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Exclusive: NY regulator presses European banks about hidden assets

French BNP Paribas bank logo is seen at their presentation of their 2010 annual results in Paris February 17, 2011. REUTERS/Charles Platiau
French BNP Paribas bank logo is seen at their presentation of their 2010 annual results in Paris February 17, 2011. REUTERS/Charles Platiau

By Karen Freifeld

NEW YORK (Reuters) - New York's state banking regulator has stepped up pressure on four European banks, ordering them to hand over details of their transactions with a Jordanian bank and documents related to Turkey's Uzan family, which owes billions of dollars to Motorola Credit Corp.

In an order issued Thursday, the state Department of Financial Services told New York branches of the banks they must submit a reasonable timetable for compliance by October 18.

The four banks are BNP Paribas SA , Credit Agricole SA , Societe Generale and Standard Chartered Plc .

New York Banking Superintendent Benjamin Lawsky has been clamping down on foreign banks with New York branches. Last year, the regulator reached a $340 million settlement with Standard Chartered over transactions with Iran.

The latest action stems from a long-running federal case between Motorola Credit Corp and members of the Uzan family, whose business dealings are the subject of legal actions around the world. In the Motorola case, a federal judge in New York has found that the Uzans siphoned off some $2 billion that Motorola loaned to Turkish mobile phone company Telsim, which the Uzans controlled at the time.

The judge, U.S. District Judge Jed Rakoff, said in August that the Uzans have hidden their assets to prevent Motorola from collecting billions of dollars in damages.

Rakoff also determined the Amman-based Jordan Dubai Islamic Bank is a proxy for the Uzans.

On August 7, the New York banking regulator ordered six banks to hand over details of their transactions with Jordanian bank and any documents relating to the federal court case.

In its latest order, posted on the agency's website, the regulator described the four banks that refused to produce the records as "Non-Complying Banks." The agency rejected the banks' arguments that the information was shielded by foreign bank secrecy laws and a New York rule that views each branch as a separate entity.

The two other banks subject to the August order, Commerzbank AG and Deutsche Bank AG , were not listed as "non-complying" institutions in the latest order.

Mary Guzman, a spokeswoman for Credit Agricole, declined to comment. Representatives of the other banks did not respond to requests for comment. Representatives of Jordan Dubai Islamic Bank also did not respond.

APPEALS COURT

Separately, a federal appeals court in New York heard arguments on Friday in a related case in which Motorola is seeking Uzan assets held by Standard Chartered.

Standard Chartered argued it should not have to comply with a restraining order served on its New York branch to freeze assets at a branch in the United Arab Emirates belonging to Uzan family members or entities or people controlled by them.

Bruce Clark, an attorney for the bank, told the 2nd U.S. Court of Appeals that a so-called "separate entity" rule should apply and that the bank could otherwise be subject to double liability: it would have to pay the frozen money to Motorola, but also would be obligated to remit the funds to the Jordanian bank under United Arab Emirates law.

Howard Stahl, an attorney representing Motorola, argued Standard Chartered chose to subject itself to the laws of multiple jurisdictions, and that a "separate entity rule" does not exist in post-judgment situations.

In a friend-of-the-court brief, the Institute of International Bankers, the European Banking Federation and the New York Bankers Association opposed allowing U.S. courts to attempt to reach non-U.S. assets belonging to a bank's customer in another country. That "would create serious problems for international banks doing business in New York, and would adversely affect New York's position as a pre-eminent financial Center," the organizations wrote in their brief.

Judge Guido Calabresi, a member of the three-judge panel hearing argument, said the case was a good one to help decide the issue.

"It involves both problems with international comity and questions of gross, gross, gross fraud," Calabresi said.

Cem Uzan, a member of the family named as a defendant, told Reuters in emails the defendants were not permitted to put up a defense in the Motorola case. Uzan said he is living in France. Judge Rakoff has rejected submissions from Uzan, saying he must first submit himself to the jurisdiction of the court.

Motorola Credit Corp, the former Motorola Inc's financing arm, became a subsidiary of Motorola Solutions after the communications company split in 2011. Vodafone Group Plc bought Telsim in 2005.

The cases are Motorola et al v. Uzan et al, U.S. District Court, Southern District of New York, No. 02-cv-00666, and Motorola Credit Corporation et al v. Standard Chartered Bank, U.S. Court of Appeals for the 2nd Circuit, No. 13-cv-2535.

(Reporting by Karen Freifeld; Editing by Eddie Evans and David Gregorio)

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