Bangladesh Bank v. Rizal Com. Banking Corp.

208 N.Y.S.3d 2

BANGLADESH BANK, Plaintiff–Respondent,

v.RIZAL COMMERCIAL BANKING CORPORATION, et al., Defendants–Appellants,Maia Santos Deguito, et al., Defendants.

Supreme Court, Appellate Division, First Department, New York.

Entered: February 29, 2024

Certain defendants appeal from an order of the Supreme Court, New York County (Andrea P. Masley, J.), entered January 17, 2023, which, insofar as appealed from as limited by the briefs, denied the motions of defendants RCBC, Romualdo Agarrado, Nestor O. Pineda, Ismael S. Reyes, Brigette B. Capina, Raul Victor B. Tan, and Lorenzo V. Tan to dismiss the complaint as against them under CPLR 327(a), CPLR 3211(a)(7), and CPLR 3211(a)(8), and denied defendant Kim Sin Wong’s motion to dismiss the complaint as against him under CPLR 327(a).

Sidley Austin LLP, New York (Eamon P. Joyce, Tai-Heng Cheng, Melissa Colόn–Bosolet, Melanie Berdecia, Tyler J. Domino and James R. Honer of counsel), for Rizal Commercial Banking Corporation, Brigitte B. Capinã, Nestor O. Pineda, and Romualdo Agarrado, appellants.

The Kochisarli Law Firm, New York (Brian Kochisarli of counsel), for Lorenzo V. Tan, Raul Victor B. Tan, and Ismael S. Reyes, appellants.

The Howley Law Firm P.C., New York (John J.P. Howley of counsel), for Kam Sin Wong, appellant.

Cozen O’Connor, New York (Jesse R. Loffler and John J. Sullivan of counsel), for respondent.

Troy K. Webber, J.P., Saliann Scarpulla, Bahaati E. Pitt-Burke, Llinét M. Rosado, Kelly O’Neill Levy, JJ.

PITT-BURKE, J.

This appeal raises the interesting question of whether a trial court has the discretion to deny a motion to dismiss a complaint pursuant to CPLR 327(a), on forum non conveniens grounds, after it has already found New York to be an inconvenient forum as to another defendant and dismissed the complaint as against it. For the reasons that follow, we find that Supreme Court had the discretion to deny the motion to dismiss the complaint on the ground of forum non conveniens as that doctrine presumes jurisdiction. However, Supreme Court should have dismissed the action as against defendants Reyes, Pineda, Capina, and Agarrado (individual defendants), because the allegations in the complaint are insufficient to establish that New York had long-arm "conspiracy" jurisdiction under CPLR 302(a) as to these defendants. Supreme Court should have also dismissed the causes of action sounding in conversion, as the record establishes that the stolen funds are no longer specifically identifiable.

Facts

This case arises from an international fraud and money laundering scheme, whereby plaintiff, the central bank of the People’s Republic of Bangladesh, alleges that over $81 million was stolen from its account at the Federal Reserve Bank of New York (N.Y. Fed). The theft, which occurred when plaintiff’s computer network was infiltrated by unknown North Korean hackers, was effectuated by the issuance of unauthorized payment orders which were used to fraudulently transfer plaintiff’s funds through defendant Rizal Commercial Banking Corporation’s (RCBC) accounts.

The hackers began to infiltrate plaintiff’s network in January 2015. By January 2016, they gained access to the SWIFT-LIVE¹ system used by plaintiff to effectuate transactions. The theft was initiated after close of business on February 4, 2016, when the hackers sent 36 payment orders directing the transfer of nearly $1 billion from plaintiff’s N.Y. Fed account to various recipients. While nearly all the transfers were initially rejected due to missing routing information, it is alleged that the hackers obtained RCBC’s correspondent account routing information from RCBC individuals and sent revised orders to the N.Y. Fed. Four payment orders, totaling over $81 million, were processed by the N.Y. Fed.

To facilitate the theft, the hackers conspired with defendant RCBC, one of the Philippines’s largest banks. Because RCBC did not have an account with the N.Y. Fed, the funds could not be transferred out of the U.S. directly from plaintiff’s N.Y. Fed account. Therefore, the hackers used four RCBC correspondent accounts at New York and Pennsylvania branches of Wells Fargo, Bank of New York and Citibank to transfer plaintiff’s stolen funds. Importantly, these intermediary banks had access to the N.Y. Fed’s Fedwire system and could transfer the stolen funds immediately to the four RCBC correspondent accounts. After the initial transfer to the correspondent accounts, the stolen funds were then transferred abroad to fictitious RCBC accounts in the Philippines.

