Free Redacted Document - District Court of Delaware - Delaware

Case 1:08-cv-00361-JJF

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE
STILTON INTERNATIONAL HOLDINGS LIMITED

Petitioner

c.A. No. 08- 361

(JJF)

CIS FINANCIAL SERVICES , INC. and CARGILL , INCORPORATED
Respondents.

PUBLIC VERSION

RESPONDENTS CARGILL, INCORPORATED AND CIS FINANCIAL SERVICES, INC.' S MEMORANDUM IN OPPOSITION TO MOTION FOR CONFIRMATION OF ARBITRATION AWARD AND ENTRY OF JUDGMENT AND IN SUPPORT OF CROSS- MOTION TO VACATE OR
AL TERNA

LANDIS RA TH & COBB LLP Daniel B. Rath , Esquire (No. 3022) Rebecca L. Butcher , Esquire (No. 3816) 919 Market Street, Suite 600 Wilmington , Delaware 19801 Telephone: (302) 467- 4400 Facsimile: (302) 467- 4450 Email: rath~lrc1aw. com butcher~lrclaw. com
Attorneys for

OF COUNSEL: AEGRE & BENSON LLP Michael B. Fisco , Esquire Will Stute , Esquire Michael M. Krauss , Esquire 2200 Wells Fargo Center 90 South Seventh Street Minneapolis , MN 55402 (612)766- 7000

Services, Inc. and Cargill, Incorporated

DATE: July 15 2008

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ABLE OF CONTENTS
TAB LE 0

PRELIMINARY STATEMENT.....................................................................................................
FACTS......................................................................................................................... ....................
ARGUMENT ...................................................................................................................................

The Award Should Be Vacated Because The Panel Exceeded Its Powers By Re- Writing the Account Agreement. ......................................................................

The Panel exceeded its authority by inferring a nonexistent contractual duty to insure against the broker s collapse , or to return funds on demand.
The Panel based its A ward exclusively on nonexistent contract terms .......................................................................................................... 8
II.

Alternatively, The Award Should Be Modified or Vacated Because It Is Not Final and Definite And Allows For Double Recovery ............................................ The Amount of The Award Is An Impermissible Moving Target............. Increasing distribution percentages reduce the Award
amount........................................................................................... .

The A ward allows Stilton to manipulate resolution of the

preference action and improperly reduce the credit owed to Cargill.............................................................................. .
The Award improperly allows for double recovery.................................. .14
The A ward provides no mechanism for Cargill to receive any credit
due............................................................................................................. .

III.

Cargill' s Alternative Proposed Judgment............................................................ ..

CONCLUSION............................................................................................................................. .

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ABLE OF AUTHORITIES
Cases
Brentwood Med. Assocs. v.

Page
United Mine Workers of Am.

396 F. 3d 237 (3d Cir. 2005)........................................................................................................

Circuit City Stores, Inc. 532 U. S. 105 (2001).. .......................................................... ...... .....................
Collins Aikman Floor Coverings Corp. v. Froehlich Y. 1990) ....................................................................................... 7

736 F. Supp. 480 (S.
Dighel!o v. Busconi
673 F. Supp. 85 (D. Conn. 1987),

, 10

ajJ'

849 F. 2d 1467 (2d Cir. 1988) ....................................... 10

Duhos v. Strasberg,
321 F . 3d

365 (3d Cir. 2001)............................................................................................................ 4
v.

Eljer Mfg., Inc.

14 F.

3d 1250 (7th Cir. 1994) ..
C. v.

Kowin Development Corp.

.. 15

Exxon Shipping Co.

73 F . 3d

v. Exxon Seamen s Union 1287 (3d Cir. 1996)............................................................................................................ 5

Hal! Street Assocs., 1.1.

Mattei, Inc.

- U. S. - ' 128 S. Ct. 1396 (2008)............................................................................................. 3 , 4
Matteson

Ryder Sys. Inc. 99 F. 3d 108 (3d Cir. 1996).............................................................................................................. 4
v.

Roadway Package Sys. , Inc., v. Kayser 257 F. 3d 287 (3d Cir. 2001)........................................................................................................ 4 , 9
Southco, Inc.
v.

Reel! Precision Mfg. Corp.

F. Supp. 2d _ 2008 WL 2221891 (E. D. Pa. May 27 , 2008)................................................... 5
Tollinger v. Ithaca Gun Co. , Inc. 555 N. Y. S . 2d 908 (3d Dep t 1990)................................................................................................. 8

1645 362 F. 2d 677 (2d Cir. 1966)................................................... ......................
Torrington Co. v. Metal Prod. Workers Union Local

Statutes
9 U.
C. 99 1 ,
2... ......................................., ......

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9 U.

