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Cedar Swamp Holdings, Inc. v. Zaman

May 17, 2007

CEDAR SWAMP HOLDINGS, INC., ET AL., PLAINTIFFS,
v.
FAITH ZAMAN, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Lewis A. Kaplan, District Judge.

MEMORANDUM OPINION

Plaintiffs are (1) Duli Yang Teramat Mulia Paduka Seri Pengiran Digadong Sahibul Mal Pengiran Muda Haji Jefri Bolkiah, the youngest brother of the ruling Sultan of Brunei ("Prince Jefri"), (2) Cedar Swamp Holdings, Inc. ("Cedar Swamp") and Casa de Meadows, Inc. (Cayman Islands) ("Cayman Casa"), and (3) Amedeo Hotels Limited Partnership ("Amedeo"), all of which are beneficially owned by Prince Jefri. They sue, among others, Faith Zaman and Thomas William Derbyshire, husband and wife as well as English barristers, in connection with the management of Prince Jefri's assets. Zaman and Derbyshire are charged with various counts of, inter alia, fraud and breach of fiduciary duty, as well as one count of racketeering in violation of the Racketeering Influenced Corrupt Organizations Act ("RICO").*fn1 They move to dismiss the RICO claim. Plaintiffs move for leave to amend the complaint.

Facts

I. The Amended Complaint

According to the Amended Complaint,*fn2 Zaman and Derbyshire from Approximately May 2004 to November 2006 served as "principal legal advisors, strategists and confidantes" to Prince Jefri, members of his family, and companies owned or controlled by them.*fn3 Prince Jefri agreed to pay Zaman and Derbyshire each £1 million per year in return for their services.*fn4 He gave Zaman a limited power of attorney and appointed her the director and officer of Cedar Swamp and Cayman Casa, as well as other unspecified entities that he owned.*fn5 Derbyshire provided legal advice to Prince Jefri and took control of Prince Jefri's companies along with Zaman.*fn6 In February 2006, Zaman became the managing director of the New York Palace Hotel, which is owned by Amedeo.*fn7

Plaintiffs allege that Zaman and Derbyshire breached their fiduciary and other obligations, principally by

(1) causing Cedar Swamp to sell a piece of property called the Sunninghill Estate*fn8 to defendant Westfields Invest Limited, LLC ("Westfields") -- a company allegedly owned or controlled by Zaman and Derbyshire and operated by their friend, defendant Charles Hoareau -- in a "sham transaction" where "[n]either the down payment nor any other sales proceeds were ever delivered to Cedar Swamp or Prince Jefri,"*fn9

(2) depositing a check payable to Cayman Casa into the account of a "twin, doppelganger entity" owned by Zaman called Casa de Meadows Inc., Cayman Islands Corp., LLC ("Delaware Casa"), and using the money to buy property for one of their companies, defendant Oceanview Estate, LLC ("Oceanview"),*fn10

(3) falsifying employment documents to overstate Zaman's compensation for directing Amedeo and managing the Palace Hotel,*fn11

(4) hiring Zaman's brother, defendant Arzie Zamarni, at a high salary and for an unnecessary position at the Palace Hotel, despite an anti-nepotism policy,*fn12

(5) using Amedeo corporate credit cards for personal expenses,*fn13

(6) causing the Palace Hotel to purchase over $4 million worth of television and related equipment -- which it never received -- from Golden Twist, Ltd., a company owned by Prince Jefri, and depositing $1 million of the sale proceeds into Zaman's personal account,*fn14

(7) executing long-term, below-market subleases of real property belonging to Amedeo to defendants Fitzjohn's Holdings Inc. ("Fitzjohn's") and Eurofinch Limited ("Eurofinch"), which they owned or controlled,*fn15

(8) drafting an agreement whereby they would receive a $40 million brokerage commission for causing Amedeo to sell the Palace Hotel and another hotel owned by Prince Jefri,*fn16

(9) devoting their time to running a hotel they owned in Texas instead of Prince Jefri's affairs,*fn17 and

(10) failing to return confidential documents relating to Prince Jefri's companies following their November 2006 termination and threatening to disclose privileged information if plaintiffs did not drop this lawsuit.*fn18

Count Twenty-Four of the amended complaint charges Zaman and Derbyshire with a RICO violation. According to plaintiffs, Zaman, Derbyshire, Westfields, Hoareau, Delaware Casa, Oceanview, Zamarni, Fitzjohn's, and Eurofinch comprised a RICO enterprise. Moreover, plaintiffs claim, Zaman and Derbyshire's use of telephone calls, faxes, e-mails, and wire transfers to effectuate various of the above schemes allegedly constituted predicate acts of mail and wire fraud, and their wrongful depositing of a check made out to Cayman Casa into ...


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