Archive for U.S. Law

L.A. Times on Litigation Against North Korea

October 4, 2010 Terrorism (NK), U.S. Law 2 comments

At the L.A. Times, John M. Glionna discusses litigation against North Korea and the efforts of the plaintiffs’ attorneys to find, fix, and seize North Korean assets. Here’s a teaser:

“Nobody pays attention unless these nations are held accountable,” said Han Kim, the son of the Chicago minister abducted by North Korea.

Meanwhile, plaintiffs’ lawyers continue their hunt for North Korean assets. “I don’t know whether we’ll ever be successful. That’s the sad part,” said Streeter. He said he charged each of four plaintiffs a $5,000 retainer but will receive no more until a judgment is collected. “But I want to see some of that money that Kim Jong Il is using to buy his yachts and his Courvoisier as payment to my clients,” he said. “I’ll take it in Courvoisier. I don’t care.”

Glionna’s quotes of the lawyers are interesting reading, though legally and substantively, there isn’t much there that you haven’t read right here, at this humble blog. In fact, several weeks ago, after Glionna read the page, he contacted me with a few questions about how the law has evolved in this area. I also put him in touch with Richard Streeter and told him how to find Robert Tolchin (at the bottom of his pleadings, published on my page). It’s all just another day in the life of an pajama-clad blogger rearranging and serving table scraps from the dead tree media.

It bears repeating that these lawyers are trying to collect tort judgments on behalf of American victims of terrorism and torture, something that’s completely consistent with what Congress intended when it amended the Foreign Sovereign Immunities Act after 9/11. Yet their primary opponent hasn’t been North Korea, which failed to offer any defense to the suits, but our own State Department. I can understand the State Department arguing to maintain its prerogative over the conduct of foreign relations before Congress passes a law. What I can’t understand is State continuing to frustrate a statute after it is passed and signed by the President, after it has become the settled law of the land — just as it did with the North Korean Human Rights Act.

I don’t make any secret of the fact that I’m rooting for Streeter, Tolchin, and their clients. It’s fair to suppose that none of the assets they levy will have been earmarked to buy baby formula. Today, the total amount of the U.S. District Court judgments against North Korea is approaching $500 million. By some estimates, that’s the same amount North Korea was earning from its overseas weapons sales every year until recently.

Pueblo Plaintiffs Hunt for North Korean Assets in Treasury’s Files

September 4, 2010 Sanctions, U.S. Law No comments

When the survivors of the U.S.S. Pueblo, joined by the widow of their captain, sued North Korea for the horrific torture they endured in 1968, the real question wasn’t whether they were entitled to compensation, it was whether they could ever collect any. North Korea, as it has done with all of the other suits against it in U.S. federal courts, refused to respond to the suit after being duly served at its U.N. mission. Consequently, the court entered a $68 million judgment for the plaintiffs (by contrast, North Korea has been litigious in the British courts).

hawaiian-good-luck-sign.jpg
The Hawaiian Good Luck Sign

I’ve periodically reviewed the public court records regarding each of these cases. My most recent review of the docket of Massie v. Democratic People’s Republic of Korea today indicates that Richard Streeter, who represents the Pueblo plaintiffs, is now poring through a trove of information turned over by the Treasury Department’s Office of Foreign Assets Control, or OFAC, about North Korean assets within American jurisdiction. This information is largely a matter of speculation to those of us whose access is limited to open-source information. Here, OFAC claims that public disclosure would be prohibited by the Trade Secrets Act. But as it has done in similar previous cases, OFAC agreed to share information about blocked North Korean assets with Streeter, subject to a protective order. Here’s some text from OFAC’s unopposed motion for that protective order:

OFAC has agreed to provide plaintiffs with certain information responsive to the subpoena, pursuant to the terms of the attached proposed protective order.1 Without a protective order, the release of this information might violate the Trade Secrets Act (“TSA”), 18 U.S.C. § 1905, which imposes criminal penalties for the disclosure of information falling within its terms without appropriate authorization of law. Thus, while OFAC does not waive any right, privilege, or immunity to which it may be entitled with respect to any further response, it respectfully requests that, in light of the prohibitions of the Trade Secrets Act, the Court authorize its disclosure of information responsive to plaintiffs’ subpoena via the attached proposed protective order.2

OFAC explains why the information must remain protected from public disclosure:

Here, the information OFAC is willing to disclose was provided to it pursuant to 31 C.F.R. § 501.603, which requires financial institutions and other holders of blocked property to file reports with OFAC within ten business days of 4 Case 1:06-cv-00749-HHK Document 16 Filed 10/05/09 Page 4 of 6 the blocking of the property, as well as annually. The requirement is “mandatory,” see id., and “[r]eports filed are regarded as privileged and confidential. Id. subsection (a). In the absence of a protective order, disclosure of information submitted to OFAC under § 501.603 would adversely affect OFAC’s administration of its programs relating to terrorist financing and economic sanctions, which depends in large part on OFAC’s ability to maintain the confidentiality of the information submitted to it.

