Academic journal article Defense Counsel Journal

Illegal Contract Still a "Business Transaction"

Academic journal article Defense Counsel Journal

Illegal Contract Still a "Business Transaction"

Article excerpt

A California citizen, James Adler, and his controlled Mexican corporation, El Surtidor del Hogar, were taken in and then participated in a scam conceived by various Nigerian individuals and at least one Nigerian government official. When Adler and El Surtidor tried to recover the $5.18 million bilked from them, they ran into the doctrine of unclean hands and were denied recovery by the Ninth Circuit in Adler v. Federal Republic of Nigeria, 219 F.3d 869 (9th Cir. 2000, as amended on denial of rehearing and rehearing en banc).

Adler signed a contract in Nigeria with persons who represented themselves as Nigerian government officials to perform certain acts that would result in a 40 percent commission on $130 million to be deposited in a bank account in the Grand Cayman Islands. Most of the remainder of the $130 million was to be paid to the "government officials." Adler was led to believe that El Surtidor was going to get a contract for the computerization of Nigerian oil fields. Adler performed his part of the contract, coughing up more than $5 million, but as it turned out, it was a magnificent scam from which he received nothing.

Adler and El Surtidor sued the Federal Republic of Nigeria, the Central Bank of Nigeria and 17 Nigerian officials. They defended on the Foreign Sovereign Immunities Act, 28 U.S.C. 1330 et seq., which immunizes foreign governments from suits in U.S. federal courts unless one of the exceptions to the act applies. The district court found that "the evidence establishes that Adler intended to aid and abet Nigeria officials to pay themselves kickbacks." The exception at issue, as expressed in 28 U.S.C. 1605(a)(2), strips immunity for "an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes of a direct effect in the United States. …

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