RCBC employees and Philippine nationals Maia Santos Deguito, Angela Ruth Torres, Lorenzo V. Tan, Raul Victor Tan, Ismael Reyes, Brigitte Capina, Nestor Pineda, and Romualdo Agarrado were involved in opening the fictitious accounts at RCBC branches in the Philippines. These accounts served as conduits to launder the stolen funds through the Solaire and Midas casinos, located in the Philippines, and operated by Bloomberry Resorts and Hotels (BRHI), a Philippine corporation, and Eastern Hawaii Leisure Company (EHL), a branch of a Chinese corporation with a principal place of business in Manila, respectively.

As relevant here, the conduit accounts included five fictitious accounts (fictitious accounts) which were opened by Deguito and Torres and signed off on by Agarrado for defendant Kam Sin Wong,² owner of EHL and good friend of Lorenzo V. Tan, RCBC’s President and CEO. These accounts were opened on May 15, 2015 in the names of fictitious individuals to hold U.S. dollars. Aside from an initial five-hundred-dollar deposit, the accounts remained dormant until the stolen funds were deposited on February 5, 2016.³ Notably, it is alleged that Wong "clearly [knew] that the stolen funds were coming" into the fictitious accounts, because he called RCBC’s Deguito on February 5, 2016, and asked "whether a large deposit had been transferred into the [fictitious] Cruz Account." When Deguito asked how Wong knew about the large deposit, Wong responded, "I told you, Lorenzo [Tan] knows this."

On the date of the theft, RCBC opened another fictious account in the name of defendant Go, doing business as Centurytex Trading. The Centurytex paperwork was executed during a meeting between Deguito and Wong at a casino, a venue exempt from reporting requirements under Philippine anti-money laundering law. RCBC laundered nearly all of plaintiff's funds through the fictitious U.S. dollar Centurytex account. The funds were then transferred into and between fictitious Philrem⁴ accounts. Importantly, as the fictitious accounts were opened in fictitious names, RCBC and the other banking related defendants, including Lorenzo Tan and Raul Tan (the Tans) and the individual defendants, were the only entities that could transfer funds in and out of the accounts.

Due to the suspicious nature of the transfers, RCBC’s Settlements and Operations Groups placed holds on the fictitious accounts, including the fictitious Centurytex account. Raul Tan, the former head of the retail banking group, contacted Pineda and Capina to discuss if the hold was appropriate. Pineda and Capina, in turn, consulted with Deguito, who advised that the account holders were longtime wealthy clients from the Solaire Casino, whose documents were in order and that the transfers had been expected. Raul Tan then ordered the hold removed, despite learning that the transactions were suspicious. Reyes, Capina, Pineda and other senior RCBC officials did nothing to stop the transactions.

Upon discovery of the theft, plaintiff sent stop payment messages to RCBC. However, RCBC did not receive the messages until the next day because it signed out of the SWIFT server after the theft occurred. When RCBC’s Settlements Department finally received the stop payment requests, it forwarded them to the Jupiter branch, where Deguito and Torres worked.

At the time the stop payment requests were forwarded to the Jupiter branch, $58.2 million remained in the fictitious accounts. Instead of placing an immediate hold on the accounts, Jupiter branch employees continued to process transfers and waited over six hours to place the holds. This delay resulted in almost all the funds being transferred to the Centurytex account, an account RCBC did not freeze, despite it holding $42.9 million of plaintiff's stolen funds.

RCBC Head Office then sent SWIFT messages to plaintiff and its correspondent banks claiming it placed holds on "the remaining proceeds" even though it had not placed a hold on the Centurytex account. Over the next several days, the stolen funds in the Centurytex account were removed from RCBC.

By the time RCBC filed a Suspicious Transaction Report, over $80 million of plaintiff’s funds had been stolen and transferred into Philrem RCBC accounts, converted into Philippine pesos, deposited into other banks, and distributed through various businesses, including EHL, the Centurytex account, and the Solaire and Midas casinos. The stolen funds were converted into casino chips at the Solaire Casino and given to players who used the chips to gamble for over a month.

Relevant Procedural History

Instant Action

Plaintiff commenced this action on May 27, 2020.⁵ The complaint asserted causes of action for conversion/theft/misappropriation; aiding and abetting conversion/theft/misappropriation; conspiracy to commit conversion/theft/misappropriation; fraud; aiding and abetting fraud; conspiracy to commit fraud; conspiracy to commit trespass against chattels; unjust enrichment; and money had and received.⁶ Prior Motions to Dismiss

BRHI moved to dismiss the complaint pursuant to CPLR 3211(a)(7) and (8) for failure to state a claim and lack of personal jurisdiction, and on forum non conveniens grounds pursuant to CPLR 327(a). EHL and Wong also moved to dismiss the complaint pursuant to CPLR 306–b and CPLR 3211(a)(8), with EHL further moving to dismiss on forum non conveniens grounds pursuant to CPLR 327(a).

On or about April 8, 2022, Supreme Court...