This implies, but doesn’t necessarily mean, that there are assets within OFAC’s reach to satisfy the judgment. Note also that according to public court records, Streeter filed a writ of garnishment, presumably for something. This does not mean, however, that whatever assets there may be are subject to attachment. In fact, OFAC has carefully reserved its position on whether any blocked assets are subject to attachment under the Foreign Sovereign Immunities Act. One hopes that the government of this country will not frustrate the pursuit of justice by those who suffered so much to defend that same country. With Treasury now revitalizing its own hunt for North Korean assets to block, the various plaintiffs with claims against North Korea may have access to more attachable assets.

While this is an interesting glimpse at Streeter’s strategy, we’ll have to wait and see whether he manages to collect any of Kim Jong Il’s yacht money. Meanwhile, this is one more complication and disincentive for anyone contemplating new business transactions with Kim Jong Il’s regime.

Related: The Calderon-Cardona plaintiffs, who recently won that massive $378 million judgment against North Korea, filed a similar protective order, as agreed with OFAC, just last week. The court has also permitted them to register their judgment in other jurisdictions, noting cryptically that although the protective order prevents them from disclosing where the North Korean assets are, they aren’t within the District of Puerto Rico.

Meanwhile, the family of the Rev. Kim Dong Shik has also won a default against North Korea. Even so, the Foreign Sovereign Immunities Act requires a plaintiff to prove the liability of the defendant to the court’s satisfaction. No hearing date has been set, but it looks like it could happen this month.

Throw the Book at Him

August 30, 2010 U.S. & Korea, U.S. Law, Washington Views 2 comments

So I will assume that Stephen Kim, the Korean-American State Department contractor who is now being prosecuted for leaking top secret / sensitive compartmentalized information was neither employed by, nor sympathetic to, North Korea given his choice of Fox News as a recipient for his leak of information that might have revealed U.S. intelligence sources in North Korea. And having said that, I really don’t care what Kim’s specific views were, I just want to know if any foreign government put him up to this. Regardless of Kim’s views, the administration is right to throw the book at those who illegally leak classified information.

One of the most inviolable rules any civil servant, contractor, or employee must respect is that confidential or classified information must never leave the office. That’s why you’ve never seen me talk about my work, and you seldom even see me allude to it. There are exceptions, recognized by law, for revealing abuse of authority or a violation of law by colleagues, but the appropriate vehicle for those reports is to report that information to the Inspector General, not Fox News or Wikileaks.

I already regret making the comparison to Robert Kim, because I only draw it because of Stephen Kim’s ancestry, which shouldn’t matter. But among South Korea’s favorite methods for exerting its extensive influence over U.S. policy toward the Koreas is to leak reports that favor its policy goals. I emphasize that I have no particular reason to believe that Stephen Kim was working for South Korea, but Kim’s case does illustrate the danger that foreign governments will use leaks to corrupt U.S. government employees for their own purposes (and in case you’re wondering, I hold precisely the same view of Jonathan Pollard, who deserves to die in prison). Ultimately, this legitimizes suspicions of dual loyalties against loyal and honest American citizens who may bring badly needed linguistic and cultural understanding to the federal service. That means that leaks of this kind are toxic for good policymaking, for the civil service, and for society as a whole, and that the Obama Administration gets my full support for this prosecution.

Kim Jong Il, Call Your Lawyer

August 10, 2010 NK Economics, U.S. Law One comment

I think it’s safe to say that North Korea is going through something of a legal rough patch. Boycotting talks has worked well for North Korea, but boycotting trials, not so much:

A state-run North Korean bank has lost a lawsuit for not paying back a loan it borrowed from a Taiwanese bank nine years ago, the New York district court said Friday.

