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Construction Drilling, Inc. v. Chusid

August 31, 1999

CONSTRUCTION DRILLING, INC. AND THOMAS R. CROFTS,
PLAINTIFFS,
V.
EUGENE G. CHUSID, ET. AL.,
DEFENDANTS.



The opinion of the court was delivered by: William H. Walls, U.S.D.J.

FOR PUBLICATION

Opinion

Walls, U.S.D.J.

Factual Background

In August 1998, plaintiff Thomas R. Crofts, while in Venezuela on business for plaintiff Construction Drilling, Inc. ("CDI"), telephoned the "U.S. Representative Office" of Caribbean Bank of Commerce ("Caribbean Bank") in Ridgewood, New Jersey, and spoke to defendant Eugene Chusid to request information about Caribbean Bank's banking operations. Around August 19, 1998, Caribbean Bank, by telecopy, forwarded to Crofts a series of documents pertaining to the bank. Included among these documents was a financial report, which allegedly represented the following:

(1) that Caribbean Bank is a wholly owned subsidiary of Int'l Financial;

(2) that Caribbean Bank had some $195 million in assets in two branch offices, with some $162 million in deposits headquartered in St. Johns, Antigua at the time it was acquired by Int'l Financial on July 29, 1997;

(3) that Caribbean Bank has a "headquarters" in Antigua and is licensed in that jurisdiction; and

(4) that the total deposits in Caribbean Bank/Int'l Financial were $651.7 million by December 31, 1997.

Attached to the financial statement was an auditor's report signed by "James H. Chance" (purportedly a "licensed public accountant") that stated that the financials presented fairly the financial conditions of the two companies. In reliance on the financial statement and auditor's report, plaintiff CDI wired $350,000 to its account with Caribbean Bank between August and October 1998.

On October 15, 1998, in a telephone conversation between defendant Chusid in Ridgewood and Crofts in Massachusetts, Chusid advised Crofts of the availability of Caribbean Bank "investment units" being offered by Caribbean Bank of Commerce, Ltd. (DOM), purportedly a subsidiary of Caribbean Bank. Chusid then telecopied to Crofts sales literature and a subscription agreement, which stated that "[r]edemption of Bond is guaranteed by Caribbean Bank of Commerce Ltd and First Nations Insurance Company of Alaska."

On April 12, 1999, Crofts traveled to St. John's, Antigua, and notwithstanding a diligent search, was unable to locate any presence of Caribbean Bank. CDI claims that it then demanded that Caribbean Bank close its account and wire all monies contained therein to its Citibank account in Venezuela.

On May 7, 1999, Chusid informed Crofts that he was resigning as Senior Vice President of Caribbean Bank and that he had handed CDI's account over to Michael Swartz of Caribbean Bank. He also allegedly represented that the wire transfer for $330,000 would occur as planned on June 11, 1999. On June 10, 1999, Mr. Bender, the President of Caribbean Bank, assured CDI by telephone that the wire transfer would occur on June 11, 1999. However, by telecopy dated June 10, 1999, Swartz advised Crofts that:

(1) "[w]ith a heavy heart . . . as of 12:01 am St John's, Antigua time, the Caribbean Bank of Commerce, Ltd. shall cease to exist as an independent entity";

(2) Caribbean Bank was on the brink of insolvency and was merging with "Digital Commerce Bank";

(3) Caribbean Bank "elected" to no longer be licensed by Antigua and Barbuda;

(4) Eugene Bender had resigned as President and was being replaced by ...


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