DORA L. IRIZARRY, District Judge.
Approximately 200 individuals and estates of deceased persons (collectively, "Plaintiffs"), brought this consolidated action against defendant National Westminster Bank Plc ("NatWest" or "Defendant"), seeking to recover damages from fifteen terrorist attacks in Israel and the Palestine Territories pursuant to the civil liability provision of the Antiterrorism Act
Plaintiffs' claims arise from fifteen attacks in Israel and the Palestine Territories that occurred between March 27, 2002 and September 24, 2004 (the "relevant period"), which Plaintiffs allege were perpetrated by the Palestinian organization, Hamas. (Def.'s Statement of Material Facts, Weiss Dkt. Entry No. 266 ("NW's 56.1") ¶ 241; Pls.' Response to Def.'s Statement of Material Facts, Weiss Dkt. Entry No. 273 ("Pls.' 56.1 Resp.") ¶ 241.) Plaintiffs comprise approximately 200 United States citizens who were injured in the terrorist attacks, the estates of those killed in the terrorist attacks and/or are family members of people killed or injured in the terrorist attacks. (See 5th Am. Compl., Weiss Dkt. Entry No. 141 ("Weiss 5th Am. Compl."), ¶¶ 8-438; Compl., Applebaum Dkt. Entry No. 1 ("Applebaum Compl."), ¶¶ 5-287.)
NatWest is a financial institution incorporated and headquartered in the United Kingdom. (NW's 56.1 ¶ 1; Pls.' 56.1 Resp. ¶ 1.) While Plaintiffs allege that Defendant had several "agents" in New York and Connecticut, and opened an office in Texas (Fifth Am. Compl. ¶¶ 440-41), NatWest denies these allegations, stating only that it was registered to conduct business in Texas and closed the associated office in 2003 (Ans. to 5 Am. Compl. ¶¶ 440-41.)
During the relevant period, NatWest employed numerous individuals to assist in its compliance with British and international banking regulations. NatWest's Group Security and Fraud Office ("Fraud Office")
NatWest maintained records of its SARs and NCIS disclosures about its customers on a database named "Goalkeeper."
Interpal, a/k/a the Palestine Relief & Development Fund, a/k/a Palestinians Relief & Development Fund ("Interpal"), is a non-profit entity registered in the United Kingdom with the Charity Commission for England & Wales ("Charity Commission"). (NW's 56.1 ¶ 2; Pls.' 56.1 Resp. ¶ 2.) Interpal, which is headquartered in London, states in its Declaration of Trust, that it collects funds for humanitarian aid that it transfers to various charitable organizations throughout Jordan, Lebanon, and the Palestinian Territories.
British banks engage with numerous law enforcement and regulatory agencies when they suspect a customer of engaging in terror financing, including the NCIS, the Bank of England, the Metropolitan Police, and the Charity Commission. NCIS was established in 1992 to address serious and organized crime in the United Kingdom. (NW's 56.1 ¶ 12; Pls.' 56.1 Resp. ¶ 12.) During the relevant period, banks in the United Kingdom were required to report knowledge or suspicion of terror financing to the authorities. (NW's 56.1 ¶ 14; Pls.' 56.1 Resp. ¶ 14.) Among other activities, NCIS received such disclosures from banks and disseminated them to the appropriate law enforcement agency. (NW's 56.1 ¶ 13; Pls.' 56.1 Resp. ¶ 13.)
During the relevant period, the Bank of England was responsible for administering financial sanctions against financial institutions in the United Kingdom. (NW's 56.1 ¶ 16; Pls.' 56.1 Resp. ¶ 16.) NatWest contends that the Bank of England's Financial Sanctions Unit was responsible for advising the British government about whether to designate and sanction persons or entities for their involvement in terrorism and/or terror financing (NW's 56.1 ¶ 17), which Plaintiffs dispute (Pls.' 56.1 Resp. ¶ 17); however, there is no evidence
The National Terrorist Financial Investigation Unit ("NTFIU") of the Special Branch in the Metropolitan Police in London was responsible for investigating suspicions of terror financing in the United Kingdom. (NW's 56.1 ¶ 18; Pls.' 56.1 Resp. ¶ 18.)
The Charity Commission is a department in the British government for which there is no United States equivalent. All charities operating in the United Kingdom must register with the Charity Commission. (NW's 56.1 ¶ 19; Pls.' 56.1 Resp. ¶ 19.) The Charity Commission collects and makes publicly available information about each registered charity, including the charity's constitutional documents, income, expenditures, goals, activities, and achievements. Charities with annual income over £1 million, such as Interpal, must file an annual return, which lists, among other things, the charity's contact and trustee information, income, and expenditures. (NW's 56.1 ¶ 20; Pls.' 56.1 Resp. ¶ 20.) The Charity Commission has the authority to institute inquiries and to deregister charities it concludes were not established for and/or are not being operated for charitable purposes. (NW 56.1 ¶ 19.) The Charity Commission's Compliance Assessment and Intelligence Unit is responsible for addressing allegations of a charity's links to terrorism and as such, "liaise[s] closely with the relevant law enforcement agencies to ensure a proper investigation of the allegations or suspicions."
