Why did the Bank of China terrorism finance case tank?

The bank denied any knowledge that the funds had been used for terrorism.

Bank of China's logo is seen through trees at its branch office in Beijing (photo credit: REUTERS)
Bank of China's logo is seen through trees at its branch office in Beijing
(photo credit: REUTERS)
Why did the terrorism financing case against the Bank of China, possibly the most significant and contentious of its kind, tank? The case involved more than 20 families of American victims of attacks in Israel from 2003-2008, with allegations that the bank served as a conduit for Iran and Syria to funnel funds to Hamas and Islamic Jihad related to those attacks.
The bank denied any knowledge that the funds had been used for terrorism.
There were obvious reasons the case had been headed for failure.
The Israeli government, which by virtually all accounts initially pressed the plaintiffs, led by Shurat Hadin and the firm of Boies Schiller & Flexner, into filing the case to deter China from permit terrorists to be financed through its banks, later turned its back on the case.
Whether Israel’s changed position was right morally and geopolitically is a separate question, but let’s focus back on why the case tanked.
Despite the government’s 2013- 2014 refusal to allow its former agent Uzi Shaya to testify, the plaintiffs insisted they still had a great case. For one, the plaintiffs still had former Israeli government agent Shlomo Matalon’s affidavit which mapped out the exact path of the funds as well as Israeli agents putting the bank on notice in 2005.
There are legal doctrines which allow submitting more documents to prove an allegation in place of a witness if the only potential witness is made unavailable.
If the plaintiffs could move forward even after Israel blocked Shaya as a witness, why should Israel’s change of position matter? The question gets deeper when one carefully reads the stipulation which spells out why the plaintiffs’ allegedly dropped the case.
It not only says that they could not prove the bank’s knowledge without Shaya’s testimony (despite plaintiffs earlier saying they could win without Shaya), it also says that the bank and the terrorist financing transfers were not sufficiently connected to New York to maintain jurisdiction.
This point comes off as almost preposterous since the plaintiffs had previously beaten off several motions to dismiss by the bank on a range of jurisdictional issues from 2010-2013.
The plaintiffs’ wins on these jurisdictional issues culminated with a September 2013 slam-dunk ruling by the New York Court of Appeals that the case was properly in New York, not China, and that Israeli law would be applied regarding whether the bank was liable.
If the plaintiffs earlier said they did not need Shaya and earlier won in court on keeping the case in New York, then why are they blaming dismissing the case on these issues? No doubt some of the answer is that the plaintiffs earlier in the case overestimated their hand.
In contrast, once they got closer to trial they realized that Matalon’s affidavit, without Shaya, might not be considered sufficient and might only prove the fund transfers, not the bank’s knowledge that the transfers were crooked.
Maybe they expected a breakthrough from getting former US House majority leader Eric Cantor to testify about Chinese obstruction, more documents from Israel via a High Court of Justice petition or to depose a key alleged terrorist player in the financing scheme who they found in Belgium - which did not occur.
But it is hard to escape the feeling that after the plaintiffs had consistently marched on for a full year plus after the Israeli government itself had deserted the case, they simply ran out of gas for remaining in conflict with the government that they would much rather support.
This is without mentioning the stress of fighting the world’s two largest powers, the US and China.
Further, even if the lawyers wanted to keep fighting, if the clients, the families of the victims in the cases, lost their steam for fighting with Israel, the lawyers would need to yield.
Another issue could be money and general momentum.
When Shurat Hadin was at the height of resisting Israeli pressure in 2013-2014 to push forward with the case, the case was seen as its golden nugget chance for an historic victory.
But by February 2015, Shurat Hadin had won a high-profile $650 million judgment against the Palestinian Authority which put it in the history books and likely generated new sources of funding.
Sometimes even the most principled operators need to make practical decisions about switching which horse they invest in and bet on mid-race, and the Bank of China case could have been a casualty of that process.
Boies Schiller and Flexner also lost some momentum when its lead lawyer on the case, Lee Wolosky, took leave in June to become the US government’s czar for closing the Guantanamo Bay prison.
The bottom-line is that no matter how committed a group of plaintiffs may be, not all terrorism finance cases are equal and going after a bank in China will always be more of an uphill battle than going after the Palestinian Authority or a smaller regional bank.