The District Court of New York confirmed it ordered the Foreign Trade Bank of Korea to pay compensations of just under US$6.77 million to the Mega International Commercial Bank (MICB) in a ruling made earlier in the week. [Yonhap]

By which they really mean the U.S. District Court for the Southern District of New York. Nit, picked.

The North Korean bank is widely viewed as Pyongyang’s main foreign exchange earner with branch offices in Europe, the Middle East and Hong Kong.

Hallelujah. We’ve finally located an institution capable of holding North Korea to the same standards as other human beings. I wish all of these plaintiffs the best of luck in collecting their winnings. But as the article notes, with all of these judgments piling up — by my count, fast approaching $500 million, or about a year’s worth of counterfeiting/dope peddling/proliferating income — people are going to hesitate to do deals with the regime if they think their funds, instead of going toward their North Korean partners, are likely to get attached by third-country courts to satisfy judgments in America.

The down side of this is utterly lost on me.

Plan B Watch: A Shot Across China’s Bow?

July 28, 2010 China, China & Korea, Counterfeiting, Money Laundering, Sanctions, U.S. Law 2 comments

Hey, did the State Department threaten the Bank of China and the Bank of Shanghai? Or to put the question more bluntly, did someone just grow a pair?

A diplomatic source here said the U.S. will blacklist more North Korean entities and individuals in the coming weeks so that international financial institutions would cut off ties with them.

Any foreign banks refusing to sever business ties with the North Korean entities and individuals in question will have U.S. financial institutions suspend ties with them, the source said. “Think of Citibank or Bank of America suspending business ties with Bank of China or Bank of Shanghai. That will be a great burden to China.”

What I wouldn’t give to see the case of the vapors Peter Lee must be having at this moment. Of course, I care little and know less about Lee’s background, but I wonder if the manic oscillation between contemptuous arrogance and resentful victimhood is a function of life in a society where destiny is so often imposed on the resentful by the arrogant. If it’s futile or worse for a Chinese citizen to curse the policies of his own government, there’s no less futility in cursing the policies of the American government.

Crowley said last week that the U.S. will not only use existing measures like the Patriot Act, but will also establish “new executive authorities” to blacklist more “entities and individuals supporting proliferation, subjecting them to an asset freeze; new efforts with key governments to stop DPRK trading companies engaged in illicit activities from operating in those countries and prevent their banks from facilitating these companies’ illicit transactions.” [Yonhap]

They certainly do sound very serious about this. And thorough:

Robert Einhorn told the Voice of America that the U.S. has tracked down every trading company and individual in North Korea doing illegal business activities overseas and will freeze their assets. It was the first interview Einhorn has given since being made the U.S. government’s special adviser for nonproliferation and arms control.

Einhorn said the legal basis for past sanctions, which he called “existing authorities,” will be more actively applied and used to freeze assets of North Korean organizations, trading companies and individuals involved in terror or nuclear proliferation activities.

The new sanctions, on the other hand, will be focused on restraining other illegal activities such as trade in conventional weapons, luxury goods, tobacco, counterfeit bills and drugs, he said. He said the U.S. is drafting “authorities” to control those non-terror or nuclear proliferation areas. He said once the new authorities are arranged, the ability of the U.S. to freeze those illegal activities by the North will be strengthened. The details of the new sanctions will be announced by next week, he said. [Joongang Ilbo]

All of this has the potential for some very interesting money laundering prosecutions in the courts. The measure to watch for, however, is whether Treasury will simply declare the entire country of North Korea to be a primary money laundering concern and deny its entities access to the U.S. financial system, something that my spies tell me key people in Treasury have seriously considered. This so-called Fifth Special Measure is to Plan B what the Public Option is to Obamacare. And it wouldn’t be unprecedented. We’ve done this to Nauru and the Ukraine, among other places.

It’s encouraging that the old partisan reflexes really aren’t very probative of how people in Washington see the issue of financial pressure. Most hard-liners agree that all kinds of pressure have to be applied in tandem with at least an offer to negotiate, in the unlikely event that North Korea is prepared to accept the kind of fundamental transparency that even most soft-liners now know it never will.

North Korea Hit with $378M Judgment for 1972 Lod Airport Massacre

July 17, 2010 Terrorism (NK), U.S. Law One comment

I haven’t seen this reported in the news yet, but standing alongside the Pueblo judgment, this creates a basis for American victims of North Korean atrocities to try to collect several hundred million dollars from North Korean accounts and entities in third countries, using international agreements that allow for the reciprocal enforcement of foreign judgments.

