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March 31, 1993


The opinion of the court was delivered by: VINCENT L. BRODERICK



 This case involves an allegedly wrongful seizure of funds put up by plaintiff to secure an irrevocable standby letter of credit posted in connection with an international commercial transaction.

 In this memorandum order I address a claim by plaintiff Omar International, Inc., ("Omar") against defendant UBAF Arab American Bank ("UBAF"), a New York bank.

 Omar had applied to UBAF for a standby letter of credit in connection with Omar's commercial transaction with ALAF General Organization for Fodder ("ALAF"), a Syrian corporation. In summary, Omar and ALAF had a commercial dispute in the matter to which the letter of credit pertained. After the letter of credit had expired UBAF, without Omar's permission, transferred to another account in UBAF the funds belonging to Omar and held by UBAF to secure the letter of credit. The transferee account was that of the agent of ALAF, the intended beneficiary of the letter of credit. After Omar settled its commercial dispute with ALAF, UBAF returned to Omar the funds that UBAF had transferred.

 UBAF appears itself to have retained the interest earned on the monies which it had transferred to the account of ALAF's agent, contrary to a court order issued on March 27, 1991. UBAF claims it credited or paid that interest to the account of ALAF's agent but that claim is unsupported. Moreover, this would have been both illegal and unauthorized.

 Omar now moves to recover interest on the improperly transferred funds for the nearly five-year period during which the funds were held in the account of ALAF's agent at UBAF, and additional relief including costs and attorneys' fees. I treat these requests as applications for enforcement of my prior orders issued December 25, 1985, March 27, 1991, *fn1" May 6, 1991, and June 3, 1991.

 I grant Omar's motion to the extent set forth below, and also direct UBAF to show cause why it should not be held in contempt and assessed attorney's fees, as more fully explained in part VII below.


 Omar, a New York corporation engaged in the import-export business, initiated this action on October 30, 1985 seeking, inter alia, to prevent UBAF from transferring funds belonging to Omar posted to secure the standby letter of credit issued by UBAF. The letter of credit was procured pursuant to an agreement entered into between Omar and ALAF, an administrative unit within the Ministry of Agriculture of Syria, which agreement pertained to the sale of 40,000 metric tons of feed barley at a specified price ("the agreement").

 UBAF placed Omar's funds in an interest-bearing collateral account, and issued irrevocable standby letter of credit # 100547 (the "letter of credit") on behalf of Omar in favor of the Commercial Bank of Syria, S.A. ("the Syrian bank") with ALAF as the designated beneficiary.

 The Syrian bank, a banking customer of UBAF which acted as ALAF's agent and banker throughout the transaction, is a major shareholder of UBAF. ALAF and the Syrian bank are sometimes referred to here as "the Syrian defendants." *fn2"

 UBAF thus was both the issuing bank for Omar and the depository bank for the Syrian bank in the event the letter of credit were to be drawn down.

 The amended expiration date of the letter of credit was October 4, 1985. On October 28, 1985 UBAF notified Omar that by telex dated October 27, 1985 the Syrian bank had instructed UBAF to make payment on the letter of credit because "your clients [Omar] did not fulfill their contractual obligations." *fn3" Omar attempted to prevent the Syrian bank from drawing upon the letter of credit by informing UBAF by telephone and telex that ALAF had not posted its required guarantees and by pointing out that the letter of credit had in any event expired. UBAF did, however, transfer the funds to the Syrian bank's account pursuant to the Syrian bank's telex instructions, which stated in relevant part, "kindly credit our head office account with you for USDLRS.295.800-- under tested teleadvice to keep it as margin until settlement of the lawsuit [in Damascus]."

 UBAF informed Omar that UBAF would not make payment with respect to the letter of credit until 5 PM on October 30, 1985. Omar commenced this action and sought a temporary restraining order, which I granted at 3:15 p.m. on October 30, 1985, to prevent payment with respect to the letter of credit, but the transfer of $ 295,800 to a Syrian bank account at UBAF had already been accomplished. Omar then amended its complaint, naming UBAF as an additional defendant and on December 23, 1985, I issued a preliminary injunction, ordering that "the funds in the amount of $ 295,800, plus any interest that may be accruing thereon, currently credited to the 'margin account' of [the Syrian bank] at defendant UBAF in New York continue to be held in the 'margin account' . . . pending further order of this court" and enjoining the transfer, withdrawal, reduction or encumbrance of such funds without my prior approval. That injunction has never been modified, vacated, or appealed.

 UBAF neither answered nor moved to dismiss the amended complaint in this action.

 The funds remained frozen in an account at UBAF until June 1, 1990, when, subsequent to Omar's settlement with ALAF, UBAF credited Omar with $ 289,610. *fn4" Omar did not receive any interest or an accounting for interest that had or may have accrued from ...

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