September 23, 2020

Arab Bank Found Liable for Terror Support


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arab-bank-hqBy Andrew Keshner, From New York Law Journal

Arab Bank is civilly liable for the material support of 24 Hamas terror attacks during several years of unrest in Israel, a federal jury decided Monday.

After almost two days of deliberations, capping a five-week trial, an Eastern District jury agreed with terrorism victim plaintiffs, determining the bank knew some of its customers had ties to Hamas. Moreover, the jury concluded transactions handled by the bank played a substantial role in the chain of events leading to attacks from 2001 to 2004.

Linde v. Arab Bank, 04-CV-2799, is believed to be the first case in which a financial institution stood trial for violating civil provisions in the Anti-Terrorism Act.

Lawyers for some 300 victims immediately praised the verdict in the liability-only trial, but the Jordanian bank pledged to appeal.

The verdict came after 10 years of hard-fought litigation.

Gary Osen of Osen LLC called the jury’s decision “an enormous milestone. The question now is how the rest of the financial world, regulators and governments will deal with Arab Bank.” He noted that financial institutions such as Wells Fargo and HSBC were correspondent banks with Arab Bank, which had nearly $50 billion in assets last year and more than 600 branches worldwide.

To be able to call the families of victims and tell them about the verdict and “some accountability means the world,” Osen said.

Mark Werbner of Sayles Werbner in Dallas said he could not hold back tears when the verdict was announced. “The message here is when banks open their doors to terrorists, they are going to be held accountable.”

But the bank in a statement said, “Arab Bank believes it will ultimately prevail in this case. The trial was infected by scores of errors, and the bank has very strong grounds for appeal. It will seek prompt review by the Second Circuit.”

The bank slammed a pretrial sanction over its failure to produce certain records—a punishment the U.S. Solicitor General’s Office faulted in litigation leading up to Monday’s verdict.

In its statement, the bank said it “predicted that any proceeding conducted under the district court’s improper sanctions, which the U.S. government found to be ‘erroneous,’ would be nothing more than a show trial.”

As he left the courtroom, Shand Stephens, a partner at DLA Piper who represented the bank, called the plaintiffs’ evidence “a mile wide and an inch deep.”

He continued, “evidence this thin would never have resulted in a verdict unless there were errors in the admission of evidence, errors in the instruction and errors in imposing a sanction that the U.S. government has already told the Supreme Court was improper.”

After the jury was excused, Eastern District Judge Brian Cogan (See Profile), who presided over the trial, said “the case is a long way from over” and added he would schedule a status conference in the next few weeks. Cogan had complimented the work of the jury and said that only in the United States would a trial like this go to a jury.

Before their verdict, the jurors asked to see demonstrative slides and trial testimony regarding Hamas’ purported liability for certain attacks.

Plaintiffs presented testimony from witnesses including experts on Hamas, a forensic accountant and a former Israeli government official.

Defense witnesses included the bank’s chairman, Sabih Al-Masri, and experts on charities in the Palestinian territories and banking compliance and regulation.

In closing arguments, the plaintiffs’ attorneys said the bank could not avoid liability by merely pointing to transactions that cleared blacklists developed within the U.S. Treasury Department’s Office of Foreign Assets Control (NYLJ, Sept. 19).

  1. Tab Turner of North Little Rock, Ark., told the jury of three men and eight women that they had the ability to “change the world banking system.”

But Stephens told jurors it was not the job of private business to draw up blacklists when such duties were left to the government. Moreover, financial services had to be carried out by individuals, and then he recounted various defense witnesses, asking if they deliberately supported the violence.

Restricted Testimony

The bank had been forced to make its case within the confines of a sanction arising from its failure to produce certain records.

Though the bank said it was restrained from disclosure because of bank secrecy laws in foreign jurisdictions, an order by Eastern District Judge Nina Gershon (See Profile) prevented the introduction of the state of mind evidence and allowed for an adverse inference jury instruction.

The bank filed an unsuccessful appeal to the Second Circuit, and the U.S. Supreme Court denied cert.

At trial, the plaintiffs repeatedly noted the bank’s failure to turn over certain records. Meanwhile, defense witnesses could not offer particular testimony.

For example, when Al-Masri testified, Cogan stopped him from responding to questions like whether the bank supported terror or whether he preferred peace to the type of violence experienced in the Second Intifada, which started in 2000 (NYLJ, Sept. 9).

In its statement Monday, the bank said it was bracing for the verdict based on the sanction imposed pretrial and other rulings.

“Once the court eliminated the bank’s defenses, permitted weeks of inadmissible and inflammatory testimony of plaintiffs’ witnesses, and rejected the Supreme Court’s binding causation standard, the verdict against the bank was inevitable,” it said.

That view of the case was apparently evident during trial.

For example, a transcript shows that in a sidebar during a cross-examination of the bank’s charity expert, the parties were arguing over testimony.

Cogan at one point told the defense “put it in the record, so when the Court of Appeals looks at it—who you seem to be trying this case for— they can make their own judgment whether there’s any ambiguity.”

Arab Bank was also represented by DLA Piper partners Brett Ingerman and Anthony Coles.

Shawn Naunton, a partner at Zuckerman Spaeder, also represented the plaintiffs, as did Michael Elsner, a member at Motley Rice in South Carolina.

IMAGE: Arab Bank headquarters in Amman, Jordan Wiki

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