.
26
Another topic discussed was restructuring the shareholding in Capcom US. Time was running out to meet the Board of Trade’s requirements. The option to increase Capcom UK’s share capital was rejected. With Akbar no longer in a position to siphon funds from the BCCI treasury, Khalil had no interest in investing his own funds in Capcom. Khalil had also made it clear that he would not provide a personal guarantee. Akbar, however, was willing to sign a guarantee. Khalil, Jawhary, and Akbar tentatively agreed to a new arrangement in which Akbar would become the largest shareholder of Capcom US, at least on paper, with a 28 percent stake. However, Jawhary proposed that they explore other restructuring options to use additional nominees.
Some further discussions clearly took place. Khalil had traveled to Chicago to discuss with shareholders, Akbar, and attorneys the restructuring of Capcom UK’s shareholding in Capcom US. On August 6, 1987, The Capcom Board sent Capcom US’s Chicago counsel a letter announcing the new shareholding structure of Capcom US.
See
Pis.’ Ex.1945. Under the final structure, three shareholders would each hold in excess of 5 percent and would provide personal guarantees. Akbar’s share had dropped to 14 percent, and the largest shareholder became Wadia Sayed Khalil, Khalil’s brother, who purportedly bought 89 percent of Capcom US. On August 19, 1987, the Capcom UK Board formally ratified the new shareholding arrangement. Wadia Khalil did not testify in this case, and, from the evidence, the Court can only conclude that Khalil had found a nominee he could trust; Khalil beneficially owned.the 39 percent of Cap-com U.S. held in his brother’s name.
Concern over Akbar’s trustworthiness and increased regulatory interest in Cap-com U.S. led Khalil to believe that he should disassociate himself from Capcom altogether — on paper. Separation from Capcom also meant divesting himself of Paten Holding, which was tied to Capcom on paper through the false loan agreements. During the autumn of 1987, Khalil had repeatedly requested reports from Capcom UK staff detailing the company’s finances. Many of these demands were designed to pressure Akbar to be more forthcoming with Khalil in the conduct of their partnership. However, having received no satisfactory response, Khalil called for an extraordinary shareholders meeting, which was scheduled for February 5,1988. Khalil’s pressure tactics finally drew a response from Akbar, who agreed to a fixed payment to assuage Khalil’s concerns regarding Akbar’s em
*47
bezzling from their jointly-owned companies and to allow Khalil to formally disassociate himself from Capcom and Paten Holding.
Two days before the shareholders meeting, February 3, 1988, Khalil signed documents purporting to transfer his shares in Capcom and Paten Holding to Akbar for (pounds)4 million. Khalil would now be a silent partner. Khalil took no steps to record the sale of his shares or to make other interested parties aware that he had sold his shares.
On the contrary, Khalil neither attended the February 5,1998 shareholders meeting to announce the “sale” of his interest, nor did he advise any of the other shareholders as to the reason for his absence. Indeed, Khalil affirmatively concealed the paper sale of his shares from Jawhary and from other principals and directors of Cap-com. In November 1988, long after Khalil had purported to have no further interest in Capcom, Khalil executed a proxy in favor of Jawhary for an extraordinary general shareholders meeting for Capcom UK.
XII. Khalil’s Record Shareholding: BCCI, CCAH, Capcom
Khalil asserts that by the late 1980s, he had successfully withdrawn from his dealings with BCCI, CCAH, Capcom, and Akbar. The Court finds otherwise. Khalil took no steps to assure that the BCCI Holdings shares were ever taken out of his name. Although he had agreed with Naqvi that the shares could remain registered in his name until December 31, 1988 (itself an illegal nominee agreement), Khal-il learned from Naqvi in 1989 that the shares still remained in his name. Indeed, in April 1989, another block of BCCI Holdings shares had been registered in Khalil’s name. Khalil was never thereafter informed that the BCCI shares in his name were transferred to another owner, and he took no affirmative action to remedy the situation. In fact, all of the shares remained registered in the name of Khalil until April 1990, when the bulk of the shares were transferred to another shareholder. At the time BCCI was seized in 1991, a total of 57,748 shares remained registered in Khalil's name. Those BCCI Holdings shares remained in Khalil’s name until the proceeds from the sale of the nominee interests were forfeited to the United States in December 1994.
As to the CCAH shares in Khalil’s name, Khalil was a nominee shareholder in the illegal acquisition and maintenance of control of First American from March 1982 onwards. Khalil told Jawhary that he had sold his interest in First American,
see
Jawhary Dep.
(BCCI)
at 124-25, but Khalil took no affirmative steps to have the CCAH shares taken out of his name. In addition, Capcom shares remained registered in Khalil's name until at least July 1994. Khalil continued to receive Capcom shareholder materials until at least 1993 and made no request to have his name removed from the share register.