C. 99 1- 16 ""''''''''''''''
99 11

9 U. S. C.

''''''''''''''''''''''............................................................................................,.......... 3

9 U.
9 U.

C. 9 1 O(a)(

, 6, 9

C. 9 11

III

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PRELIMINARY STATEMENT
Though it is fairly rare for a federal court to vacate an arbitration award , this is the rare
case demanding vacation. The Panel issued an award based on a contract provision that does not
exist , thereby exceeding the Panel's powers under the Federal Arbitration Act.
, this

Court can , and indeed should , vacate the arbitration award. Beyond that , the Panel' s award is not

final or definite , and does not provide sufficient mechanisms for execution of its terms.
This dispute arose out of the now infamous Refco bankruptcy

billion dollar fraud perpetrated by Philip Bennett , Refco s CEO , who today was sentenced to a

federal prison term of

Stilton International Holdings , Inc.

Stilton ) had a foreign exchange trading account with CIS Financial Services , Inc. (" CISFS"

an umegulated foreign

Incorporated. Cargill sold its

, including the assets of

CISFS , and Stilton agreed , in writing, to transfer its account to Refco as part of the

Transfer of Trading Account attached hereto as Ex.
came to light , and Refco
RCM" ), quickly filed the largest

, Mr. Bennett' s fraud

, including Refco

, Ltd.

account with Refco was $54 million at the time of the bankruptcy filing, and Stilton
unsecured creditor in the bankruptcy holding a $54 million claim.

Stilton filed an arbitration claim against Cargill and CISFS with the American Arbitration
Association (" AAA"

I The Panel found that " Cargill ' caused' the transfer of the Agreement and , while both

Respondents are responsible here , Cargill' caused' the dissolution of CISFS in 2006. ) Accordingly, solely Cargill " unless context demands specifying CISFS. Regardless , both Defendants are jointly liable under the Award.

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arbitration , including that Cargill knew or should have known of Bennett' s fraud , fraudulently or

negligently misled Stilton to agree to transfer its account to Refco prior to the sale , and breached

other purported fiduciary duties owed to

The arbitration panel here

Panel"

correctly rejected and dismissed all of Stilton s tort claims.
Still , the Panel entered an award against Cargill and in favor of Stilton for $30. 6 million

subject to Cargill' s right to a
bankruptcy. (Final Arbitration Award
attached hereto as Ex. 2).

, 2008 (hereinafter " Award"

Refco ,

Cargill assigned the

contractual obligations

, and therefore under New York law

performance under the Account Agreement. But the Award rests entirely and

nonexistent contract term that simply does not

Agreement between Cargill and

purported guarantee
s deposit. Thus ,

bankruptcy, or default of the broker holding Stilton

even if Cargill

jointly liable to Stilton under the Account Agreement as an assignor after the transfer to Refco

there is no provision in the
Stilton

s funds against

The Panel

inexplicably and erroneously created a contract term out of whole cloth and rested the Award on
it.

Under the Federal Arbitration Act (" FAA"), courts have the power to vacate
awards where an arbitration panel exceeds its powers. Arbitrators do so when they create a new

agreement for the parties and issue an award based on the agreement created by the Panel. That
is exactly with the Panel did here. Accordingly, this Court can and should vacate the Award.

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Alternatively, if the Court denies Cargill' s motion to vacate , the Court should modify the
A ward or remand the matter back to arbitration

, as

required by the FAA. Indeed , the approved distribution from RCM has already been increased
since the A ward ,
evidencing the undetermined ,

shifting, and

Award. The Award

alone is enough for the Court to vacate the Award , or remedy it.

FACTS
Cargill Incorporated and CIS Financial Services , Inc. (collectively referred to herein as
Cargill" ) incorporate by reference and adopt the fact section contained in Stilton s Motion for
Confirmation of Arbitration A

, without adopting or agreeing to any

of the legal conclusions contained therein.

ARGUMENT

The Federal Arbitration Act ,

9 U.S. c. 99 1-

supplies mechanisms for enforcing

arbitration awards: a judicial decree
modifying or correcting it."

, an order vacating it ,
1. 1. C. v.

or an order

Hal! Street Assocs. ,

Mattel,

Inc.

U. S. - '

128 S. Ct.

1396 , 1402 (2008) (citing 9 U.S. c.

99 9- 11).

2 Where

, as here , one party seeks to confirm the

award , and the other party seeks either to vacate or modify it on specified statutory grounds , the

FAA provides for expedited judicial review. " An application for any of these

2 The FAA
involving foreign or interstate commerce. 9 U.S. c. 99 1 2. In this case , the Account Agreement is between a Delaware corporation and a company existing and organized under the laws of the British Virgin Islands , and addresses over- the-counter trading in foreign exchange accounts. As such , the Account Agreement is subject to the FAA. See Circuit City Stores, Inc. v. Adams 532 involving commerce " in the S. 105 , 112 implementing Congress s intent ' to exercise its commerce power to the full'''

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streamlined treatment as a motion , obviating the separate contract action that would usually be

necessary to enforce or tinker with an arbitral award in court.

