ROBERT A. SWIFT Kohn, Swift Graf; P.C. Estrada, the corrupt and now-deposed President of the...

ROBERT A. SWIFT Kohn, Swift & Graf; P.C. One South Broad Street, Suite 210& Philadelphia, PA 19107 Telephone No.: (215) 238-1700

SHERRY P. BRODER #1880 Attorney at Law-A Law Corporation Davies Pacific Centc/o 841 Bishop Stt'eet, Suite 800 Honolulu, Hawaii 96813 Telcphone No.: (808) 531-1411

Jon Van Dyke 2515 Dolc Street Honolulu, Hawaii 96822 Telephonc No.: (808) 956-8509

Attorneys for Defendant Mariano Pimentel and thc Class of Filipino Judgmcnt Ct'cditors

PIlm IN THE! .1JII/rIED trATES DISTRICT CQUIlT

DISTRICT OF HAWAII

. (_ 'MAR 1 3 2001

~ffcfodc a~,,, .f.' WAlTER A. Y. H. CHINN: C;;;

IN THE UNITED STATES DISTRICT COURT

DISTRICT OF HA WAIl

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

Plaintiff, v.

ARELMA, INC., et aI., Dcfendants

----------------------------}

} } } } } } } } } } }

Civil No. CVOO-00595MLR

DEFENDANT PIMENTEL'S OPPOSITION TO PCGG's MOTION TO DISMISS, TRANSFER OR STAY FILED 03/05/01; DECLARATION OF ROBERT A. SWIFT; CERTIFICATE OF SERVICE

DEFENDANT PIMENTEL'S OPPOSITION TO PCGG's MOTION TO DISMISS, TRANSFER OR STAY FILED 03/05/01

University Of Hawaii School of Law Library - Jon Van Dyke Archives Collection

TABLE OF CONTENTS

Page

I. BACKGROUND 2

II. THE INSTANT INTERPLEADER ACTION 5

III. ARGUMENT 6

A. UNCONTRADICTED FACTS 6

B. THE PCGG HAS NOT SHOWN IT IS EMPOWERED TO APPEAR IN TIDS PROCEEDING 7

C. THE ACT OF STATE DOCTRINE DOES NOT BAR TIDS INTERPLEADER ACTION. 7

1. Introduction 7

2. The Location of the Assets Bars Application of the Act of State Doctrine 8

3. The Burden Is on the PCGG to Prove That an Act of State Occurred. 10

4. The Swiss Judicial Order Is Not an Act of State Because It Is Only a Provisional and Temporary Act, Not a Final and Conclusive One, and Because It Was Issued by a Court Rather than by the Executive Branch. 11

5. This Interpleader Action Does Not Require U.S. Courts to Examine the Legitimacy of the Swiss Decision. 12

6. The Act of State Doctrine Is Inapplicable Because the Purported Act of the Swiss State Did Not Concern Matters "Within Its Own Territory." 13

D. CONCEPTS OF "INTERNATIONAL COMITY" DO NOT BAR THIS INTERPLEADER ACTION. 14

E. VENUE IS PROPERLY PLACED IN THE DISTRICT OF HAWAII. 16

IV. CONCLUSION 19


TABLE OF AUTHORITIES

Rules & Statutes

Fed. R. Civ. P. 22

Fed. R. Civ. P. 23(d)

28 U.S.C. § 1332

28 U.S.C. § 1335

28 U.S.C. § 1391

28 U.S.C. § 1397

Cases

Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682 (1976)

Bandes v. Harlow & Jones, Inc., 570 F. Supp. 955 (S.D.N.Y.1983)

Bandes v. Harlow & Jones, Inc., 852 F.2d 661 (2d Cir. 1988)

F. & H.R. Farman-Farmaian Consulting Engineers Firm v. Harza Engineering Co., 882 F.2d 281 (7th Cir. 1989), eerl. denied, 497 U.S. 1038 (1990)

Faysound Ltd. v. Walter Fuller Aircraft Sales, Inc., 748 F.Supp. 1365 (E.D.Ark.1990), eert. denied, 502 U.S. 1096 (1992)

Federal Office for Police Matters v. District Attorneys' Office IV for the Canton of Zurich, lA.87/1997/err

-i-

Page

16

19

16

16,18,19

16,17,19

17,19

10,11,13

9

9

8,10

12

15


Flatow v. Islamic Republic of Iran, 999 F.Supp. 1 (D.D.C. 1998)

Hilao v. Estate of Marcos, 95 F.3d 848 (9th Cir. 1996)

Hilao v. Estate of Ferdinand Marcos, 103 F.3d 767 (9th Cir. 1996)

Hilton v. Guyot, 159 U.S. 113 (1895)

In re Estate of Ferdinand Marcos Human Rights Litigation, 25 F.3d 1467 (9th Cir. 1994), eert. denied, 513 U.S. 1126 (1995) 103 F .3d 762 (9th Cir. 1996)

In re Estate of Ferdinand Marcos Human Rights Litigation, 94 F.3d 539 (9th Cir. 1996)

Leader Nat'l Ins. Co. v. Shaw, 901 F. Supp. 316 (W.D. Okla. 1995)

Letelier v. Republic of Chile, 488 F.Supp. 665 (D.D.C. 1980), eerl. denied, 471 U.S. 1125 (1985)

Liu v. Republic of China, 892 F.2d 1419 (9th Cir. 1989), cert. dismissed, 497 U.S. 1058 (1990)

Mannington Mills, Inc. v. Congoleum Corp. 595 F.2d 1287 (3rd Cir. 1979)

Minnesota Mut. Life Ins. Co. v. Ensley, 174 F.3d 977 (9th Cir. 1999)

Pimentel v. Merrill Lynch, 00 Civ. 580 (D.Haw.)

Ramirez de Arellano v. Weinberger, 745 F.2d 1500 (D.C. Cir. 1984)

-ii-

14

13

3

14

16

16

19

13

11,13

12

17,18

5

11


Republic of the Philippines v. Christie's, 2000 U.S. Dist. LEXIS 10635 (SDNY 2000)

Republic of Iraq v. First National City Bank, 353 F.2d 47 (2d Cir. 1965), cert. denied, 382 U.S. 1027 (1966)

Republic of the Philippines v. Marcos, 862 F.2d 1355 (9 th Cir. 1988)(en bane), eert. denied, 490 US. 1035 (1989)

Republic of the Philippines v. Marcos, No. 96-16246 (9th Cir.1997)

Republic of the Philippines v. Marcos. Civ. Case No. 0141 (Sandiganbayan, July 27, 1999)

Russian Travel Bur., Inc. v. Grossman, No. 80 Civ. 476, 1980 U.S. Dist. LEXIS 10944 (S.D.N.Y. Apr. 11, 1980)

Society Nationale Industrielle Aerospatiale v. District Court, 482 U.S. 522 (1987)

Sotheby's v. Garcia, 802 F. Supp. 1058 (SDNY 1992)

State Farm Fire & Casualty Co. v. Tashire, 386 U.S. 523 (1967)

Tchacosh Co. v. Rockwell International Corp., 766 F.2d 1333 (9th Cir. 1985)

Technograph Printed Circuits, Ltd. v. Packard Bell Elec. Corp., 290F. Supp. 308 (C.D. Cal. 1968)

Timberlane Lumber Co. v. Bank of America, 549 F.2d 597 (9th Cir. 1976), eerl. denied, 472 U.S. 1032 (1985)

Trajano v. Marcos-Manotoc, 978 F.2d 493 (9th eire 1992», eert. denied, 508 U.S. 972 (1993)

-iii-

6

9

10

5

15

18

14

6,17,18

17

8,9

19

12

16


Underhill v. Hernandez, 168 U.S. 250 (1897)

United States Trust Co. v. Jenner, 168 F.3d 630 (2d Cir. 1999)

W.S. Kirkpatrick & Co. v. Environmdntal Tectonics Corp., Int'l. 493 U.S. 400 (1990)

Other

Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment oCPunishment, Dec. 10,1984,23 I.L.M.I027 (1984),

8,13

18

12

as modified, 24 I.L.M. 535 (1985) 15

Federal Office for Police Matters. sec.7(c)(cc) 15 sec.7(c)(ee) 15 sec. 7(c) (gg) 15

International Covenant on Civil and Political Rights, 999 U.N.T.S. 171 (1966) 15

Restatement (Second) of the Foreign Relations Lalv of the United States (1965), sec. 43 comment a 11 sec. 41 comment d 12

Restatement (Third) of the Foreign Relations Law of the United States (1987), sec. 403 Comment a and Reporters' Note 5 14 sec. 443 Reporters' Note 4 14

7 C. Wright & A. Miller, Federal Practice and Procedure § 1703 (1972) 17

-iv-


Defendant Mariano Pimentel, by his undersigned counsel, vigorously opposes the

Motion of the Philippine Presidential Commission on Good Government ("PCGG") to dismiss,

transfer or stay proceedings. 1 The Motion is a transparent attempt to relegate to backroom

corruption and payoffs the entitlement to approximately $35 million of assets which belonged to

Ferdinand E. Marcos and which are located in the State of Hawaii. Under the leadership of

Joseph Estrada, the corrupt and now-deposed President of the Philippines, the PCGG attempted

pre-interpleader to spirit the assets from the United States and prevent any meaningful judicial

inquiry of entitlement. Unable to adduce any proof of entitlement to the assets and despising of

an open and fair judicial inquiry, the PC GO solution is to have entitlement resolved in a cloistered

and secretive proceeding in the Philippines that·bars participation by other parties and lacks

jurisdiction over them. As will be shown below, the PCOG has regularly litigated entitlement to

ownership of Marcos assets in the United States when it suited itself. Because the PCGG's

activities have been rife with questionable transactions and cloaked in secrecy and it relies upon

five (5) untested affidavits and numerous documents for Court consideration, it must be ordered

to provide full discovery of all relevant facts before this Court will have a sufficient record to

make a ruling on its Motion.2

I. BACKGROUND

The Class of Filipino human rights victims obtained a judgment against the Estate

of Ferdinand E. Marcos for $1.964 billion on February 3, 1995 in the United States District Court

The PCGG's Motion to Recuse Judge Manuel Real has been referred to Judge Alan Kay and will be addressed in a separate memorandum.