North Korea was held liable for its role in supporting the Popular Front for the Liberation of Palestine and the Japanese Red Army, which planned the attack together in North Korea. North Korea did not contest the suit. The award consisted of $78 million in compensatory damages awarded to the estates and surviving relatives of the victims, and $300 million in punitive damages.

You can read the decision here: calderon-order.pdf

I’ve assembled more information at this page about other civil litigation against North Korea in U.S. courts.

President Bush removed North Korea from the list of state sponsors of terrorism on October 11, 2008, to reward it for its anticipated progress toward complete, verifiable, and irreversible nuclear disarmament. President Obama reaffirmed Bush’s decision on February 3, 2010. Despite substantial evidence of North Korea’s recent sponsorship of terrorism and his own assurances that he would consider re-adding North Korea to the list, President Obama still has not re-added North Korea to the list.

Robert Einhorn to Lead North Korea Sanctions Implementation Effort

May 31, 2010 Cheonan Incident, China & Korea, Counterfeiting, Money Laundering, Sanctions, U.S. Law, Washington Views 6 comments

einhorn.jpgThe Joongang Ilbo is reporting that Clinton Administration alumnus and counter-proliferation expert Robert Einhorn is going to be put in charge of “streamlining the process by which it implements” international sanctions against North Korea, sanctions that are likely to be enhanced after an international investigation found that North Korea torpedoed and sank the South Korean warship Cheonan.

“The U.S. administration was seeking more efficient management of implementation of sanctions, which had been divided between the State and the Treasury departments,” the source said. “Philip Goldberg, the assistant state secretary at the Bureau of Intelligence and Research, had been doubling as the implementation coordinator, but Einhorn is poised to take over.

“The U.S. government also tried to strengthen its sanctions system after the second North Korean nuclear test last year, when Goldberg was named the coordinator,” the source said. Goldberg was appointed to his Bureau of Intelligence and Research post in February.

Another source said Einhorn’s nomination is also part of the U.S. government’s efforts to follow up on President Barack Obama’s order to review “existing authorities and policies” on North Korea. Soon after South Korean President Lee Myung-bak unveiled Seoul’s countermeasures against Pyongyang Monday, the White House expressed its support and said in a statement, “This review is aimed at ensuring that we have adequate measures in place and to identify areas where adjustments would be appropriate.

You can read more information about Philip Goldberg here and here. Previous reports suggested that he would quit as North Korea sanctions coordinator, but he continues to occupy a senior post within the State Department.

My research and inquiries about Einhorn suggest that we could do worse. He was deeply involved in negotiating Agreed Framework I, but since then, Einhorn has caught on faster than most of those in the foreign policy industry. His statement in 2007 that North Korea was “backtracking” on its promises to disarm suggests that he could see how Agreed Framework II would end a year before most reporters would see through Chris Hill’s glib deceptions.

“Aside from his knowledge of North Korean nuclear issues, Einhorn is tight with Gary Seymour, the weapons of mass destruction coordinator at the White House, and other nonproliferation officials in the Obama administration,” another source in Seoul said. “Einhorn should be able to provide leadership in his new role.

This is another good sign. The report probably means to refer to Gary Samore, an Obama Administration official whose validation of longstanding suspicions that North Korea was secretly enriching uranium departed from Democratic orthodoxy that the Bush Administration’s 2002 uranium enrichment accusations blew up a perfectly good disarmament deal with North Korea over sketchy evidence. Today, the evidence of North Korea’s cheating is so overwhelming that the Obama Administration is also insisting that North Korea disclose its uranium enrichment activities.

Is it bad news that someone from State, rather than Treasury, is going to lead the implementation effort? Yes, State ought to be handling our dealings with foreign governments, but Treasury — and I single out Undersecretary for Terrorism and Financial Intelligence Stuart Levey in particular — has generally been much more determined and effective than State in making sanctions work. The last time State and Treasury confronted one another over sanctions, Chris Hill rolled Treasury and got sanctions lifted against North Korea, in spite of Treasury’s persistent belief that North Korea continues to counterfeit U.S. currency. My suspicions are fueled by this recent history, and also by the fact that the same people are running State’s East Asia Bureau and Treasury’s Bureau for Terrorism and Financial Intelligence now as during President Bush’s second term. All of the key players in both departments are holdovers or career civil servants. During the Bush Administration, the absence of strong leadership at State, the White House, and the NSC meant that more junior officials like Christopher Hill could effectively set policy. Today, the White House and the NSC seem to be setting policy for the more junior officials to implement.

