Attorney General v Pacific International Development Bank of American Samoa [2000] WSSC 48 (6 October 2000)

IN THE SUPREME COURT OF SAMOA
HELD AT APIA

BETWEEN

THE ATTORNEY GENERAL.
Applicant

AND

PACIFIC INTERNATIONAL DEVELOPMENT BANK OF AMERICAN SAMOA.
First Respondent

AND

WILLIAM CRAVENS.
Second Respondent

AND

ANZ BANK (SAMOA) LIMITED.
Third Respondent

Counsel: G. Latu for applicant
S. K. Ainuu for first and second respondents
Third respondent was not required to appear

Hearing: 20 September 2000
Judgment: 6 October 2000

JUDGMENT OF SAPOLU CJ

Introduction

The Court is concerned in these proceedings with an ex parte motion by the applicant, the Attorney General, for an order under the provisions of the Money Laundering Act 2000 (MLPA) to freeze funds held in bank account number 2303876 under the name of the first respondent in the third respondent bank. I will explain later in this judgment why the applicant’s ex parte motion has been dealt with inter partes but in the absence of the third respondent.

The Attorney General is the “competent authority” under section 2(1) of the MLPA 2000 and has the authority to bring these proceedings for a “freezing order” under section 20(1) and (2) and section 29 of the Act, the applicant citing the latter provision in its motion. These proceedings can be filed by the Attorney General on a request made by a foreign State under section 26 for assistance in the investigation or prosecution in that state of a money laundering offence as defined in section 2 of the Act. The first respondent is a bank incorporated under the laws of American Samoa and is based in American Samoa and holds under its name a bank account number 2303876 in the third respondent bank in Apia. The second respondent is the president of the first respondent. The third respondent is the principal bank in Apia.

It was said on behalf of the applicant that the funds held in the aforesaid bank account under the name of the first respondent are “proceeds of crime” as that expression is defined in section 2(1) of the MLPA 2000, having originated from a fraudulent investment scheme in the United States. It was also said for the applicant that the United States Federal Bureau of Investigation (FBI) is conducting a criminal investigation in the United States into the promoters and other individuals involved in the aforesaid fraudulent investment scheme. That investigation has revealed that one of the principal foreign places to which funds in this investment scheme has been transferred is in bank accounts in the third respondent bank in Apia. In fairness to the third respondent, I must say there was no evidence before the Court to suggest that the third respondent was aware or had any knowledge that the aforesaid funds originated from a fraudulent investment scheme in the United States.

It was also said on behalf of the applicant that the second respondent, being the president of the first respondent banc has control over the aforesaid bank account under the name of the first respondent in the third respondent bank. It was further stated that the United States District Court for the Western District of Washington has granted an interim injunction against the promoters of the investment scheme prohibiting them from continuing to sell securities in interstate commerce and requiring them as well as the second respondent to repatriate to the United States all overseas funds and to deposit them with the Court. To avoid any possible misunderstanding, the reference to “Washington” in this judgment means the state of Washington whose capital city is Seattle and not Washington DC the federal capital of the United States.

Factual Background

The applicant filed a bundle of documents in support of the motion. The principal document in that bundle upon which the applicant relies for factual matters is the affidavit by one David Rubincam sworn on 30 August 2000. But there are several other documents in the bundle. Mr Rubincam is a special agent of the Federal Bureau of Investigation (FBI) who is conducting a criminal investigation in the United States into the promoters of an alleged fraudulent investment scheme in which they and others are suspected of having committed securities fraud, mail fraud, wire fraud, money laundering and unlawful transportation of fraudulently obtained property.

The United States Securities and Exchange Commission (SEC) which is responsible for the civil enforcement of the United States securities laws has also conducted an investigation into the same investment scheme and has filed a civil lawsuit against its promoters and obtained an interim injunction against the promoters and the second respondent ordering them to repatriate all investor funds back to the United States and deposit them with the United States District Court for the Western District of Washington.

So there have been two investigations in the United States into the alleged fraudulent investment scheme. One is the criminal investigation conducted by the FBI which appears from Mr Rubincam’s affidavit to have found a substantial amount of evidential material but is still continuing. The other is the civil investigation conducted by the SEC which has resulted in a civil lawsuit being filed in the United States District Court for the Western District of Washington and the issuing of an interim injunction against the promoters of the investment scheme and the second respondent.

