LAS VEGAS (CN) - Hedge fund manager NML Capital prevailed in motions to compel two Nevada companies to provide information on 123 shell companies that might be hiding $65 million in embezzled Argentine money.
U.S. District Magistrate Judge Cam Ferenbach on Monday granted motions to compel two Nevada companies to cooperate with subpoenas to help NML determine where the money might be.
NML Capital in 2003 initiated 11 collection actions and won a judgment in the Southern District of New York against Argentina to recoup the $1.7 billion owed from Argentine bonds.
"NML suspects that former Argentine President Néstor Kirchner and his wife, current President Cristina Fernández de Kirchner, awarded lucrative state-controlled projects to two political insiders, Lázaro Báez and Cristobal López, who embezzled billions of pesos in state funds and laundered the proceeds through Nevada," Ferenbach wrote.
Ferenbach said NML's suspicion arises from a 2013 investigative report by an Argentine journalist that indicates the Kirchners and Baez embezzled "billions of pesos from public-infrastructure projects" and laundered the money and other embezzled funds through several international shell companies.
A prosecutor in Argentina claims Baez used 150 shell companies in Nevada to launder $65 million, and NML says there is "reasonable suspicion" 123 Nevada corporations subpoenaed by NML and identified as "Baez entities" are among the 150 the prosecutor says were used to launder the money, Ferenbach wrote.
NML on June 24, 2014 subpoenaed M.F. Corporate Services to obtain information and depose its only employee, Patricia Amunategui, regarding the Baez entities. NML said the court ruled "'there is no doubt'" the entities are shell corporations and "'there is no doubt that shell corporations are routinely formed to commit fraud .'"
NML said it wants information from M.F. Corporate Services on its relationship to Panamanian law firm Mossack Fonseca, the identities and organizational structure of the Baez entities, and the flow of money in and out of accounts maintained by the entities that were set up by Mossack Fonseca through M.F. Corporate Services.
NML said Mossack Fonseca uses M.F. Corporate Services to create corporations in jurisdictions around the world to enable its clients to reduce their exposure to taxation and regulations .
Val de Loire and M.F. Corporate Services each filed motions to quash the subpoenas, and NML in turn filed motions to compel .
In their motions to quash, Ferenbach said, Val de Loire and M.F. Corporate Services argued that NML has not established a connection between Val de Loire and Argentine assets, that NML improperly served M.F. Corporate Services as agents of Mossack Fonseca, and that the document requests are "unduly burdensome."
But Ferenbach said Val de Loire is not "immune from discovery if a direct transfer" with Argentina is not shown.
Ferenbach said NML has the legal standing to obtain information from any person or entity relevant to its attempt to recoup funds from Argentina.
Ferenbach also said NML has "demonstrated reasonable suspicion that examination of M.F. Corporate Services' records could lead to the discovery of the Argentina's assets" and "NML's need to examine M.F. Corporate Services' records outweighs its privacy interests."
Ferenbach granted NML's motion to compel Val de Loire to fully comply with the subpoena and denied Val de Loire's motion to quash.
The subpoena with which NML served M.F. Corporate services seeks information on the 123 Baez entities plus 14 other companies.
"Because NML has not demonstrated reasonable suspicion to doubt the good faith of asset transfers between these fourteen entities and Argentina," Ferenbach partly denied NML's motion to compel and partly granted M.F. Corporate Services' motion to quash.
Ferenbach granted NML's motion to compel regarding the 123 other entities and denied M.F. Corporate Services' motion to quash in regard to them.
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