What the policy will be comes down to the question of political will, but the more reliable information I’ve heard, both before and after the Cheonan report, indicates that the Obama Administration is determined to pressure Kim Jong Il rather than caving in and signing Agreed Framework III. Einhorn isn’t one who appears to favor talks for the sake of talks, at any price. There’s reason, then, for cautious optimism. The question, of course, is where the pressure is taking us. Is the objective to force Kim Jong Il back to talks? There isn’t much point in that if, as almost everyone agrees, he’ll never disarm anyway. That’s especially so when China continues to signal that it will block and undermine sanctions against North Korea, and fails to enforce the sanctions in effect now. At some point, one can only hope that the administration decides to make North Korea China’s problem by trying to destabilize the regime.

Another diplomatic source said the Obama administration needed to tighten its sanctions regime. The source said when North Korean overseas accounts were closed off by U.S. sanctions, they simply changed the name of the individual or the company which had opened the account and resumed transactions. The sanctions were aimed at banning transactions by companies or individuals suspected of involvement in the North’s weapons of mass destruction programs.

“U.S. officials have taken note of such [name-changing] practices and they’re preparing measures to eliminate them,” the source said.

At the same time, the Chosun Ilbo reports that the Obama Administration intends to devote more attention to finding and freezing Kim Jong Il’s substantial personal accounts stashed in overseas banks. This is something I’ve been calling for for years.

Sanctions against North Korea by the U.S. government are expected to focus on Kim Jong-il’s personal slush funds. The aim is to tighten the noose around Kim and the rest of the North Korean leadership rather than to increase pressure on the North Korean people, in a parallel with the 2005 freezing of what was apparently money for Kim’s private use in the Banco Delta Asia in Macau.

U.S. and South Korean intelligence are exchanging information about the bank accounts managed by a department of the North Korean Workers Party’s Central Committee codenamed “Room 39,” which manages Kim’s personal coffers. “We discovered long ago that most of the overseas bank accounts that received money from South Korean businesses involved inter-Korean projects were owned by the North Korean military,” said a South Korean government official.

I’ll just pause here to let you bask in the warm, gentle glow of Sunshine and reflect on how much kinder and gentler it has made North Korea.

Room 39 is expected to be the main target of the latest financial sanctions. It has 17 overseas offices, some 100 trading companies, a gold mine and its own bank. The $200 million to $300 million earned by subsidiary companies have gone straight into Kim’s overseas bank accounts. The director of Room 39, Jon Il-chun, is expected to face financial sanctions as well. Kim appointed Jon after the former head, Kim Tong-un, was put on a blacklist of North Korean officials by the EU in December.

The U.S. government may also freeze overseas bank accounts held by North Korea’s Reconnaissance Bureau, which is believed to have orchestrated the attack on the South Korean Navy corvette Cheonan in March. But some experts say the U.S. may find it more difficult to apply financial pressure on North Korea because the North moved most of its money to accounts in China and Russia.

Are these developments connected? I can’t say for certain, but Einhorn has previously expressed support for tightening sanctions on luxury goods that support Kim Jong Il’s patronage system. The overseas accounts probably consist largely of proceeds of illicit activities, or those banned under U.N. Security Council resolutions. The funds in those accounts are probably paying for the yachts, cars, booze, and other luxuries that Kim Jong Il continues to import in violation of those resolutions.

How can the U.S. government reach those funds? I can think of at least two ways off-hand. One is to designate North Korea, Bureau 39, and/or Kim Jong Il as primary money laundering concerns under Section 311 of the USA PATRIOT Act, which would force any bank holding those accounts to freeze them, or risk losing its access to its correspondent accounts with U.S. banks. As the example of Banco Delta Asia showed, access to correspondent accounts in the United States means access to the global financial system. Depositors who are engaged in international business transactions can’t bank at an institution without that access. With the marginal rate at which banks are capitalized, even the threat of Section 311 sanctions would render most banks insolvent.