Indeed, to show that he was never, or at least no longer, a member of a conspiracy with BCCI management, Khalil introduced evidence of a meeting between himself, Adham’s attorneys, and Jawhary in 1992. At that time, the United States Department of Justice (“DOJ”) and the District Attorney of New York were investigating the circumstances of CCAH’s nominal acquisition of First American. DOJ officials sought statements from the record shareholders of CCAH concerning the source of the funds for their nominal investment. The meeting was held to discuss possible responses to the DOJ request. At the meeting, Khalil discussed a cover story explaining that the money for the first investment in CCAH came from a real estate transaction brokered by Khalil.
See
Jawhary Dep.
(JBCCI)
at 135-44, 146-49. Shortly before pleading guilty, Adham and Jawhary submitted a signed statement with the cover story to the DOJ. Khalil, on the other hand, refused to sign. The Court finds that, at the meeting, in which his counsel was not present, Khalil had been instrumental in creating the cover story. However, after the meeting, Khalil
*48
conferred with his counsel, and he subsequently refused to sign and submit a statement with the cover story to the DOJ.
Contrary to Khalil’s intent in introducing this evidence, the Court finds that Khalil was again a willing co-conspirator in the cover story plot, but that he was more shrewd than his co-conspirators in assessing the risks of submitting such a tale to the DOJ. The evidence of Khalil’s participation in this conspiracy lends further credence to the evidence demonstrating Khalil’s participation in the nominee scheme and the Capcom conspiracy with Akbar.
XIII. Separate Payments to Akbar
On the theory that a conspirator is liable for the acts of co-conspirators in furtherance of the conspiracy, the Liquidators also sought to hold Khalil liable for payments made by BCCI separately to Akbar. For example, in August 1988, Akbar traveled to Washington to meet with a Senate investigator about BCCI and First American. Following his meeting with the Senate investigator, Akbar sent a facsimile from Washington to London indicating that he believed that Capcom’s continued success would require him to disclose harmful facts about BCCI (including the First American nominee scheme and frauds involving the Khalil accounts) to the Senate. In exchange for his silence, Akbar demanded $15 million from BCCI. Naqvi instructed CFC to make the payment by wire using United States bank accounts, to Capcom UK.
Although Akbar funneled this and other direct payments through Capcom, the Court finds that Akbar was operating outside the scope of his conspiracy with Khalil regarding these payments. Akbar is personally liable for these payments to BCCI; Khalil is not.
DISCUSSION
In his answer to the complaint, Khalil asserted thirteen affirmative defenses, some of which, if accepted, would have prevented the Court from reaching the merits of this dispute.
See Khalil,
20 F.Supp.2d at 4-7 (discussing some of these). However, at trial Khalil focused only on the merits, leaving his affirmative defenses unattended and unaddressed. For example, Khalil’s counsel made no mention of the statute of limitations, imputation, or standing in his closing argument. Moreover, in Khalil’s Proposed Findings of Fact and Conclusions of Law — which, in a party’s best-case scenario, could be adopted as the opinion of the Court — no mention is made of any affirmative defense other than the defense as to proximate cause.
27
As a matter of caution, the Liquidators addressed issues such as imputation, adverse domination, and fraudulent concealment in their Proposed Findings and Conclusions, and Khalil did respond to those proposals.
28
But it is not up to plaintiffs to preserve defendant’s affirmative defenses.
The Court finds that Khalil waived his affirmative defenses with the exception of defenses 6 and 9 related to causation.
29
Moreover, even if Khalil had preserved these issues, the Court would have found that the Liquidators are entitled to relief largely for the reasons they advance.
See
*49
Pis.’ Prop. Findings of Fact and Concl. of Law ¶¶ 112-140,171-185.
Ultimately, the Court would have found that the Liquidators’ claims accrued in April 1994. In addition to the reasons advanced by the Liquidators, discussion of the Supreme Court’s opinion in
Klehr v. A.O. Smith Corp.,
521 U.S. 179 , 117 S.Ct. 1984 , 138 L.Ed.2d 373 (1997), would have been required.
30
The Supreme Court in
Klehr
strongly implied that some discovery rule applies to the civil RICO limitations period but was less certain as to what information the plaintiff must discover to trigger the limitations period.
See Klehr,
521 U.S. at 185-86, 191-93 , 117 S.Ct. 1984 . In this Circuit it has been assumed, but not decided, that the four-year limitations period for a civil RICO claim begins to run when the plaintiff discovered, or should have discovered, his injury.
See Riddell v. Riddell Washington Corp.,
866 F.2d 1480, 1489-90 (D.C.Cir.1989). Had it been necessary, the Court would have held that even under the most restrictive of the discovery rules left intact by
Klehr ,
on the facts of this case, the Liquidators’ suit was timely filed.
