Oct. 10 (Bloomberg) -- New York’s highest court threw out a $99 million award against members of Brazil’s Nasser banking family in a lawsuit by Merrill Lynch & Co. accusing them of high-risk trading activity.
Merrill Lynch sued Nasser family members in April 2008, claiming they defrauded the brokerage out of more than $78 million after engaging in a series of “high risk trades.” Merrill Lynch was acquired by Charlotte, North Carolina-based Bank of America Corp. in 2009.
A lower court in New York entered a default judgment against members of the family after a referee determined they failed to comply with Merrill Lynch’s demands to exchange evidence in the case. An appellate panel in Manhattan upheld the award in April 2012. The Court of Appeals in Albany threw out the judgment in a ruling dated today, saying the lower court abused its discretion.
“The penalty imposed -- entry of a default judgment against the Nassers, individually -- was not commensurate with the alleged disobedience, i.e., failure to produce documents that Merrill Lynch claimed were in the Nassers’ possession with respect to the Nasser entities,” the Court of Appeals said.
The Court of Appeals also upheld a ruling reinstating the complaint against Albert Nasser, saying that it found without merit an argument that the Appellate Division erred in concluding he was subject to jurisdiction under the state’s long-arm statute.
“While we are disappointed with this ruling, this decision does not address the underlying merits of this case,” William Halldin, a spokesman for Bank of America, said in a statement.
In its suit, Merrill called the Nassers, part of Brazil’s Safra banking empire, “sophisticated, wealthy international financiers” who cost the brokerage more than $78 million from “speculative and risky” trading that including short sales of thousands of uncovered put options on Bear Stearns common stock.
Safra Group controls Sao Paulo-based Banco Safra SA, which is led by Joseph Safra, Brazil’s second-wealthiest person and the world’s 81st-richest person with a net worth of $13.1 billion, according to the Bloomberg Billionaires Index.
Merrill’s suit accused Ezequiel Nasser, his son Raymond and his uncle Albert of defrauding Merrill through offshore entities based in the British Virgin Islands, including Global Strat Inc. and Excel Global Opportunities Ltd.
Today’s decision is “quite gratifying,” Charles Manuel, an attorney representing the Nassers, said in a telephone interview. It was “extraordinary” for the Court of Appeals to hear the case given that the Appellate Division had ruled unanimously against the Nassers, Manuel said. Claims against the Nasser’s offshore entities have been settled on confidential terms, Manuel said.
The case is Merrill Lynch, Pierce, Fenner & Smith Inc. v. Global Strat Inc., 601012/2008, New York state Supreme Court Appellate Division, First Department (Manhattan).
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