2 Defendant Pimentel has filed a Motion for Expedited Discovery with the Court seeking discovery from the PCGG and the affiants who filed affidavits on its behalf.

2


for the District of Hawaii. The judgment was affirmed on appeal and, with interest, has a value in

2001 of about $3 billion. See Hilao v. Estate of Ferdinand Marcos, 103 F.3d 767 (9th Cir. 1996)

The Class has initiated numerous proceedings in aid of execution, including an attempt to transfer

the judgment to the Republic of the Philippines. Two years ago it reached a settlement with the

Estate and Philippine government which was never funded and is now terminated. See Order

entered in MOL No. 840 on Jan. 12,2001. The Philippine Presidential Commission on Good

Governmenf has thwarted the Class' efforts to execute upon Marcos assets and thwarted the

funding of the settlement. The Philippine courts have never permitted the transfer of the judgment

to that country, and there is no opportunity for the Class to participate in the Marcos forfeiture

proceeding in the Philippines.

In 1986 the Philippine government succeeded in having the Swiss government

freeze the Marcos assets in Switzerland. However, Switzerland never finally adjudicated

entitlement to the frozen assets. Instead, it found prima facie evidence that at least some of the

assets were illegally acquired, and required the Philippine government to prove in its own courts

in a final judgment that the assets were illegally acquired. Assets totaling $627 million were

eventually transferred into an escrow account invested outside the Philippines with the Philippine

National Bank as escrow agent.

3 The mantra of the PCGG is secrecy. It operates in its own country in secrecy where there is an executive order precluding forced disclosure of information. The PCGG has also operated in Switzerland, again in secret proceedings. The PCGG now uses as a legal consultant the former Zurich District Attorney, Peter Cosandey, who directed the transfer of the Marcos assets from Switzerland to the Philippines in 1995. Since the PCGG claims that it must be treated the same as its government (PCGG Br. at 20, fint 12), it is not unfair to impute to it the same corruption and payoffs as resulted in the January 2001 removal of President Estrada who controlled the PCGG and its membership.

3


Even though Ferdinand E. Marcos died in 1989 and was no longer subject to

criminal proceedings, the Philippine government commenced a criminal forfeiture proceeding

against him in 1991. Indeed the Swiss courts ruled that a portion of the Marcos assets in

Switzerland could be legitimate wealth of Fer din and E. Marcos, but it lacked information to

allocate.4 In September 2000 a Philippine court, the SandiganbayanS, ruled that because the

Marcos heirs had disclaimed ownership to the $627 million then in escrow, the government was

entitled to the money. However, that Court acknowledged that the disclaimer by the Marcoses to

the $627 million in assets does not demonstrate the truth of the government's claim that the

money was illegally acquired.6 In Fact, the Marcoses were forced to disclaim or else be convicted

of criminal conduct in the Philippines for failure to disclose assets or pay taxes. There was no

ruling on the Merrill Lynch account since the Philippine government did not have jurisdiction over

it. Furthermore, the PCGG has, after many years, never shown any illegal origin of the $2 million

deposited in the Merrill Lynch account in 1972, which has grown to $35 million by July 2000.

Indeed, after seven years of legal work for which the PCGG has paid him handsomely, Swiss

attorney Martin Kurer apparently still has no evidence. 7

4 Martin Kurer Affidavit, Ex. 2 at 9.

5 The Sandiganbayan, and its notoriously anti-human rights jurist Justice Francis Garchitorena, refused to acknowledge the validity of the December 1997 decision of the Swiss Supreme Court which directed the Philippine government to compensate its human rights victims who had received a judgment as part of the Class. Thus, the Sandiganbayan enforced that part of the decision of the Swiss Supreme Court to transfer assets, but refused enforcement of the remainder.

6 Danilo Daniel Affidavit, Ex. J at 27.

7 See Kurer Affidavit "s 19-26.

4


II. THE INSTANT INTERPLEADER ACTION

When Class Counsel learned of the existence of the Merrill Lynch account, it filed

a complaint against Merrill Lynch in the Hawaii federal court in early September 2000. The case,

Pimentel v. Merrill Lynch, 00 Civ. 580 (D.Haw.), was assigned to Judge Manuel Real. By

agreement of counsel, that case was dismissed in return for Merrill Lynch promising to initiate an

interpleader proceeding in the Hawaii federal court and deposit the proceeds of the account into

that court. The Hawaii federal court memorialized that understanding in a consent Order on

September 13,2000.8 The court, sua sponte, also sealed the record of the case.9

The decision to initiate an interpleader proceeding in Hawaii was sound. Merrill

Lynch had an office in Hawaii, and defendant Pimentel was resident in Hawaii. The judgment in

favor of the Class had been rendered in Hawaii, the site selected by the MDL in 1990. The

Marcoses had lived in Hawaii between 1986 and 1991, and Ferdinand E. Marcos died in Hawaii.

Presumably he controlled the Merrill Lynch account from Hawaii while he was alive. Golden

Budha obtained its judgment in Hawaii. The PCGG has litigated over Marcos assets in Hawaii,

beginning in 1986 and most recently in 1996 when it litigated and lost its claim against the Marcos

house on Makiki Heights Drive. See Republic of the Philippines v. Marcos, No. 96-16246 (9th

Cir. 1997). The Philippine government maintains a consulate in Hawaii.

8 Much of the PCGG's Motion is focused on Judge-bashing. Apparently its secretive plans to strong arm Merrill Lynch to transfer the proceeds of the US based account to the Philippines were spoiled when Merrill Lynch filed the interpleader complaint. One can only wonder how this money would have been divided once it reached the Philippines.

9 That record has been unsealed for months, and the PCGG neither moved to open it nor can cite any prejudice from the sealing of the record for a short period.

5


In questioning the venue of the United States or even Hawaii, the PCGG's lack of

candor borders on the unethical. The PCGG or its attorneys have a duty to inform this Court of

the 15 years of intense litigation over Marcos assets or corruption it has engaged in throughout

the courts of this country. A LEXIS search picks up over a dozen different reported cases. The

PCGG has voluntarily participated in at least two interpleader proceedings, including one that is

on-going involving a Picasso painting. See Republic of the Philippines v. Christie's, 2000 U.S.

Dist. LEXIS 10635 (SDNY 2000); Sotheby's v. Garcia, 802 F. Supp. 1058 (SDNY 1992). When

the PCGO comes into this Court, it is scandalous to sandbag the Court by feigning that it will be

inconvenienced and prejudiced were a United States Court to rule as to entitlement to proceeds of

a Merrill Lynch account that are located in Hawaii.

III. ARGUMENT

A. UNCONTRADICTED FACTS

Based on the assertions contained in the Motion of the PCGG and the other known

facts, the following would appear uncontradicted:

• The proceeds of the Merrill Lynch account are in the State of Hawaii and deposited with the

Clerk of the Court.

• The PCGO was trying to deprive United States courts of jurisdiction over the assets in

the Merrill Lynch account by convincing Merrill Lynch to transfer the assets to the

Philippines.

• All parties that have appeared and answered or otherwise moved in this proceeding have

a legally significant nexus to Hawaii, including the Philippines which has a consulate in

Hawaii and has engaged in significant litigation here.

6


• The PCOO has presented no evidence in any forum showing that the $2 million

deposited in the Merrill Lynch account in 1972 was illegally acquired and belongs to the

Philippine government.

B. THE PCGG HAS NOT SHOWN IT IS EMPOWERED TO APPEAR IN THIS PROCEEDING

Following the removal of President Joseph Estrada for rampant corruption in

January 2001, four members of the PCOO resigned, including its chairman Magdangal Elma.

There is no evidence that new commissioners or a chairman have been appointed. It is the

understanding of plaintiffs' counsel that the PCOO lacks power to act without a quorum and a

chairman. Until such time as the PCOG demonstrates that it is fully authorized to act, the Court

should take no action on the pending Motion.