As to the merits, the Liquidators allege that Khalil is liable under the civil RICO provision, 18 U.S.C. § 1964 (c). Count I covers Khalil’s role in BCCI’s acquisition of First American; Count II covers- Khal-il’s role as a nominee on BCCI’s shares and for the BCCI Treasury; Count III covers Khalil’s role in the operation of Capcom; and Count IV covers Khalil’s use of funds from BCCI to capitalize Capcom. In addition, the Liquidators asserted three common law counts covering the same conduct: Count V alleges common law fraud; Count VI is for unjust enrichment; and Count VII is for conversion.
Overview of Civil RICO
RICO reaches higher-level criminal organisms that have evolved beyond simple schemes and single criminal acts. The operative criminal provision is 18 U.S.C. § 1962 , which creates four distinct offenses. Common to each offense is “a pattern of racketeering activity.”
The phrase ‘racketeering activity’ is a term of art defined in terms of activity that violates other laws, including more than 50 specifically mentioned federal statutes, which forbid, for example ... extortion, and various kinds of fraud. § 1961(1). The word ‘pattern’ is also a term of art defined to require ‘at least two acts of racketeering activity ... the last of which occurred within ten years after the commission of a prior act of racketeering activity.’ § 1961(5).
Klehr,
521 U.S. at 183 , 117 S.Ct. 1984 . Also common is some relation between the “pattern of racketeering activity” and an “enterprise,” a defined term that includes corporations.
See
18 U.S.C. § 1961 (4).
Subsection (a) renders unlawful the acquisition of any interest in or the establishment or operation of an ‘enterprise’ ... with the proceeds of a ‘pattern of racketeering activity.’ .... Subsection (b) outlaws acquiring or maintaining an interest in or control of an enterprise ‘through a pattern of racketeering activity.’ .... Subsection (c), the subsection most litigated, outlaws the conduct of affairs of an enterprise (under circumstances outlined in the statute) ‘through a pattern of racketeering activity.’ Subsection (d) adds nothing substantive to the law. Rather, it makes it unlawful to conspire to violate any of the preceding three sections.
Danielsen v. Burnside-Ott Aviation Training Ctr.,
941 F.2d 1220, 1224 (D.C.Cir.1991).
*50
A special RICO provision — commonly-known as civil RICO — permits ‘[a]ny person injured in his business or property
by reason of
a violation’ of RICO’s criminal provisions to recover treble damages and attorneys fees. § 1964(c).
Klehr,
521 U.S. at 183 , 117 S.Ct. 1984 (emphasis added).
COUNT I: Acquisition of First American
Count I alleges that Khalil conspired to, and did, cause injury by agreeing to hold CCAH shares as a nominee, and by undertaking certain overt acts in furtherance of that agreement. The Liquidators allege that the injuries for which they seek to recover were proximately caused by Khal-il’s violation of 18 U.S.C. § 1962 (b). That section provides:
It shall be unlawful for any person through a pattern of racketeering activity or through collection of an unlawful debt to
acquire or maintain, directly or indirectly, any interest in or control of any enterprise
which is engaged in, or the activities of which affect, interstate or foreign commerce.
18 U.S.C. § 1962 (b) (emphasis added). To recover on this claim the Liquidators must have proven: (1) that First American was an “enterprise”; (2) that Khalil acquired or maintained an interest in First American; (3) that such acquisition or maintenance involved violations of two or more specified federal laws within 10 years; (4) that those violations were related and continuous; and (5) that the BCCI corporate entities were injured “by reason of’ (1) - (4). The Liquidators also allege in Count I that Khalil conspired with former BCCI management to acquire an interest in First American in violation of § 1962(b) and that the conspiracy also proximately caused the BCCI Group harm.
A. First American is an “Enterprise”
A RICO “enterprise” includes “any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” 18 U.S.C. § 1961 (4). An enterprise is established by a common purpose among the participants, organization, and continuity.
United States v. Richardson,
167 F.3d 621, 625 (D.C.Cir.1999). An enterprise is engaged in interstate and foreign commerce when it is “directly engaged in the production, distribution, or acquisition of goods and services in interstate commerce.”
United States v. Robertson,
514 U.S. 669, 672 , 115 S.Ct. 1732 , 131 L.Ed.2d 714 (1995) (citations omitted). The interstate commerce requirement is met if either the activity of the enterprise or the predicate acts of racketeering affect interstate commerce.
R.A.G.S. Couture, Inc. v. Hyatt,
774 F.2d 1350, 1353 (5th Cir.1985). First American was a multistate banking group — an enterprise — routinely engaged in interstate and foreign commerce.