The pivotal issue in this case is whether NatWest, as the bank that held Interpal's accounts, knowingly facilitated Interpal's provision of money to charities based in Palestine that allegedly supported Hamas, such that NatWest can be held accountable for terror financing under the ATA. A chronological presentation of the facts is informative.
On March 6, 1996, The Times of London published an article indicating that the United Kingdom Security Service (MI5) was "studying police intelligence on alleged links between Hamas militants" and Interpal. (NW's 56.1 ¶ 31; Pls.' 56.1 Resp. ¶ 31.) This article prompted the Charity Commission to open an investigation on Interpal, during which the Charity Commission temporarily froze Interpal's bank accounts, scrutinized Interpal's controls and records, and scrutinized payments from Interpal's bank statements. (NW's 56.1 ¶ 32; Pls.' 56.1 Resp. ¶ 32.) On July 3, 1996, NatWest updated its records on Interpal, indicating that[redacted](Declaration of Valerie Schuster ("Schuster Decl."), Dkt. Entry No. 267, Ex. 23.) In the words of the Charity Commission, the nature and scope of the investigation was as follows:
(Schuster Decl. Ex. 25.) The Charity Commission explained that "[o]n our first visit to the charity we were accompanied by one of our accountants and accountancy support has been available throughout our investigation." (Id.)
Ultimately, the investigation concluded that Interpal was an entity fulfilling charitable purposes. In particular, the Charity Commission stated that:
(Id.)
According to NatWest, in the immediate aftermath of the terror attacks of September 11, 2001, banks in the United Kingdom scrutinized their accounts and "anything and everything that was vaguely associated with or linked to anything that could possibly be connected to extremism of any description" for disclosure to the appropriate authorities. (Schuster Decl. Ex. 10.)
[redacted]The Cryptome Report was written by an individual identified only as "Anonymous" and purports to link a "briefing document ... prepared for the South African President, Thabo Mbeki"
[redacted]
(Id.) Douglas Hartley, an employee in NatWest's Fraud Office, entered an undated note into Goalkeeper regarding the disclosure, indicating that "Special Branch are investigating." (NW's 56.1 ¶ 36; Pls.' 56.1 Resp. ¶ 36.) There is no evidence that NatWest received any responses, directives, or requests for further information from any United Kingdom law enforcement agencies or regulators in response to this disclosure of an unsubstantiated allegation.
On October 15, 2001, Hoseason made a second disclosure to NCIS, summarizing his review of Interpal's accounts as follows:
[redacted]
(NW's 56.1 ¶ 38; Pls.' 56.1 Resp. ¶ 38.) There is no evidence that NatWest received any responses, directives, or requests for further information from any United Kingdom law enforcement agencies or regulators in response to this disclosure.
On November 15, 2001, Olha Leeming, a NatWest employee, sent an internal SAR to NatWest's Fraud Office based on a suspicion of terror financing due to what she perceived to be [redacted] received into Interpal's accounts. (NW's 56.1 ¶ 40; Pls.' 56.1 Resp. ¶ 40.) As a result, NatWest created a Goalkeeper report. (NW's 56.1 ¶ 42; Pls.' 56.1 Resp. ¶ 42.) NatWest investigated, and Belinda Lane, the NatWest relationship manager assigned to the Interpal accounts, set up a meeting at Interpal's office with its officers.
According to Lane, Qundil said that Interpal's donations increased "following [the attacks of] 9/11, because there was a lot more sympathy for the people, and people felt more obliged to make donations to help people." (Deposition of Belinda Lane taken on June 24, 2008 ("Lane 06/24/08 Depo. Tr."), attached as Ex. 38 to the Declaration of Joel Israel ("Israel Decl."), Dkt. Entry No. 272, 91:1-5.) When pressed by Plaintiffs' counsel as to why, specifically, donations increased, Lane stated that she "didn't have a very detailed conversation about it," and that Qundil "literally just told me that, you know, following that situation, the — the deposits
After this meeting, Lane prepared a "know your customer" report on Interpal, updating NatWest's files on Interpal with updated officer information, Interpal's annual report for 2000, and other documents. (NW's 56.1 ¶ 48; Pls.' 56.1 Resp. ¶ 48.)