C. THE ACT OF STATE DOCTRINE DOES NOT BAR THIS INTERPLEADER ACTION.

1. Introduction

Defendants Republic of the Philippines and the Presidential Commission on Good

Government (PCGG)(hereafter referred to as "PCOG") argue that the present interpleader action

is barred by the act of state doctrine. Their argument is that this interpleader action, governing

the distribution of the Arelma Merrill Lynch account, will interfere "with the orders of assistance

rendered to the Philippines by the Swiss government." The argument presented by the PCGG is

meritless for several reasons. The PCOG has not carried its burden of establishing that the

judicial act of the Swiss court meets the formal requirements of being an official "act of state,"

nor has it demonstrated that the interpleader action in the U.S. District Court would require any

U.S. court to question the legitimacy of the Swiss action. And most significantly, as explained

7


below, because the property in dispute is not within the jurisdiction of Switzerland, the act of

state doctrine has no applicability to any Swiss action that attempts to control the property. Even

if it could be established that the Swiss action was an act of state, the legitimacy of that action

should be questioned in a United States court since the assets at issue are in the United States.

At page 11 of its memorandum, the PCGG offers the "classic formulation" of the

act of state doctrine from Underhill v. Hernandez, 168 U.S. 250, 252 (1897): "the courts of one

country will not sit in judgment on the acts of the government of another country done within its

own territory" (emphasis added). It is undisputed by the parties in this case that the Merrill Lynch

account in dispute is not, in fact, in Switzerland, but is rather in the United States, where it has

always been. If the action of the Swiss court was designed to govern these assets within the

United States, then the Swiss court was attempting to govern matters extraterritorially, and the

act of state doctrine would not be applicable to its decree.

2. The Location of the Assets Bars Application of the Act of State Doctrine

The fact that the Merrill Lynch accounts at issue are located in the United States

is dispositive of the Republic's "act of state doctrine" argument. "Notions of territoriality run

deep through the doctrine." Tchacosh Co. v. Rockwell International Corp., 766 F.2d 1333, 1336

(9th Cir. 1985). The United States indisputably has an independent concern with protecting

property and transactions within its borders, and it is that interest which forms the basis of the so ..

called "extraterritorial exception" to the act of state doctrine. F. & H.R. Farman .. Farmaian

Consulting Engineers Firm v. Harza Engineering Co., 882 F.2d 281,287 (7th Cir. 1989) ,cerl.

denied, 497 U.S. 1038 (1990).

8


This exception is well settled - "when property is located within United States

territory at the time of confiscation, 'the policies mandating a hands-off attitude no longer apply

with the same force.'" Tchacosh Co., 766 F.2d at 1337 (quoting Bandes v. Harlow & Jones, Inc.,

570 F. Supp. 955, 960 (S.D.N.Y. 1983». Instead, "[w]hen property confiscated [by a foreign

sovereign] is within the United States at the time of the attempted confiscation, our courts will

give effect to acts of state 'only if they are consistent with the policy and law of the United

States. '" Id. (quoting Republic of Iraq v. First National City Bank, 353 F.2d 47, 51 (2d Cir.

1965), cert. denied, 382 U.S. 1027 (1966».

It follows that "act of state" objections to interpleader jurisdiction have no merit

where the stakeholder and the property at issue are located in the United States and deposit the

property with the United States courts. For example, in Bandes v. Harlow & Jones, Inc., 852

F.2d 661 (2d Cir. 1988), the court rejected an "act of state" argument in a case procedurally

similar to the case at bar. Bandes, a New York resident, sued Harlow & Jones ("H&J"), a

Connecticut steel manufacturer, in the Southern District of New York, seeking to recover

inventory that was in H&J's possession when the Sandinista government seized control of

Bandes' Nicaraguan steel corporation. H&J then filed an interpleader in the same court, naming

Bandes and the Sandinista-appointed representative of the seized corporation as claimants. Id. at

664-65. The Court refused to dismiss the case based on the "act of state" doctrine, despite the

"official" transfer of control over the corporation, because the inventory was located in the United

States.

The rationale [underlying the doctrine], however, does not extend to property located within the United States. When another state attempts to seize property held here, our jurisdiction is

9


paramount. Conversely, the foreign sovereign is acting beyond its enforcement capacity when it involves itself within our nation's jurisdiction. The act of state doctrine, accordingly, does not apply, and we may look to our own laws to determine the reach of the foreign sovereign's proscriptions. Only acts that are consistent with this nation's policies will be given effect within our borders.

Id. at 666-67 (internal citations omitted). See also F. & H.R. Farman-Farmaian Consulting

Engineers Firm v. Harza Engineering Co., 882 F.2d 281,285 (7th Cir. 1989) (noting that courts

have properly rejected the proposition that "a foreign sovereign's dissolution of its own

corporation is dispositive of the corporation's power to exercise dominion over assets located

within the United States simply because the dissolution of the corporation is an "act of a foreign

state, done within its own territory. "')

To overcome this argument the PCGG cites the Legal Assistance Treaty between

the United States and the Philippines. However, the only portion of the treaty having even a

remote nexus with this case, article 16, provides for determinations by [judicial] authorities in the

country having jurisdiction over the property subject to forfeiture. Thus article 16 supports the

interpleader litigation here. Moreover, the Treaty is a bilateral instrument between two nations

and there is no evidence that the Philippines has invoked its terms.

Therefore, because the United States has sole jurisdiction over the Merrill Lynch

account at issue, the potential for interference with foreign acts of state with respect to that

account is not a bar to jurisdiction in this case.

3. The Burden Is on the PCGG to Prove That an Act of State Occurred.

The U.S. Supreme Court held squarely in Alfred Dunhill of London, Inc. v.

Republic of Cuba, 425 U.S. 682, 691, 694-95 (1976), that the party attempting to hide behind the

10


act of state doctrine has the burden to prove that an event occurred that constitutes an act of

state. See also Republic of the PhiliI?pines v. Marcos, 862 F.2d 1355, 1361 (9th Cir. 1988)(en

bane), eert. denied, 490 US. 1035 (1989)(confirming that "[t]he burden of proving acts of state

rests on the party asserting the applicability of the doctrine"); Liu v. Republic of China, 892 F.2d

1419, 1432 (9th Cir. 1989)(adding that "[a]t a minimum, this burden requires that a party offer

some indication that the government acted in its sovereign capacity and some indication of the

depth and nature of the government's interest").

4. The Swiss Judicial Order Is Not an Act of State Because It Is Only a Provisional and Temporary Act, Not a Final and Conclusive One, and Because It Was Issued by a Court Rather than by the Executive Branch.

A matter rises to the status of an "act of state" only if it is an official and final act

formally decreed by a government. To qualify, an event must be "the public act of those with

authority to exercise sovereign powers" sufficient to be "entitled to respect in our courts." Alfred

Dunhill of London. Inc. v. Republic of Cuba, 425 U.S. 682,694 (1976). In Ramirez de Arellano

v. Weinberger, 745 F.2d 1500, 1535 (D.C. Cir. 1984), vacated on other grounds, 105 S.Ct. 2353

(1985), an en bane panel ruled that a decree issued by the President of Honduras saying that

property "shall be expropriated under the right of eminent domain on account of public exigency

and for the public good" was not an act of state because "a conclusive foreign act must be

completed before the doctrine is invoked," ide at 1535 n. 154 (relying on language in the

Restatement (Second) of the Foreign Relations Law of the United States (1965), sec. 43 comment

a, which said that the "act of state doctrine ... becomes applicable only when and if the act has been

fully executed").

11


A judgment issued by a court is usually not an act of state, because such a

judgment "involves the interests of private litigants" and "court adjudication is not the usual way

in which the state exercises its jurisdiction to give effect to its public interests." Liu v. Republic of

Chin~ 892 F.2d 1419, 1433 (9th Cir. 1989), cert. dismissed, 497 U.S. 1058 (1990)(quoting from

Restatement (Second) of Foreign Relations Law of the United States (1965), sec. 41 comment d).

Numerous cases illustrate that U.S. courts are reluctant to grant the elevated "act of state" status

to events that occur in the context of administrative or judicial proceedings. See, e.g., Timberlane

Lumber Co. v. Bank of America, 549 F.2d 597, 607-08 (9th Cir. 1976), cert. denied, 472 U.S.

1032 (1985)(refusing to grant "act of state" status to the administrative actions of the Honduran

government and its judicial decrees); Mannington Mills. Inc. v. Congoleum Corp. 595 F.2d 1287,

1295 (3rd Cir. 1979)(refusing to grant "act of state" status to a foreign sovereign's grant of a

patent); Faysound Ltd. v. Walter Fuller Aircraft Sales, Inc., 748 F.Supp. 1365, 1374 (E.D.Ark.

1990) cert. denied, 502 U.S. 1096 (1992)(ruling that the PCGG's foreign judicial judgment did

not rise to the status of an act of state, and that the sale by the PCGG had the "strong odor of

corruption") .