Essentially what is alleged in the affidavit of Mr Rubincam is that the promoters set up an investment scheme comprising of three investment funds and promoted the scheme within the United States. People were induced to invest in the scheme by giving them assurances that there was no risk to their funds which will be traded offshore and they were also promised a $120% return on their investments at the end of the year.

What happened was that there was no offshore trading with the investor funds. A large amount of millions of US dollars of the investors funds was used by the promoters for their own benefit and purposes such as payment of salaries and commissions to themselves and the purchase of expensive cars and two expensive residential houses in Arizona. An overwhelming amount of the investors funds worth many millions of dollars was transferred to bank accounts in the Bahamas, Costa Rica and Samoa making recovery of the funds difficult. In the end the 120% returns promised by the promoters were not realised and many investors lost the entire amounts of their investments.

How the third respondent came into the picture was that investors funds worth many millions of US dollars were initially deposited in a bank account in Washington controlled by the promoters. Those funds were then transferred overseas and one of the principal places to which the funds were transferred was to bank accounts in the third respondent bank in Apia. These bank accounts are said to be held in the names of two companies. The second respondent played the principal role in the establishment of those two companies and their bank accounts in the third respondent bank. One of those two companies is the first respondent. The second respondent is also said to be technically the beneficial owner of these two bank accounts. One of these accounts is under the name of the first respondent of which the second respondent is the president. That is the bank account which is in issue in these proceedings and is number 2303876.

The United States Government has made request to the Attorney General for assistance in relation to the funds in the aforesaid bank account 2303876. The Attorney General has therefore filed these proceedings for a freezing order under the MLPA 2000 to freeze the funds in the aforesaid bank account.

Before the present proceedings, the Attorney General had made an ex parte application to this Court on 12 May 2000 for a search warrant and for seizure of the aforesaid funds. An ex parte order was accordingly made by Wilson J on 25 May. I will deal in a separate judgment with the application for the release of those funds. But counsel for the first respondent and second respondent submitted in relation to that application and the present proceedings, that more than four months have elapsed since the funds were seized pursuant to the search warrant and still there has been no charge filed against any person in relation to those funds. The first and second respondents however, did not dispute any of the factual allegations in the Rubincam affidavit.

Hearing of motion

As I said at the beginning of this judgment, the applicant filed an ex parte motion under the MLPA 2000 for a freezing order. Under the Act, the Court has power to grant orders ex parte. However, what happened in this case was that the present ex parte motion came before the Court together with the application by the first respondent to release funds that had been seized since 25 May, and were called together in the presence of both counsel for the Attorney General and the first respondent. As both counsel were present and the funds were still under seizure pending the outcome of the present proceedings and the application to release funds, I decided to hear both proceedings with both counsel present and arguing the respective cases for the parties they represent. In the circumstances, it was not necessary to require the presence of the third respondent bank which, I understand, is still the depositary and custodian of the funds.

Submissions for applicant

Counsel for the applicant submitted that under the MLPA 2000, the Attorney General as the competent authority under the Act has locus standi and authority to apply to the Court for an order to freeze the funds and bank account in issue on a request from a foreign state for assistance, and the Court has the necessary jurisdiction under section 20(1) and (2) of the Act to grant the freezing order sought. Counsel also made detailed reference to the Rubincam affidavit and said that it is on the basis of that affidavit that the United States Government made its request to the Attorney General for assistance in the “investigation or prosecution of a money laundering offence” in terms of section 26 of the Act.

Section 20(1) is clear that where a person has been charged or about to be charged with a money laundering offence, the Court, on an application by the Attorney General, can make an order to freeze the funds which are the property of, or in the possession of, or under the control of that person which is alleged to be the proceeds of crime wherever such funds may be. As earlier stated, there was no challenge to the truthfulness of the facts alleged in the Rubincam affidavit. So I assume that what is there stated about the investors funds and the alleged fraudulent investment scheme is true. I would also assume that what is said about those funds being initially deposited in a bank in Washington and then transferred to overseas bank accounts including the bank account 2303876 in the third respondent bank is also true. I would further assume that the relevant bank account in issue is under the control of the promoters who are under criminal investigation by the FBI for various kinds of fraud and money laundering. I would also assume that the promoters of the aforesaid investment scheme are now the subject of a civil lawsuit in Washington as a result of the investigation by the SEC and that an interim injunction has been issued against them and the second respondent to repatriate the aforesaid funds back to the United States. I would also assume that the second respondent played the principal role in the establishment of the first respondent under whose name the relevant bank account is held and that he is the president of the first respondent and technically the beneficial owner of the aforesaid bank account.

