Harpoon

by Nitsana Darshan-Leitner

  The Lebanese Canadian Bank wasn’t an American company, and it did not have a branch office in the United States. But the bank did work with a financial institution in the United States that enabled the LCB to conduct transactions in dollars, a relationship referred to in the banking industry as a correspondent bank. In this case, the correspondent bank was American Express Bank, a subsidiary of the American Express Company, a multinational behemoth doing $1 trillion of business per year, but with its head office located on Vesey Street in lower Manhattan. American Express’s location was ironic: One would have thought that being located directly across the street from Ground Zero, the site of the largest terrorist attack the world had ever known, American Express would have been more careful about assisting terrorist money launderers. It was also less than a mile from the federal courthouse in Manhattan.

  The links connecting Hezbollah to the LCB were staggering and damning. The lawyers decided to proceed against LCB, but they also decided to file claims against the Democratic People’s Republic of Korea (commonly known as North Korea) and the Islamic Republic of Iran in separate proceedings. The opinion was that everyone complicit in the terror should be held accountable. Many of the missiles used by Hezbollah in the 2006 Second Lebanon War were produced in North Korea.1 Other missiles, including medium-and long-range rockets, were supplied by Iran. It seemed a case could be made proving they all had to share liability for the Hezbollah missile barrages that had devastated Israel. The plaintiffs would allege that the different parties had contributed different necessary components providing material support to the terrorists, enabling them to fire thousands of rockets, packed with high explosives and ballbearing shrapnel, into civilian communities. Whether it was financial services, money, or the rockets themselves, they needed to be called into account. But the different pieces of the case would have to be pulled together before the bad guys could be sued. It was a daunting challenge.

  Over the summer of 2008, teams of lawyers and interns of Shurat HaDin trekked from Tel Aviv to Israel’s north to gather evidence from the victims. The latter came from families from every different type of background. The only common denominator was that they all had suffered the tragic fate of having been injured by Hezbollah. An Israeli-Arab attorney helped gather evidence from the Arabic-speaking victims. Experts on missiles, banking, Hezbollah, and North Korea were consulted and retained.

  One of the plaintiffs was Michael Fuchs. Fuchs was forty-nine years old when Hezbollah launched the war and had just changed professions, going from being a school principal to growing a successful business that imported dinnerware from China. The married father of five was glued to his steering wheel in his new job, driving across the country to visit his close to two hundred clients and sell his wares. He was in northern Israel on July 13, 2006, driving near the city of Safed, when news reports of rocket fire prompted him to head home. He suddenly heard a menacing whistling sound followed by a massive explosion. A Hezbollah rocket landed close to his car, sending fragments through his windshield and slicing across his shoulder. His dashboard was sprayed with blood. He glanced to his right arm but all he saw was mangled flesh; a huge hole had been torn through his shoulder. He wrapped his shirt around the wound and, before going into shock, managed to kick open his door and cry for help. An ambulance picked him up ten minutes later. The Katyusha rocket from Lebanon had detached his deltoid muscle. His family learned of his situation while watching the news and then desperately searched for him among the wounded from that day’s deluge of missiles. Although doctors wanted to amputate his arm, Fuchs refused. Fuchs was numbed by the fear of losing a limb, compounded by the physical pain and psychological impact of driving through a missile barrage. His injuries left him with a 90 percent loss of use of his right arm.

  Another victim who joined the lawsuit was Rabbi Chaim Kaplan, a resident of Safed and an American citizen, married, and the father of eight children. Rabbi Kaplan, thirty-two years old when the war erupted, ran a camp for children from overseas near Safed. On July 13, 2006, the city came under missile fire. The rabbi’s wife, Rivka, called him on his cellular phone in a panic—rockets had rained down all over the city, and the children were terrified. Once he made sure that his campers were inside their shelters, Rabbi Kaplan raced home to attend to his family. While driving, a missile impacted near the rabbi’s car, and shrapnel punched into the vehicle and into his eye. It took hours to remove the fragments from his face and eye. The injuries crippled the young community leader, making it virtually impossible for him to carry out his duties. The rabbi’s family, especially his sons and daughters, suffered severe psychological trauma during the bombardment—the first of what would be many attacks during the conflict.