5. This Interpleader Action Does Not Require U.S. Courts to Examine the Legitimacy of the Swiss Decision.

In W.S. Kirkpatrick & Co. v. Environmental Tectonics Corp., Int'I. 493 U.S. 400,

405 (1990), the U.S. Supreme Court explained that the act of state doctrine is not relevant to a

case in which a court can grant the requested relief without "declar[ing] invalid the official act of a

foreign sovereign performed within its own territory." Because the assets in dispute are within

the jurisdiction of the United States, the actions taken by the U.S. courts regarding these assets

12


are not inconsistent with actions taken by the Swiss government regarding share certificates of

Arelma, Inc. within its control. Because the two court systems can operate separately within their

separate spheres of jurisdiction, the act of state doctrine is not implicated.

6. The Act of State Doctrine Is Inapplicable Because the Purported Act of the Swiss State Did Not Concern Matters "Within Its Own Territory."

As the PCGG Memorandum explains at page 7, Arelma, S.A., is a Panamanian

corporation established with the "sole business" of maintaining a Merrill Lynch account in New

York. At page 12 n.6, the PCGG recognizes "that Arelma's only reason for being was the Merrill

Lynch account." The PCGG also acknowledges at page 2 of its Memorandum that "Merrill

Lynch has held the Arelma assets for many years," and thus that these assets have always been

located in the United States. Just as the essential locus of a bank deposit is at the location of the

branch where the deposit was made, see Hilao v. Estate of Marcos, 95 F.3d 848, 851 (9th Cir.

1996), the only situs of the Merrill Lynch account was in the United States, where the investment

was made and managed. If the Swiss court purported to freeze these assets, it was seeking to

extend the reach of its decree to assets outside its jurisdiction.

The act of state doctrine, but its very terms, is limited to activities undertaken by a

government regarding matters "within its own territory." See Underhill V. Hernandez. 168 U.S.

250,252 (1897); Alfred Dunhill of London, Inc. v. Republic of Cuba 452 U.S. 682,691 n.7

(1976). U.S. courts have repeatedly refused to apply the doctrine to activities and assets located

outside the country that has exercised an "act of state." See, e.g., Liu v. Republic of China, 892

F.2d 1419, 1431-33 (9th Cir. 1989)(refusing to apply the act of state doctrine to the Republic of

China's murder of an individual within the United States, because an inquiry into the "legality and

13


propriety of an act that occurred within the borders of the United States ... would hardly affront the

sovereignty of a foreign nation"); Letelier v. Republic of Chile, 488 F.Supp. 665 (D.D.C. 1980),

cert. denied, 471 U.S. 1125 (1985) (refusing to apply the act of state doctrine to the Republic of

Chile's activities in planning the assassination of an individual within the United States); Flatow v.

Islamic Republic of Iran, 999 F.Supp. 1,24 (D.D.C. 1998)(refusing to apply the act of state

doctrine to the Islamic Republic of Iran's participation in the bombing of a bus in Israel, even if

the actions taken by Iran were on Iranian soil, in part because "the bombing complained of' was

not "perpetrated within the Islamic Republic of Iran"); Restatement (Third) of the Foreign

Relations Law of the United States (1987), sec. 443 Reporters' Note 4 ("The act of state doctrine

does not extend to takings of property located outside of the territory of the acting state at the

time of the taking, even if the property belonged to an enterprise based in that state.")

Because the property in dispute is in Hawaii and was never in Switzerland, any

action taken by any Swiss governmental body regarding this property would thus not be covered

by the act of state doctrine.

D. CONCEPTS OF "INTERNATIONAL COMITY" DO NOT BAR THIS INTERPLEADER ACTION.

International "comity" refers to a spirit of cooperation in which the tribunal of one

country approaches the resolution of cases affecting the law and interests of another country.

Society Nationale Industrielle Aerospatiale v. District Court, 482 U.S. 522, 543 n. 27 (1987). Its

foundation is the principle of "reciprocity," which underlies all international discourse. Hilton v.

Guyot, 159 U.S. 113 (1895); Restatement (Third) of Foreign Relations Law of the United States

(1987), sec. 403 Comment a and Reporters' Note 5.

14


In the present case, the courts of the Philippines have refused to accord comity to

the decisions of the U.S. courts in the Marcos Human Rights Litigation, even though the U.S.

courts were providing a forum to fulfill the international law obligation accepted by the United

States to adjudicate claims for compensation, when jurisdictional prerequisites are met, by victims

of gross violations of fundamental human rights. Philippine courts have refused to recognize and

permit the transfer of the final judgment in the Class' favor. In Republic of the Philippines v.

Marcos. Civ. Case No. 0141 (Sandiganbayan, July 27, 1999), the Sandiganbayan court blocked

the funding of the settlement reached by the Class, the Marcoses, and the Philippine government

despite the explicit recognition by the Swiss Federal Supreme Court in its December 10, 1997

ruling in Federal Office for Police Matters v. District Attorneys' Office IV for the Canton of

Zurich, lA.8711997/err, that the Philippine government had a responsibility to facilitate the

compensation of the human rights victims for their injuries and suffering. The Swiss Court stated

that under the International Covenant on Civil and Political Rights, 999 U.N.T.S. 171 (1966), and

the Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment of

Punishment, Dec. 10, 1984, 23I.L.M. 1027 (1984), as modified, 24I.L.M. 535 (1985), "victims

of serious human rights violations are entitled to compensation and to a fair trial, in which they

can assert their claims for compensation." Federal Office for Police Matters. sec. 7(c)(cc). The

Swiss Court also recognized that the "Philippine judiciary has a reputation for being slow-moving

and susceptible to corruption and political influence,"id sec. 7(c)(ee), and instructed the

Philippine government to "keep the Swiss authorities up to date on the status of these proceedings

and on the precautions and procedures applied to compensate the victims of human rights

violations under the Marcos regime." Id. sec. 7(c)(gg).

15


Because of the complete lack of cooperation on the part of the Philippine judiciary

with the Marcos Human Rights Litigation, in spite of the explicit requirement of the Swiss court

that such cooperation be provided, the reciprocity underlying a comity requirement is lacking, and

the u.s. courts have no obligation to reciprocate such comity to the PCGG. The PCGG asserts

that the Philippines have a greater interest in the dispute over the Marcos' assets, but because

gross violations of fundamental human rights have occurred, universal jurisdiction exists to

provide a proper remedy for the victims, and all humans have a stake in ensuring that proper

compensation be provided to the victims. From the very beginning of the Marcos Human Rights

Litigation, the Philippine government strongly encouraged the courts of the United States to

provide a forum to adjudicate the human rights claims, and the U.S. courts have provided such a

forum. See In re Estate of Ferdinand Marcos Human Rights Litigation, 94 F.3d 539, 547 (9th Cir.

1996)( explaining the amicus curiae brief submitted by the Philippine government). This human

rights litigation has been underway for 15 years, and the U.s. Court of Appeals for the Ninth

Circuit has repeatedly confirmed the legitimacy of the U.S. jurisdiction over the human rights

dispute. See. e.g., Trajano v. Marcos-Manotoc, 978 F.2d 493 (9th Cir. 1992», cert. denied,

508 U.S. 972 (1993); In re Estate of Ferdinand Marcos Human Rights Litigation, 25 F.3d 1467

(9th Cir. 1994), cert. denied, 513 U.S. 1126 (1995); and 103 F.3d 762 (9th Cir. 1996). The

United States thus has a strong interest in ensuring the proper resolution of this dispute, and it is

improper to conclude that Philippine interests are stronger than those of the United States.

E. VENUE IS PROPERLY PLACED IN THE DISTRICT OF HAWAII

The Republic and PCGG do not dispute that Merrill Lynch's complaint satisfies the

statutory requirements for subject matter jurisdiction under 28 U.S.C. § 1335 ("statutory

16


interpleader") or 28 U.S.C. § 1332 (diversity jurisdiction as an independent basis for a "rule

interpleader" pursuant to Fed. R. Civ. P. 22).10 Thus, venue may lie under both 28 U.S.C. §

1391 (applicable to cases based in part on diversity of citizenship) or 28 U.S.C. § 1397 (applicable

to statutory interpleader cases).

Here, section 1397 provides an adequate basis for venue in this court. Statutory

interpleader cases may be brought in the district where any claimant resides. 28 U.S.C. § 1397.

State Farm Fire & Casualty Co. v. Tashire, 386 U.S. 523,529 (1967). Section 1397 broadens

jurisdiction and venue beyond that which would be possible in a diversity action - diversity need

only exist among any two claimants and the amount in controversy requirement is only $500; and

venue is authorized in any district where any claimant resides. Minnesota Mut. Life Ins. Co. v.

Ensley, 174 F.3d 977, 980 (9th Cir. 1999).11 There is no question that Mr. Pimentel was a resident

of Hawaii at the time of the filing of the Complaint. Therefore venue is appropriate in this Court

under Section 1397.

The Republic and PCGG argue - without any citation to authority - that Mr. Pimentel's

residence is "immaterial" because he has no "standing" as a claimant due to his status as an absent

class member in the Human Rights litigation. However, as the Republic is well-aware,

"availability of the interpleader remedy ... is not dependent on the merits of the claims asserted

against the stakeholder. 'The mere threat of future litigation is a sufficient basis for

10 RuIe interpleader cases must have an independent jurisdictional basis, such as the diversity of citizenship present in this case under 28 U .S.C. § 1332. The plaintiff is of diverse citizenship from all of the claimants and the amount in controversy exceeds $75,000 exclusive of interest and costs.