On June 7, 2002, N. Morrison, a NatWest employee, prepared a SAR for terror financing based on Interpal's receipt of a credit of [redacted] from [redacted] noting [redacted] as the payee, which Morrison perceived to imply that the funds were designated [redacted]. (NW's 56.1 ¶ 49; Pls.' 56.1 Resp. ¶ 49.) On June 17, 2002, NatWest created a Goalkeeper report to track the investigation of the transaction and disclosed the transaction to NCIS. (NW's 56.1 ¶¶ 51-52; Pls.' 56.1 Resp. ¶¶ 51-52.) On August 5, 2002, a note was entered into Goalkeeper stating that NatWest had received an acknowledgment from NCIS that [redacted]. (NW's 56.1 ¶ 52; Pls.' 56.1 Resp. ¶ 52.) NatWest conducted an internal investigation, during which employees of NatWest's Fraud Office contacted Lane to obtain more information about Interpal. (NW's 56.1 ¶ 54; Pls.' 56.1 Resp. ¶ 54.) Lane provided the Fraud Office with "know your customer" paperwork for Interpal and its officers. Lane also indicated that, with respect to the specific transaction at issue, Interpal stated that it was a donation from [redacted](NW's 56.1 ¶ 57; Pls.' 56.1 Resp. ¶ 57.)
The investigations of this transaction found no wrong doing on Interpal's part. Indeed, unbeknownst to N. Morrison, [redacted] (NW's 56.1 ¶ 49; Pls.' 56.1 Resp. ¶ 49.) Thus, one of the reasons that this credit appeared to be suspicious — hat the purpose for the payment was [redacted]had a harmless explanation. The Goalkeeper records of the investigation indicate that, at the time that Interpal received the [redacted] the [redacted] donor organization was not listed as having links to terrorism. However, on September 17, 2003, Tony O'Hear, the head of the Fraud Office, updated the Goalkeeper report, noting that on May 29, 2003, nearly one year after Interpal's receipt of the payment, the Bank of England had designated [redacted]. (NW's 56.1 ¶ 59; Pls.' 56.1 Resp. ¶ 59.) O'Hear noted that he contacted the NTFIU regarding the subsequent designation of this entity and any potential implications of the designation for Interpal. The NTFIU advised him that[redacted]. (Id.) NatWest did not receive any further requests from NTFIU.
NatWest's disclosure of "anything and everything" continued. On May 2, 2003, NatWest submitted an NCIS disclosure related to a customer who had made several payments to Muslim organizations, including Interpal. (NW's 56.1 ¶ 62; Pls.' 56.1 Resp. ¶ 62.) On July 18, 2003, NatWest updated its Goalkeeper report to indicate that it had produced documents to the Special Branch, pursuant to a Production Order NatWest received from Special Branch. (NW's 56.1 ¶¶ 63-64; Pls.' 56.1 Resp. ¶¶ 63-64.)
On August 21, 2003, the United States Treasury Department Office of Foreign Assets Control ("OFAC") listed Interpal as a Specially Designated Global Terrorist ("SGDT") for purposes of OFAC's asset freezing regulations. (NW's 56.1 ¶ 95; Pls.' 56.1 Resp. ¶ 95.) The U.S. press release stated that:
(Schuster Decl. Ex. 96.) The U.S. and U.K. governments discussed the imposition of terror financing sanctions against Interpal, as set forth more fully below. (NW's 56.1 ¶ 104; Pls.' 56.1 Resp. ¶ 104.)
On August 26, 2003, subsequent to OFAC's SDGT designation of Interpal, the Charity Commission issued an order freezing Interpal's accounts. (NW's 56.1 ¶ 65; Pls.' 56.1 Resp. ¶ 65.) On August 27, 2003, NatWest responded via letter as follows:
[redacted]
(Schuster Decl. Ex. 51.) On that same day, the Fraud Office asked Terry Woodley, the assistant relationship manager for Interpal, to [redacted] (Schuster Decl. Ex. 52.)
On August 28, 2003, NatWest submitted a disclosure to NCIS indicating that [redacted] (NW's 56.1 ¶ 68; Pls.' 56.1 Resp. ¶ 68.) The disclosure referred to NatWest's two prior NCIS disclosures and the Charity Commission's pending investigation. (Id.) In particular, the disclosure requested that [redacted] (Schuster Decl. Ex. 53.) On August 29, 2003, O'Hear entered a note into Goalkeeper summarizing a telephone call from NTFIU. O'Hear indicated that NTFIU [redacted] (NW's 56.1 ¶ 69; Pls.' 56.1 Resp. ¶ 69.) O'Hear conveyed this request to Woodley the next day. (NW's 56.1 ¶ 70; Pls.' 56.1 Resp. ¶ 70.)
While the Charity Commission's freezing order was in effect, [redacted] (NW's 56.1 ¶ 71; Pls.' 56.1 Resp. ¶ 71.) NatWest also reviewed Interpal's payments for the past 12 months. (NW's 56.1 ¶¶ 72-73; Pls.' 56.1 Resp. ¶¶ 72-73.)
