In US courts, Pilatus controller says shuttered bank is on ‘fishing expedition’ for damages

An American expert engaged by the Maltese financial regulator to oversee the shuttered private bank Pilatus after the suspension of its licence, is opposing a request to produce in an American court information pertaining to his role.

Pilatus’s owners want Lawrence Connell to provide it with all the information in his hand since being installed by the MFSA, so that Pilatus can file proceedings against the European Central Bank, which cancelled its bank licence after Hasheminejad’s arrest in February 2018.

Connell was appointed in March 2018 to take over Pilatus as its ‘competent person’ after the arrest of Pilatus owner Ali Sadr Hasheminejad in Washington D.C. that year. Hasheminejad, a naturalised American and St Kitts & Nevis citizen, has since been acquitted of charges of money laundering and breaching US sanctions in Iran.

Replying to the summons, Connell – who has since resigned his MFSA position – told the US courts that Pilatus’s contemplated damages action was speculative. An ongoing action in the European Court of Justice could still find that the European Central Bank had appropriately revoked Pilatus’s license. “It follows that the contemplated damages action – supposedly based on the wrongful license revocation and regulatory ‘takeover’ of Pilatus – would be inapt.”

Pilatus’s German lawyer, Otto Hendrik Behrends, claims the ECB revoked the bank’s licence on the prompting of the MFSA after the wrongful arrest of Hasheminejad. He accused both the ECB and the MFSA of shuttering the bank because of falsely alleged crimes that predated the bank’s existence.  “At the time of the indictment, the MFSA and Malta’s political leaders were besieged by international accusations of ‘looking the other way’ while Malta’s banks enabled money laundering and global sanctions violations.”

But Connell said in his reply to the summons that should the ECB and MFSA action be verified as having been proper, then Pilatus’s requests as they stood were nothing but a fishing expedition.

Pilatus filed an application for discovery in the US courts – that is, for documents and testimony regarding ECB’s and MFSA’s motives and justifications for their regulatory actions concerning Pilatus. But Connell replied that these are protected by privileges under EU and Maltese law. “ECB and MFSA, the holders of the applicable regulatory privileges, have expressly instructed Mr Connell to maintain their privileges and not to disclose the documents and information sought,” Connell’s lawyer told the court.

Connell’s appointment also included a confidentiality agreement with MFSA under which he is not permitted to disclose information regarding his appointment. His lawyer questioned why Pilatus had not filed their discovery claim against the ECB or the MFSA, who would be the actual parties to their contemplated legal action for damages. “The inescapable conclusion is that the application is an improper attempt by the applicant to circumvent applicable privileges that would preclude discovery of these matters before the appropriate tribunals in the EU and Malta.”

He said that although Connell had to take charge of the Pilatus assets to safeguard the interests of depositors, “it does not follow that Mr Connell was in an agent-principal relationship with [Pilatus] for purposes of any applicable privileges, or that such a relationship would effect a waiver of privileges vis-à- vis the bank. Mr. Connell served in a contractual relationship with the MFSA, a banking regulator, in connection with the MFSA’s regulatory supervision of Pilatus.”

Pilatus Bank, owned by Ali Sadr Hasheminejad, largely dealt with millions in reserves owned by the Azerbaijani ruling family and oligarchs. His bank was implicated in the Egrant affair, when the late journalist Daphne Caruana Galizia claimed the bank had processed a $1 million payment from the Aliyevs of Azerbaijan to the wife of former prime minister Joseph Muscat. The allegation was disproven by a Maltese magisterial inquiry. But by then, the bank’s other dealings for Azerbaijan had come under the lens of financial investigators. When Hasheminejad was arrested in Dulles airport in the United States in February 2018, the Maltese financial regulator shut down the bank and started an investigation.