Roberto Isaias
Roberto Isaias (wikimedia)

Ecuador got a green light from a state appeals court to pursue a claim in Miami seeking at least $20 million from two brothers who operated and allegedly defrauded a major Ecuadorean bank.

Roberto Isaias was executive president of Filanbanco S.A. in the 1990s. William Isaias was executive vice president.

Filanbanco retained the international accounting firm Deloitte & Touche to determine the extent and causes of massive losses at the bank. In May 2001, Deloitte reported losses of at least $661.5 million.

Filanbanco, then the nation’s largest bank, was forced to close. Ecuador alleged the Isaiases drained the bank’s funds through fraudulent misconduct, Third District Court of Appeal Judge Vance Salter’s opinion states.

In 2003, Ecuador issued arrest warrants for the Isaiases, who had moved to Miami. They were convicted in absentia and sentenced to eight years in prison.

In 2008, the country’s banking authority issued a resolution approving the Deloitte report. The Agencia de Garantia de Depositos, Ecuador’s equivalent of the Federal Deposit Insurance Corp., sued the Isaiases in 2009 to recover lost bank assets.

Ecuadorean regulators recovered and sold about $400 million in assets. The Isaiases’ outstanding liability was $261.5 million. The AGD is trying to seize at least $20 million in property that brothers allegdly own in Florida.

The Isaiases brought a counterclaim. Just as the case was to get to trial a year ago, Miami-Dade Circuit Judge John W. Thornton found decisions made in Ecuador to seize the assets failed to meet the standards of U.S. constitutional law.

“Courts have been reluctant to give effect to foreign acts of state which offend the U.S. Constitution’s distaste for takings without just compensation,” Thornton wrote in his order granting summary judgment.

But Third District Court of Appeal Judge Vance Salter said Thornton’s order was based on an erroneous predicate advanced by attorneys for the Isaiases, “who characterized the Florida complaint as an effort to ‘seize the Isaiases’ property in the U.S.’ through an ‘executive fiat’ within Ecuador. In fact, however, the complaint seeks a judgment for money damages which, if further proceedings warrant, could only then be used to execute upon property in the United States.”

The Isaiases did not show the trial court that Ecuador’s actions were confiscatory acts strictly based on politics, revolution or regime change, Salter said.

In obtaining the dismissal, the Isaiases also didn’t show Ecuador’s claims of misapplication and misrepresentation or the Deloitte findings were a pretext, “or even factually incorrect,” he said. “Simply stated, the republic claims to be a creditor with a claim for money damages against the Isaiases based on their allegedly wrongful acts and omissions in Ecuador.”

Since genuine issues of material fact remain about the alleged indebtedness and the country’s entitlement to a judgment for damages, Salter said Ecuador is entitled to submit evidence to make its case.

Third District Judges Linda Ann Wells and Leslie Rothenberg concurred.

Ecuador was represented by Alvin B. Davis, Digna B. French and Rafael Langer-Osuna of Squire Sanders in Miami.

Davis said: “It’s an excellent decision. The ruling is consistent with the argument that we made in our brief before the court. The trial court said the republic was seeking to seize property in the U.S. We said we were not. We were seeking a money judgment, therefore, the trial court was in error and had been led into error by the lawyer for the brothers.”

The Isaiases were represented by Michael Tein of Lewis Tein and Elliot Kula of Kula & Samson in Miami.