On September 24, 2003, the Charity Commission published its report, announcing that it had completed its investigation of Interpal and had cleared Interpal of allegations of terror financing. (Schuster Decl. Ex. 66.) The report indicated that Interpal had received funds from The Al-Aqsa Foundation in the Netherlands (which was sanctioned by the United Nations in May 2003 for terror financing), but that Interpal received those funds for work already carried out by Interpal prior to The Al-Aqsa Foundation's designation. (Id.) The report made reference to the OFAC designation and indicated that the Charity Commission had contacted the United States government to obtain the information supporting its designation. (Id.) The report indicated that "[t]he U.S. Authorities were unable to provide evidence to support allegations made against INTERPAL within the agreed timescale." (Id.) The Commission concluded that, "in the absence of any clear evidence showing INTERPAL had links to Hamas' political or violent military activities, INTERPAL's bank accounts should be unfrozen and the Inquiry closed. The bank accounts were `unfrozen' and the Inquiry was closed on 24 September 2003." (Id.) [redacted] (NW's 56.1 ¶ 76; Pls.' 56.1 Resp. ¶ 76.)
In addition to disclosing [redacted] and [redacted] NatWest disclosed [redacted] to the Bank of England. On September 5, 2003, Richard Gossage, Director of Group
[redacted]
(Schuster Decl. Ex. 75.)
On October 3, 2003, after the Charity Commission had issued its report clearing Interpal of allegations of terror financing, Dawlings responded by letter that:
[redacted]
(Schuster Decl. Ex. 76.)
On October 28, 2003, Gossage replied in a letter stating that:
[redacted]
(Schuster Decl. Ex. 77.)
Immediately upon learning about OFAC's designation of Interpal, NatWest conducted its own internal investigation of Interpal's accounts "to get additional information to a greater level of depth." (Deposition of Amanda Holt taken on July 23, 2010 ("Holt Depo. Tr."), attached as Ex. 13 to Schuster Decl. 78:14-79:6, 82:8-83:2.) NatWest initiated its own review of Interpal's accounts, rather than simply wait for the results of the law enforcement investigations. (Id. 82:17-83:2.) NatWest's periodic reviews found no links to Hamas or any other terrorist organizations.
The first such review occurred in May 2004. Guy Cole, an employee in the CBFM MLPU reviewed the payments made from Interpal's accounts to various charities abroad for the past six months. (Schuster Decl. Ex. 78.) He compared the names of the recipient organizations (as well as any abbreviations or other similarly named organizations) to a database that collected information from British and other government sources, as well as news sources, and other public sources of information. (NW's 56.1 ¶ 82.) He determined that one recipient organization was designated as linked to terrorism by nature of "an unofficial opinion from an Israeli website," but that there were "no other reports or recognition of this charity having links to terrorism ... on any other websites." (Schuster Decl. Ex. 78.) Ultimately, he concluded that none of the donors or recipients was a designated terrorist organization. (Id.) At the time of Cole's internal investigation, NatWest lacked the tools to review payments made from Interpal's accounts to organizations abroad simply by name recognition of the recipient organization in real time. Thus, he suggested semi-annual retroactive review of the accounts. (Id.)
Cole conducted two additional reviews of Interpal's accounts. These reviews occurred after the relevant period. They are included in this narrative as they demonstrate NatWest's continued efforts to detect transactions made in aid of any terrorist organizations or acts. For example, in December 2004, Cole researched Interpal's payments for the prior six months to over sixty organizations abroad. (Schuster Decl. Ex. 79.) None of them were designated terrorist organizations by the Bank of England or OFAC. He explained that, "[a]s one might expect with charities operating in this region, speculation exists around some of the [organizations] being connected with terrorism, in particular Hamas." (Id.) He also noted that six of the organizations were listed as linked to Hamas in the indictment in the United States prosecution of The Holy Land Fund.
Later, in May 2005, Cole conducted another retroactive review. (Schuster Decl. Ex. 80.) Cole determined that, at the time the payments were made to the various organizations abroad, none of them were designated terrorist organizations by the Bank of England or OFAC. However, a recipient who received a payment from Interpal in January 2005, was designated by the Bank of England five months later, in June 2005. NatWest decided to keep Interpal's accounts open, but to conduct quarterly reviews of the accounts.
Currently, Interpal remains on OFAC's list of SDGTs. Neither the British government nor European Union has designated Interpal as linked to terrorism or terror financing. (NW's 56.1 ¶ 108.) However, in addition to British law enforcement agencies, the British government's political branch was aware of the OFAC designation when it was made in 2003 and sought information about the designation from the United States government. On October 6, 2003, a member of the United Kingdom's Parliament inquired as to the status of Interpal, given that it had been listed as a SDGT by OFAC. (NW's 56.1 ¶ 110; Pls.' 56.1 Resp. ¶ 110.) It is clear that the U.K. and U.S. governments held discussions regarding Interpal, as Interpal's status under OFAC was raised several times at Parliament. (NW's 56.1 ¶¶ 112-16; Pls.' 56.1 Resp. ¶¶ 112-16.) Nonetheless, neither the Bank of England nor any other United Kingdom agency ever designated Interpal as an organization that supports terrorism.
