ANALYSIS – Victory against Latin bank fraud marks milestone
A Dominican government legal victory in Miami sparks questions about banking justice in Latin America
BY JANE BUSSEY – firstname.lastname@example.org
The Dominican government’s victory in a Miami courtroom earlier this week over one of the Caribbean nation’s most powerful financiers was a milestone in bringing the alleged architects of the country’s 2003 banking crisis to justice.
But a bigger question for Latin America is whether the judgment against Dominican business executive Luís Alvarez Renta will set a precedent in a region frequently roiled by banking and fraud crises.
Bankers, lawyers and financial analysts concur that the verdict in the civil case was a first: a Latin American government’s case against a wealthy and powerful member of the elite was vindicated by an impartial court in a foreign country.
”It is quite a victory for those who want to stamp out financial corruption,” said Christian Stracke, head of emerging market research at CreditSights, an independent Wall Street research firm. “It certainly sends a positive signal.”
But the question is whether the Dominican government’s success in the Miami case can be replicated by other countries seeking to go after alleged banksters — the term coined by Ecuadorians during their 1998-99 banking crisis.
On Monday, a seven-member jury in U.S. District Court in Miami found Alvarez Renta liable on three counts of racketeering, as well as fraudulent money transfer for his part in a scheme that swindled the Dominican bank, Banco Intercontinental or Baninter, out of tens of millions of dollars.
The Miami win could give a boost to an ongoing criminal case against Alvarez Renta and top Baninter executives Ramón Báez Figueroa and Marcos Báez, which has been stymied in the Dominican courts.
According to testimony in the Miami case, some of the money left Baninter and was deposited in Alvarez Renta’s Miami bank accounts just weeks before authorities seized the bank.
In April 2003, banking regulators in Santo Domingo discovered more than $2.2 billion was missing from Baninter, and the burden of the banking crisis was born by the country, which went into a deep economic swoon.
The Alvarez Renta case, which was heard in the courtroom of U.S. District Judge Jose E. Martinez, had standing to be tried in the United States because of the misuse of U.S. financial institutions. Alvarez Renta also holds U.S. citizenship.
Since the lawsuit filed by the Dominican commission liquidating Baninter was a civil case, Alvarez Renta does not face any prison time.
But legal and practical hurdles remain for collecting the damages — $59 million, which will be tripled under the rules of the Racketeer Influenced and Corrupt Organizations Act, or RICO.
Alvarez Renta’s attorney Richard C. Smith, with Shook Hardy & Bacon in Miami, said attorneys planned to file motions for a new trial and an appeal.
Lawyers representing the Dominican authorities said collecting the settlement may be a challenge.
”We will try. We will try very hard,” said attorney Matias R. Dorta who tried the case along with Bryan T. West of the Miami firm of Tew Cardenas
The Alvarez Renta case is unique because in other Latin American countries, bankers have often skipped town to avoid arrest, fighting extradition requests while living in places such as Miami or marshaling vast legal resources to quash the charges.
The cases often become bogged down in partisan politics.
But in Miami, there were none of those problems.
Bert Ely, a banking consultant in Alexandria, Va., said he is not sure that U.S. courts can change corrupt behavior in Latin America. But he said that turning to the American legal system sends a signal about the state of justice in Latin America.
”The fact that nothing has gone anyplace [in the banking cases] is a very strong indicator of how weak the legal system is [there],” Ely said.
Miami has long been a center for businesses seeking to settle international business disputes. But a number of attempts to use U.S. courts to seek redress against Latin American bankers accused of fraud in banking crises have been sent back to the home countries.
Cases involving both Venezuelan and Colombian-owned banks have been dismissed for lack of standing in recent years.
Still, some lawyers see this case as setting a stronger precedent for making banking cases a matter of U.S. concern.
Among them is Fidel Ernesto Pichardo Baba, general counsel to the Dominican Central Bank, which spearheaded the lawsuit.
”This decision is a historical precedent for our country and possibly, because of its magnitude, for the rest of Latin America,” Pichardo said in an interview after the verdict.
”It shows the justice system can actually win,” said Stracke of CreditSights.