Hughes Hubbard secured a major victory for the Central Bank of Paraguay when the U.S. Second Circuit Court of Appeals affirmed an order returning millions of dollars to the Central Bank of Paraguay. The decision, which was widely covered in Paraguay, brought to a close a nine year legal battle.
The case dates back to 2001, when the Paraguayan press reported that $16 million was missing from Banco Union and Banco Oriental, two banks in liquidation. The Central Bank of Paraguay, after conducting an investigation, uncovered documents purporting to paper an alleged “investment” in a “high yield/low risk” program sponsored by the Federal Reserve Bank. The investigation also revealed that the “investment” had been orchestrated by fraudsters in the U.S. working with Paraguayan bank officials who have since been convicted of various crimes in Paraguay.
The Central Bank of Paraguay filed a conversion action in federal court in New York to recover the $16 million and obtained an order of attachment freezing certain accounts in New York which held approximately $14.1 million of the diverted funds. During the course of discovery, the defendants offered an ever-shifting series of excuses for their conduct, ranging from a mysterious, secret United States Government-sponsored funding program to an equally vague offshore viatical “insurance endowment” program, all allegedly intended to fund infrastructure development projects in Paraguay. In a 22-page opinion, the district court granted summary judgment to the Central Bank of Paraguay, finding the defendants had conceded in discovery that they had to return the $16 million. The district court also dismissed a counterclaim and third-party complaint that defendants had filed. The Second Circuit affirmed the district court on all points, specifically finding that the defendants had converted the $16 million.
Nick Swerdloff and Dan Weiner, with help fromAviva Wernick and Ross Paolino, represented the Central Bank of Paraguay.