Pursuant to Section 2333(a) of the ATA, two groups of Plaintiffs brought separate actions in this District against Defendant, captioned Weiss, et al. v. National Westminster Bank Plc, 05-CV-4622(DLI)(MDG), and Applebaum, et al. v. National Westminster Bank Plc, 07-CV916(DLI)(MDG). (See generally Compl., Weiss Dkt. Entry No. 1 ("Weiss Compl."); Applebaum Compl.) Plaintiffs seek damages arising out of terrorist attacks allegedly carried out by Hamas in Israel and the Palestinian Territories from March 27, 2002 to September 24, 2004, and alleged that Defendant aided and abetted the murder or attempted murder of United States citizens, committed acts of international terrorism, and collected and transmitted funds on behalf of a terrorist organization. (Weiss Am. Compl. ("Weiss Am. Compl."), Weiss Dkt. Entry No. 28 ¶¶ 419-37; Applebaum Compl. ¶¶ 426-44.) Specifically, Plaintiffs allege that Defendant aided Hamas because it maintained bank accounts for Interpal and sent money to Hamas front organizations on behalf of Interpal, even it knew that Interpal supported Hamas. (Weiss Am. Compl. ¶¶ 350-418; Applebaum Compl. ¶¶ 351-425.)
NatWest moved to dismiss the Weiss amended complaint in its entirety. (See Def.'s Mot. to Dismiss, Dkt. Entry No. 38.) The Honorable Charles B. Sifton, Senior United States District Judge, who was presiding over the action at the time,
Defendant moves for summary judgment, asserting that no reasonable juror could find that: (1) Defendant acted with the requisite scienter, (2) Plaintiffs have proven proximate causation and Article III standing; or (3) Hamas was responsible for the terrorist attacks at issue. (See Def.'s Mem. of Law in Supp. of its Mot. for Summ. J., Weiss Dkt. Entry No. 265 ("Def.'s Mem.").) Defendant also contends that the proposed testimony of the experts Plaintiffs put forth to establish scienter, causation, and Hamas' responsibility for the attacks is inadmissible, and, therefore, cannot be relied upon by the Court in deciding the motion for summary judgment. (See id. at 15-20, 32-34, 37-49.) Plaintiffs oppose Defendant's motion for summary judgment. (See Pls.' Mem. Of Law in Opp'n to Def.'s Mot. for Summ. J., Weiss Dkt. Entry No. 281 ("Pls.' Opp'n").)
Summary judgment is appropriate where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The court must view all facts in the light most favorable to the nonmoving party, but "only if there is a `genuine' dispute as to those facts." Scott v. Harris, 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007). "When opposing parties tell two different stories, one of which is blatantly contradicted by the record, so that no reasonable jury could believe it, a court should not adopt that version of the facts for purposes of ruling on a motion for summary judgment." Id. A genuine issue of material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The nonmoving party, however, may not rely on "[c]onclusory allegations, conjecture, and speculation." Kerzer v. Kingly Mfg., 156 F.3d 396, 400 (2d Cir. 1998). "When no rational jury could find in favor of the nonmoving party because the evidence to support its case is so slight, there is no genuine issue of material fact and a grant of summary judgment is proper." Gallo v. Prudential Residential Servs., Ltd. P'ship, 22 F.3d 1219, 1224 (2d Cir.1994)(citing Dister v. Cont'l Grp., Inc., 859 F.2d 1108, 1114 (2d Cir.1988)).
Plaintiffs' claims arise under Section 2333(a) of the ATA, which provides a civil remedy for United States citizens who are injured by a terrorist attack. The statute provides that: "[a]ny national of the United States injured in his or her person, property, or business by reason of an act of international terrorism, or his or her estate, survivors, or heirs, may sue therefor in any appropriate district court of the United States and shall recover threefold the damages he or she sustains and the cost of the suit, including attorney's fees." 18 U.S.C. § 2333(a). Plaintiffs contend that Defendant committed an act of international terrorism because it violated 18 U.S.C. § 2339B ("Section 2339B") and 18 U.S.C. § 2339C ("Section
Section 2339B imposes criminal penalties on anybody who:
18 U.S.C. § 2339B(a)(1).
Section 2339C imposes criminal penalties on anybody who:
18 U.S.C. § 2339C(a)(1).
Defendant asserts that no reasonable juror could find that it acted with the scienter required by Sections 2333(a), 2339B or 2339C because there is no evidence that it knowingly provided support to terrorists. (See Def.'s Memorandum of Law in Support of Def.'s Mot. for Summ. J. ("Def.'s Mem.'"), Dkt. Entry No. 265, 1-20.) Plaintiffs contend that there is ample evidence upon which a reasonable juror can conclude that Defendant had the requisite state of mind. (See Pls.' Opp'n to Def.'s Mot. for Summ. J. ("Pls.' Opp'n"), Dkt. Entry No. 271, 22-34.)
Courts have held that a party must engage in knowing misconduct to be liable under Section 2333(a). See Boim v. Holy Land Found. for Relief & Dev., 549 F.3d 685, 694 (7th Cir.2008) (en banc) ("Boim III"). A party also must "knowingly" provide material support to a terrorist organization to run afoul of Section 2339B, which means that it must "have knowledge that the organization is a designated terrorist organization ... that the organization has engaged or engages in terrorist activity ..., or that the organization has engaged or engages in terrorism." 18 U.S.C. § 2339B(a)(1). Section 2339C similarly requires that the party act "with the knowledge that such funds are to be used" to carry out terrorist attacks. 18 U.S.C. § 2339C(a)(1) (emphasis added); see also Strauss, 2006 WL 2862704, at *17.