B. Whether Khalil Directly or Indirectly “Acquired or Maintained” an “Interest In” or “Control Of’ of First American
The Liquidators argue that Khalil can be held to have violated § 1962(b) so long as he “participated in a pattern of racketeering activity to acquire and maintain an interest in or control of First American.”
See
Pis.’ Prop. Findings and Concl. ¶ 211. This statement conflates their claims in Count I against Khalil for directly violating § 1962(b) and conspiring to assist BCCI in violating § 1962(b). For Khalil to have violated § 1962(b), it is necessary that he acquired an interest in or control of First American.
The Liquidators proved that Khalil directly acquired a nominal interest in First American by becoming a record shareholder of CCAH. But, according to the evidence, Khalil did not acquire a beneficial interest in First American. BCCI, by contrast, acquired both a beneficial interest in, and control of, First American indirectly, through the nominees.
Acquiring beneficial stock ownership in a corporation undoubtedly is “ac
*51
quisition” of “an interest in” an “enterprise” within the meaning of 18 U.S.C. § 1962 (b).
E.g., Whaley v. Auto Club Ins. Ass’n,
891 F.Supp. 1237, 1240-41 (E.D.Mich.1995);
Moffatt Enter., Inc. v. Borden, Inc.,
768 F.Supp. 143, 147 (W.D.Pa.1990);
cf. Teague v. Bakker,
35 F.3d 978 , 994-95 n. 23 (4th Cir.1994). Accordingly, BCCI, as the beneficial owner of the CCAH shares in Khalil’s name, acquired an interest in First American, and, as is discussed below, Khalil conspired with BCCI management to facilitate BCCI’s acquisition of that interest through a pattern of racketeering activity.
The harder question is whether Khalil, as the nominal owner of the stock beneficially owned by BCCI, can also be held liable under § 1964(c) for directly violating § 1962(b). A § 1962(b) “interest” in an enterprise is a proprietary one:
The common or dictionary definition of [“interest”] includes ‘right, title or legal share in something; participation in advantage, profit and responsibility.’ .... It has also been defined as ‘(t)he most general term that can be employed to denote a right, claim, title, or legal share in something.’ .... So defined, ‘interest’ in fact encompasses all ‘property rights’ in a business enterprise.
United States v. Jacobson,
691 F.2d 110, 112-13 (2d Cir.1982) (per curiam);
31
see also Keystone Helicopter v. Textron, Inc.,
1997 WL 786453 *2 (E.D.Pa. Dee.2, 1997);
Nafta v. Feniks Int’l House of Trade,
932 F.Supp. 422, 428 (E.D.N.Y.1996).
Adopting this broad understanding of “interest,” this Court finds that holding legal title to corporate stock that is beneficially owned by another is a sufficient “interest” in an enterprise to incur liability under § 1962(b).
[T]he law recognizes the general principle that the legal title to shares may be in one person; that is, the holder of the stock certificate, whereas equitable ownership of all the shares, or a portion thereof, may be in another person. The whole beneficial interest in the shares may belong to others, or others may be beneficially interested with the registered owner or certificate holder....
Blanton v. Austin,
392 S.W.2d 140, 143 (Tex.Civ.App.1965). Both the holder of legal title and the beneficial owner have proprietary interests in the corporation.
Cf. Student Loan Marketing Ass’n v. Riley,
104 F.3d 397, 407 (D.C.Cir.1997) (ownership of legal title alone is a proprietary interest in the student loan context). The holder of title has the power to exercise the rights over the property. Failure to do so in accord with the wishes of the beneficiary may expose the title holder to separate liability, but the nominal owner is empowered to exercise proprietary rights nonetheless. This power is a sufficient to be considered an “interest in” the corporation within the ambit of § 1962(b).
See Jacobson,
691 F.2d at 113 .
In addition, on these facts, Khalil indirectly exercised control over First American. Khalil’s considerable economic leverage over BCCI allowed him to control BCCI in certain respects. As Naqvi testified, BCCI had little choice other than to meet Khalil’s demands for payment as a nominee. Because BCCI had actual control over First American, Khalil’s power to control BCCI gave him derivative control over First American.
Cf. In re Am. Honda Motor Co., Inc. Dealerships Relations Litig.,
958 F.Supp. 1045, 1054-55 (D.Md. 1997). For example, in 1984, Robert Altman authorized special treatment for Khal-il when Khalil sought to cash his travelers checks. More importantly, Altman gave Khalil a briefing on First American’s prospects in recognition of Khalil's power to demand such information. This is sufficient control for purposes of § 1962(b).