Id.

Sections 10 and 11 of the FAA provide the exclusive grounds for vacating or modifying
an arbitration award. See id.

at 1404- 05. Under

, an award may be

among other things

the arbitrators exceeded their powers , or so imperfectly executed them that
9 10(a)(4).

a mutual , final and definite award upon the subject matter was not made. " 9 U.S. c.
Under Section 11 ,

an award may be modified or corrected where , among other things the award
1d.

is imperfect in matter of form not affecting the merits of the controversy.

9 11 (c). Because

the Panel exceeded its powers by
nowhere in the Foreign Exchange Account Agreement (attached hereto as Ex. 3), or the Foreign

Exchange Account Agreement Addendum

Account

Agreement" ), this Court should vacate the arbitration award. Alternatively, because the Panel'

award is not definite , because it lacks any mechanism to enforce Cargill' s rights thereunder , and

because it allows Stilton to have a double recovery, it should be either modified by this Court or
vacated for further proceedings.

The Award Should Be
Writing the Account Agreement.
Although review of arbitration awards is " extremely deferential" and vacation warranted

only in " exceedingly narrow "

circumstances

Duhos

v.

Strasberg,

321 F. 3d 365 , 370 (3d Cir.
stamp ' the interpretations

2001), courts are " neither entitled nor encouraged to simply ' rubber

and decisions of arbitrators

Matteson

v.

Ryder Sys. Inc. 99 F. 3d

108 ,

113 (3d Cir. 1996). As

the Third Circuit has explained

a court may
Roadway Package
v.

authority when it is obvious from the written opinion.
257 F. 3d 287 301 (3d Cir. 2001).

Kayser

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Where neither the form nor terms of an arbitration award are rationally derived from the
parties '
authority.

contract

, the
Inc. v.

See Southco ,

Reel! Precision Mfg. Corp.

F. Supp. 2d -'

2008 WL

2221891 , at *5 (E. D. Pa. May 27 2008) (citations omitted). The award should not be

where its terms are " completely irrational " such that the award does not draw its essence
the agreement to arbitrate. Id.

(citation omitted). " In considering the arbitrator s interpretation of

the contract , the question becomes whether ' the interpretation can in any rational way be derived

from the agreement , viewed in the light of its language , its context , and any other indicia of the
parties ' intention.
1295 (3d Cir. 1996)).
Id. (quoting Exxon Shipping Co. v.

Exxon Seamen

s Union 73 F. 3d 1287

Where the arbitration award is
parties ' contract , vacation is
Am.
Brentwood Med. Assocs. v.

United Mine

396 F. 3d 237 , 241- 42 (3d Cir.

In

Brentwood the Third Circuit found that the

arbitrator had effectively " added

language " to the parties '

contract in supporting the award , and

confirmed the award only because it found other , legitimate contractual bases for the award. The

Third Circuit explained: " Had this (modification of contract language) been the only basis for
his conclusion , we would agree that vacatur is

, even if we were to kick

out the ' bum leg ' of the arbitrator s award , there are still many others upon which this award can

stand.

1d.

at 242.

But the Panel' s

award here rests exclusively on the Panel' s implied assertion that the
s funds on

Account Agreement imposed on RCM (and thus

request - in other words , to guarantee against the risk of bankruptcy of the
thus exceeded its authority by first inferring a material term in the Account Agreement that does

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not exist , and then basing its award on that nonexistent term. This Court should therefore

the Award under section

The Panel exceeded its authority by inferring a nonexistent contractual duty to insure against the broker s collapse, or to
The Panel improperly read into the Account Agreement a contractual duty by CISFS (and

later Refco) to insulate Stilton against any broker default , liquidation or bankruptcy, by returning
on demand funds in Stilton s account. The Account

contrary, as the Account

, the foreign

completely umegulated and uninsured. In it , Stilton expressly acknowledged " that transactions
in Foreign Exchange are umegulated by any governmental entity or self-regulatory organization

and that the activities of
organization and that the

oversight." (Account

Bearing this mind

(Stilton) represents it is aware
financially able to bear such risks and withstand any losses incurred.
(Id.
s breaches of the

The Panel held that
Agreement ,

which it

Refco

s October 13 ,

2005 moratorium on

withdrawals; liquidation of the account; and

account." (Award at 3. )

For these purported breaches

$30. 6 million. But the Account

otherwise protecting Stilton from the risk of default , liquidation , or
Refco by

Agreement flow in only one direction: from Stilton to

Account Agreement identifies nine

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(Account Agreement ~8(a)-(i). )

Each addresses an

by Stilton

that entitles

CISFS (and later Refco) to declare an Event of Default

by Stilton.

In

fact , one occurrence giving
- but not of the broker.

rise to an Event of Default is the bankruptcy or insolvency

of Stilton

(Id.