  Another victim who joined the lawsuit against the LCB was Karene Erdstein, a native of Columbus, Ohio, who was also in Safed when the missiles came raining down on her home and her family. Trained as a nurse, Erdstein had seen trauma before but had never experienced full-scale total blitz. The Hezbollah bombardments caught the family at home by surprise. A series of missiles impacted near the building where she lived with her husband and five children. A neighbor, who had not made it to shelter, was torn apart by an incoming rocket and killed instantly. Karene was pregnant at the time, and the trauma had caused her to miscarry. The Erdsteins’ oldest daughter, Mayan, was also severely traumatized by the rocket attacks. The family had to move from their home and seek shelter in the central part of the country, safe from the range of Hezbollah missiles; the family, like so many others in Israel, had become refugees in their own country.

  Compiling the victims’ testimony was heart-wrenching. Many of the summer interns wept as they heard stories of trauma and injury. Hezbollah had launched endless salvos of rockets against the citizens of more than half of Israel. It was the first time since the Second World War that a modern First World nation had endured such a degree of indiscriminate terrorism against a civilian population. Regardless of whether one regards the conflict between Lebanon and Israel as some form of “legitimate” warfare, the wanton Hezbollah missile attacks aimed randomly at civilian areas were unmistakably terrorism. Going after the LCB and the other players was designed to make sure that such horrors never happened again.

  There were two groups of clients: the first were American citizens who were entitled to sue North Korea, Hezbollah, and Iran in court because of the physical and psychological damage that they had endured as a result of the missile barrages.* These were Americans living in northern Israel—Safed and Karmiel, as well as Nahariya and Haifa. This group sued under the provisions of the Anti-Terrorism Act, and the Foreign Sovereign Immunities Act, special laws enacted by Congress that allow United States citizens and their families to bring suits in American courts regardless of where in the world they were targeted by terrorism. In enacting these laws, Congress expressed its intent that American families should not have to chase terrorist perpetrators and those who support them in legal actions around the world, actions that might prove logistically prohibitive and financially impossible. Many of the U.S. citizens that met with the lawyers were skeptical they would ever win a case in court, and all were certain they would never manage to collect anything. But with little to lose, and no one else offering them any assistance or hope, they all wanted to be plaintiffs, to seek a measure of closure.

  The second group of families encompassed Israeli citizens. This group included residents from Israel’s north—Druze, Bedouin, Christians, and Jews—who had suffered loss of life and property during Hezbollah’s rocket campaign. Because this group didn’t include American citizens, the lawsuit was filed in New York State Court asserting common-law claims under the laws of Israel, such as wrongful death, intentional infliction of emotional distress, assault, and battery. Suing for damages in state court was a novel approach, what lawyers call a “case of first impression.” The argument was that even though the LCB was not doing business directly in the United States, the fact that it had a correspondent bank in New York
and was doing dollar wire transfers through a New York bank, created enough contacts with the forum to find that the LCB could be hauled into court in New York State. The plaintiffs argued that under New York State’s long-arm statute the LCB could be made to stand trial in Manhattan. The complaint alleged that the LCB had been providing financial services to Hezbollah’s Yousser Company and Shahid (Martyrs) Foundation. These funds were utilized by Hezbollah to purchase rockets, pay its troops, and launch missiles into Israel. Moreover, it was alleged that the LCB processed payments to the families of the shaheeds, the widows and orphans of the terrorists killed while attacking Israeli civilians.

  The lawyers for the LCB and the American Express Bank tried to get the cases dismissed. The LCB argued that it was a Lebanese entity and had no American presence, no branches or business offices, and, accordingly, there was no jurisdiction. The American Express Bank argued while it conducted business in the United States it was merely a correspondent, its client was solely the LCB, and it had no means of determining whose wire transfers they were processing or what they were for.

