Using the LCB case as a precedent makes it highly likely that the smaller of the two lawsuits (the 200-page one), mentioned in my January article, would be similarly dismissed.
by Dan Azzi -Source: Annahar
I’ve often been accused of being a pessimist in my analyses or projections. I have a problem with such characterizations — optimist or pessimist. I mean, if someone goes to the doctor and she diagnoses him with terminal cancer, I don’t know too many people who respond with “Wallaw, ya 7akimeh, why are you so pessimistic?” Most rational people might get a second opinion, and if both opinions converge, they go to the next step — treatment of the disease. I feel the same way about my analyses of the economy — I’m neither an optimist nor a pessimist — I’m a realist. In fact, my state of mind or wishes have no relevance to the final outcome — I’m either right or wrong — simple as that.
I wrote an article in November about our precarious economic position, in which I highlighted our vulnerability to sanctions and reprisal, because of our dollarized economy, especially because of our being forcefully thrust into a regional geopolitical conflict much bigger than us. I followed with another article in January about two independent civil lawsuits filed against eleven banks, which points out the different ways that our economic system can be assaulted and unhinged. However, in the article, I also stated that one of the two lawsuits, which sought damages for the Hizbullah rocket attacks on Israel during the 2006 War, was a much weaker case, and I predicted that it would be summarily dismissed or outright won.
An identical lawsuit had been filed against the Lebanese Canadian Bank (LCB) earlier. You may remember that LCB was the fifth largest bank in Lebanon and was accused by NY State Attorney for the Southern District of New York, Mr. Preet Bharara, of aiding and abetting terrorism and other heinous acts. The fact that a local authority like a district in New York, instead of the US Treasury or another Federal Agency, is going around the world enforcing US Federal Law, in itself raises some jurisdictional questions. This overstepping by prosecutors in New York, taking advantage of financial services firms being physically located in their area, has launched many a successful political career like that of Eliot Spitzer, who eventually became Governor of New York, until he had to resign due to a toe fetish that got out of hand. In the settlement order in 2013, LCB had one of the cleanest and most successful settlement orders of any bank worldwide, faced with these types of fatal accusations. The overly ambitious Mr. Bharara had to climb down from his original sweeping accusation, and was quite a defeat, at least relative to his original claims. It was the beginning of several setbacks in his career, such as the overturning of his convictions of Sheldon Silver and hedge fund manager David Ganek, finally culminating in his being fired by President Donald Trump.
Unfortunately, this wasn’t sufficient for LCB to survive, because of the fragility of any bank, and the unwillingness of counterparties to take the risk of doing business while it proved its innocence. Of course, like any bank, there might have been some stuff going on that slipped through their compliance procedures, but the final settlement order, signed (and therefore acknowledged) by Mr. Bharara, included an unequivocal statement by LCB management, vehemently denying management complicity or knowledge of any improprieties. LCB management also stated that they settled only to put things behind them and move on. Despite this victory, LCB could not be saved, and in the end, it was bought by SGBL in a shotgun marriage blessed by BDL.
Your only memory of LCB today is if you walk by Starbucks in Hamra, then you’d see a star on the ground, like the celebrity stars in Hollywood, with its name still etched on the sidewalk tiles.
The lawsuit invoked a far-reaching US law, the Anti-Terrorism Act (ATA), intended to discourage attacks against US citizens worldwide, by imposing significant damages on any party that provides material assistance to the perpetrators. The lawsuit accused Hizbullah of injuring Israeli-American citizens and alleged that LCB facilitated the funding that financed these acts.
The judge on the case is the Honorable George B. Daniels, widely considered one of President Bill Clinton’s finest appointees. Judge Daniels, an African American, grew up in the Deep South in less than ideal conditions, but despite that, put himself through some of the top universities in the country. After graduating from Yale and UC Berkeley, he started out his career helping the less fortunate, by working for the Legal Aid Society, then moved to the private sector, in one of the most prestigious law firms, finally ending up a judge. Judge Daniels has a pristine reputation for fair and balanced treatment of both the accused and the plaintiff, and the courage in taking tough decisions.
Last Friday, Judge Daniels dismissed the case on the grounds that the plaintiff did not establish that LCB actions constituted an act of international terrorism or that LCB actions were the “proximate cause.” Specifically, the ruling stated that “even if LCB’s provision of financial services … constitute international terrorism, which was not established anyway, LCB’s liability claim would still fail because plaintiffs have not sufficiently alleged that such conduct was the proximate cause of their injuries.” Lest you think Judge Daniels is somehow sympathetic to defendants from this part of the world, he had recently ruled in favor of other plaintiffs in a separate case, issuing a $7.5 billion judgment against Iran.
Using the LCB case as a precedent makes it highly likely that the smaller of the two lawsuits (the 200-page one), mentioned in my January article, would be similarly dismissed. This is great news for the banking sector and the eleven banks named in the lawsuits — a nice break from the string of recent bad luck.
Dan Azzi is a regular contributor to Annahar. He has recently been invited to be an Advanced Leadership Initiative Fellow at Harvard University, a program for senior executives to leverage their experience and apply it to a problem with social impact. Dan’s research focus at Harvard will be economic and political reform in a hypothetical small country riddled with corruption and negligence. Previously, he was the Chairman and CEO of Standard Chartered Bank Lebanon.