Another alternative would be to issue indictments and forfeiture counts against the North Korean accounts themselves, under 18 U.S.C. sec. 1956, our strongest money laundering statute. Because North Korea never contests litigation in U.S. courts, the Justice Department would win convictions on the criminal forfeiture counts, and correspondent accounts of the banks holding those assets would be blocked. The banks, in turn, would have to freeze the accounts to avoid absorbing the loss. Because the money laundering statute has extraterritorial jurisdiction, Justice could pursue the assets almost anywhere in the world. But how would we prove that all of the funds were proceeds of illicit activity? We wouldn’t have to. A long-standing principle of money laundering laws is that if illicit funds are “co-mingled” with legitimately derived funds, the entire amount is considered tainted and can be forfeited.

What charges would we be able to prove? First, Justice would have indicted North Korean entities for the supernote counterfeiting conspiracy years ago, had it not been for the State Department’s intervention. Second, an Australian newspaper recently reported that indictments could be forthcoming for the transactions associated with the 2009 Bangkok weapons seizure.

Finally, does the fact that many of Kim Jong Il’s funds have moved to Russian and Chinese banks put them beyond the reach of Treasury and Justice? No. Like every bank that needs access to the international monetary system, Russian and Chinese banks need their correspondent accounts in U.S. banks to operate. Back in 2005, when the Treasury Department first announced its sanctions against Banco Delta Asia, there were also reports that the Bank of China was also under suspicion. This caused such extreme consternation in the Bank of China that two years later, its officers refused to touch the frozen Banco Delta funds that both the U.S. and Chinese government wanted it to transfer back to North Korea to facilitate Agreed Framework II. For China’s government, the downside of its transition to a market economy is that even it doesn’t have complete control over its capital. And in the face of any hint of a Treasury Department investigation, capital is a coward.

Lender Beware: North Korea’s Foreign Trade Bank Sued in U.S. Federal Court

May 7, 2010 NK Economics, U.S. Law No comments

The Korea Times reports that since its establishment in 1959, North Korea’s Foreign Trade Bank has been the regime’s “main foreign exchange bank,” with “branch offices in France, Australia, Kuwait, Hong Kong and Beijing.” The Times also informs us that the bank now finds itself the defendant in a multi-million dollar lawsuit in a U.S. federal district court:

A state-run North Korean bank is facing trial in the United States for failing to pay a $5 million loan that it borrowed from a Taiwanese bank in 2001, according to sources Wednesday. The District Court for the Southern District of New York ordered the Foreign Trade Bank (FTB) of North Korea to make a court appearance on May 17 and submit a proposed case management plan and scheduling order.

The FTB reportedly borrowed $5 million from the Mega International Commercial Bank (MICB) in Taiwan on Aug. 25, 2001 on the promise to amortize the principal and interest in three installments by Sept. 15, 2004. No repayment was made until December 2008, when the FTB paid the MICB $100,000 to cover some of the interest. The North Korean bank has thus far paid off a total of $462,000 to the MICB, still owing $1.78 million in interest and $4.7 million in principal. [Korea Times]

Note that this default preceded the sanctions under UNSCR 1874, so the default by itself may not say much about the effectiveness of sanctions. Yes, it’s possible that this was somehow a residual effect of the Bush-era sanctions against Banco Delta Asia and UNSCR 1718, but I doubt it. The timing of this default actually coincides with a building boom in Pyongyang and evidence suggesting that the regime could have made its payments.

So why would North Korea suffer such an injury to the reputation of one of its main portals to the world’s most gullible lenders and investors? As with so much of what North Korea does, pure spite explains it as well as anything else can. North Korea has a long history of defaulting on international loans, and as a consequence, it hasn’t been able to borrow from more prudent lenders for many years.

The suit against the FTB implicates a different exception to the Foreign Sovereign Immunities Act than the terrorism exception invoked by all of these lawsuits. Ordinarily the FTB would be immune from suit as an entity of a foreign government, but the immunity does not cover ordinary commercial transactions, which are as amenable to suit as those of any private bank.

The order to appear for a hearing on case management and scheduling is pursuant to Rule 16 of the Federal Rules of Civil Procedure. It most likely follows a non-appearance by the North Koreans for a Rule 16(f) “meet and confer” with counsel for the plaintiffs, when the parties are supposed to try to agree on the acceptable limits of discovery, including the always nettlesome issue of “electronically stored information,” including e-mails. Judges in the Southern District of New York are particularly fastidious about enforcing these discovery requirements, and if the plaintiffs were smart enough to demand FTB’s relevant e-mails or correspondence from the servers and files in Pyongyang, we could be looking at a very interesting sanctions motion coming before the court.

