April 22, 1996
SUNDIAL INTERNATIONAL FUND LIMITED, JAN CHRISTIAN SUNDT, THOMINVEST OY, MEGA PACIFIC INTERNATIONAL, LTD., ZEN LTD., DAVID J. SHARPE, PETER ANSON, CRESCENT HOLDINGS LTD., JOHN C. DILWORTH, CLAS GOTZE, GUEST SUPPLIES LTD., GUILDEN INTERNATIONAL LTD., HELION INVESTMENTS LTD., SENTINEL INVESTMENT CORP., MICHAEL L. SMITH, GORDON TARAPASKY, MICHAEL J.E. THORNHILL and WRIGHT FAMILY DISCRETIONARY TRUST, Plaintiffs, against DELTA CONSULTANTS, INC., (a New Jersey corporation), NOPKINE CO. LTD. (a limited company of the British Virgin Islands), WILLIAM C. DUNN, WILLIAM D. DUNN, PAUL F. LENGEMANN, IVAN SANDS, CREDIT LYONNAIS, BANK JULIUS BAER LTD., SOCIETE GENERALE, CHASE MANHATTAN BANK, N.A., VARIOUS JOHN DOES, JANE DOES AND ABC COMPANIES, Defendants. MUSASHI LIMITED, Plaintiff, - against - DELTA CONSULTANTS, INC., (a New Jersey corporation), NOPKINE CO. LTD. (a limited company of the British Virgin Islands), WILLIAM C. DUNN, WILLIAM D. DUNN, PAUL F. LENGEMANN, IVAN SANDS, CREDIT LYONNAIS, BANK JULIUS BAER LTD., VARIOUS JOHN DOES, JANE DOES AND ABC COMPANIES, Defendants. MABLYN INVESTMENTS LIMITED, Plaintiff, - against - DELTA CONSULTANTS, INC., (a New Jersey corporation), NOPKINE CO. LTD. (a limited company of the British Virgin Islands), WILLIAM C. DUNN, WILLIAM D. DUNN, PAUL F. LENGEMANN, IVAN SANDS, CREDIT LYONNAIS, BANK JULIUS BAER LTD., VARIOUS JOHN DOES, JANE DOES AND ABC COMPANIES, Defendants.
The opinion of the court was delivered by: GRIESA
Defendants Bank Julius Baer Ltd., Credit Lyonnais (the "bank defendants") and Ivan Sands, an employee of Credit Lyonnais, have moved to dismiss the actions pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted, and pursuant to Fed. R. Civ. P. 9(b) for failure to allege fraud with particularity.
Following the submission of voluminous briefs and the holding of oral argument, the bank defendants were invited to submit proposed findings of fact and conclusions of law representing their position on the motions to dismiss.
On April 11, 1996 the Court held a further hearing and placed its rulings on the record. The reason for this procedure was to permit the Court to have some additional discussion with counsel about the rather intricate problems involved in the allegations of fraud in connection with the claim under the CEA. As the Court stated at the hearing, the present allegations are too lengthy in presenting matters beyond what should be in the complaint, and are insufficient in respect to the claims of wrongdoing which should be in the complaint, if it is to stand. Plaintiffs' attorney stated that plaintiffs wish to amend these allegations. The Court will permit this to be done. If proper allegations of fraud are presented, the action will go forward under the CEA against the bank defendants. The Court rejects the argument of the bank defendants that plaintiffs have no standing to sue them under the CEA. However, the CEA claim is dismissed as to Sands because plaintiffs have no standing to sue him under that statute.
The Court also announced that it is dismissing the claims under RICO against the bank defendants and Sands.
Finally, the Court stated that it would not attempt to dispose of the common law claims at this time as to the bank defendants. Therefore, the motions of the bank defendants to dismiss the common law claims are denied, without prejudice to renewal at a later time. With regard to Sands, since there are no federal claims against him left standing, the Court declines to keep the action open on the common law claims against him. Thus, the entire action is dismissed as to Sands.
PLAINTIFFS' CURRENT ALLEGATIONS
Plaintiffs allege that investors in the United States and abroad placed well over $ 100 million with Dunn in order for him to conduct currency exchange trading. It is alleged that he created a currency exchange operation in conjunction with certain individuals, and that certain entities were formed as vehicles for this operation.
Plaintiffs allege that Dunn and his colleagues and entities defrauded the investors through false reports made at the time of their original investments and further false reports to induce the investors to reinvest their funds with him.
In order to carry out the trading, Dunn set up currency exchange accounts at various banks including Credit Lyonnais and Bank Julius Baer. At times Dunn would direct the investors to remit funds directly to the banks to be deposited in these accounts. However, the business of the banks was distinct from that being carried out by the Dunn group. Dunn was soliciting the investors and assembling the pool of funds from these investors to be used for the currency trading. The banks were doing traditional banking business, including the currency trading.
Nevertheless, it is alleged that the bank defendants aided and abetted the fraud of the Dunn defendants. Plaintiffs attempt to allege that the bank defendants knew of the fraud being committed by the Dunn defendants and carried on the trading with this knowledge, thus assisting in the fraud. In their current form, these allegations are insufficient. Whether this insufficiency will be remedied by the amendments remains to be seen.
The same is true for Sands. He was never part of the Dunn operation. His connection was solely with Credit Lyonnais, where he was ...
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