~8(b). ) The Account Agreement does

by the broker , much less allow recovery for one in an amount exceeding $30 million. Under the

structure of the Account Agreement , Stilton had to pursue remedies in tort if it claimed that its
broker misappropriated or wrongly withheld funds.

It is well-settled that " (a)n arbitrator cannot re-write a new agreement for the parties.
Collins

Aikman Floor Coverings Corp.

736 F. Supp. 480 , 484 (S.

Y. 1990)

(citing

Torrington Co.
Collins

1645 , 362 F.2d 677 682 (2d Cir.

1966)). The court in

held that the arbitrator exceeded her authority by awarding a former
period of time " after discharge ,

employee commissions on sales made for a " reasonable
though the agreement
termination. Id.

even

To the extent that " no provision "
Id.

of the parties

' agreement supported such an

award , the arbitrator had exceeded her powers.

The same is true here. No provision of the Account Agreement entitles Stilton to contract

damages for the broker s failure to freeze trading and withdrawals , or to fail to return
demand. Indeed , neither CISFS nor Refco is even a signatory to the Account Agreement - only

Stilton is.

The Account

addresses an obligation flowing from Stilton to CISFS (and later Refco), as it provides that " the
Customer

agrees. . . as follows. " (Account

The only purported
opaque reference to " the Agreement of (CISFS) to act as broker.
(Id.)

From this sentence

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fragment Stilton
liquidation , or bankruptcy of

prOVISIOn insulating

Refco) to return the funds in Stilton s account on demand , no matter the circumstances. But it is
well-settled that "

the specific controls over the general
Inc.

Tollinger

v.

Ithaca Gun Co. ,

555 N. Y.S.2d 908 , 910 (3d Dep t 1990). And

Account Agreement specifies the obligations thereunder and the Events of Default giving rise to
contractual remedies. Conspicuously

for Stilton if CISFS (and later Refco) liquidates or enters bankruptcy, or of any contractual duty
arising for CISFS (and later Refco) if Stilton demands return of its funds.

The Panel based its Award exclusively on nonexistent contract terms.

The Panel based its award solely on the
giving rise to contract
Stilton
s tort claims ,

s failure to return funds.

having

Stilton nor made any misrepresentation in connection with the sale of CISFS'

Accordingly, the Panel specifically

damages flowing from Refco s sudden collapse - leaving only recovery in contract.
And unlike the awards in both Brentwood and

Collins the Award here should be vacated
In

because the only contract leg on which it stands is a phantom one.

each of those cases ,

the

court ultimately denied vacatur
award ,

such that it had

See Brentwood 396 F. 3d

at 242-

(ultimately confirming award where
additional support for his conclusions);

Collins

736 F. Supp. at 485- 87

(denying motion to

vacate where arbitrator apparently granted relief on theory of implied duty of good faith). Here

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in contrast , review of the Panel' s written statement demonstrates that the Panel based its A

entirely on a
demand. (Award at 3.

s bankruptcy or to
See Roadway Package Sys. 257 F. 3d at 289 (vacating award where " the

arbitrator s written opinion makes crystal clear " that decision was based on factors

scope of authority).
Accordingly, neither the Award' s form nor its terms can be rationally derived from the

Account Agreement itself.
First , by writing into the

Stilton against any of the broker s potential financial problems by guaranteeing return of funds

on demand. Second , by imposing contract damages of more than $30 million - the full value of
Stilton s bankruptcy proof of claim less bankruptcy
breach of that non-existent contractual duty.

s interpretation and resulting

Award cannot in any rational way be derived from the Account Agreement , the Award should be
vacated on the ground that the Panel exceeded its powers.

II.

Alternatively, The Award Should Be Modified or Vacated Because

It Is

Not

Final and Definite And Allows For Double Recovery.
If the Court denies Cargill' s
motion to vacate the A

authority, the Court should modify the award before entering judgment because the A
final and definite

, as the FAA requires , or vacate the award on that
mutual ,

See

9 U.S. C. 9

10(a)(4) (award may be vacated where " a

final and
is imperfect in

matter was not made

id.

9 II(c) (award

matter of form not affecting the merits of the controversy

(FJor an arbitration award to be

final and definite , it must resolve all issues

, and determine each issue

fully so that no further litigation is necessary to finalize the obligations of the parties under the

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award.

Dighel!o

673 F. Supp. 85

90 (D. Conn. 1987),

aff'

849 F.2d 1467 (2d Cir.

1988) (table). In other words , the award " must be clear enough to indicate what each party is
required to do.
Id. See also Collins

736 F. Supp. at 487- 88 (S.

Y. 1990) (remanding award

to arbitration panel where award was not final or definite).

The A ward here falls far
remains ever-shifting, and because it leaves Cargill with no mechanism to collect any credit from
Stilton.

REDACTED.

The pertinent section of the Award provides:

Also , resolution/distributions with respect to the " preference claim " of $20 million is irrelevant to damages here since Refco ' s was not a breach of the Agreement.