The Plaintiffs and Defendant in this case, much like the Plaintiffs and Defendant in a similar case before this Court, Strauss, et al. v. Credit Lyonnais, 06-CV-702(DLI)(MDG), 07-CV-914(DLI)(MDG), debate the standard for "knowledge" and
To survive summary judgment, the evidence, in the light most favorable to the nonmoving Plaintiffs, must establish that NatWest either: (i) had actual knowledge of Interpal's funding of Hamas, or (ii) exhibited deliberate indifference, meaning, that NatWest knew there was a substantial probability that NatWest was supporting terrorism by retaining the Interpal accounts and sending money at the behest of Interpal to the alleged Hamas-related charities abroad. Upon careful consideration of the facts and circumstances of this case, summary judgment is granted in Defendant's favor as the undisputed evidence demonstrates that Defendant did not have the requisite scienter.
First, none of the payments that NatWest processed for Interpal went to United States or British designated terrorist organizations.
Second, NatWest investigated OFAC's designation of Interpal as an SDGT in 2003, seeking immediate, [redacted] guidance from the Charity Commission, Special Branch, and the Bank of England. Each of these government departments investigated Interpal and cleared Interpal of allegations of terror financing, expressly giving NatWest permission to maintain Interpal's accounts. (Schuster Decl. Exs. 66, 67 70, 71, 76, 77.) Notably, the British government did not designate Interpal even though the British government had discussed Interpal's SDGT designation with the United States government (NW's 56.1 ¶¶ 104-05, 114-15; Pls.' 56.1 Resp. ¶¶ 104-05, 114-15), and the British government had the authority to designate and sanction Interpal under its own laws (Stmt. of Interest ¶¶ 3, 8.) In a submission to this Court in connection with this litigation, Her Majesty's Treasury wrote that:
[redacted]
Third, none of the NatWest employees involved with Interpal actually suspected Interpal of supporting terrorism. (Holt Depo. Tr. 79:24-80:22, 214:5-216:11, 227:21-228:15, 230:4-230:8; Deposition of Guy Cole taken on June 8, 2010, attached as Ex. 9 to Schuster Decl. ("Cole Depo. Tr.") 141:4-8; Deposition of Irvine Rodger taken on July 22, 2010, attached as Ex. 12 to Schuster Decl. ("Rodger Depo. Tr.") 129:2-4; 06/24/08 Lane Depo. Tr. 170:23-171:14) The filing of a SAR does not equate to knowledge or even legitimate suspicion of terror financing because employees were trained to file SARs any time a transaction or information obtained raised red flags, regardless of their subjective beliefs.
Fourth, there is no evidence of a corporate culture of deliberate indifference with respect to regulatory obligations. Notably, with respect to efforts to prevent terror financing, Holt testified that she:
(Holt. Depo. Tr. 228:21-229:3; see also Schuster Decl. Ex. 51.) She further clarified that, "If we had any accounts connected to Hamas we would have already reported and exited." (Holt. Depo. Tr. 92:3-4.) Indeed, the NatWest employees involved with internal investigations of Interpal testified that NatWest had a zero tolerance policy for terror financing. (Holt Depo. Tr. 79:24-80:22; Deposition of Michael Hoseason taken on July 14, 2010, attached to Schuster Decl. as Ex. 10 ("Hoseason Depo. Tr. 7/14/10"), 24:12-25:8; Rodger Depo. Tr. 129:2-4.) This vigilance towards terrorism is, undoubtedly, a function of regulatory obligations; but, terrorism is likely a very personal issue for NatWest's employees, as NatWest itself sustained damage from bombing attacks in 1992 and 1993. (Reply Declaration of Stephanie B. Sado in support of Def.'s Mot. for Summ. J. ("Sado Reply Decl.") Ex. 1.)
Plaintiffs portray NatWest employees as ill-motivated and reckless with respect to anti-terror finance compliance. Plaintiffs' assertions are unsupported by the record.
