American courts deny Pilatus Bank right to summon MFSA expert for damages case

A United States district judge has rejected a request filed by the shuttered Pilatus Bank to summons an MFSA-appointed expert, for information it wants to use to file for damages against the European Central Bank.

Pilatus’s owners say that as the MFSA-appointed competent person, Connell has intimate knowledge of Pilatus’s financial condition, and the merits of the ECB’s and MFSA’s “post hoc attempts to justify their decisions to shutter the bank and revoke its license.” Pilatus has accused both the ECB and the MFSA of shuttering the bank because of falsely alleged crimes that predated the bank’s existence.

Connell’s information is required to assess the level of damages, that Pilatus will request from the European Central Bank, in the courts.

In a ruling this week, Justice Joseph A. DiClerico denied the request for ‘discovery’ by New Hampshire resident Lawrence Connell, appointed by the MFSA to take over operations at the shuttered private bank.

The revocation of the Malta-based private bank, controversial for its close association to members of the Azerbaijani ruling dynasty, came in March 2018 when owner Ali Sadr Hasheminejad was arrested in the U.S.A., on charges of having violated the sanctions regime against Iran.

But in an unprecedented turn of events, after first being found guilty by the New York court, the United States District Attorney filed a nolle prosequi, effectively throwing the sponge over a grievous error in withholding evidence from the Hasheminejad defence team. The courts have since expunged the guilty verdict.

Pilatus’s German lawyer, Otto Hendrik Behrends, claimed that the ECB revoked the bank’s licence on the prompting of the MFSA after the wrongful arrest of Pilatus owner Ali Sadr Hasheminejad. The MFSA ordered the removal of Hasheminejad and appointed Connell as “competent person” to take charge of the bank.

Behrends said Connell is a key witness in an annulment action at the European Court of Justice, because he is at the centre of MFSA’s decisions and has knowledge of ECB’s “improper motives” to shut down the bank.

Behrends told the court Pilatus intended to file an action for damages against the ECB because of the decision to withdraw its authorisation, and required Connell’s information on the bank.

But the judge noted that the applicants had not provided any proof as to why it believed the address for Lawrence Connell in Rye Beach, New Hampshire, was indeed correct – a key concept in such discovery applications.

The judge also said Pilatus required more than a “subjective intent” for legal action against its intended target, the ECB, and had to provide an indication that action is being contemplated: “Pilatus Bank has not indicated where the action might be brought or what claims it would raise against the ECB,” the judged said, saying the action appeared “merely speculative” and no “more than just a twinkle in counsel’s eye.”

As a result, Pilatus had not shown that the requested discovery would be used in a damages action, but limited to a pending annulment action against the ECB in the European Court of Justice for the bank licence. Pilatus can now serve an amended petition until the end of the month, failing which judgment will be entered and the case will be closed.

Pilatus has 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 Maltese Financial Services Authority 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.”

Hasheminejad ran a private bank in Malta, which he had licensed in 2013, and which 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 along with other allegations she made about Pilatus Bank, but by then the banks’ 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.