11 Section 1335 also allows for nationwide service of process regardless of the law of the state in which the district court sits. See 7 C. Wright & A. Miller, Federal Practice and Procedure § 1703 (1972).

17


interpleader.'" Sotheby's Inc .. v. Garcia, 802 F. Supp. 1058, 1065 (S.D.N.Y. 1992) (citations

omitted) (denying the motion to dismiss or stay an interpleader action brought against Republic to

adjudicate claims to art work allegedly owned by Imelda Marcos). 12 "The court's jurisdiction

under the interpleader statute extends to potential, as well as actual, claims." Minnesota Mut.

Life Ins. Co., 174 F.3d at 980.

Mr. Pimentel's status as ajudgment debtor of the Marcos estate clearly satisfies this broad

standard for status as a "claimant" under 28 U.S.C. § 1335. Indeed, he brought a separate civil

action against Merrill Lynch in this court, claiming a right to the account. Interpleader

jurisdiction over the claims of Pimentel is therefore appropriate, whether or not they are

meritorious. Sotheby's. Inc., 802 F. Supp. at 1065 (holding that a demand letter from the

Republic's counsel to the stakeholder was sufficient to confer interpleader jurisdiction). It follows

that his residence is a proper basis for establishing venue in this Court.

Moreover, the Republic and PCGG are simply wrong when they argue that Mr. Pimentel

cannot serve as a class representative. This Court has the discretion and authority to certify a

defendant class of interpleader claimants upon an appropriate motion. United States Trust Co. v.

Jenner, 168 F.3d 630 (2d Cir. 1999) (affirming certification of three classes of interpleader

defendants). Such a motion may be made either by a plaintiff or by a defendant. See ~ Russian

Travel Bur .. Inc. v. Grossman, No. 80 Civ. 476, 1980 U.S. Dist. LEXIS 10944 (S.D.N.Y. Apr.

11, 1980) (certifying two defendant classes of claimants, and appointing named defendants as

class representatives, upon motions by both the stakeholder and an intervening claimant).

Likewise, this Court could substitute Mr. Pimentel as class representative for the Human Rights

12 Notably, the Republic never asserted the act of state doctrine as a defense to jwisdiction in the Sotheby's case

18


Litigation pursuant to its authority to enter orders to protect that class under Fed. R. Civ. P.

23(d).13

In either case, Mr. Pimentel is a proper interpleader claimant for purposes of28 U.S.C. §

1335, and therefore his residence in Hawaii is an adequate basis for holding that venue lies in this

Court under § 1397. For the same reason, venue is also proper under 28 U.S.C § 1391(b),

because this is a judicial district in which events occurred (namely the Human Rights Litigation

trial and judgment) giving rise to Mr. Pimentel's claim. Accordingly, the Republic's motion to

dismiss based upon venue considerations should be denied.

IV. CONCLUSION

F or all the foregoing reasons, this Court should require defendant PCGG to

respond expeditiously to Pimentel's discovery requests so that a full record exists. On the merits,

this Court should deny the PCGG's Motion.

March 13,2001 Respectfully submitted,

ROBE T A. SWIFT SHERRY P. BRODER JON VAN DYKE

13 The Republic and PCGG incorrectly argue footnote 14 of their brief that Mr. Pimentel cannot be a class representative because he was not the Human Rights Litigation class representative at the time plaintiff filed the complaint. However, the cases cited for this proposition stand nothing for more the proposition that the court must look at the residence of the parties at the time offiling. Leader Nat'l Ins. Co. v. Shaw, 901 F. Supp. 316 (W.D. Okla. 1995) "Having examined the addresses of the parties at the time of filing, the Court determines that the District Court of Kansas was the improper venue under § 1397") ; Technograph Printed Circuits, Ltd. v. Packard Bell Elec. Corp., 290 F. Supp. 308 (C.D. Cal. 1968) ("Hoffman v. BlaskL supra, is also authority that venue, i.e., "where [the action] might have been brought," is to be determined as of the time of the filing of the actions"). It is undisputed that Mr. Pimentel was a Hawaii resident at the time the interpleader was commenced.

19


IN THE UNITED STATES DISTRICT COURT DISTRICT OF HA WAIl


Plaintiff,

v.

ARELMA, INC., et al., Defendants

} } } } } } } } }


DECLARATION OF ROBERT A. SWIFT

------------------------------------} ROBERT A. SWIFT, declares and states under penalty of perjury as follows:

1. I am an attorney practicing law as a senior member ofKohn, Swift & Graf, P.C. in

Philadelphia, Pennsylvania. I initiated and am lead counsel in the Estate ofF erdinand E. Marcos Human

Rights Litigation, MDL No.840, United States District Court for the District of Hawaii in which a class

of9,539 Filipinos obtained a Judgment for $1.964 billion against the Estate of Fer din and E. Marcos.

The Judgment was affirmed by the Ninth Circuit Court of Appeals in its entirety. The Honorable Manuel

L. Real has continuing jurisdiction over this case as well as the permanent injunction entered as part of

the Judgment.

2. In July 2000 I met in Zurich Switzerland with the current Zurich District Attorney,

Dieter Jann. He inquired why I was not executing upon a financial institution in the United States which

had assets of the late Ferdinand E. Marcos. However, upon instruction of the Swiss Foreign Ministry,

he refused to tell me the name of the institution. Mr. Jann also informed me that his predecessor, Peter

Cosandey, a close colleague of the PCGG's Swiss attorney Martin Kurer, was now a paid legal

consultant to the PCGG.

3. In late August or early September 2000 I learned of the existence of an account at

Merrill Lynch under the name of Arelma, Inc. which may have $30 million or more, and concluded that


this was the account alluded to by Dieter Jann. I caused a lawsuit, Pimentel v. Merrill Lynch, 00 Civ.

580 (D . Haw. ) to be filed against Merrill Lynch in Hawaii. The lawsuit was assigned by the Hawaii court

to Judge Manuel Real. I subpoenaed Merrill Lynch to a deposition in Los Angeles at the same time that

Judge Real was holding a scheduled hearing in MDL No. 840 on September 11,2000. After the lawsuit

was filed I learned from counsel for Merrill Lynch that other parties were claiming the account. In

advance of the hearing I reached agreement with counsel for Merrill Lynch to deposit the proceeds of

account No. 165-07312 with the Clerk of the Court in Hawaii and file an interpleader there in return for

the dismissal of my litigation. Hawaii was a logical location for the interpleader since that is the place

where the MDL had directed the litigation of human rights cases against Ferdinand E. Marcos, the

Marcoses had resided there for 5 ~ years, the Golden Budha had obtained its judgment in Hawaii, the

Philippine government has a consulate there, and Merrill Lynch had an office there. In a conference with

the court on September 11, the court memorialized the understanding with Merrill Lynch in an Order

which directed it to deposit the proceeds of the account with the Hawaii court. The court sua sponte

also sealed the file of the interpleader action. In reliance on Merrill Lynch's actions, I caused the

Pimentel complaint to be dismissed.

4. During the past 10 or more years I have tried to follow the Swiss legal assistance

proceedings and Philippine forfeiture proceedings regarding assets of Fer din and E. Marcos. Except for

the occasional public opinion, these proceedings have been secretive and there was no opportunity for

the human rights Class to participate in any meaningful way. I have been concerned for some time that

the secrecy of these proceedings would encourage misstatements or deception or payoffs on the part of

the PCGG whose sole objective was to maximize its recovery. Furthermore, I have seen no indication

that the Philippine government intends to honor the portion of the Swiss Supreme Court's decision of

2


December 1997 requiring the Philippine government to compensate Filipino human rights victims who

received a judgment against the Estate of Ferdinand E. Marcos. To the contrary, the Sandiganbayan

through its notorious anti-human rights jurist Francis Garchitorena, has erected legal impediment after

legal impediment to any recovery by the Class. It was Garchitorena who ruled it was illegal under

Philippine law for the Philippine government to fund the February 1999 settlement of$150 million. The

Philippine courts have also refused to give judicial recognition to the Class' judgment even though the

judgment is final and binding.

5. The Philippine government and the PCGG have litigated entitlement to alleged

Marcos assets throughout the United States since 1986. A LEXIS search discloses over a dozen

different cases which the PCGG litigated in the United States. Some are well known. The PCGO

litigated over ownership to two New York City office buildings. It litigated over various Marcos assets

in the Central District of Cali fomi a before Judge Pfaelzer utilizing a RICO theory. See Republic of the

Philippines v. Marcos, 862 F.2d 1355 (9th Cir. 1988) Notably, in that case it vehemently objected to

invocation of the act of state doctrine, and the Ninth Circuit agreed with it. Id. at 1360. It litigated over

the Makiki Heights house the Marcoses lived in in Hawaii which was owned by Lei investments, Ltd.

