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(CNS): The Office of the Director of Public Prosecutions was ordered to pay US$64,000 in compensation to a Brazilian businessman after the office tried unsuccessfully to freeze and seize his assets in the Cayman Islands even though he was able to show that the money was legitimately earned. The order followed a decision by the Grand Court in 2020 that the case for seizing the money was “frivolous” and that prosecutors had “failed to establish” the bare minimum of a “good arguable case”, which according to case law cited is one that is “barely capable of serious argument”.
In the first case of its kind in the Cayman Islands, the ODPP was given a punitive order over the bungled case. It began in November 2019 when prosecutors applied to the Grand Court for a restraint order targeting an investment fund managed in the Cayman Islands and held in the name of Massimo Andrea Giavina Bianchi, an Italian citizen and Brazilian businessman.
The initial investment had been US$1,375,000 but by May 2020, following a number of withdrawals, only US$453,000 remained on the account, indicating that this was the amount when the restraint order was imposed.
The RCIPS Financial Crimes Unit alleged that the initial investment funds were criminal proceeds from money laundering, corruption, tax evasion, bribery and other organised and financial crimes in Brazil. Police here claimed the money was connected to a “subway-railroad cartel” accused of manipulating the tendering process for lucrative government contracts in Brazil between 1998 and 2008. In June 2020, the ODPP followed up with an application for a property freezing order on all Bianchi’s Cayman Islands accounts.
But Bianchi, who was represented by Jonathon Hughes, a local attorney with Samson Law, vehemently denied the allegations and put forward evidence that the funds had been legitimately earned and declared to Brazilian tax authorities.
Chief Justice Margaret Ramsay-Hale, who heard the second application in the summer of 2020, found that the crown had “failed to establish a case which is ‘even barely more than capable of serious argument’ that the funds were obtained in the cartel scheme”. She was persuaded by Hughes’ arguments that the crown’s application was frivolous, defined as “being so unmeritorious that there was no realistic prospect of it succeeding after full argument”, and awarded costs to his client on an indemnity basis.
But given the circumstances of the case, Hughes invoked section 65 of the Proceeds of Crime Act on behalf of Bianchi, seeking to recoup not just legal fees but also compensation to reflect the
lost opportunity to invest and profit from the funds that had been frozen by the court pending the final outcome of his case.
In a ruling dated October 2022, Justice Cheryll Richards found that the police and prosecution were guilty of “serious failures” and that it would be just to order compensation and full legal costs to the businessman concerned. In January 2023, the matter was settled with a payment from the crown to Bianchi of US$63,886.51.
Speaking about the decision, Hughes said he understood the crown’s need to prosecute money laundering but raised concerns about the potential abuse of its powers.
“All too often we see the crown overreaching when it comes to the significant powers given to it under the Proceeds of Crime Act,” he said. “Whilst we understand the eagerness of the crown to prosecute suspected money laundering, it is equally important that cases are investigated and prepared thoroughly so that innocent individuals and companies do not erroneously fall under suspicion.” He said the firm was pleased their client had been “entirely vindicated”.
The case had emerged as a result of a report from a financial institution and the crown had relied “in good faith” on information from the Brazilian authorities that Bianchi’s company, Mottarone, which was the source of the investment funds, was not a legitimate business.
Court documents indicate that the authorities in Brazil are still investigating him in relation to another business he owns, TIRans, which had been involved in activities that had led to Bianchi’s indictment in Brazil in 2015, though most of the charges have since been dismissed. In addition, both TIRans and Bianchi had received an administrative fine for their role in the bidding cartel’s operations.
The ODPP had wanted to freeze the funds by claiming that the real source of money held in the Cayman Islands was from the alleged illegal activity of TIRans, and that Mottarone was a sham company and merely a funnel for the proceeds of crime.
But the court found that by the time the ODPP sought the freezing order, there was a mountain of evidence that the crown did not have a case in this instance and there were serious failings in the investigation. The court found that the investigative authorities had failed to undertake a full review of the documents they had received that had placed the case “on shaky ground”, and that a further detailed inquiry had been warranted but was not undertaken.
“I hold that there is a good arguable case that a certain kind of unlawful conduct had occurred. In my judgment, however, the Crown has not established any nexus between the unlawful conduct and the funds in the Cayman Islands,” Justice Ramsay-Hale wrote in her 2020 decision. “It is not enough to say that a defendant is guilty of unlawful conduct. The statute requires that some causal link between the conduct and the property be shown.”
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