  The lawsuit against the LCB was initially filed in the New York State Supreme Court at 60 Centre Street in downtown Manhattan on April 8, 2009, and was moved by the defendants to the United States District Court for the Southern District of New York. In the case of Licci v. American Express Bank, Harpoon permitted Shai to provide an affidavit in the case to answer the defendant’s motion to dismiss. In the affidavit he explained that some of the accounts maintained by Hezbollah at the LCB’s branches in Lebanon between 2004 and July 12, 2006, were titled to the Shahid (Martyrs) Foundation. The Martyrs Foundation served as an important component of Hezbollah’s financial apparatus. “The organization,” Shai U. submitted, “has used funds from this account to prepare for and carry out a wide range of terrorist and other violent activities, including rocket and missile attacks on Israel.”2

  The specifics of Shai’s affidavit pointed to one of the Martyrs accounts, numbered 108987. During the period between 2004 and July 12, 2006, and even later, Hezbollah made dozens of dollar wire transfers in and out of account number 108987 in the LCB’s branch in Beirut. These wire transfers, which totaled several million dollars, were executed by the LCB through Amex Bank in New York, which acted as the LCB’s correspondent bank for these dollar transfers. The name on the account was Martyrs, so according to Shai, there was no question that Amex Bank knew that it was executing wire transfers on behalf of Hezbollah.3

  The federal court in New York initially accepted the defendants’ arguments and dismissed the case. It was a big blow to the families. The plaintiff’s lawyers filed an appeal in the United States Court of Appeals for the Second Circuit. American Express Bank succeeded in its position that it was merely a correspondent bank and had no obligation to know the ultimate customer of its customer, even if it was something called the Martyrs Foundation in Beirut, Lebanon, during a highly publicized Middle Eastern armed conflict.

  The case against the LCB, however, was more interesting. The Second Circuit wrote that New York State law was unclear as to whether New York courts have jurisdiction over a foreign bank that did business through a New York-based correspondent bank. Since the issue was one of first impression, meaning it had never been addressed by New York State’s highest court, the Second Circuit issued a “certified question” to the New York State Court of Appeals. This appeal within an appeal was then briefed and argued to the New York State Court of Appeals. During oral argument, Judge Victoria A. Graffeo asked incredulously: “So are the banks now going to have to ask what are you using these monies for before they wire the funds?” The attorney Robert Tolchin, responded confidently, “They may. And I don’t think that’s a bad thing as a policy matter.”4

  The argument worked. On November 20, 2012, the Court of Appeals issued a landmark decision holding that maintenance and use of a correspondent banking arrangement in New York was a sufficient contact in New York to confer jurisdiction and that the long-arm statute provided the right to reach the LCB in Lebanon. Nitsana, shuttling back and forth between Tel Aviv and New York City, felt that the victims she represented just might have a chance in court.

  The implications were astounding and immediately set the banking world reeling. No place in the world was more central to the banking industry than New York. No international bank could afford to be without a correspondent bank in New York, since without one they could not clear dollar transactions. And the highest court in New York had just ruled that even a bank that has no branch or other presence in the United States could still be reached by courts in New York when the transactions at issue involved wire transfers through a correspondent bank in Manhattan. Virtually every sizable international financial institution in the world had some U.S. correspondents, almost all of which were located in New York. Banks that had believed they could move terror funds with impunity because they were not present in the United States now understood that victims of terrorism could drag them into litigation and they could face massive damages awards. In one decision, the New York Court of Appeals had created a meaningful downside that would make international banks think twice before they turned a blind eye to doing business with terrorist organizations.

  American banks were also concerned by the ruling. It meant there was a chance that they, too, could be held accountable for the actions of the unscrupulous foreign banks for which they served as correspondents. International banking had just gotten much more complicated and potentially expensive.

  The plaintiffs dug in for a long litigation journey against the LCB—one that continues to this day. The bank’s attorneys continued to fight.