It litigated against Westinghouse in New Jersey federal court for years over alleged payoffs from

Westinghouse to the Marcoses. See Republic of the Philippines v. Westinghouse Electric Com., 43 F.3d

65 (3 rd Cir. 1994) The PCOG also liquidated Redwood Savings Bank in the San Francisco area.

Importantly, the PCOG or Philippine government has been party to at least two interpleader proceedings

in the United States, including one that is ongoing. The first, Sotheby's v. Garci~ 802 F.Supp. 1058

(S.D.N.Y. 1992) involved a number of works of art allegedly owned by the Marcoses. The second,

Republic of the Philippines v. Christie's, 98 Civ. 3871 (S.D.N.Y.), is ongoing and involves a Picasso

3


painting allegedly owned by the Marcoses. In both cases the works of art were located in the same

venue as the interpleader actions. I believe the PCOO has operated throughout the United States

recovering Marcos property and using the federal and state courts when needed from 1986 through the

present.

6. In late 2000 the Philippine House of Representatives impeached President Joseph

Estrada for corruption in office, and the Philippine Senate convened a trial in December 2000. During

the Senate trial evidence was presented of vast corruption by the President including bank accounts

opened for the president in alias identities. When the Senate refused to admit into evidence the most

damning of documents and testimony, the trial broke up, and public demonstrations resulted in another

"bloodless revolution" and the installation of the Vice President as President in January 2001. President

Estrada also controlled the PCGO and its appointments. Four members of the PCGG resigned after

Estrada's removal, including its chairman. It is my understanding that the single remaining

commissioner, who does not constitute a quorum, lacks power to authorize the PCOO to participate in

litigation in the United States.

7. Only after receiving documents from various parties in the instant litigation did I

become aware of the extreme efforts the PCOO went to to remove the Merrill Lynch account from the

jurisdiction of United States courts. First, it enlisted the Swiss District Attorney to transfer to it the

Arelma share certificates. Then it went to Panama to change Arelma' s officers and directors, installing

its own slate. Then it demanded that Merrill Lynch transfer to its escrow agent the proceeds of the

account. But for other claimants who had also claimed the account, this strategy almost worked to

deprive the United States courts of jurisdiction.

4

- :.


03/13/2001 11:01 FAX 2152389806 KOHN SWIFT raJ 006

8. Expedited discovery is necessary for defendant Pimentel and the Class to collect

information to oppose the PCGG's Motion. This discovery will enable this defendant to detennine the

validity of documents submitted by the PCGG, many of which are of foreign origin, and to obtain other

documents pertinent to this inquiry which the peOG did not share with the court.· Depositions are

essential to test the veracity of the allegations made by the peOG' s affiants and develop the backgroum

of facts regarding the Merrill Lynch account and Arelma's activities-

I declare under penalty of perjury under the laws of the United States of America that

the foregoing is true and correct.

Dated: March 13, 2001

5


IN THE UNITED STATES DISTRICT COURT DISTRICT OF HAWAII

MERRILL LYNCH, PIERCE, FENNER

& SMITH INCORPORATED, Plaintiff,

v.

ARELMA, INC., et aI., Defendants

-----------------------------------} CERTIFICATE OF SERVICE

} }

} } } } } } }


CERTIFICATE OF SERVICE

The undersigned hereby certifies that a copy of the foregoing document was duly

served upon the following parties at their last known addresses this 13th day of March, 2001 by

United States mail, postage prepaid.

Matthew J. Viola Simons & Viola 707 Richards Street, PH-l Honolulu, Hawaii 96813

Attorneys for Defendants The Republic of The Philippines and the Presidential Commission On Good Government

Ward D. Jones Pauahi Tower, Suite 460 1001 Bishop Street Honolulu, Hawaii 96813


•

Daniel C. Cathcart, Esq. Magana, Cathcart & McCarathy 180 1 Avenue of the Stars, Suite 810 Los Angeles, CA 90067

William C. McCorriston, Esq. McConiston Miller Mukai MacKinnon P.O. Box 2800 Honolulu, Hawaii 96803

Jack J. Cullen, Esq. F oster Pepper & Shefelman 1111 Third Avenue, Suite 3400 Seattle, Washington 98101

Attorneys for Defendant Suntrust Investment Co.

Jeffrey S. Portnoy, Esq. Cades Schutte Fleming & Wright 1000 Bishop Street, 12th Floor Honolulu, Hawaii 96813

A. Robert Pietrzak, Esq. Elizabeth Storch, Esq. Barbara F orston, Esq. Brown & Wood One World Trade Center New York, NY 10048

Attorneys for Plaintiff

Andrew V. Beaman, Esq. Leroy E. Colombe, Esq. 9th Floor, Hawaii Building 745 Fort Street Honolulu, Hawaii 96813

Attorneys for Defendant ENC Corporation


John K. Burns 300 Wacker Drive, Suite 900 Chicago, Illinois 60606

Defendant

Frontier Risk Capital Management, LLC 6100 Neil Road, Suite 500 Reno, Nevada 89511

Defendant

Grosvenor Capital, Ltd. Grosvenor Gardens House, Suite 117 3537 Grosvenor Gardens London, SWI WOBS United Kingdom

Defendant

March 13, 2001,

ROBE A. SWIFT SHERRY P. BRODER JON M. VAN DYKE

Attorneys for Defendant Mariano Pimentel and the Class of Filipino Judgment Creditors


ROBERT A. SWIFT Kohn, Swift & Gl·af, P.c. One South Broad Street, Suite 2100 Philadelphia, PA 19107 Telephone No.: (215) 238-1700

SHERRY P. BRODER #1880 Attorney at Law-A Law Corporation Davies Pacitic Center 841 Bishop Street, Suite 800 Honolulu, Hawaii 96813 Telephone No.: (808) 531-1411

Jon Van Dyke 2515 Dole Street Honolulu, Hawaii 96822 Telephone No.: (808) 956-8509


•



Plaintiff, v.

ARELMA, INC., et a!., Defendants

-------------------------------}

} } } } } } } } } } } } }


NOTICE OF MOTION; DEFENDANT PIMENTEL'S MOTION FOR EXPEDITED DISCOVERY FROM THE DEFENDANT PCGG; MEMORANDUM IN SUPPORT OF MOTION; DECLARATION OF ROBERT A. SWIFT; EXHIBITS A & B; CERTIFICATE OF SERVICE


NOTICE OF MOTION

TO: Matthew 1. Viola Simons & Viola 707 Richards Street, PH-l Honolulu, Hawaii 96813

Attorneys for Defendants The Republic of The Philippines and the Presidential Commission On Good Government

Ward D. Jones Pauahi Tower, Suite 460 1001 Bishop Street Honolulu, Hawaii 96813

Daniel C. Cathcart, Esq. Magana, Cathcart & McCarathy 180 1 Avenue of the Stars, Suite 810 Los Angeles, CA 90067

William C. McCorriston, Esq. McCorriston Miller Mukai MacKinnon P.O. Box 2800 Honolulu, Hawaii 96803

Jack J. Cullen, Esq. F oster Pepper & Shefelman 1111 Third Avenue, Suite 3400 Seattle, Washington 98101

Attorneys for Defendant Suntrust Investment Co.

Jeffrey S. Portnoy, Esq. Cades Schutte Fleming & Wright 1000 Bishop Street, 12th Floor Honolulu, Hawaii 96813

2


A. Robert Pietrzak, Esq. Elizabeth Storch, Esq. Barbara Forston, Esq. Brown & Wood One World Trade Center New York, NY 10048

Attorneys for Plaintiff

Andrew V. Beaman, Esq. Leroy E. Colombe, Esq. 9th Floor, Hawaii Building 745 Fort Street Honolulu, Hawaii 96813

Attorneys for Defendant ENC Corporation

John K. Burns 300 Wacker Drive, Suite 900 Chicago, Illinois 60606

Defendant

Frontier Risk Capital Management, LLC 6100 Neil Road, Suite 500 Reno, Nevada 89511

Defendant

Grosvenor Capital, Ltd. Grosvenor Gardens House, Suite 117 3537 Grosvenor Gardens London, SWI WOBS United Kingdom

Defendant

PLEASE TAKE NOTICE that Defendant Pimentel's Motion For Expedited Discovery

From the Defendant PCGG filed herein shall come on for hearing before the Honorable

3


________ on ____ , 2001 at ___ .m. in the above-entitled Court, Prince

Kubio Federal Building, 300 Ala Moana Boulevard, Honolulu, Hawaii.

DATED: March 13,2001

4

ROBE A. SWIFT SHERRY P. BRODER JON VAN DYKE





Plaintiff, v.


} } } } } } } } }


DEFENDANT PIMENTEL'S MOTION FOR EXPEDITED DISCOVERY FROM THE DEFENDANT PCGG

-----------------------------------} DEFENDANT PIMENTEL'S MOTION FOR

EXPEDITED DISCOVERY FROM THE DEFENDANT PCGG

Defendant Mariano Pimentel, by his undersigned counsel, moves this Court pursuant to

Rules 12(b) and (c), 26 and 56 of the Federal Rules of Civil Procedure to grant expedited document

and deposition discovery as per the discovery requests attached hereto. In support of this Motion the

defendant relies upon its memorandum attached hereto and the Declaration of Robert A. Swift.

