The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Court of Appeal yesterday ruled that a “substantial overlap” between separate legal cases cannot by itself be “an abuse of process” as it overturned the removal of a multi-million dollar asset freeze imposed on proceeds from a fraud allegedly involving flamboyant “philanthropist”, Rudolph Kermit King.

Appeal justice Bernard Turner, in a unanimous verdict backed by his two colleagues, reversed then-justice Cheryl Grant-Thompson’s now seven year-old decision to discharge an asset freeze sought by US federal prosecutors over a purported $2.289m fraud perpetrated against multinational aerospace giant, Boeing.

A portion of the fraud proceeds were alleged to have ended up in various accounts at Royal Bank of Canada (RBC) Bahamas in the names of Celebrating Women International (CWI) and Celebrating Women International Investments. CWI and Mr King, who are both named as defendants, were represented before the Court of Appeal by Damien Gomez KC, the former minister of state for legal affairs, and Monique Gomez.

Mr Gomez yesterday said he was unable to comment when contacted by Tribune Business as he had yet to fully read the Court of Appeal’s verdict. However, the decision reaffirms the overturning of Justice Grant-Thompson’s June 19, 2019, ruling that removed the asset freeze obtained by the Attorney General’s Office at the request of US prosecutors under the Mutual Legal Assistance Treaty (MLAT) with The Bahamas.

She concluded that the MLAT asset freeze, which was imposed two years earlier on June 20, 2107, was “an abuse of process” because it was based on the same facts - and effectively sought to re-litigate - a previous bid to restrain the alleged Boeing fraud proceeds that was made under the domestic, separate, Proceeds of Crime Act (POCA) process.

And Justice Grant-Thompson also lifted he asset freeze on the basis that insufficient evidence had been provided to connect the various defendants to the alleged fraud. However, the Court of Appeal yesterday overturned this decision on the basis that an “overlap” between the MLAT and Proceeds of Crime Act processes does not amount to an “abuse of process” by itself.

It also found that she applied the incorrect test, adding that Justice Grant-Thompson had wrongly focused on whether the correct culprits had been identified in legal papers as opposed to whether a sufficient connection between the alleged fraud proceeds and offence was established. And, in a move that will mean this case will have passed up and down the entire Bahamian judicial system over a decade-long span, the Court of Appeal has now sent it back to the Supreme Court for its reconsideration.

This means the matter will have passed from the Supreme Court to the Court of Appeal, and then to the London-based Privy Council, the highest court in the Bahamian judicial system. It is now coming back down, having been passed from the Privy Council to the Court of Appeal, and now to the Supreme Court again where it will finally be concluded.

For yesterday’s Court of Appeal ruling overturns a May 27, 2021, verdict that the same judicial body, albeit featuring a different three-judge panel, made in relation to the asset freeze controversy. For Appeal justice Milton Evans, in a unanimous ruling backed by his two fellow justices, refused to reinstate the asset freeze as he blasted Bahamian prosecutors for failing to resolve “inconsistency in the evidence”.

The failure to resolve discrepancies over the date when a US bank account was closed resulted in “a material non-disclosure” to both the Supreme Court and Court of Appeal that was now “too late to cure”, appeal justice Evans determined, especially given that this fact “had the potential to destroy” the entire basis for the case against Mr King, Celebrating Women International and the others, Jonathan Reid and David Valdez-Lopez.

However, that verdict was rejected by the Privy Council in September 2024, which ruled there “was an obvious error” from a typographical perspective. Noting that this was not a case where there were conflicting or competing dates, it added that the 2015 date give for the account’s closure in the US request for judicial assistance was clearly incorrect as all other evidence revealed it was used for transactions in 2016.

As a result, it sent the matter back to the Court of Appeal which, taking its cue from the Privy Council, yesterday delivered a decision aligned with the latter rather than its own five year-old verdict. The Privy Council had also noted that, despite the length of time that has elapsed, the asset freeze has not been rendered moot or void as the disputed funds were now being held by an unnamed Bahamian law firm.

“It is alleged that the fraudsters induced Boeing to transfer $2.289m to an account in the US under their control by falsely representing that the transfer was the repayment of a deposit paid in respect of the purchase of a jet aircraft under a contract which had been cancelled. In fact, the appellant alleges the payment which had been made to Boeing had been made by Fuji Industries for unrelated purposes,” the Privy Council said of the background to the fraud.

The $2.289m was, at the alleged instruction of the perpetrators, transferred by Boeing to one of three accounts at Sun Trust Bank “over which the fraudsters had control”. The three accounts had been opened in the name of a Georgia-based company, CWI International Investments. While sharing the same initials, the judgment did not say this entity is connected to Celebrating Women International.

