Monday, May 18, 2009

Attorney Forced Off Lawsuits Against Banks Over Pinochet Money

Alana Roberts
Daily Business Review
May 18, 2009

Squire Sanders & Dempsey partner Pedro Martinez-Fraga has been forced -- after at least four years of work -- to withdraw from cases filed by the Chilean government alleging four banks helped former Chilean dictator Augusto Pinochet hide $26 million in government money. Portugal's Espirito Santo Bank claims Martinez-Fraga has a conflict of interest in pursuing the complaints because a Squire Sanders attorney serves on Espirito Santo's board. Another defendant, Pittsburgh-based PNC Financial Services Group, also is a Squire Sanders client.

The Chilean government claims Espirito Santo, PNC, Spain's Banco Santander and the Bank of Chile violated the Racketeer Influenced Corrupt Organizations Act for negligence or active roles in helping Pinochet hide stolen government money. The suits were filed in Miami federal court March 11 by Martinez-Fraga and Squire Sanders associate Tania Cruz.

Pinochet, who seized power in a 1973 military coup that overthrew the Marxist-led government of President Salvador Allende, died at the age of 91 in late 2006. Although he led the country to an age of prosperity and a revival of a free market economy, his name became synonymous worldwide with human rights abuses, brutal political oppression and domestic corruption. He was barred from continuing as president in a 1988 plebiscite.

Two years before his death, Chilean investigators said they identified millions Pinochet had placed in secret bank accounts in various countries, and the Santiago government undertook legal action to retrieve the money.

"Tragically, had many of the financial institutions that opened accounts by or for Pinochet followed even the most basic regulations and guidelines concerning among other things the reporting of suspicious transactions and the determination of the source of a customer's funds, Pinochet's misdeeds would have been exposed long ago," the complaint against Espirito Santo says.

Martinez-Fraga asked to withdraw as counsel for the Chilean government in all four of the Miami cases after the conflict issue was raised by Berger Singerman attorneys Mitchell Berger of Fort Lauderdale, Fla., and James Cunningham Jr. of Miami. They alleged in an April 27 response that the presence of another Squire Sanders attorney on Espirito Santo's board caused a conflict. Another conflict stems from PNC's status as a Squire Sanders client, attorneys familiar with the case say.

Espirito Santo noted Squire Sanders of counsel Eric Buermann is a senior director on Espirito Santo's board, and a bank court filing said the Squire Sanders team initially refused to withdraw from the case.

Berger and Cunningham also wrote that Squire Sanders attorneys told them Buermann said there was no reason to withdraw.

"Squire Sanders & Dempsey indicated to the bank's counsel that based on the facts known by Mr. Buermann, there was no reason for it to withdraw. The only way that the law firm could have reached this conclusion was by interviewing Mr. Buermann about his knowledge of the facts of the case. The bank pointed out that any such interview is a violation of ... rules of professional conduct," Espirito Santo said in a court filing.

The Squire Sanders team filed a motion to withdraw from the Espirito Santo Bank case last month and sought a 30-day extension to find replacement attorneys. Espirito Santo is challenging the 30-day request, and a hearing on that motion is set for today before U.S. District Judge Donald Graham.

William Hill and Melissa Alvarez, attorneys at Bilzin Sumberg Baena Price & Axelrod in Miami, agreed to step in to represent the Chilean government.

The Espirito Santo attorneys also allege the case is time-barred and say the RICO statute is often misused.

In a filing last week, Hill disputed that assertion and said Espirito Santo's effort to block the 30-day extension to find replacement plaintiff attorneys is now moot.

"On the issue of the conflict, we said very clearly in the papers we're not addressing it," Hill said. "It's not an issue. That issue I will say for PNC is moot because the Squire Sanders firm was given leave to withdraw."

Banco Santander filed a dismissal motion Monday, arguing the case is time-barred and asserts "unsupportable legal theories."

Martinez-Fraga didn't address in an e-mail why he withdrew from the cases.

Calls to Buermann, Berger and Cunningham were not returned by deadline.

Martinez-Fraga began working on the case while he was a Greenberg Traurig shareholder. He and other lawyers for the Chilean government petitioned U.S. District Judge Joan Lenard in June 2005 to force the banks to cooperate with its investigation.

The Chilean probe of Pinochet concluded banks helped the general hide stolen government funds.

"Over the course of 20 years, Pinochet and his chief henchman, Oscar Aitken Lavanchy, devised and implemented a scheme to siphon no less than $26 million in funds, secreted these funds and their investment proceeds in an astonishing number of bank accounts at financial institutions located worldwide, including in the United States," the Chilean government's complaint said.