Defendant Pimentel requests that this Court grant his Motion and direct defendant PCGO to fully

comply with his discovery by producing the requested documents within 14 days and producing six (6)

deponents for deposition in Hawaii April 23 through April 25, 2001.

March 13, 2001,

SHERRY P. BRODER JON M. VAN DYKE





Plaintiff, v.


-----------------------------------}

} } } } } } } }


MEMORANDUM IN SUPPORT OF MOTION

MEMORANDUM IN SUPPORT OF MOTION

Defendant Mariano Pimentel, by his undersigned counsel, has moved this Court

pursuant to Rules 12(c), 26 and 56 of the Federal Rules of Civil Procedure to grant expedited

document and deposition discovery. This need for expedited discovery is twofold. First, the

discovery is needed to test the five (5) affidavits submitted by defendant Philippine Presidential

Commission on Good Government ("PCGG") and the numerous documents affixed thereto. Many of

those documents were generated in foreign countries. Discovery is needed to understand the

averments of the affidavits and contest them on a full factual record. Second, this Court has set dates

for a final pretrial conference in May and a trial in June. The PCGG's Motion should not be permitted

to upset that schedule by giving it inordinate time to object to discovery and delay this proceeding.

The PCGG knew about this interpleader proceeding even before it was filed I and deliberately delayed

filing its Motion. The PCGG is the moving party and must either discharge its discovery

responsibilities as a result of its overriding reliance on facts outside the record or withdraw its Motion.

As set forth in more detail in Pimentel's Opposition to the PCGG Motion, the PCGG is

far from a benign player in these affairs. A United States court once described the PCGG as having

See Richard Martin Affidavit, ~7.


the "strong odor of corruption." See Faysound Ltd. V. Walter Fuller Aircraft Sales, Inc., 748 F.Supp

1365, 1374 (E.D.Ark. 1990). In 1994 the United States Court of Appeals for the Third Circuit agreed

with a trial court that the Philippine government had harassed and intimidated witnesses who intended

to give evidence in the government's case against Westinghouse creating a "situation no court can

tolerate." Republic of the Philippines v. Westinghouse Electric Corp., 43 F.3d 65, 72 (3 rd Cir. 1994).

During the past 2 ~ years the PCGG operated under the control of President Joseph Estrada whose

corruption led to a popular uprising that overthrew him two months ago. The PCGG has operated

secretively for years in trying to acquire assets of the late Ferdinand E. Marcos. Much of its work was

focused on mutual legal assistance proceedings in Switzerland. Filings and even court decisions in

Switzerland are non-pUblic, so that the PCGG could make what averments it chose without scrutiny

by parties like the Class of Filipino human rights victims. The PCGG's "guardian angel" was Zurich

District Attorney Peter Cosandey, a colleague of the PCGG's Swiss counsel, Martin Kurer. It is

believed that Cosandey is now in the employ of the PCGG. The discovery requested will, inter alia,

test the bona fides of the proceedings in Switzerland and the Philippines to determine whether they

were tainted by corruption.

Rules 12(b) and (c) each provide that if a party relies upon facts outside the pleadings,

then the motion will be treated as provided by Rule 56. Rule 56 gives a party opposing summary

judgment the right to discovery and an opportunity to submit responsive affidavits prior to judicial

determination. Rules 26, 30 and 34 permit this Court to require discovery on an expedited basis.

Pimentel has attached to his Motion a deposition notice and a request for production of documents.

He has also attached a notice of depositions for six (6) deponents. Five of the deponents have

submitted affidavits to this Court. The sixth is a commissioner of the PCGG. Pimentel also leaves

2


open the possibility that additional discovery may be required before the record will be complete for

adjudication of the PCGG's Motion.

Accordingly, defendant Pimentel requests that this Court grant his Motion and direct

defendant PCGG to fully comply with his discovery by producing the requested documents within 14

days and producing six (6) deponents for deposition in Hawaii April 23 through April 25, 2001.

March 13,2001

3

ROB T A. SWIFT SHERRY P. BRODER JON M. VAN DYKE





Plaintiff,

v.


} } } } } } } } }


DECLARATION OF ROBERT A. SWIFT

------------------------------------} ROBERT A. SWIFT, declares and states under penalty of perjury as follows:

1. I am an attorney practicing law as a senior member ofKohn, Swift & Graf, P.C. in

Philadelphia, Pennsylvania. I initiated and am lead counsel in the Estate ofF erdinand E. Marcos Human

Rights Litigation, MDL No.840, United States District Court for the District of Hawaii in which a class

of 9,539 Filipinos obtained a Judgment for $1.964 billion against the Estate of Ferdinand E. Marcos.

The Judgment was affirmed by the Ninth Circuit Court of Appeals in its entirety. The Honorable Manuel

L. Real has continuing jurisdiction over this case as well as the permanent injunction entered as part of

the Judgment.

2. In July 2000 I met in Zurich Switzerland with the current Zurich District Attorney,

Dieter Jann. He inquired why I was not executing upon a financial institution in the United States which

had assets of the late Ferdinand E. Marcos. However, upon instruction of the Swiss Foreign Ministry,

he refused to tell me the name of the institution. Mr. Jann also informed me that his predecessor, Peter

Cosandey, a close colleague of the PCGG's Swiss attorney Martin Kurer, was now a paid legal

consultant to the PCGG.

3. In late August or early September 2000 I learned of the existence of an account at

Merrill Lynch under the name of Arelma, Inc. which may have $30 million or more, and concluded that


this was the account alluded to by Dieter Jann. I caused a lawsuit, Pimentel v. Merrill Lynch, 00 Civ.

580 (D . Haw. ) to be filed against Merrill Lynch in Hawaii. The lawsuit was assigned by the Hawaii court

to Judge Manuel Real. I subpoenaed Merrill Lynch to a deposition in Los Angeles at the same time that

Judge Real was holding a scheduled hearing in MDL No. 840 on September 11,2000. After the lawsuit

was filed I learned from counsel for Merrill Lynch that other parties were claiming the account. In

advance of the hearing I reached agreement with counsel for Merrill Lynch to deposit the proceeds of

account No. 165-07312 with the Clerk of the Court in Hawaii and file an interpleader there in return for

the dismissal of my litigation. Hawaii was a logical location for the interpleader since that is the place

where the MDL had directed the litigation of human rights cases against Ferdinand E. Marcos, the

Marcoses had resided there for 5 Y2 years, the Golden Budha had obtained its judgment in Hawaii, the

Philippine government has a consulate there, and Merrill Lynch had an office there. In a conference with

the court on September 11, the court memorialized the understanding with Merrill Lynch in an Order

which directed it to deposit the proceeds of the account with the Hawaii court. The court sua sponte

also sealed the file of the interpleader action. In reliance on Merrill Lynch's actions, I caused the

Pimentel complaint to be dismissed.

4. During the past 10 or more years I have tried to follow the Swiss legal assistance

proceedings and Philippine forfeiture proceedings regarding assets ofF erdinand E. Marcos. Except for

the occasional public opinion, these proceedings have been secretive and there was no opportunity for

the human rights Class to participate in any meaningful way. I have been concerned for some time that

the secrecy of these proceedings would encourage misstatements or deception or payoffs on the part of

the PCOG whose sole objective was to maximize its recovery. Furthennore, I have seen no indication

that the Philippine government intends to honor the portion of the Swiss Supreme Court's decision of

2


December 1997 requiring the Philippine government to compensate Filipino human rights victims who

received a judgment against the Estate of Ferdinand E. Marcos. To the contrary, the Sandiganbayan

through its notorious anti-human rights jurist Francis Oarchitorena, has erected legal impediment after

legal impediment to any recovery by the Class. It was Oarchitorena who ruled it was illegal under

Philippine law for the Philippine government to fund the February 1999 settlement of$150 million. The

Philippine courts have also refused to give judicial recognition to the Class' judgment even though the

judgment is final and binding.

5. The Philippine government and the PCOO have litigated entitlement to alleged

Marcos assets throughout the United States since 1986. A LEXIS search discloses over a dozen

different cases which the PCOO litigated in the United States. Some are well known. The PCOO

litigated over ownership to two New York City office buildings. It litigated over various Marcos assets

in the Central District of California before Judge Pfaelzer utilizing a RICO theory. See Republic of the

Philippines v. Marcos, 862 F.2d 1355 (9th Cir. 1988) Notably, in that case it vehemently objected to

invocation of the act of state doctrine, and the Ninth Circuit agreed with it. Id. at 1360. It litigated over

the Makiki Heights house the Marcoses lived in in Hawaii which was owned by Lei investments, Ltd.

It litigated against Westinghouse in New Jersey federal court for years over alleged payoffs from

Westinghouse to the Marcoses. See Republic of the Philippines v. Westinghouse Electric Corp., 43 F 3d

65 (3rd Cir. 1994) The PCOO also liquidated Redwood Savings Bank in the San Francisco area.

