On April 20, 2006, the Firm achieved another significant victory for its client, Citibank, N.A. against defendant Illinois Union Insurance Company in In re Commercial Money Center, Inc. Equipment Lease Litigation, a multi-district litigation pending before Judge Kathleen M. O'Malley in the United States District Court for the Northern District of Ohio.
In January 2001, Citibank purchased $50 million in notes to be paid through receivables originated by Commercial Money Center. CMC, now defunct, is alleged to have run a Ponzi scheme whereby it re-paid investors through funds raised from new investors. All of the lease receivables in Citibank’s asset pool defaulted within about a year.
Citibank sought recovery from Illinois Union, which had issued a surety contract—in the form of an insurance policy—guaranteeing the receipt of all amounts due under the lease receivables. Illinois Union, however, contended that its insurance policy was void ab initio on account of the fraud of the insured, a CMC affiliate. In August 2005, the Court granted Citibank’s pre-discovery motion for judgment as a matter of law based on the pleadings, holding that it was entitled to recover notwithstanding any fraud by CMC.
Illinois Union thereafter resisted entry of final judgment on a number of grounds, including that damages should be limited to Citibank’s initial investment as it was against public policy to allow recovery of interest in a Ponzi scheme. The Court rejected each of Illinois Union’s arguments and granted the motion for entry of final judgment in its entirety. The award of damages in the final judgment to be entered will include over $46 million in damages, over $9 million in pre-judgment interest and reasonable attorney’s fees.
The Simpson Thacher team has consisted of Barry Ostrager, George Wang, Amy Semet, Tim Cornell, Tiffany Liston, Katherine Weall, Carlos Lopez, and paralegals Gleny Ramirez and Mario Hyacinth.