Sunday, August 31, 2014


Megaval Enterprises Ltd., which was one of the Venezuelan-based companies that had sub-accounts at Bank of America NA, in the Rosemont Financial Corp. forfeiture case, brought a civil action against the bank, in US District Court*, in Miami. Megaval was one of the money service businesses who used Rosemont   accounts, when trading Venezuelan bonds, and converting the proceeds into US Dollars. Megaval's account moved $45m, resulting in substantial fees for Bank of America.

Megaval's attorneys originally filed the action in state count ( Circuit Court)** in Miami, but later removed the case to Federal Court. The allegations:
(1) Negligence.
(2) Breach of Fiduciary Duty.
(3) Violations of Article 4 of the Uniform Commercial code (UCC), regarding acting in good faith and the exercise of ordinary care.

In essence, the plaintiff asserts that the bank gave it faulty advice, specifically instructing Rosemont that Megaval did not need to register, and obtain FinCEN and State of Florida money service business licenses; the bank said the plaintiff could rely upon Rosemont's licenses.

The seizure of $1.3m, from Rosemont's accounts, by the United States, for lack of MSB licenses, resulted in a $250,000 civil penalty, and cost the plaintiff middle six figures in attorneys fees.

Bank of America's attorneys have filed a motion to dismiss, stating:
(1) Megaval was not the bank's customer.
(2) The bank had no legal duty to advise Megaval of the Federal & Florida licensing requirements, or to render legal advice to a non-client.
(3) There are a number of other, technical deficiencies in the plaintiff's complaint.
(4) Two cases, involving similar facts, have been dismissed.

The Court has paused Discovery until late September, so that it can render a ruling upon the bank's motion. we will update our readers when an order on the motion is entered.
The takeaway for compliance officers in this case: always have your own outside counsel render a written opinion, on all important legal issues, before the bank gets involved in any matter where regulatory, or licensing, issues may appear. Why Megaval relied upon Rosemont's representation, to the effect that its clients could operate as MSBs, without registration, amazes me. Always consult your attorneys on any issue where interpretations upon the law will occur.
* Case No.: 14-cv-20909-KMW (SD FL).
** Case No.: 14-5483-CA (11th Cir. Ct. Miami-Dade Co. Fl).

Suggested reading:
The Bitter Lessons of Rosemont Capital Corporation

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