The owner of the now defunct Pilatus Bank, Ali Sadr Hasheminejad, has failed in his attempt in a US court to force the MFSA-appointed Competent Person Lawrence Connell to answer a barrage of questions and hand over reams of documents related to his investigation.

Sadr’s legal team requested information on Connell’s experience, position and extensive information relating to the MFSA, the investigation, and all communications between Connell and anyone else, related to the case. 

One of the reasons they requested the information was in the hopes of using it in a future damages case against the MFSA and European Central Bank (ECB) following the forced closure of his bank due to allegations of money laundering and other financial crimes.

US District Judge Joseph A. DiClerico denied the request on a number of grounds, including the fact there was no basis for the questions, concluding that they were “unduly burdensome” and nothing more than a fishing expedition.

In March 2018, Sadr was charged with conspiracy to defraud the US, conspiracy to violate the International Emergency Economic Powers Act, bank fraud, conspiracy to commit bank fraud, money laundering, and conspiracy to commit money laundering. 

Two years later, he was found guilty by a jury on five of the six counts and he was due to be sentenced in August 2020. But Sadr asked for a retrial based on accusations that the government failed to disclose potentially exculpatory evidence.

In July of that year, the guilty verdict was vacated and the charges were dismissed with prejudice.

The current ruling relates to an amended petition, where it is argued that three days after Sadr was indicted, the MFSA took over Pilatus Bank, removing voting rights from Sadr and stripping directors of authority. 

The next day, Connell was appointed as the ‘competent person’ at Pilatus Bank by the MFSA. The financial services authority then petitioned the European Central Bank to revoke the bank’s licence which then occurred in November 2018.

Connell was responsible for reviewing the affairs of the bank and for taking charge of its assets. Much of this work was conducted between March 2018 and November 2018. Once the banking licence was revoked, the Maltese authorities seized Pilatus Bank’s offices and Connell returned to the US.

He visited Malta in January and February 2019 to oversee the seizure of Pilatus Bank assets, before resigning from his position on 13 January 2021. A Maltese auditor, Robert Ancilleri, was appointed in his stead.

Okko Hendrik Behrends, a lawyer representing Pilatus Bank, initiated action against the ECB in the Court of Justice of the European Union by filing an action in 2019. He asked for the court to annul the order of the ECB to revoke the bank’s licence.

Reasons for wanting to annul the decision included claims that Sadr’s indictment was not a proper reason to withdraw the bank’s authorisation. They also accused the ECB of not being impartial, failing to examine facts objectively, infringing the principle of proportionality, and the fact that Sadr’s charges were based on US sanctions that are not recognised in Europe. In February, 2021, the European Court of Justice rejected Pilatus Bank’s claims.

In parallel in the US, Pilatus Bank also sought to make Connell reveal details of the work he carried out and information he gave to the MFSA. He claims that the information Pilatus Bank is seeking would violate the privileges given by the MFSA as well as his obligation to keep investigatory matters confidential. This would be used in the annulment filing and potential damages action.

The former bank and its lawyers argued that Connell’s privilege in terms of not being able to reveal detailed information doesn’t apply in a US court, as it is a Maltese jurisdictional matter. 

Pilatus Bank demanded to know what the MFSA’s reasons for selecting Connell were, who tasked and paid him, the objectives he was given in relation to the bank, his observations regarding Pilatus Bank’s financial strength, whether the closure of the bank was predetermined, and matters relating to the motives and credibility of the MFSA.

They also requested communications between Connell and the MFSA and any between him and third parties related to the matter. In addition to the petition was an extensive list of documents including a CV, qualifications and documents related to his work as the competent person.

The US court ruled that the information sought was not relevant to the claims brought in the annulment action. “Pilatus makes no effort to show how the information it seeks from Connell is relevant to specific claims or issues in the annulment action against the ECB, and Connell denies any relevance,” according to court documents.

It was noted that Connell objected to the demands, calling them nothing more than a “fishing expedition to find grounds for damages claims that have not yet been formulated”.

The court added that the bank failed to provide any concrete explanation for its potential damages action including what it intends to claim for, the legal basis, and what evidence they have. Furthermore, the information sought could be considered “unduly burdensome”.

During his tenure, Connell refused to answer any questions on the state of affairs within the bank, including the amount of deposits still held there. Shortly after his appointment, a company he worked as a consultant for received a €345,000 direct order from the Finance Ministry.

The payment was made to Promontory Financial Group for “review and assessment services” in relation to Pilatus Bank.

Proceedings by Pilatus Bank’s holding company against the MFSA are still underway in Malta before the Financial Services Tribunal.