Respondents shall pay to Claimant the sum of THIRTY MILLION , SIX HUNDRED THOUSAND DOLLARS and NO CENTS ($30 600 000. 00), plus interest at the legal rate from the date of this Award until said sum is paid in full; provided , however , that Respondents shall be given creditfor any monies paid to Claimant on account of its $54 million claim in bankruptcy court in excess of $23.4 million.
(Award at 3 (emphasis added).
Additional background is

flawed and why it requires

, Stilton was a

creditor in the Refco bankruptcy proceedings with a claim of $54 000 000. (Stilton s Proof of

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Claim dated

717/2006

attached hereto as Ex. 5).

Trustee ) over time had approved six distributions , then totaling 43. 33% of the claim amounts

to all creditors in Stilton s position , specifically holders of foreign exchange accounts with RCM

(the " RCM
approximately $23
generally,

For Stilton ,
400 000.

this

But

Stilton

distributions are being withheld because the Trustee has filed a

action against Stilton. In that action , the Trustee seeks return of $20, 000

000 that Stilton

allegedly withdrew from its RCM account just before the bankruptcy filing.
receive distributions until it resolves the outstanding
withheld by the Trustee ,

Stilton also cannot

000 000 bankruptcy claim in the

distressed debt market , where such claims are currently selling for approximately 62. 5% of the
total amount of claims.

The Amount of The Award Is An Impermissible Moving Target.
The net effect of the Award is to place Cargill in the position of
recovery of

000 000 bankruptcy claim.

, there is no

language in the Account Agreement to support this finding and the A

vacated. But if the

s motion to vacate ,

it nonetheless should

award because Stilton s ultimate damages remain a moving target and the ultimate amount of the
award is uncertain.

Increasing distribution percentages reduce the Award amount.
Indeed , Cargill is already entitled to a " credit" against the amount of the A

the recent increase in the amount of approved claims by the bankruptcy Trustee. As

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the Award was issued, approved distributions were 43. 33% , and that amount has since increased
to 44.

57% as of June 20 , 2008. (See RCM

s Amended Notice of (1) Seventh

Interim Distribution of RCM Assets in Place and (2) Fifth Interim
Property attached hereto as Ex. 6).

REDACTED.

Under the terms of the Award , Cargill is

entitled to a credit "

for any monies paid to Claimant on account of its $54
(Award

bankruptcy court in excess of$23.4 million. "

REDACTED

Additional distributions are very likely. Another category of Refco bankruptcy creditors
Refco Securities Customers , has received 91. 8% of the amount of its claims , and recoveries are

capped at 100%. The Trustee is actively pursuing litigation against a number of entities , seeking

to recover hundreds of millions in additional funds for distribution to account holders , including

a claim against Thomas H. Lee
Investor in Refco , N. Y. TIMES , August 9 , 2007

, Bankruptcy Trustee
reprinted at

www. nvtimes. com/

2007/08/09/business/09refco. html attached hereto as Ex. 7).
certainly possible that the

While perhaps
will receive

, including Stilton ,

distributions totaling 100% of their claims. Under the A ward , this would leave Cargill with the
right to a credit for the entire $30. 6 million Cargill is ordered to pay to Stilton under the Award.

It is virtually certain , however , that the amount of allowed distribution from the
Stilton will increase as the bankruptcy proceedings progress , thereby further reducing the amount

REDACTED.
4 REDACTED.

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it may recover from Cargill.

The Award allows Stilton to manipulate resolution of the preference
action and improperly reduce the Credit owed to Cargill.

The Trustee s preference action against Stilton creates even more uncertainty as to the

final Award amount.
against Stilton could be resolved. Stilton could
it to keep the $20 000 000 outright. Alternatively, Stilton could
ordered to pay the

s preference action

, thus allowing

000

000 to

Neither of these

alternatives would have any effect on the amount Cargill ultimately pays Stilton.
But a third , and more likely, option is that that Stilton and the Trustee agree on terms to

resolve the preference action. One
action , allowing Stilton to keep the entire $20 000 000 or some percentage of it , in exchange for
Stilton
s agreement to accept a distribution from the RCM bankruptcy of an

amount less than the

approved distribution.

This would decrease Cargill' s potential credit under the Award , because

it would reduce the " monies paid to Claimant on account of its $54 million claim in bankruptcy
court.

(Award at 3.

This is unfair , and directly contrary to the FAA' s requirement that

arbitration awards constitute a final determination of the issues between the parties.

REDACTED.

All of these problems flow from the Panel's core and fundamental error in issuing an indefinite

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award that does not finalize the parties ' obligations , in violation of the FAA.