From the aforesaid facts, I am of the opinion, based on the extent of the investigations in the United States and the fact that the promoters of the investment scheme are now the subject of a civil lawsuit as well as the subject of an interim injunction in Washington, that it will not be long before those individuals become the subject of criminal charges in the United States for money laundering. The additional facts against the second respondent are that he was primarily responsible for the establishment of the first respondent under whose name the aforesaid bank account is held and he is also the president of the first respondent and still technically the beneficial owner of the funds in the aforesaid bank account. Should it turn out that no criminal charge for money laundering is preferred against the second respondent because of insufficient evidence, it is still clear from the material placed before the Court that there is cogent evidence against the promoters so that criminal charges against them for a money laundering offence should be expected at any time now.

Perhaps I should make it clear that for the purposes of the MLPA 2000, it is not necessary that a person against whom a freezing order is sought under section 20 should be charged with a money laundering offence in Samoa. It is sufficient, in my opinion, to satisfy the requirements of section 20, if such person is charged with an offence in the foreign State, that has made a request to the Attorney General for assistance in the investigation or prosecution of an offence which is a money laundering offence in terms of section 2(1) of the Act. The expression “money laundering offence” is defined in section 2(1) to mean, inter alia,;

“(a) .................

(b) Receiving, possessing, concealing, disguising, transferring, converting, disposing of, removing from or bringing into Samoa any property that is the proceeds of crime, knowing or having reasonable grounds for believing the same to be the proceeds of crime.”

This is a very broad definition of money laundering and covers an extensive list of activities. Section 3(1) then provides:

“A person who, after the commencement of this Act, engages in money laundering “is guilty of an offence.”

Section 4 of the Act then further provides:

“Where an offence under the provisions of section 3 is committed by a body of persons, whether corporate or incorporate, every person who, at the time of the commission of the offence, acted in an official capacity for or on behalf of such body of persons, whether as a director, manager, secretary or other similar office, or was purporting to act in such capacity, shall be guilty of that offence, unless the adduces evidence to show that the offence was committed without his knowledge, consent or connivance.”

Section 5 then goes on to provide:

“Any person who attempts or who aids, abets, counsels, or procures the commission of, or who conspires to commit the offence of money laundering, is guilty of an offence.”

Thus not only do we have an extensive list of activities encompassed within the definition of money laundering under section 2(1) which are made offences by section 3(1), but sections 4 and 5 further extends the web of what is a money laundering offence to include further activities which do not come within the parameters of the section 2(1) definition of money laundering. It is not necessary, in my opinion, for the purposes of section 20(1) of the Act that a person should only be charged or about to be charged with any money laundering offence in Samoa. Section 20(1) would also apply, if a person against whom a freezing order is sought is charged or about to be charged in the requesting foreign state with an offence that would amount to a money laundering offence within our MLPA 2000.

Section 20(1) next requires that the property in respect of which a freezing order is sought must be “the property of, or in the possession, or under the control” of the person who has been charged or about to be charged with a money laundering offence. The words “the property of” in my view connotes ownership. I refrain from attempting any definition of “ownership” but it must include beneficial ownership. What is said in the Rubincam affidavit that the second respondent is technically the beneficial owner of the funds kept under the first respondent’s name in account number 2303876 with the third respondent bank suggests that those funds are “the property of” the second respondent for the concept of ownership must include beneficial ownership.

In respect of “possession”, which is not defined in the Act, its common law meaning encompasses not only physical possession but also legal possession which is much wider. In his book Commercial Law (1995) 2nd at pp 46-47, Professor Goode says about legal possession:

“Possession, like ownership, is incapable of precise definition; indeed, its meaning varies according to the nature of the issue in which the question of possession is raised. Moreover, there is not even an agreed terminology as to the different forms of possession. We can leave the higher theory to the masters of jurisprudence. For our purposes it is sufficient to describe possession of an asset as control, directly or through another, either of the asset itself or of some larger object in which it contained or of land or buildings on or beneath which it is situated, with the intention of asserting such control against others, whether temporarily or permanently. The common law concept of possession in thus much broader than it is under French law or civil law systems based on French law, where a person holding goods for another is considered to be a mere de’tenteur, having custody but not possession of the goods.