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C. Khalil’s Pattern of Racketeering Activity
The Liquidators have also proven that Khalil’s conduct in relation to BCCI’s illegal acquisition of First American was part of a “pattern of racketeering activity.” That element requires (1) at least two predicate acts of racketeering within ten years which are (2) related; and (3) have continuity.
H.J., Inc. v. Northwestern Bell Tel. Co.,
492 U.S. 229, 239 , 109 S.Ct. 2893 , 106 L.Ed.2d 195 (1989);
Sedima, S.P.R.L. v. Imrex Co.,
473 U.S. 479, 497 , 105 S.Ct. 3275 , 87 L.Ed.2d 346 (1985).
1. Predicate Acts
The predicate acts of racketeering in defendants’ acquisition of First American included multiple acts of (1) wire and mail fraud in violation of 18 U.S.C. §§ 1341 and 1343; (2) bank fraud in violation of 18 U.S.C. § 1344 ; (3) travel and transportation in aid of racketeering in violation of 18 U.S.C. § 1952 ; (4) money laundering in violation of 18 U.S.C. § 1956 ; and (5) extortion in violation of 18 U.S.C. § 1951 (b)(2).
(a) Wire Fraud/Mail Fraud
Wire and mail fraud require a “scheme to defraud” and the use of wires in interstate or foreign commerce, or of the United States mail, to further that scheme.
United States v. Lemire,
720 F.2d 1327, 1334-35 (D.C.Cir.1983).
32
To establish a violation of the wire and mail fraud statutes, proof is required only of a scheme to defraud, not the commission of the fraud itself.
United States v. Reid,
533 F.2d 1255, 1264 (D.C.Cir.1976). In addition, “[a]ll that is required is that [defendant] have knowingly and willfully participated in the scheme; she need not have performed every key act herself.”
United States v. Maxwell,
920 F.2d 1028, 1035 (D.C.Cir.1990).
A wire or mailing is in furtherance of an alleged scheme if it is “incident to an essential part of the scheme, or a step in the plot.”
Schmuck v. United States,
489 U.S. 705, 710-11 , 109 S.Ct. 1443 , 103 L.Ed.2d 734 (1989) (citations and internal quotations omitted). Communications need not be fraudulent in themselves to serve as RICO predicates, as long as they further a fraudulent scheme.
United States v. Pemberton,
121 F.3d 1157, 1170-71 (8th Cir.1997);
Reid,
533 F.2d at 1265 . Nor is it required that a defendant be shown specifically to have intended to use the wires or mail service if their use was reasonably foreseeable.
United States v. Ross,
131 F.3d 970, 981 (11th Cir.1997),
cert. denied,
119 S.Ct. 258 (1998).
A person commits wire or mail fraud if he causes an interstate or international wire communication or mailing to be made; it is not necessary that the person actually make the communication or even personally instruct that the communication be made.
United States v. Rogers,
9 F.3d 1025, 1030 (2d Cir.1993). Under the wire fraud statute, “an act [can be] caused not simply when it is a physical consequence of the person’s conduct but when, in addition, the actor either knew the consequence would occur or its occurrence was reasonably foreseeable.”
Id.
(citation and internal quotations omitted). A defendant may cause an interstate or international wire communication by placing an intrastate wire communication which foreseeably leads the financial institution with which the defendant is dealing to in turn place an interstate or international communication.
United States v. De Biasi,
712 F.2d 785, 791 (2d Cir.1983).
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As set forth above, numerous specific acts constituting use of interstate and international wires and United States mail, such as wire transfers of U.S. dollars cleared through financial institutions in the United States, took place in furtherance of the scheme to fraudulently acquire First American. These uses of wires and the United States mail were vital to the scheme to defraud because they authorized and effected the transfer of funds for the illegal acquisition of First American. Khalil authorized this use of wires and United States mail when he agreed that BCCI could take whatever actions it deemed necessary to purchase CCAH shares in his name. Use of United States mail and international wires was clearly foreseeable.
(b) Travel Act
Violation of the Travel Act requires; (1) travel in interstate or foreign commerce or use of a facility in foreign or interstate commerce; (2) with the intent to promote an unlawful activity; and (3) the performance or attempted performance or the facilitation of the performance of an overt act in furtherance of the unlawful activity.
United States v. Childress,
58 F.3d 693, 719 (D.C.Cir.1995) (citations omitted). Congress targeted the Travel Act not toward “sporadic, casual involvement [in the predicate offenses], but rather toward a continuous course of conduct sufficient for it to be termed a business enterprise.”
United States v. Auerbach,
913 F.2d 407, 411 (7th Cir.1990). However, one instance of interstate travel is sufficient to establish interstate racketeering if defendant travels to further an illegal activity.