Plaintiffs suggest that NatWest's retention of the interest earned on Interpal's deposits due to Interpal's refusal to accept interest, on religious grounds, is evidence of NatWest's desire to place profits above compliance. (Pls.' Opp'n. 15-18.) This contention is frivolous at best. First, the purported lucrative nature of the Interpal accounts for one particular relationship manager, Lane, was discussed among Lane and other branch employees in the context of a complaint from Interpal as to the poor service it received at the branch office, and, importantly, not in the context of a broader discussion at NatWest as to whether NatWest should retain Interpal as a client. (Israel Decl. Exs. 103, 104, 105, 110.) Second, it is absurd to suggest that the interest earned on the bank accounts of a non-profit entity, which constituted a miniscule portion of NatWest's annual revenue, would induce NatWest to ignore and thereby facilitate terrorism. (Sado Reply Decl. Ex. 4; Lane 6/24/08 Depo. Tr. 72:13-17.) Notably, Lane was just one of six relationship managers at one of NatWest's more than 100 business centers. (Lane 6/24/08 Depo. Tr. 28:18-20.) Third, Lane's request for an adjustment to her annual income target, should NatWest terminate Interpal as a client, should be viewed as nothing more than a prudent business solution. (Schuster Ex. 85.) Fourth, the Interpal account was not nearly as lucrative for Lane as Plaintiffs suggest. When Lane transferred to a different division within NatWest, she did not retain Interpal's accounts in her portfolio because Interpal, as a non-profit, was not "growing" and its stagnant revenue presented "no potential for [Lane] to grow with the customer." (Lane 6/24/08 Depo. Tr. 47:8-15, 72:9-73:2.) Finally, there is no evidence that NatWest engaged in any sort of crude comparative analysis — weighing profits garnered from Interpal's accounts on one side, against the risks associated with assisting an alleged terrorist organization on the other side, thereby choosing profits over liability for noncompliance with antiterrorism laws and regulations.
Plaintiffs' suggestion that evidence of NatWest's "dismissive" attitude towards United States law and Israeli designations of terrorist entities demonstrates that NatWest acted with the requisite scienter is unsupported by the record. As set forth in greater detail above, it is undisputed that, as soon as OFAC designated Interpal as an SDGT, NatWest reported the designation to the appropriate British authorities and began an extensive dialogue with those authorities regarding OFAC's SDGT designation of Interpal. Rather than dismissing the United States' designation, this diligence demonstrates a concern with determining whether the designation impacted NatWest's ability to maintain the Interpal accounts. Furthermore, NatWest knew that the British government disagreed
It appears that Plaintiffs' support for this contention arises out of a nuanced discussion held by NatWest's top management and compliance officers as to whether to retain Interpal — a customer at times accused of terror financing, for whom neither NatWest nor the British government had uncovered credible links to terrorism despite their thorough investigation. Among other considerations, officers at NatWest discussed: (i) the reputation risks associated with keeping an OFAC SDGT designated customer, (ii) the reputation risks associated with terminating a British customer accused of terrorism that the British government found has no links to terrorism, (iii) the risks, reputational or otherwise, to plans to expand business to the United States, (iv) the "different stance towards the Palestinian issue between the U.S. and UK," (v) the increased costs of diligently monitoring and administering Interpal's accounts, and (vi) the overtly biased nature of some of the accusations against Interpal. (Schuster Ex. 85, 89.) It bears repeating that NatWest conducted this conversation about a customer that NatWest employees had no subjective suspicions of terrorism links or objective evidence from either NatWest's internal investigations or investigations conducted by the British government. There is no evidence to suggest that, had NatWest known or actually suspected Interpal of terror financing, it would have done anything other than closed its accounts.
Notably, Guy Cole's summary of his May 2004 investigation discusses an issue which is at the heart of this case — namely, the different views of different countries as to the Israeli-Palestinian conflict. (Schuster Decl. Ex. 78.) For example, regarding Israel and the United Kingdom, Cole writes:
(Id.) This difference of opinion did not trouble Cole or others at NatWest because NatWest had no branch offices or subsidiaries operating in Israel. (NW's 56.1 ¶ 119; Pls.' 56.1 Resp. ¶ 119.) The evidence in this case indicates that NatWest employees viewed the different treatment of Interpal by the United States and British governments as a reflection of the two governments' different policies as to the Israeli-Palestinian conflict, rather than, a reflection of the two governments' different definitions of terrorism. (Schuster Decl. Ex. 86, 89; Deposition of Stephen Foster taken on July 16, 2010, attached as Ex. 81 to Schuster Decl. ("Foster Depo. Tr."), 233:3-15; Israel Decl. Ex. 120.)
Ultimately, NatWest decided to retain Interpal as a customer and to undertake enhanced monitoring of its accounts. (Schuster Decl. Ex. 89, Foster Depo. Tr. 201:18-202:2.) Stray comments in email correspondences recognizing the United Kingdom's purported different view of the Israeli-Palestinian conflict from the United States or Israel does not in any way diminish the diligence that NatWest undertook in investigating, disclosing, and monitoring Interpal's accounts. These stray comments do not support a finding of deliberate indifference because they were made in the context of routine due diligence investigations of Interpal's accounts.
In sum, this case involves a bank that reported any and all suspicions regarding its non-profit customer, no matter how small or credible, to its government, cooperated with its government, and maintained a customer's account because neither the bank nor its government found credible evidence of the non-profit's terrorist activities. It is apparent that the U.S. government, by nature of OFAC's designation of Interpal as a SDGT, felt otherwise. There is no authority for the proposition that knowledge of an OFAC designation equates to knowledge of terrorist activities under the ATA for purposes of civil liability. Otherwise the scienter requirement of the ATA would be meaningless. Banks would be strictly liable for maintaining such accounts, and the scope of ATA liability would be radically enlarged. Furthermore, as Her Majesty's Treasury wrote, [redacted] (Stmt. of Interest ¶¶ 15-20.)