The Award improperly allows for double
The Award also impermissibly provides the theoretical opportunity for a double recovery,

and negates Stilton

s obligation to mitigate , because it ties the calculation of Cargill' s credit to

any monies paid to Claimant." (Award at 3. )
be tied to the ultimate

Instead ,

the calculation of Cargill' s credit should
, as

measured by the final report of the Trustee setting for the total amount of allowed
Award states:

Respondents shall pay to Claimant the sum of THIRTY MILLION , SIX HUNDRED THOUSAND DOLLARS and NO CENTS ($30 600 000. 00), plus interest at the legal rate from the date of this A ward until said sum is paid in full; provided , however , that Respondents shall be given credit for any monies paid to Claimant on account of its $54 million claim in bankruptcy court in excess of $23.4 million.
(Id.

(emphasis added). ) The A ward thus ties the calculation

s credit to the amount

Stilton actually receives on account of its claim in the RCM bankruptcy, without regard to
Stilton s ability to recover even more through the bankruptcy process.

The problem with this is that Stilton
owns and controls a number of other investment

, Harold McPike. Mr.

bankruptcy claim to a third party that he owns or controls for $23 400 000 , he could pocket the
proceeds and deny Cargill any credit under the Award.

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REDACTED.

This potential for a double recovery requires that the A
the Court to cure this problem by entering a judgment that fixes this fatal flaw.

, or at a minimum , allows
Eljer Mfg., Inc.

v.

Kowin Development Corp. 14 F. 3d

1250 , 1254 (7th Cir. 1994)

double recovery constitutes materially unjust miscalculation that may be modified under FAA).
The simplest way for the Court to fix this error in the A
Cargill' s credit to the
bankruptcy proceeding, rather than tying it to

any monies paid to Claimant.

(Award at 3.

The Award provides no mechanism for Cargill to receive any credit due.
Complicating matters further , there is no
credit due to it under the A ward.

no known presence in the United
Association of Stilton International Holdings Limited attached hereto as Ex. 8).

of Harold McPike ,
States citizen ,

Stilton s sole principal ,

is unknown , but he is not

and he claimed to be a
, and

Accordingly, Cargill has no

potentially no way to effectively do so through any federal or state court in the United
This is untenable and illogical. The FAA requires

avoid this very
remanding the matter to arbitration.

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III.

Cargill' s Alternative Proposed Judgment.

Cargill believes that the Award should be vacated outright.
motion to vacate and enters judgment in Stilton s favor , it should nonetheless modify or correct
the Award. Cargill proposes and requests that any
to remove ambiguity from the Award and to correct its flaws.
$29 932 200 plus annual interest of 9% from the

That Cargill immediately pay

date of the A ward until paid , into an escrow account for the benefit of Stilton.

That upon the

, Stilton shall

deliver to the escrow agent a copy of the final report of the Trustee , indicating the final and full

amount of distribution to RCM
agent shall then pay to Stilton: (i)

, with a copy to Cargill.
$29 932
200; minus

(ii) the total amount of the
$54 000 000

Stilton is entitled to receive from the bankruptcy proceedings in connection with its

claim as set forth in the Trustee s final report.

That Stilton is entitled to any and all
payable from the escrow account to Stilton upon receipt of the Trustee s final report.

That any amount remaining in the escrow
paragraphs 1- 3 above shall then be distributed to Cargill.

, for example , if the approved

conclusion of the bankruptcy per the Trustee s final report is 70% , Stilton would be entitled to a

distribution from the
800 000
which equals

$16 200 000 ($54 000 000 minus $16 200
000), plus

any and all interest deposited , and interest earned.

Case 1:08-cv-00361-JJF

Document 21

Filed 07/15/2008

Page 21 of 22

Cargill would be entitled to receive $13,732
$13 732 200).

200 ($29

932

200

minus

$16 200 000 , which equals

In modifying the A

, the Court would fulfill the FAA' s mandate that

any arbitration award be final , definite , and subject to execution. By placing the Award

in escrow pending resolution of the

losses without relieving Stilton of its duty to
action. Moreover , the proposed modification provides a mechanism by which Cargill is fairly

and reasonably assured that it will be able to obtain the credit the A
theory, but not in practice ,

and avoids the impermissible potential for Stilton s double recovery.

Finally, the proposed judgment also
recovery in a clear way, without disturbing the rationale ofthe underlying Award.

Case 1:08-cv-00361-JJF

Document 21

Filed 07/15/2008

Page 22 of 22

CONCLUSION
If ever there were an arbitration award that requires vacation , this is it. The
an award of $30. 6 million on a contract provision that it created out of whole cloth. By doing so

the Panel exceeded its powers under the
Award.