United States v. Vanichromanee,
742 F.2d 340, 349 (7th Cir.1984). And, in the case of a conspiracy, it is immaterial whether defendant personally caused or knew of interstate travel because, as a co-conspirator, he is liable for other participants’ acts in furtherance of the conspiracy.
33
The “use of a facility in commerce” includes use of the United States mails,
United States v. Heacock,
31 F.3d 249, 255 (5th Cir.1994); the making of interstate telephone calls and telegraphs,
United States v. Jenkins,
943 F.2d 167, 172-73 (2d Cir.1991); and the interstate wire transfer of funds,
United States v. Antonick,
481 F.2d 935, 938 (9th Cir.1973).
In furtherance of their scheme to acquire nominal interests in First American for the benefit of BCCI, Khalil and Akbar violated 18 U.S.C. § 1952 (a) by traveling in interstate and foreign commerce with the intent of furthering unlawful activity and thereafter engaging in such unlawful activity. For example, in 1981, Khalil, Akbar and others traveled from London to the District of Columbia for purposes of meeting with other nominee shareholders of the First American enterprise, consulting with attorneys, and testifying in front of the Federal Reserve with regard to the proposed purchase of. the First American enterprise.
Additionally, Khalil was responsible for the use of a facility in commerce in furtherance of the scheme to defraud. In the course of this scheme, Khalil and Akbar, acting singly and in concert with Abedi and Naqvi, transferred the funds used to purchase shares in First American from accounts abroad to the United States and from the United States to accounts abroad with the intent to promote the carrying of their fraudulent ownership and management scheme and to conceal or disguise the nature, the location, the source, the ownership, and the control of the proceeds of their unlawful activity, in violation of 18 U.S.C. § 1952 (a).
Subsequent to his 1981 trip to Washington, D.C., Khalil signed transfer deeds in
*54
blank and undertook other overt acts in furtherance of the scheme by which he had acquired a nominal interest in First American.
(c) Money laundering
The requirements to prove money laundering in violation of 18 U.S.C. § 1956 differ depending on whether the offense is domestic or international.
See United States v. Piervinanzi,
23 F.3d 670, 680 (2d Cir.1994); Barrett Atwood
&
Molly McConville,
Money Laundering in Project, Fourteenth Survey of White Collar Crime,
36 Am.Crim.L.Rev. 901, 904 (1999) [hereafter
Mail Fraud
].
Illegal money laundering within the United States requires that the defendants knowingly conducted a financial transaction or transferred funds which were the proceeds of illegal activity to promote the illegal activity or to disguise the nature, location, source or control of the proceeds. 18 U.S.C. § 1956 (a)(1);
United States v. Wynn,
61 F.3d 921, 924 (D.C.Cir.1995). In a complex routing transaction, each transfer of funds, if it affects interstate or foreign commerce, can be a separate § 1956(a)(1) violation.
See
Atwood & McConville,
Mail Fraud
at 916— 17. But the defendant must know that the proceeds with which he conducts the financial transaction are tainted.
United States v. Quintero,
165 F.3d 831, 838 (11th Cir. 1999);
Piervinanzi
23 F.3d at 680 .
By contrast, international money laundering in violation of § 1956(a)(2) does not require that “proceeds” first be generated by illegal activity, followed by a financial transaction with those proceeds. Instead it penalizes an overseas transfer “with the intent to promote the carrying on of specified unlawful activity.”
Piervinanzi
23 F.3d at 680 (quoting § 1956(a)(2)(A));
see also Quintero,
165 F.3d at 838 .
There is some circularity in considering international money laundering as a predicate “racketeering activity” under RICO as defined in 18 U.S.C. § 1961 (1). This is because the “specified unlawful activities” that are predicates for an international money laundering violation under § 1956(a)(2)(A) also are those offenses listed in § 1961(1).
See
18 U.S.C. § 1956 (c)(7)(A).
Khalil violated § 1956(a)(2) when he agreed to the transfer of funds to the United States to purchase CCAH shares in his name so as to further BCCI’s fraudulent takéover of First American through BCCI’s nominees.
(d) Extortion
Khalil also engaged in the RICO predicate act of extortion, defined as the “obtaining of property from another with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right.” 18 U.S.C. § 1951 (b)(2). Fear of economic, rather than physical harm, is sufficient to establish an extortion claim under § 1951.
United States v. Tomblin,
46 F.3d 1369, 1382 (5th Cir.1995). The required effect on interstate commerce is
de minimis. Id.
at 1383-84;
United States v. Debs,
949 F.2d 199, 202 (6th Cir.1991). Extortion under D.C.Code Ann. § 22-3851 is similarly defined.
In the course of the scheme to acquire and maintain controlling interest in First American, Khalil demanded payment from the BCCI Group in exchange for his agreement not to disclose the scheme and to continue his services as a nominee shareholder. Disclosure of the scheme would have substantially injured the BCCI Group, exposing it to financial loss and criminal prosecution. Payment of the extortion, at least the $15 million payment, affected foreign and interstate commerce. Khalil’s threats in exchange for payment constituted extortion in violation of 18 U.S.C. § 1951 .
