U.S. Bank Sued for Allegedly Helping To Fund Hezbollah

By Marc Perelman

Published July 17, 2008, issue of July 25, 2008.
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An American bank is being sued in a United States court for allegedly helping to finance a Middle Eastern terrorist organization, in what appears to be the first case of its kind.

The target of the suit is the American Express Bank, which is being sued alongside the Lebanese-Canadian Bank in New York’s Supreme Court. The suit was brought on July 11 by 85 American, Canadian and Israeli citizens who were hurt by Hezbollah rocket attacks during the 2006 war between Israel and the Lebanese militia.

The victims allege that the banks, on behalf of Hezbollah, wired millions of dollars that were used to carry out the rocket campaign. They are asking for $650 million in compensatory damages.

In recent years, victims of Middle Eastern terrorist attacks have sued a major Arab bank and two leading European banks in American courts for their alleged financing of Hamas. Experts in the field say that it was not surprising that an American financial institution is now ensnared in litigation, given the clout of America’s banks and the vast international reach of their operations.

“It was only a matter of time before a U.S. bank would be named in a suit like this,” said Dennis Lormel, who set up the FBI’s terrorism financing operations section after the September 11 attacks and is now a private consultant. “It’s not unrealistic to think it will not be the last.”

The suits have arisen because American financial institutions have numerous so-called correspondent agreements with counterparts abroad, whereby
they conduct a series of transactions for them — most of all, dollar conversions.

The American Express Bank, which is headquartered in New York and was acquired last year by Britain’s Standard Chartered bank, serves as a correspondent for the Lebanese-Canadian bank, which is based in Beirut.

American Express Bank spokeswoman Susan Altran told the Forward that the bank could not comment, since it had not yet been served with the lawsuit.

“We can say that we are firmly committed to ensuring that our bank’s operations are not used for any improper purposes,” she added.

The plaintiffs’ lawyers also filed a suit against the Lebanese bank in Canada’s Quebec Superior Court on behalf of four Canadians, asking for some $6 million in damages.

Georges Zard Abou Jaoude, LCB’s chairman and general manager, said in a statement that the actions in Canada and New York were part of an “overall scheme… to attempt to discredit the [Lebanese banking] sector.”

“Lebanese Canadian Bank has nothing whatever to do with any political or military activity in Lebanon or elsewhere, including the financing of any such activity,” he said, adding that the bank intends to “vigorously defend itself against the unfounded allegations.”

The plaintiffs claim that the two banks helped fund Hezbollah by allowing two of its alleged front organizations to perform money transfers prior to and during the 2006 war. The entities are the Yousser Company for Finance and Investment and the Martyrs Foundation, both of which were identified by the U.S. Treasury Department as Hezbollah fronts last year.

The plaintiffs base their claims in part on written findings, issued last year by the New York State Banking Department, that determined that American Express Bank failed to put in place adequate procedures to prevent terrorism financing. The suit also relies on documents purportedly showing the involvement of American Express Bank in transactions between the two front entities and the Lebanese to go after the American bank. The plaintiffs’ lawyers declined to share the documents, and they would not comment on them.

Similar evidence was used in suits brought in federal court in New York against the Arab Bank in 2004 and Credit Lyonnais and National Westminster Bank in 2006 for their involvement in transactions with Palestinian charities suspected of ties to Hamas. While those suits accuse the banks of willfully financing terrorist groups, the one against Hezbollah contends that the American bank was negligent. Even though none of the cases has reached the trial stage yet, lawyers keep on filing new cases or amendments.

Earlier this month, Gary Osen, one of the lawyers who brought the suits against Arab bank and the two European banks, filed an action against five Lebanese banks in federal court, in which he identified their American correspondents. He declined to name them as defendants.

The Lebanese bank being sued has four other American-based correspondents listed on its Web site: Bank of New York, Wachovia Bank, JP Morgan Chase and Mashreq Bank.

Nitsana Darshan-Leitner, the lead Israeli lawyer in the case, told the Forward that those banks could be sued, as well, if evidence of transactions similar to the ones involving American Express Bank were uncovered.

“The other banks that have a correspondent relationship with LCB should be aware of Hezbollah’s ties to the bank and that they could also be found liable,” she said. “U.S. correspondents for Lebanese banks owe it to themselves and to their shareholders to carefully examine and re-evaluate their relationships with banks in Lebanon.”

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