Past history, however, suggests that the North Koreans will continue to fail to appear in court, and they’ll lose the entire case by default anyway. FTB could also be stuck paying the plaintiffs’ attorney fees.

I have mixed feelings about this suit. Sure, I’m always up for a little private-sector help with the enforcement of the financial squeeze against Kim Jong Il, but on the other hand, part of any risky borrower’s creditworthiness is the lender’s capacity to collect through the courts. Leaving aside the murky questions of jurisdiction and venue, it might be a more effective financial sanction against North Korea to legislate that U.S. courts have no subject-matter jurisdiction to enforce the commercial debts its government institutions owe.

Lender beware.

All About Those Lawsuits Against North Korea

March 13, 2010 Terrorism (NK), U.S. Law No comments

Yes, you too can now read the complaints against North Korea filed in U.S. federal district courts — all four of them. At this new page, I’ve posted a summary and the status of each case, downloaded and posted the key court documents, and even linked to the statutes that strip North Korea of its sovereign immunity.

Hours for fun for North Korea watchers and plaintiffs’ lawyers.

The Indictments Are Coming! The Indictments Are Coming!

January 8, 2010 Axis of Evil, Iran, Missiles, Money Laundering, Proliferation, Sanctions, U.S. Law 2 comments

il-76-at-don-muang.jpgWhy do I blog? Because of stories like this:

U.S. authorities plan to indict a New Zealand company allegedly involved in selling North Korean arms to Iran, sources linked to the investigation say. They are trying to track down shadowy figures using a labyrinth of thousands of Auckland companies registered to an office on Queen Street, Auckland’s main street. [Sydney Morning Herald]

The significance of indicting the company is that the feds will probably tack on some criminal forfeiture counts, which means that some of Iran’s money will end up taking a tiny dent in our hopelessly colossal sea of debt instead of putting kobe beef on Kim Jong Il’s table. Oh goody. Consulting Plan B, I see the Justice Department has selected Option Number 2. Expect the indictment to allege violations of 18 U.S.C. sec. 1956 and/or 1957, our supple-yet-graceful money laundering statutes, with their nubile extraterritorial jurisdiction, and their warm, yielding criminal forfeiture provisions.

International organisations fear New Zealand’s casual company registration system makes laundering money and financing terrorism easy. Most of the companies in question were set up by the Vanuatu-based GT Group, controlled by the New Zealand accountant Geoffrey Taylor and sons, Ian and Michael. None have obvious purpose, and none of their directors can be traced. It is not suggested that the Taylors had any knowledge of the subsequent operations of the companies they set up.

“Indictments are coming and they will be big,” a source said.

Call a doctor. I’m getting priapism again.

There’s more on the companies involved in those transactions here, and not surprisingly, there may also be a Chinese link.

New Zealand’s Serious Fraud Office, police and Reserve Bank are also investigating but, in an embarrassment to the country’s authorities, the US Justice Department is preparing indictments a week before the US Secretary of State, Hillary Clinton, visits New Zealand.

And we now have our first semi-official confirmation that the cargo was headed just where I’d said it was — Iran, according to “sources” the SMH quotes. The bigger question, of course, is who the Iranians would have transferred those toys to from there, especially the man-portable anti-aircraft missiles said to be aboard.

Sources say international inquiries suggest SP was set up as a “one-time use” company solely to charter the plane; that Iran used SP to pay North Korea; and that SP’s New Zealand address allowed it to use a prominent US bank, unaware of the true purpose, to launder the money to the North Korean capital, Pyongyang.

GT Group will only say SP was set up “at the request of one of our professional clients based in the United Kingdom”. Sources say the client is the target of US interest. If the Taylors do not reveal the identity of the people they sold SP’s registration to, they are liable to indictment. A US Justice Department spokesman in Manhattan yesterday would not confirm the department’s interest, other than to say it was aware of the issue and a statement would be made later.

I can hardly wait. Readers will recall that according to David Asher, Justice had prepared an indictment of North Korea years ago for the supernote conspiracy, only to see the State Department step in at the last minute and kill the indictment. I don’t doubt that the indictment is still sitting in someone’s hard drive, in a long-expired version of Word Perfect. The rest, of course, is history: we signed Agreed Framework II, President Bush removed North Korea from the list of state sponsors of terrorism, North Korea disarmed, sheaves of grain sprouted from the blighted earth, and there was much singing of kumbaya, followed by the disciplined shaking of plastic flowers.

Oh, right. I guess I dreamed that part.

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