*55
(e) Financial institution fraud
Finally, Khalil also conspired to, and did, commit bank fraud in violation of 18 U.S.C. § 1344 . That section prohibits engaging in or attempting to engage in a pattern or course of conduct designed to deceive a federally chartered or insured financial institution into releasing property with intent to victimize the institution by exposing it to actual or potential loss.
United States v. Stavroulakis,
952 F.2d 686, 694 (2d Cir.1992). The financial institution need not incur loss nor must the defendant personally benefit from the scheme to defraud.
See United States v. Goldblatt,
813 F.2d 619, 624 (3d Cir.1987);
see also United States v. Moede,
48 F.3d 238, 242 (7th Cir.1995).
Khalil and his co-conspirators defrauded the First American banks, a financial institution within the meaning of 18 U.S.C. § 20 , by concealing the material fact that First American’s capitalization was being illegally diverted from BCCI through nominee loans, that First American’s shares were pledged to secure purported loans to the nominee shareholders and that First American was illegally owned by a foreign banking group. Khalil, in conspiracy with Akbar and BCCI’s senior officers, knowingly presented false testimony to the Board of Governors of the Federal Reserve Bank. In addition, the Liquidators established that Khalil knowingly participated in the misrepresentation of the First American investment as loans to Khalil, thereby falsifying BCCI’s own books and records. This scheme was undertaken with specific intent to defraud and exposed First American to risk of loss.
2. Relatedness and Continuity
To form a “pattern” of racketeering activity, the aforementioned predicate acts need be “related” and “continuous.” The indicia of relatedness between predicate acts include common: purpose, result, participants, victims, and methods of commission.
H.J., Inc.,
492 U.S. at 240 , 109 S.Ct. 2893 . The concept of continuity is primarily a temporal one.
Pyramid Securities, Ltd. v. International Bank,
726 F.Supp. 1377, 1382 (D.D.C.1989),
affd,
924 F.2d 1114 (D.C.Cir.1991). Continuity is measured by a “commonsense” approach,
H.J., Inc.,
492 U.S. at 241 , 109 S.Ct. 2893 , focusing on the number and variety of predicate acts, the number of victims, the number of perpetrators, the presence of separate schemes, and the occurrence of distinct injuries.
See Edmondson & Gallagher v. Alban Towers Tenants Ass’n,
48 F.3d 1260, 1264-65 (D.C.Cir.1995);
Edison Elec. Inst. v. Henwood,
832 F.Supp. 413, 417-18 (D.D.C.1993).
In this case, the aforementioned acts of racketeering had the same or similar unlawful purposes, results, participants and victims and were not isolated events. The common theme of these multiple racketeering acts was illegally to acquire and maintain an interest in and control of the First American enterprise, nominally for Khalil and other nominee shareholders, by using BCCI Group funds to conceal the existence of that control, and to use that control for the benefit of the co-conspirators. These acts were essential elements of the unlawful scheme, were carried out within 10 years (and beyond), and constituted a pattern of racketeering in violation of § 1962(b).
Khalil agreed to participate in the nominee conspiracy, and he took no affirmative steps to withdraw from the scheme. Rather, Khalil specifically agreed to allow BCCI to continue to hold First American shares in his name until December 1988. Even after that time, he knew that the shares remained in his name, and he took no steps to remedy the situation or to bring the nominee scheme to the attention of the authorities. The Liquidators met their burden to prove that Khalil directly violated § 1962(b).
3. Proximate Cause
Because Count I is a civil RICO claim, § 1964(c) requires that the Liqui
*56
dators show injury caused “by reason of’ Khalil’s violation of § 1962(b).
34
The statute’s “by reason of’ phrase incorporates the principle of proximate causation.
See Holmes v. Securities Investor Protection Corp.,
503 U.S. 258, 265-68 , 112 S.Ct. 1311 , 117 L.Ed.2d 532 (1992). The damage must be caused by the violation of § 1962 as opposed to by the predicate acts alone.
See Lightning Lube, Inc. v. Witco,
4 F.3d 1153 , 1190 (3d Cir.1993). Thus, at trial, the Liquidators had the burden to demonstrate injury flowing proximately from Khalil’s acquisition of his nominal interest in, and actual control over, First American through a pattern of racketeering activity.