, requiring vacation of the

Alternatively, the structure of the Award is flawed because it allows Stilton to manipulate
the final calculation of Cargill' s damages in its own favor , there is no mechanism for Cargill to

obtain the credit to which it is entitled , and the Award
Accordingly, if the Court determines not to vacate the
, Cargill respectfully

requests that any judgment be structured in the manner proposed by Cargill , which would not
harm or change Stilton s right to recovery in any way, but would remedy the significant

caused by the Award.
LANDIS RA TH & COBB LLP

OF COUNSEL
f:L-

Michael B. Fisco , Esquire Will Stute , Esquire Michael M. Krauss , Esquire F AEGRE & 2200 Wells Fargo Center 90 South Seventh Street Minneapolis , MN 55402 (612)766- 7000

Daniel B. Rath , Esquire (No. 3022) Rebecca L. Butcher , Esquire (No. 3816) 919 Market Street , Suite 600 Wilmington , Delaware 19801 Telephone: (302) 467- 4400 Facsimile: (302) 467- 4450 Email: rath~lrclaw. com butcher~lrclaw. com

Attorneys for Respondents CIS Financial

Services, Inc. and Cargill, Incorporated
DATE: July 15 , 2008

Case 1:08-cv-00361-JJF

Document 21-2

Filed 07/15/2008

Page 1 of 35

EXHIBIT

Case 1:08-cv-00361-JJF

Document 21-2

Filed 07/15/2008

Page 2 of 35

CI~ rIHAMCI,l.L 81t1'lVICrR , INC.

Avgv.' 15 ,

2005

REDACTED

os

, Inc .

Sun 1'o....r , Sui..,

100

233 Snulh W.r.k.. Dr;v,' Chir-"c", JIlin..;.

r.or.o~

~!2AIo". 4()UO

~. TOTAl PAGE, 02 ..

CONFIDENTIAL PURSUANT TO ORDER AAA NO. 50 148 T 00217-

SIHAAA0139

EXHffiIT 1

Case 1:08-cv-00361-JJF

Document 21-2

Filed 07/15/2008

Page 3 of 35

EXHIBIT

Case 1:08-cv-00361-JJF

Document 21-2

Filed 07/15/2008

Page 4 of 35

I (f

International Centre for Dispute Resolution

Thomas Venlrone

Vice Presidenl

1633 Broadway. 10th Floor , New York , NY 10019 telephone: 212-484. 4) 81 facsimile: 212- 246- 7274 internet: htlp://www. adr, orgIlCOR

May 22 , 200/'.

By UPS
Bruce G. Paulsen ,

Esq. Seward & KhseJ LLP I Battery Park Plaza
New York ,

NY

Michael Fisco , Esq Faegre & Benson LLP Wells Fargo Center 2200 90 South 7th Street 2200 Suite Minneapolis , MN 55402
Re: 50 148 T 00217 07

Stilton Internationallloldings Limited

CIS Financial Services , Inc.
Cargi1l , Incorporated

Dear Counsel:

By direction of the Tribunal ,
above-referenced matter.

please find enclosed herewith your executed copy of the Final

Award

in the

We will clo~e our file accordingly.
department f;hortly.
In addition, please find enclosed herewith a copy of your

final financial statement.

If you have any questions, please do not hesitate to contact me. Thank you for using our services.
Sincerely yours

Guillaume M, Lemenez , Esq. Attorney-at- Law , New York , France International Case Manager Tel: +1 212- 484- 3262 Fax: +) 212- 246- 7274 lemenezg~adr, on!'
. Admission pending

A DlvlS/OIl oflI'n

An/Ul/(:f IIJ ArliJ/ralJon AS..::;ac:iatJ(J(1

EXHIDIT 2

Case 1:08-cv-00361-JJF
Nonnandy Financial CI(y

Document 21-2

Filed 07/15/2008

Page 5 of 35
Page 3 of 4

50- 148- 00217CIS Financial Services, Inc.

Administrative Fees and Expenses:
Filing Fees
$0. $0.

Case Services Fee
Hearing Fees

$0.

AAA Room Rental Fee

$375.
$0. $0. $0.

Abeyance/Misc. AM
Non- AM Conference Room

Expenses

Mise Expenses

Your Share of Administrative Fees and Expenses:
Amount Paid for

$375.
$0.

Administrative Fees and Expenses:

Balance Administrative Fees and Expenses:

$375,

Neutral Compensation and Expenses:
Your Share of Neutral Compensation and Expenses:
Amount Paid for

$19,420.
$39, 600.
($20, 180. 00)

Neutral Compensation and Expenses:

Balance Neutral Compensation and Expenses:

Party Balance:

($19 805. 00)

file://C:\Documents and Settings\lemenezg\Local Settings\Temporary Internet Files\OLK

Case 1:08-cv-00361-JJF
Nonnandy Financial Clo,..

Document 21-2

Filed 07/15/2008

Page 6 of 35
Page 4 of4

50- 148- 00217Cargill, Incorporated

Administrative Fees and Expenses:
Filing Fees $0.

Case Services Fee
Hearing Fees

$0. $0.
$0.

AAA Room Rental Fee

Abeyance/Misc. AM
Non-AM Conference Room

$0. $0. $0.