“The funds were then quickly moved in nine tranches into one of the accounts Royal Bank of Canada (RBC) in The Bahamas in the name of the fourth respondent, Celebrating Women International,” the Privy Council added. The funds were switched to the RBC accounts between December 4, 2015, and January 16, 2016, via a series of cheques.

“The records also showed that between December 4, 2015, and January 16, 2016, various funds from two of the Sun Trust accounts were debited via ATM cash withdrawals and debit/credit card purchases at various locations in The Bahamas,” the Privy Council said of information provided by the US federal authorities.

“During the course of the frauds, the suspects sent a number of e-mails to Boeing and searches revealed that the IP (Internet Protocol) addresses for the relevant accounts showed that they were provided by The Bahamas Telecommunications Company (BTC), located in Nassau.” Three deposits totalling $794,400 were said to have been made into the RBC Bahamas account beneficially owned by Celebrating Women International, with other funds flowing into those of CWI Investments.

However, the Bahamas’ then-director of public prosecutions informed the Attorney General’s Office they had also sought an asset freeze over the same accounts and funds via the Proceeds of Crime Act as part of “an ongoing criminal investigation into possible criminal offences committed in The Bahamas”.

Justice Grant-Thompson dismissed the Attorney General’s subsequent MLAT freeze on the basis that it was an “abuse of process”, given that it was based on the same facts as the Proceeds of Crime Act case, and was also a “fishing expedition”.

However, the Court of Appeal, in yesterday’s verdict, said the Attorney General’s Office argued that the Supreme Court failed to distinguish between the two separate processes behind each case.

“The appellant argued that this was a critical legal error because the MLAT proceedings were independent of the domestic criminal investigation, and the discharge of the domestic restraint order should not have prevented The Bahamas from fulfilling its treaty obligations to the US,” the Court of Appeal added.

“It was submitted that the two applications had different legal foundations in that the domestic order was brought by the Commissioner of Police to assist a Bahamian criminal investigation into offences allegedly committed within The Bahamas, with those proceedings arising from the police investigation after a suspicious transaction report was made to the Financial Intelligence Unit (FIU)…

“As such, they argue that the MLAT is intended to operate alongside domestic law and not be displaced by it. While accepting that domestic investigations may continue, domestic restraint orders may exist, but those circumstances do not prevent The Bahamas from complying with an MLAT request and therefore submit that the learned judge wrongly treated the domestic proceedings as preventing enforcement of the MLAT,” the court said of the Attorney General’s Office arguments.

“While accepting that both proceedings involved many of the same individuals, the same bank accounts and similar allegations of fraud, the appellants contend that similar facts do not amount to an abuse of process, and submit that the overlap is explained by the fact that both investigations arose from the same alleged fraud, as different legal powers may legitimately be exercised over the same facts.”

Justice Grant-Thompson, in her verdict overturning the asset freeze, ruled that it was a “re-litigation” of the Proceeds of Crime Act case. “Whilst I am loathe to find against the requesting state [the US], I must protect the bastions of the halls of justice. I find that the current MLAT application was based on the very same facts as the criminal application, with little appreciable difference,” she wrote.

Mr King and CWI agreed that the MLAT proceedings were “misused”, arguing that they were only invoked after the Proceeds Of Crime Act domestic proceedings had “stalled through the Crown’s own delay”.

“It was submitted by the respondents that the original Proceeds Of Crime Act restraint order was never properly pursued, the interested parties were not served, about 11 months passed without the matter progressing, and that instead of repairing the Proceeds Of Crime Act proceedings, the appellant sought MLAT relief, which they say went directly to the learned judge's finding that the MLAT application was being used to circumvent the consequences of the earlier proceedings,” they alleged.

“Ultimately, the respondents submit that the learned judge was correct in her findings, as there was evidence supporting that conclusion, and therefore the appellate court should be slow to interfere.” However, the Court of Appeal did not disagree, now finding that the judge “erred” in how she applied the relevant legal principles.

Referring to the MLAT, it said: “That statutory purpose is materially different from the purpose served by domestic restraint proceedings under Proceeds Of Crime Act.

It follows that the mere existence of substantial factual overlap between a prior Proceeds Of Crime Act application and a subsequent MLAT application cannot, without more, establish an abuse of process. Similarity of facts is not synonymous with identity of legal purpose.

“The critical question is whether the later proceedings constitute an impermissible attempt to relitigate an issue already determined or whether they invoke a distinct statutory jurisdiction for a distinct statutory purpose,” the Court of Appeal added.

“In all the circumstances of the instant case, we conclude that the learned judge approached the abuse of process issue through an analytical framework which did not sufficiently distinguish the statutory purpose of the MLAT Act from that of the earlier Proceeds Of Crime Act proceedings.”