  The legal battlefield was slow-moving. The no-man’s-land of motions and delays was frustrating. The LCB wasn’t the only instance of justice delayed. The original case against the Arab Bank, Linde v. Arab Bank, had been filed in the summer of 2004 in the federal court in Brooklyn, New York, for twenty-four acts of terrorism; included among them were the Park Hotel attack, the Bus No. 19 bombing, the Sbarro restaurant massacre, the Café Moment bombing, and the double suicide bombing in downtown Jerusalem, as well as other terrorist tragedies of the intifada. All these attacks were perpetrated by Hamas. The suit was then joined by hundreds of other families, American and non-American, in similar lawsuits demanding compensation for the injuries done to their loved ones in the intifada violence carried out by a range of other terrorist organizations. The cases were brought under the Anti-Terrorism Act and the Alien Torts Claims Act.

  The complaint alleged that the Arab Bank aided and abetted the terrorist organizations by transferring funds from its branch in Lebanon through its branch in New York to the leaders and senior officials of Hamas in Gaza and the West Bank, including Sheikh Ahmed Yassin. In addition, the bank was accused of moving funds for Islamic charities affiliated with Hamas—an organization that had been outlawed in Israel and the United States—and using those accounts to provide stipends to the imprisoned terrorists and to the families of the suicide bombers. The plaintiffs also accused the bank of providing financial services to the Saudi Committee for the Support of the al-Quds Intifada, which paid salaries to the terrorists and their families taking part in the ongoing Palestinian violence against Israel.

  Parallel to the civil litigation, the U.S. Treasury initiated its own legal proceeding against the bank, charging that it had evaded American financial compliance regulations. In 2005 the Arab Bank was fined $24 million. The Treasury said that the bank’s New York branch failed to adequately guard against the risks of money laundering and terrorist financing, and also failed to properly report suspicious activities.5

  In the civil proceeding, the plaintiffs’ lawyers sorted through the massive amounts of documents and evidence collected by the IDF in the “Green Lantern,” “Destruction of Leaven,” and “Defensive Shield” operations, as well as evidence the Arab Bank was compelled to turn over to the United States in its regulatory proceeding. The plaintiffs retained experts and translat
ors to prepare reports and opinions concerning the Arab Bank’s liability. The numerous depositions were taken in several different countries. During the discovery phase the bank was required by the court, pursuant to the plaintiffs’ request, to disclose documents concerning the wire transfers for known or suspected terrorists that it had conducted. The Arab Bank refused and claimed that according to Jordanian, Lebanese, and Palestinian law there was bank secrecy, and turning over the documents would violate these regulations and would expose it to criminal and civil liability. The court did not accept the bank’s arguments and sanctioned it for noncompliance with its discovery order. This was a dangerous and potentially devastating blow to the defense’s case, and the Arab Bank’s lawyers immediately appealed.

  The defendant contended, in its appellate papers, that if the sanction led to a finding of liability at trial and then was reversed on appeal, the Arab Bank would suffer irreversible harm to its reputation. In its January 18, 2013, decision, the Second Circuit Court of Appeals refused to provide any relief, however, holding that this issue of whether the court’s sanction was proper, could be raised only after the trial. As such, the bank’s appeal, if still necessary, must wait until after final judgment was entered in the case. A year and a half later, and following ten years of preliminary preparation and proceedings, the case brought by the terror victims against the Arab Bank would finally go to trial in August 2014.

  Another legal fight against terrorism dragged on, as well, in New York federal court.

  In February 2004, Nitsana Darshan-Leitner and her colleagues, Mordechai Haller and David Strachman, had filed suit against the Palestinian Authority and the PLO over its involvement in terrorism. The civil action, Sokolow v. Palestinian Authority, bundled together the cases of eleven American families, relatives of individuals who had loved ones killed or maimed in some of the intifada’s most heinous terrorist attacks carried out between 2001 and 2004, which killed thirty-three people and injured more than four hundred. These included the Hebrew University cafeteria bombing, the shooting attack on Jaffa Street in Jerusalem, a suicide bombing on King George Street, and the Bus No. 19 attack. The victims sued the Palestinian Authority and the PLO for the deaths and injuries of their loved ones, as well as the psychological trauma inflicted upon them by the defendants, demanding more than $1 billion in monetary compensation.