Importantly, the PCOO or Philippine government has been party to at least two interpleader proceedings

in the United States, including one that is ongoing. The first, Sotheby's v. Garcia, 802 F.Supp. 1058

(S.D.N. Y. 1992) involved a number of works of art allegedly owned by the Marcoses. The second,

Republic of the Philippines v. Christie's, 98 Civ. 3871 (S.D.N.Y.), is ongoing and involves a Picasso

3


painting allegedly owned by the Marcoses. In both cases the works of art were located in the same

venue as the interpleader actions. I believe the PCGG has operated throughout the United States

recovering Marcos property and using the federal and state. courts when needed from 1986 through the

present.

6. In late 2000 the Philippine House of Representatives impeached President Joseph

Estrada for corruption in office, and the Philippine Senate convened a trial in December 2000. During

the Senate trial evidence was presented of vast corruption by the President including bank accounts

opened for the president in alias identities. When the Senate refused to admit into evidence the most

damning of documents and testimony, the trial broke up, and public demonstrations resulted in another

"bloodless revolution" and the installation of the Vice President as President in January 2001. President

Estrada also controlled the PCGG and its appointments. Four members of the PCGG resigned after

Estrada's removal, including its chairman. It is my understanding that the single remaining

commissioner, who does not constitute a quorum, lacks power to authorize the PCGG to participate in

litigation in the United States.

7. Only after receiving documents from various parties in the instant litigation did I

become aware of the extreme efforts the PCGG went to to remove the Merrill Lynch account from the

jurisdiction of United States courts. First, it enlisted the Swiss District Attorney to transfer to it the

Arelma share certificates. Then it went to Panama to change Arelma's officers and directors, installing

its own slate. Then it demanded that Merrill Lynch transfer to its escrow agent the proceeds of the

account. But for other claimants who had also claimed the account, this strategy almost worked to

deprive the United States courts of jurisdiction.

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03/13/2001 11:01 FAX 2152389806 leOHN SWIFT 141 006

8. Expedited discovery is necessmy for defendant Pimentel and the Class to collect

information to oppose the PCGG's Motion. lbis discovery will enable this defendant to detennine the

validity of documents submitted by the PCGG, many of which are of foreign origin, and to obtain other

documents pertinent to this inquiry which the peOG did not share with the court.· Depositions are

essential to test the veracity of the allegations made by the peOG's affiants and develop the backgrowxi

of facts regarding the Merrill Lynch account and Arelma's activities.

I declare under penalty of perjury under the laws of the United States of America that

the foregoing is true and correct.

Dated: March 13, 2001 --...;;;R941~R-Ob-e-rt-A.-"~~wi~~ • .;--=:-~

5




Plaintiff,

v.


-----------------------------------}

} } } } } } } } }


DEFENDANT PIMENTEL'S DOCUMENT REQUESTS TOTHEPCGG

DEFENDANT PIMENTEL'S DOCUMENT REOUESTS TO THE PCGG

Defendant Mariano J. Pimentel, on behalf of the Class of Filipino Judgment

Creditors in MDL No. 840, by and through his undersigned counsel and pursuant to Rule 34 of

the Federal Rules of Civil Procedure, hereby requests defendant Philippine Commission on Good

Government, within 14 days of its receipt hereof, to produce the requested documents in

accordance with the Definitions and Instructions set forth below.

DEFINITIONS

A. The term "Merrill Lynch Account" shall mean account No. 165-07312

maintained by Merrill Lynch for Arelma, Inc.

B. As used herein, the term "communications" shall mean oral, written or any

other exchange of words, thoughts or ideas to another person or entity, whether person-to-

person, in a group, in a meeting, by telephone, by letter, telex, facsimile, electronic mail, voice

mail or by any other process, electronic or otherwise. All written communications shall include,

without limitation, printed, typed, handwritten or other readable documents as defined herein.

A EXHIBIT -----~~~1ZQ'a


C. "Person" or "persons" means any natural individual or any corporation,

fIrm, partnership, proprietorship, association, joint venture, governmental entity or any other

organization.

D. The term "you" shall mean the Philippine Presidential Commission on

Good Government and the entire Philippine government, including its agents and offIcers.

E. "Agent" shall include, but is not limited to, accountants, legal counsel,

investigators or researchers.

F. As used herein the term "Swiss government" shall mean the government of

the Swiss Federation and the governments of its Cantons, including its officers and employees.

INSTRUCTIONS

A. You shall furnish all documents available to you at the time of response and

shall supplement your answers in accordance with Rule 26( e) of the Federal Rules of Civil

Procedure.

B. If you do not produce requested documents, in whole or in part, because of

a claim of privilege, set forth the privilege claimed; identify the facts upon which you rely to

support the claim of privilege; and identify all documents for which such privilege is claimed. In

other words, furnish a privilege log.

C. Unless otherwise specified or unless required to make your response

complete, each document request shall be for the period from February 25, 1986 to the present

unless otherwise stated, and shall be timely supplemented as required by Rule 26(e) of the Federal

Rules of Civil Procedure.

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D. To comply with this request, you may furnish the original or copies of

documents at the offices of Robert A. Swift at the address below.

DOCUMENT REQUESTS

Produce all documents in your possession, custody or control or the possession

custody or control of your agents constituting, pertaining or relating to:

1. The Merrill Lynch account for the period January 1, 1972 to the present.

2. Arelma, Inc. for the period January 1, 1972 to the present.

3. All communications between you and the United States government regarding the Merrill

Lynch account or Arelma, Inc.

4. All communications between you and the government of Switzerland regarding Arelma,

Inc. or the Merrill Lynch account.

5. The election of directors and officers for Arelma, Inc. for the period January 1, 1972 to

the present.

6. Statements (including but not limited to writings, affidavits and declarations) of Jose

Campos regarding Arelma, Inc. or the Merrill Lynch account.

7. All submissions (including petitions, letters or requests) by you to the Swiss government

regarding assets owned actually or beneficially by members of the Marcos family.

8. All submissions (including filings, pleadings, evidence, letters) by you to the

Sandiganbayan regarding assets owned actually or beneficially by members of the Marcos

family.

9. All agreements between you and the Swiss government regarding the approximately $627

million in escrow for which PNB is escrow agent.

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10. The authorization of the Philippine government or PCGG to participate in this litigation.

11. All compensation paid to the Swiss government or persons in the employ of the Swiss

government in connection with any matters regarding assets owned actually or beneficially

by members of the Marcos family.

12. Anything of value given or paid to Peter Cosandey by you or your agents.

13. All compensation and reimbursement of expenses paid by you or which may become due

in the future (by contingency or otherwise) to (a) Martin Kurer or his law firm and (b)

Heller Ehrman White & McAuliffe LLP in connection with services performed to recover

assets owned actually or beneficially by members of the Marcos family.

14. All (a) complaints and (b) judicial or administrative decisions in legal proceedings in which

the PCGG or Philippine government participated in the United States or any foreign

country in which there were allegations of corruption or theft of property by Ferdinand E.

Marcos.

15. All activities conducted by you in the State of Hawaii for the period February 25, 1986 to

the present regarding assets owned actually or beneficially by members of the Marcos

family.

DATED: March 13,2001 ROBERT A. SWIFT SHERRY P. BRODER JON VAN DYKE

Attorneys for Defendant Mariano Pimentel and the Class of Filipino Human Rights Victims

4

/ University Of Hawaii School of Law Library - Jon Van Dyke Archives Collection

IN THE UNITED STATES DISTRICT COURT

DISTRICT OF HAWAII


Plaintiff,

v.


-----------------------------------}

} } } } } } } } }


DEFENDANT PIMENTEL'S NOTICE OF DEPOSITIONS

DEFENDANT PIMENTEL'S NOTICE OF DEPOSITIONS

PLEASE TAKE NOTICE that, pursuant to Rule 30 of the Federal Rules of Civil

Procedure, the undersigned legal counsel for defendant Pimentel will take the deposition of each

deponent listed below at the law offices of Sherry P. Broder, 841 Bishop Street, Suite 800,

Honolulu, Hawaii, before a person authorized to administer oaths, on the dates and times listed

below:

Deponent Date Time

Jorge Sarmiento April 23, 2001 9:30 am

Pablo J. Espino April 23, 2001 3:30 pm

Danilo Daniel April 24, 2001 9:30 am

Richard Martin April 24, 2001 3:00 pm

Martin Kurer April 25, 2001 9:30 am

EXHIBIT _--=sr?~_~1Iaai'!!i::t

/ University Of Hawaii School of Law Library - Jon Van Dyke Archives Collection

Simon Tejeira

DATED: March r;, 2001

April 25, 2001 3:30 pm

Attorneys for defendant Mariano Pimentel And the Class of Filipino Human Rights Victims




Plaintiff, v.


} } } } } } } } }


CERTIFICATE OF SERVICE

------------------------------------} CERTIFICATE OF SERVICE

The undersigned hereby certifies that a copy of the foregoing document was duly

served upon the aforementioned parties at their last known addresses this 13th day of March, 2001 by

United States mail, postage prepaid.

March 13,2001,

ROB T A. SWIFT SHERRY P. BRODER JON M. VAN DYKE



ROBERT A. SWIFT Kohn, Swift Graf; P.C. Estrada, the corrupt and now-deposed President of the...

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