Company files $1.8M suit vs 2 Nauru corporations

A Bahamian corporation has filed a $1.8 million lawsuit in the CNMI Superior Court against two corporations controlled by the Republic of Nauru for allegedly perpetrating fraud against their creditors.

Arrival Ventures Ltd., a Bahamian corporation that is authorized to transact business in the CNMI, sued the Nauru Phosphate Royalties Development (Honolulu) Inc., Nauru Phosphate Royalties Inc., and five unnamed co-defendants.

Arrival Ventures, through counsel Danilo T. Aguilar, asked the court to hold the defendants liable to pay the corporation $1,767,187 in damages.

Aguilar stated in the complaint that Nauru Phospate Royalties Development (Honolulu) Inc. (NPRD) was a corporation organized under the laws of Delaware, while Nauru Phosphate Royalties Inc. (NPR) was a corporation organized under Nauru laws.

Aguilar did not specifically state why the lawsuit was filed in the CNMI.

The Nauru Local Government Council used to own the Nauru Building in Susupe. In 2001, Blanco Estate Inc., owner of the Susupe land where the building is located, slapped the Council with a lawsuit for alleged unpaid rentals for the lots.

Aguilar said in the complaint that in the early 1980s, various governments of Nauru conducted a scheme by establishing a series of corporations around the world for purposes of concealing monies belonging to the country from its people and creditors.

To implement the scheme, the lawyer said, Nauru organized a series of shell corporations such as Central Pacific Securities PTY Ltd., Nauru House Maintenance Services PTY Ltd., Spencer Investments PTY Ltd., Eigigu Holdings Inc., and Central Pacific Holdings PTY Ltd. (the offshore entities).

He said Nauru also organized various other shell corporations in the United States such as NPRD and NPR, and various other Delaware and Guam corporations.

In 1980, Aguilar said Nauru established a Guam corporation named Nauru Corp. controlled by David E. Orlans.

Aguilar said Orlans was the Honorary Consul of Nauru to Guam and all the shares held in his name as a shareholder was meant to conceal its true owner’s identity from creditors and the Nauruan people.

Orlans, he said, eventually transferred all the shares in the Guam corporation to Nauru upon its request.

In April 1988, Nauru also established NPRD and thereafter changes NPRD’s principal offices from Delaware to Australia.

In July 1999, Aguilar said Nauru’s Finance issued ¥5 billion in Japanese yen bonds that was guaranteed by Nauru. Aguilar said Nauru used much of the bond proceeds to fund various projects around the globe, including the development of Nauru Tower in Hawaii.

Aguilar said plaintiff Arrival Ventures is a bondholder of ¥100 million of the bonds, but the bonds matured and the issuer failed to repay the bond’s principal and accrued interest.

Aguilar said Arrival Ventures demanded payment from the issuer, to no avail and neither did Nauru, which guaranteed the debt.

The lawyer said this failure to render any payments as required under the indenture resulted in the entry of a court judgment in the amount of $1.77 million against Nauru Finance Corp., Nauru, Nauru Corp. (Guam), Nauru Phosphate Royalties Trust and Nauru Phosphate Corp.

Aguilar said Nauru is insolvent and unable to pay the judgment because it has concealed its assets in various corporations, including NPRD and NPR.

Aguilar said NPRD and NPR are liable for the acts of Nauru as its alter ego.

Aguilar said Nauru commingled its funds with other assets of NPRD and NPR and assets and funds of the offshore entities for its own convenience to assist in evading payment of obligations to creditors.

Neither NPRD or NPR, he said, ever had a board or annual meeting as required by its by-laws and Delaware and Nauru law.

Nauru, he said, used the corporate form as a conduit to conceal assets from its creditors.

Aguilar pointed out that Nauru has been named by the U.S. Department of Treasury as a primary money laundering concern for engaging in questionable financial transactions and allowing the country to be used for such questionable financial transactions.

He alleged that Nauru chose to raise capital on the international debt markets by selling bonds to investors like Arrival Ventures.

Aguilar said Nauru guaranteed the issuer’s debt but with no intentions of paying it back and diverted those funds by using a host of corporate entities like NPRDC and NPR.