Possession is indivisible. Like ownership, it can only be held or transferred “entire.”

I have referred to this passage from Professor Goode’s Commercial Law to show that “possession” may not be confined to physical possession or actual custody of the funds in issue as was suggested on behalf of the first and second respondents. It follows that I do not readily accede to that suggestion. But as the meaning of “possession” was really not argued, I will leave the point open for another case. Suffice to say that possession at law connotes an element of control.

I turn now to the question of “control”. It is clear from what is said in the Rubincam affidavit that the aforesaid bank account in the third respondent bank is controlled by the promoters of the aforesaid investment scheme. It is also clear that the same account is under the control of the first and second respondents. There was no challenge in that regard.

As to whether the funds in the aforesaid bank account were the “proceeds of crime”, there was no dispute that they were. However, counsel for the applicant submitted that the relevant crime based on the material placed before the Court would be conspiracy to defraud. At least that was the crime upon which the search warrant was sought from Wilson J in May this year. There was no evidence to show what is the maximum penalty for such an offence in the United States. But if it is the same as the maximum penalty of 3 years imprisonment under our Crimes Ordinance 1961, then conspiracy to defraud will not assist the applicant. The reason is that “proceeds of crime” is defined in section 2 of the MLPA 2000 to mean the proceeds of an “unlawful activity”. The expression “unlawful activity” is also defined in section 2 to mean any activity which under any law is a crime punishable by death or imprisonment for a maximum period of not less than 5 years. Therefore conspiracy to defraud does not come within the definition of “unlawful activity” and “proceeds of crime” unless the maximum penalty for such an offence in the United States is 5 years imprisonment or more. The more appropriate offence under Samoan law is theft under its extended definition given in section 88 of the Crimes Ordinance 1961, for it carries a maximum penalty of 7 years under section 86(1)(i) of that Ordinance.

Submissions for first and second respondents

Counsel for the first and second respondents made several submissions against the granting of the freezing order sought by the applicant. His first submission was that the MLPA 2000 only came into force on 14 June 2000 and cannot make anything that happened in Samoa before that date a money laundering offence. If the Act purports to do that then it is in contravention of Article 10 of the Constitution which provides as far as relevant:

“(1) ...........

(2) No person shall be held guilty of any offence on account of any act or omission which did not constitute an offence at the time when it was committed.....”

Counsel then submitted that the activities in respect of which the freezing order is sought all took place before the MLPA 2000 came into force and therefore cannot be made an offence under the Act because of Article 10 of the Constitution. Up to this point of his submission, I agree with counsel for the first and second respondents. But with respect to him, I do not agree with him that all that which has taken place, happened before the Act came into force.

The definition of money laundering given in the Act includes “possession, concealing or disguising” any property that is the proceeds of crime. The acts of “possessing, concealing or disguising” are continuing acts as counsel for the applicant correctly submitted. They do not stop at the moment you first commit those acts. They are continuing acts which would only cease when you stop possessing, concealing or disguising the proceeds of crime. Thus, even though it is correct that the commencement of those acts took place prior to the MLPA 2000 coming into force, they are still continuing up to now after the Act has come into force. And the Act must therefore apply to those continuing activities. From the alleged facts, it can be said that the first and second respondents are still concealing or disguising the aforesaid funds up to now, notwithstanding the seizure of those funds pursuant to a search warrant issued by this Court in May this year. There is still the risk the funds will be removed out of jurisdiction, if the seizure is lifted, and concealed somewhere else. Even though I have also decided not to express any firm view on the meaning of possession, because of the absence of arguments on the paint, it is clear that legal possession connotes control over the aforesaid funds. Therefore it is at least arguable on the alleged facts that the first and second respondents and perhaps the promoters of the investment scheme, being in control of those funds, are still in possession of those funds. But as I have said, the point was never argued. It follows from all this that the MLPA 2000 does not contravene Article 10 of the Constitution. Likewise the motion for a freezing order does not infringe the Constitution.