NatWest makes a compelling argument that, if the scienter element of the ATA is satisfied simply by knowledge of an OFAC SDGT designation, that the Court would be sanctioning an extraterritorial application of United States law. (Def. Mem. at 12-14.) The Court is inclined to agree with NatWest. OFAC's authority to designate entities as SDGTs derives from Executive Order 13224, which applies only to "U.S. persons" and "U.S. financial institutions." Exec. Order No. 13,224, 66 Fed. Reg. 49,079 (Sept. 23, 2001). Section 1 of that Order applies only to "all property and interests in property ... that are in the United States or that hereafter come within the United States, or that hereafter come within the possession or control of United States persons." Similarly, Section 2 applies only to "any transaction or dealing by United States persons or within the United States." Because OFAC is unable to block transactions conducted by non-U.S. financial institutions for non-U.S. persons, it is unlikely that Congress intended for private ATA plaintiffs to rely on a foreign bank's knowledge of a foreign customer's SDGT designation to establish scienter under the ATA. However, this finding is not essential to the outcome of this case. Moreover, clarification of this issue is better suited for the political branches of government.
Moreover, penalizing NatWest with civil liability under the circumstances here could stifle the incentive of the banks to report suspected terror activity to enforcement agencies and render the decisions of enforcement agencies meaningless. The logical extension of Plaintiffs' theory is that the financial institutions would be strictly liable regardless of the investigative conclusions reached by government bodies or whether the financial institutions reported their suspicions at all. It is unreasonable to assume the ATA intended to achieve such a result.
Throughout their briefs, Plaintiffs and Defendant refer to the consolidated Strauss action, which is also before this Court. The overarching storyline in Strauss is quite similar to this action. The Strauss plaintiffs are United States citizens who were harmed in terror attacks in Israel and the Palestinian Territories, allegedly conducted by Hamas. Strauss, 925 F.Supp. at 418-19, 2013 WL 751283, at *1. The Strauss plaintiffs seek damages from a French bank, Crédit Lyonnais, S.A. ("Crédit Lyonnais"), which administered accounts for a French Muslim charity, Comite de Bienfaissance et de Secours aux Palestiniens ("CBSP"). Id. CBSP solicited donations, which it then transferred to non-profit organizations located in the Palestinian Territories. Id. at 418-20, at *1-2. The Strauss plaintiffs assert that these
First, the diligent, thorough, and urgent manner in which NatWest investigated, reported, and monitored Interpal is absent from the facts of the Strauss case. On two occasions, Crédit Lyonnais suspected CBSP of terrorism and reported its suspicions to the French government. Id. at 419-23, at *2-5. On December 6, 2001, at the time Crédit Lyonnais filed its second report with French authorities, it had decided to close CBSP's account. Id. at 422-23, at *5. Yet, on August 21, 2003, when OFAC designated CBSP as a SDGT, the accounts were still open. Id. at 423-25, at *6. The evidence demonstrates that Crédit Lyonnais's compliance officers were not aware that the accounts had remained open years after the bank decided to close them.
Second, the activity in CBSP's accounts underlying the two reports to the French authorities is of a different caliber than that reported to the British government by NatWest. NatWest's policy of reporting "anything and everything" resulted in the filing of reports, based on evidence understood by NatWest employees at the time of reporting as unsubstantiated. In Strauss, however, Crédit Lyonnais' suspicion arose from observing abnormal account activity for which they had no explanation. Id. at 419-23, at *2-5. Initially, Crédit Lyonnais suspected CBSP of money laundering; however, by the time Crédit Lyonnais filed its second report, Crédit Lyonnais suspected links to terrorism. Id. at 421-23, at *4-5. In support of its decision to report CBSP to French authorities, Crédit Lyonnais noted an increase in donations and difficulty in determining the donors, as CBSP received its funds from an intermediary French bank and no longer directly from the donors. Id. Crédit Lyonnais feared CBSP's potential association with "a radical form of Islam" during a major escalation of violence in Israel. Id. at 421-22, at *4. At the time of reporting its suspicions of terrorism, Crédit Lyonnais informed the French authorities that it was closing CBSP's bank accounts. Id.
Third, there is no evidence that the employees at NatWest actually suspected Interpal of terror financing. In Strauss, there is a genuine dispute as to whether the Crédit Lyonnais employees did, subjectively, suspect CBSP of terror financing, such that granting summary judgment on scienter would have been improper.
Summary judgment is granted in NatWest's favor on each claim as to scienter. Accordingly, the Court need not address the parties' contentions regarding the admissibility of expert reports, proximate cause, whether NatWest provided funds to an FTO, and whether Hamas was responsible for the terror attacks at issue in this action. This action is thus dismissed in its entirety.
SO ORDERED.
