Ansbacher settles $10m legal battle


Tribune Business Editor

A Puerto Rican bank has blamed Ansbacher (Bahamas) for the now-ended controversy surrounding the latter's claim that $10.087m of its funds were "wrongfully retained".

Ruben Mendez Benabe, an attorney for Bancredito International Bank, told Tribune Business in an October 2 letter it had initially been unable to return the monies because Ansbacher (Bahamas) never provided "legal evidence" it had acquired fellow Bahamian institution, Lyford International Bank.

Given that Lyford was the original account holder with Bancredito, Mr Mendez Benabe said his client feared exposure to legal liability if it wired the funds as demanded to Ansbacher (Bahamas), which is part of AF Holdings (the former Colina Financial Group).

The row resulted in Ansbacher (Bahamas) filing a late August lawsuit against Bancredito in the Puerto Rican federal court to obtain funds it alleged were "urgently needed to honour customers' transactions".

However, the case has now been settled out-of-court after - according to Mr Mendez Benabe - an account was opened in Lyford's name and the $10.087m was wired to it by Bancredito on October 1.

Deploying multiple documents to clear Bancredito's name, Mr Mendez Benabe also produced an October 3, 2019, letter from Ansbacher (Bahamas) attorneys in which they dropped a complaint against his client to the Puerto Rican financial services regulator.

"Please be advised that the controversy between Ansbacher and Lyford, and Bancredito, has been fully resolved to satisfaction and that Ansbacher and Lyford have received the $10.087m account balance, which was wire transferred by Bancredito to a newly-opened account for the benefit of Lyford," Florida-based attorney William Tuttle wrote.

"As a result, Ansbacher and Lyford no longer have any interest in pursuing any regulatory investigation or proceeding as to Bancredito, and hereby irrevocably withdraw their complaint against Bancredito and ask that any pending proceeding before this office stemming from our September 3, 2019, letter be terminated and closed."

Giving his client's side of events, Mr Mendez Benabe confirmed that Bancredito and Lyford agreed on July 31, 2017, that the former would provide the Bahamian institution with correspondent banking services with one of the conditions being it kept a minimum account balance with the Puerto Rican bank.

After being informed that Ansbacher (Bahamas) would be acquiring Lyford "between February and June 2019", Mr Mendez Benabe alleged that Lyford requested a wire transfer from its account to that of the buyer on July 4, 2019.

He argued that the wire transfer could not be processed because it would have taken Lyford's account balance below the minimum threshold set by their contractual agreement, so Bancredito initiated the process for terminating the account - something that could take up to 180 days.

The Puerto Rican bank, having completed this process, sent Lyford a cheque for the funds on August 16, 2019. Mr Mendez Benabe argued that the agreement between the two sides allowed his client to either send a cheque or wire transfer, but Lyford insisted that the monies be wire transferred to an account in Ansbacher (Bahamas) name.

"To this date the evidence provided by Ansbacher and Lyford does not show that the merger has been completed, or that Lyford has ceased to exist as a corporate entity," the lawyer alleged. "We must stress that Ansbacher is not Bancredito's client, and there was no legal obligation of Bancredito towards Ansbacher.

"Even more, Bancredito requested, but never received, legal evidence as to the completion of the alleged merger. Consequently, Bancredito could only legally return the funds to its client, Lyford."

Ansbacher (Bahamas) and Lyford filed their federal court lawsuit 11 days later demanding payment of the $10.087m. Their August 27 action alleged: ""As of this date, plaintiffs are unaware whether the $10.087m cheque to Lyford was actually sent, or delivered, but it is not in the possession of the plaintiffs," the two Bahamian institutions alleged.

"Due to, among other things, existing [US] and other related regulatory and security rules, restrictions and constraints upon financial institutions, neither Ansbacher or Lyford are able to deposit or negotiate a $10.087m cheque payable to Lyford even if such a cheque was payable to Ansbacher.

"Plaintiffs have exhaustively inquired with all their corresponding banks, and none are able or willing to accept deposit of such a cheque, and any remittance of the account balance must be made to Ansbacher by SWIFT wire transfer."

Accusing Bancredito of acting "recklessly and not in a commercially reasonable manner", the Bahamian institutions alleged: "Bancrédito has wrongfully retained over $10m of Lyford's and Ansbacher's money in the account, using it for its own pecuniary gain, to the detriment and damage of both Lyford and Ansbacher.

"Bancredito's delays, inaction, actions and conduct described above are wholly abnormal and commercially unreasonable, and entirely unacceptable, within the applicable standards in the banking industry.

"It typically takes only hours, or perhaps a business day or two, to conduct due diligence, and honour the valid written wire instructions of an account customer and/or to close an account and transfer account funds upon the written instructions of a customer."

Mr Mendez Benabe said the matter was eventually settled after Ansbacher (Bahamas) and Lyford told Bancredito on September 17, 2019, that they had opened an account in the latter's name and asked that the funds be sent to it. The wire transfer was sent on October 1, and both Bahamian institutions agreed to dismiss their claim against Bancredito.