The next submission by counsel for the first and second respondents is that neither the first nor the second respondent is in possession of the funds for the purposes of section 20(1) of the Act because they are not in physical possession. Again I agree with counsel that in that sense the first and second respondents are not in possession. But possession is not confined to physical possession. Possession in law has a much wider meaning as I have tried to point out. In any event, I have decided to leave the meaning of the concept of possession for another case. The second respondent can still be said to be the beneficial owner of the funds and he and the first respondent can also be said to have control of the funds for the purposes of section 20(1).

Counsel then submitted that the present motion by the applicant is only a delaying and frustrating tactic. For more than four months no one has been charged with any criminal offence either in Samoa or in the United States. But now that the first and second respondents have filed a motion to release the funds, the applicant has come in with this motion for a freezing order to frustrate the respondents.

I must say that if I was satisfied with this submission for the respondents, I would have no hesitation in refusing the applicant’s motion on the ground of abuse of process. However, it appears to me that the criminal investigation by the FBI is still continuing even though much evidence has been discovered, as shown from the Rubincam affidavit sworn on 30 August 2000. The nature of the scheme under investigation, the number of people suspected of involvement in the scheme apart from the promoters, and the fact that funds had been transferred overseas to bank accounts in the Bahamas, Costa Rica and Samoa, all suggest that this is not a simple and straight forward investigation which would take a short period of time to complete at this stage of proceedings, I do not see any abuse of process by the applicant applied. But this does not mean that the agencies responsible for the enforcement of the criminal law in the United States, or the State of Washington in particular, should take their time. Speed is very necessary and important. Like the law of the United States, delay can also be fatal under the law of Samoa.

The next and related submission by counsel is that Article 9 of the Constitution requires that a person charged with an offence is entitled to a hearing within a reasonable time. While I can see that the objective of the submission is that a charge against any person for any offence must be tried within a reasonable time, the difficulty with the submission is that it did not elaborate on the meaning of the word “charge” as used in Article 9. It is clear that no formal charge has been filed against any person in connection with the alleged investment scheme. But the question is: should the meaning of the word “charge” used in Article 9 be restricted to a formal charge. There were no submissions on the point. In respect of the requirement in Article 9 that a hearing must be held within a reasonable time, what amounts to a “reasonable time” must be a question of fact in each case. The point was not fully articulated. But as I have said, the investigation into this complex matter is not expected to take a short period of time to complete. The investigation also extends beyond the United States. Given the urgency with which a judgment is needed in these proceedings, I prefer to leave the constitutional points open as I do not wish to further delay my judgments in these and other related proceedings as I endeavour to carry out my researches into all the various points raised in these proceedings. However, I wish to leave this part of my judgment with the advice to those who sought the assistance of the Attorney General that the law of Samoa is no different from the law of the United States when it comes to delay. Speed is very important and delay can turn out to be fatal.

Conclusions

From what has been said, I conclude that the promoters of the alleged fraudulent investment scheme as well as the second respondent are about to be charged in the United Stated with a money laundering offence and that the funds in account number 2303876 in the third respondent bank are the proceeds of crime and are under the control of those individuals. I therefore make the following order. Until further order of the Court, the funds in account number 2303876 in the third respondent bank must be frozen and must not be given or released to any person, corporate or non-corporate, or otherwise dealt with in any manner whatsoever. This order is made against the second respondent and promoters of the alleged fraudulent investment scheme.

As there is nothing in the material placed before the Court to show that the first respondent has been charged or about to be charged with a criminal offence, there is no order made against the first respondent.

The provisions of section 20(7) of the MLPA 2000 which provide that an order made under section 20 shall cease to have effect at the end of seven days following the hour the order was made, if the person against whom the order was made has not been charged with an offence which amounts to a money laundering offence in terms of our Act within that time, applies to the order of this Court.

Counsel for the applicant is to inform the third respondent and its general manager of the terms of this order today and then to provide the third respondent with a copy of this order when it is ready.

If counsel so wish, written submissions to be filed on the points of law I have left open for decision within five days as today is Friday and Monday will be a public holiday.

CHIEF JUSTICE

Solicitors:
Attorney General’s Office for applicant
S. K. Ainuu for first and second respondents