[Congressional Record Volume 140, Number 144 (Thursday, October 6, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: October 6, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
           BUCHEIT INTERNATIONAL CASE SHOULD BE INVESTIGATED

                                 ______


                      HON. JAMES A. TRAFICANT, JR.

                                of ohio

                    in the house of representatives

                       Thursday, October 6, 1994

  Mr. TRAFICANT. Mr. Speaker, at this time I would like to insert into 
the Record a summary of a case involving a company based in my 
congressional district, Bucheit International, and several banks--
including a bank based in Switzerland. This case is a microcosm of how 
major international banks regularly rip off American businesses. I 
intend to initiate a full investigation of this case through my 
congressional office, and I intend to press for a full inquiry on part 
of all the relevant committees in the Congress.


                              the parties

       Bucheit International Inc., Youngstown, Ohio; Ameritrust 
     Company National Association, Cleveland, Ohio; Morgan 
     Guaranty Trust Co., New York, New York; J.P. Morgan (Suisse) 
     S.A., Geneva, Switzerland.
       In 1985 Bucheit was asked to furnish a maintenance bond in 
     the form of a Letter of Credit to cover defects in a shopping 
     mall Bucheit had constructed in Riyadh, Saudi Arabia for 
     H.R.H. Prince Mishal (brother of King Fahd).
       Bucheit (an Ohio Corporation) contracted with Ameritrust 
     (an Ohio Corporation) to issue a $1.3 million dollar Letter 
     of Credit #SB26521 in favor of H.R.H. Prince Mishal. At 
     Prince Mishal's insistence, Bucheit agreed to have the 
     Ameritrust Letter of Credit guaranteed by either Morgan 
     Suisse or Saudi American Bank, Bucheit opted to mandate 
     Morgan Suisse to guarantee the Letter of Credit.
       Morgan Suisse, having no direct ties with Ameritrust, 
     decided to use Morgan New York (Morgan Suisse's Parent 
     Company) as a liaison bank. Morgan Suisse issued their 
     Guarantee on February 21, 1985.
       Consequently, Ameritrust issued an Irrevocable Letter of 
     Credit thru Morgan New York and a Guarantee by Morgan Suisse. 
     Ameritrust's Letter of Credit bound Morgan Suisse to Honor 
     the Letter of Credit under the following contingencies:
       A) Drafts at sight on Morgan Guaranty Trust Co.
       B) Copy of a key tested telex from Pictet and Cie.
       C) Letter from Engineer Omar Jazzar Consulting Engineers of 
     Riyadh.
       D) An accompanying Estimate of the Engineer or a quote by 
     the appropriate subcontractor.
       Morgan Suisse and Morgan New York worked in close 
     conjunction to supervise all future transactions regarding 
     their Guarantee of Ameritrust's Letter of Credit. Neither of 
     these Banks kept Bucheit abreast of these transactions.
       In internal memos during November 1985, Morgan Suisse 
     informed Morgan New York about telephone conversations with 
     Prince Mishal. During these telephone conversations Prince 
     Mishal manifested his intentions to draw on the Letter of 
     Credit. Also mentioned in these internal memos to Morgan New 
     York are faxes received by Morgan Suisse from Prince Mishal. 
     These same memos contain a request from Morgan Suisse to 
     Morgan New York to verify if the faxed documents from Prince 
     Mishal were acceptable for calling the Letter of Credit.
       Morgan New York faxed Morgan Suisse copies of Prince 
     Mishal's letter referring to: 1) A Letter from Omar Jazzar, 
     and 2) An Estimate from Omar Jazzar.
       It should be noted that the ``Estimate'' that was presented 
     at this time was bogus due to it's being based on the 
     original punch list which had previously been corrected.
       Following these discussions Prince Mishal submitted a 
     Formal Request in December 1985 to call the $1.2 million 
     dollar Letter of Credit. The Formal Request from H.R.H. 
     Prince Mishal contained:
       (A) Draft from Morgan Guaranty Trust Co.
       (B) Key Tested telex from Pictet Cle.
       (C) Letter from Omar Jazzar.
       Missing from the documents required to call the Letter of 
     Credit was the most important document: The Estimate:
       Morgan Suisse accepted the documents from Prince Mishal and 
     forwarded them to Morgan New York with a transmittal letter 
     which read:
       Dear Sirs: Please find enclosed the documents you require 
     concerning the above mentioned Letter of Credit.
       After scrutiny, we consider these documents to be in 
     compliance with the terms set forth in the Letter of Credit. 
     Please credit our account $1,126,217.
           Yours Truly,
                                               J.P. Morgan Suisse.
     Enc:
       (A) Letter from Omar Jazzar.
       (B) Draft on Morgan New York.
       (C) Copy of Pictet Telex.
       Again, no Estimate accompanied these documents.
       On December 13, 1985 Morgan N.Y. sent a cable message to 
     Ameritrust stating that on December 16, 1985 they would debit 
     their account $1,126,217 as documents presented are in good 
     order per Letter of Credit terms.
       On December 16, 1985 Morgan New York debited Ameritrust's 
     account and Ameritrust in turn debited Bucheit's account 
     $1,126,000. In fact, Ameritrust debited Bucheit's account 
     without seeing the documents, and without checking that the 
     documents conformed to the Letter of Credit that they issued. 
     The documents had been sent from Morgan New York to 
     Ameritrust via over-night airbill #513 223270 for delivery on 
     the morning of December 17, 1985.
       On December 20, 1985 Ameritrust sent Bucheit via U.S. Mail 
     a debit memo for the transaction which had occurred on 
     December 16, 1985, along with a copy of the documents they 
     received from Morgan New York. Again, no Estimate was 
     accompanying these documents.


                                comments

       What you have here is a typical case of the little guy who 
     does not have the clout or the resources to take on major 
     international banks who have conspired with a personal 
     customer who keeps massive deposits in the Swiss banking 
     system.
       The Swiss Bank thru it's Parent in New York ``tells'' it's 
     corresponding bank in Ohio that all the documents are in 
     order and to pay the amount without looking at the documents 
     (trust me).
       Whe Bucheit called Ameritrust to ask why they had paid 
     without the ``Estimate'', they replied, ``The money is 
     gone.''
       It is obvious that the Banks failed to exercise the duty of 
     care required of a trusted institution, and even more 
     specifically, in my opinion, credit fraud was prepared 
     intentionally and systematically, Morgan New York and Morgan 
     Suisse applied themselves to the task with criminal energy 
     and with the specific intent to keep a very large depositor 
     happy.
       Furthermore, due to preferential banking laws in New York 
     and Ohio, and in addition to a completely different set of 
     laws in Switzerland, a small company like Bucheit find legal 
     recourse a very difficult and costly ordeal to say the least.

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