Danielsen v. Burnside-Ott Aviation Training Center Inc.,
941 F.2d 1220, 1231 (D.C.Cir.1991).
The parties agree that a defendant’s acts proximately cause plaintiffs injuries when such acts are a substantial factor in the sequence of responsible causation, and where the plaintiffs injury was reasonably foreseeable or anticipated as a natural consequence of those acts.
See First American Corp. v. Al-Nahyan,
17 F.Supp.2d 10, 22 (D.D.C.1998);
see also In re American Express Co. Shareholder Litig.,
39 F.3d 395, 399 (2d Cir.1994).
At trial, the Liquidators proved that BCCI’s investment in First American was economically detrimental. BCCI invested a total of $556,108,245, through its nominees, to acquire First American. After the Liquidators entered a guilty plea on behalf of BCCI to the criminal charges pending in this Court, BCCI’s interests in First American were forfeited to the United States. From the liquidation of First American, $277,884,166 has been paid to the Liquidators.
See
Tr. (Gilkes) at 322-28. This being a negative return on investment, the Liquidators claim that the $278,224,079 loss is proximately attributable to Khalil’s participation in the nominee scheme. Additionally, the Liquidators claim that the opportunity cost of BCCI’s illegal investment in First American was $334,818,884.
However, the Court cannot find that these losses were proximately caused by Khalil’s participation in the nominee scheme. Although it was foreseeable at the time Khalil participated in the scheme that BCCI was exposing itself to criminal liability which could result in the forfeiture of its First American holdings, too many intervening factors, such as changing market conditions over a considerable period of time and numerous independent decisions by First American management, led to these losses that the Liquidators seek to attribute to Khalil.
See Powers v. British Vita, P.L.C.,
57 F.3d 176, 189 (2d Cir. 1995);
First Nationwide Bank v. Gelt Funding Corp.,
27 F.3d 763, 769-72 (2d Cir.1994).
On the other hand, other losses were directly attributable to Khalil’s acquisition of a nominal interest in First American through a pattern of racketeering activity. For example, the $27.5 million paid to Khalil, although extorted from BCCI, was a transaction cost proximately imposed on BCCI by virtue of its use of nominees to accomplish the illegal acquisition of, and maintain its control over, First American. Additionally, payment of Khalil’s expenses for his services as a nominee also were proximately caused by the pattern of racketeering activity by which Khail and BCCI acquired their respective interests in First American.
D. Conspiracy
In addition to alleging a direct violation of § 1962(b), Count I also charged Khalil with conspiracy to violate § 1962(b). Subsection (d) makes it unlawful “to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section.” 18 U.S.C. § 1962 (d). “A con
*57
spiracy is a partnership in crime.”
Pinkerton v. United States,
328 U.S. 640, 644 , 66 S.Ct. 1180 , 90 L.Ed. 1489 (1946). To be liable under § 1962(d),
[a] conspirator must intend to further an endeavor which, if completed, would satisfy all of the elements of a substantive criminal offense, but it suffices that he adopt the goal of furthering or facilitating the criminal endeavor.
Salinas v. United States,
522 U.S. 52 , —, 118 S.Ct. 469, 477 , 139 L.Ed.2d 352 (1997). A conspirator need not agree to commit or facilitate each and every part of the substantive offense; if the partners agree to pursue the same criminal objective and divide up the work, each is responsible for the acts of the other.
See id.
Indeed, “[a] person, moreover, may be liable for conspiracy even though he was incapable of committing the substantive offense.”
Id.
A conspirator remains party to the conspiracy unless and until he admits his participation to the authorities or communicates his abandonment in a manner reasonably calculated to reach co-conspirators.
See United States v. Thomas,
114 F.3d 228, 267 (D.C.Cir.),
cert. denied,
— U.S. —, 118 S.Ct. 635 , 139 L.Ed.2d 614 (1997). Once proof of a conspiracy is established, defendant has the burden of proving that he affirmatively withdrew from the conspiracy.
Id.
at 269 .
For the reasons set forth above, Khalil’s agreement to act as an all-purpose nominee for BCCI, and his specific agreement to act as a nominee in B CCI’s acquisition of First American makes him liable under § 1962(d).
In addition, the direct payments to Khalil and payment of his expenses also were proximately caused by this conspiracy. It is hornbook law that
[o]nce the conspiracy has been formed, all its members are liable for injuries caused by acts pursuant to or in furtherance of the conspiracy. A conspirator need not participate actively in or benefit from the wrongful action in order to be found liable. He need not even have planned or known about the injurious action ... so long as the purpose of the tortious action was to advance the overall object of the conspiracy.
Halberstam v. Welch,
705 F.2d 472, 481 (D.C.Cir.1983). Khalil’s agreement to act as a nominee was essential to BCCI management’s obtaining regulatory approval for its illegal acquisition of First American. And, that a

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/2449201. Public record. Not legal advice.