In Rasheed Al Rushaid v. Pictet & Cie, the New York Court of Appeals ruled in a November 22, 2016 decision that a foreign bank’s allegedly intentional and repeated use of correspondent bank accounts in New York was sufficient to subject the bank to personal jurisdiction. The Court concluded in a 4-3 decision that the bank’s use of correspondent accounts as part of an alleged conspiracy to launder looted funds was “purposeful” under the transacting business prong of New York’s long-arm statute. In reaching this conclusion, the Court rejected the Appellate Division’s finding that the bank and its client manager were not subject to jurisdiction because they “merely carried out their clients’ instructions.”
Plaintiff Rasheed Al Rushaid (“Rushaid” or “Plaintiff”) filed suit against Swiss bank Pictet & Cie (“Pictet”), its general partners, and one of its client relationship managers, Pierre-Alain Chambaz (“Chambaz”) in New York state court, alleging that they assisted three employees in concealing money in connection with a kickback scheme relating to an oil rig project operated by Al Rushaid Petroleum Investment Corporation (“ARPD”), a Saudi company owned by Plaintiff. The three ARPD employees allegedly received kickbacks and bribes from vendors located around the world in exchange for purchasing products at inflated prices and ignoring deficiencies in the vendors’ services.
Plaintiff alleged that Defendants aided the scheme by laundering and concealing the funds. Specifically, Plaintiff alleged that Chambaz, a Pictet client relationship manager, created a sham company in the British Virgin Islands – TSJ Engineering Consulting Co., Ltd. (“TSJ”) – and then opened and managed accounts for TSJ, as well as individual accounts for the ARPD employees. According to the amended complaint, the vendors wired bribes in favor of “Pictet and Co. Bankers Geneva” to Pictet’s New York correspondent bank accounts and then Pictet credited the funds to TSJ’s Geneva-based account. The money was later divided up and transferred in Geneva to the ARPD employees’ individual accounts at Pictet.
The Supreme Court granted Defendants’ motion to dismiss for lack of personal jurisdiction under CPLR 3211(a), concluding that Defendants’ alleged use of the correspondent accounts was passive not purposeful. The Appellate Division affirmed.