Expenses
Mise Expenses

Your Share of Administrative Fees and Expenses: Amount Paid for Administrative Fees and Expenses:
Balance Administrative Fees and Expenses:

$0.
$0.

$0.

Neutral Compensation and Expenses:
Your Share of Neutral Compensation and Expenses:
Amount Paid for Neutral Compensation and Expenses:

$0. $0,
$0.

Balance Neutral Compensation and Expenses:

Party Balance:

$0.

file://C:\Docurnents and Settings\lemenezg\Local Settings\Temporary Internet Files\OLKl...

Case 1:08-cv-00361-JJF

Document 21-2

Filed 07/15/2008

Page 7 of 35

INTERNATIONAL CENTRE FOR DISPUTE RESOLUTION
Commercial Arbitral Tribunal

In the Matter of the Arbitration Between:

Case No. 50 148 T 00217 07 Stilton International Holdings Limited
Vs.

CIS Financial Services , Inc. and
Cargill , Incorporated
FINAL AWARD
, the UNDERSIGNED ARBITRATORS, having been designated in accordance with
the arbitration provisions of the parties ' Foreign Exchange Account Agreement dated October 17
1997 , af; amended , and the Commercial Rules of

having been duly sworn; and having heard and duly considered the proofs and Stilton International Holdings Limited (hereinafter " Claimant ) and of CIS Financial

Services

Inc. (" CISFS" ) and Cargill , Incorporated (hereinafter " Respondents ); do hereby DECIDE and
A WARD as follows:

Operative Facts
In October 1997 ,

Claimant executed the Foreign Exchange Account Agreement; fundcd

its account with CISFS (an indirect subsidiary of Cargill); and , for the next 7 or so years, CISFS acted as Claimant' s broker in unregulated , over- the-counter foreign exchange
June 2005 ,

Cargill agreed to sell its brokerage

assets "

of CISFS

(i.

Refco ); and , when the the accounts of its customers , among other things), to Refco Group Ltd. (" transaction closed on August 31 , 2005 , Claimant' s account with CISFS was transferred to Refco

Capital Markets Ltd. (" RCM" ). During September and early October 2005

, Refco was Claimant's

broker" and serviced Claimant's foreign exchange account (in large measure using a number of

the same CISFS employees and systems who moved to Refeo as a part of the transaction). On or about October 10 , 2005 , Refco publicly announced that it had discovered serious , Phillip Bennett (who had accounting irregularities and other misconduct involving its then CEO

Case 1:08-cv-00361-JJF

Document 21-2

Filed 07/15/2008

Page 8 of 35

Case No. 50 148 T 00217 07 Stilton and CISFS/Cargill Final Award of Arbitrators

negotiated and approved the June transaction with Cargill), On October 13 2005 , Refco declared

a moratorium on trading with respect to all of its accounts, including Claimant's; and on October

, 2005, Refco and its affiliates , including RCM ,
customers and creditors pursuant to bankruptcy law,

filed for bankruptcy

consequence , Claimant's account was liquidated and made subject to distribution to all of Ref co

Claims and Defenses

By
approximately $36. 3 million ,

, Claimant seeks to recover from Respondents
calculated as the difference between its accepted proof of claim in

the Refco bankruptcy ($54 million) and the monies Claimant has received or expects to receive in

distributions from the bankruptcy proceedings (plus interest , costs and attorneys ' fees). In this , Claimant essentially argues that regard , Claimant posits two basic

since the Agreement was merely
novated , Respondents remain jointly liable with Refco for Refco s breaches of that Agreement.
Second , Claimant seeks to hold Respondents liable for Stilton
s losses by virtue of their alleged

bad faith and/or tortious misrepresentations in connection with
Refco.

With respect to Stilton s contract claim , Respondents deny any liability since Claimant
consented" to the assignment of the Agreement and transfer of its account to Refco. With respect to the tort claims , Respondents , among other things , deny that there was any bad faith on their

part; that they made any material misrepresentations; or , for that matter, that they owed any duty
to Claimant in connection with

importantly, Respondents argue , any losses suffered by
misconduct and Refco s bankruptcy; consequently, recovery of those losses must be determined

in bankruptcy court , not here. In addition to dismissal of all claims , Respondents also seek their
costs and attorneys fees incurred in these arbitration proceedings.

Liability

The credible evidence failed to
owed to Claimant , or made material misrepresentations to Claimant , in connection with the sale

of the brokerage business to Refco. While it transferred to Refco , the more Cargill stood to gain in the sale ,

there was insufficient credible

evidence that Cargill improperly misled its clients and customers into continuing their account

Case 1:08-cv-00361-JJF

Document 21-2

Filed 07/15/2008

Page 9 of 35

Case No. 50 148 T 00217 07 Stilton and CISFS/Cargill Final Award of Arbitrators

activities with Refco. In this regard , the somewhat unsavory reputation of Refco in the brokerage

business appears to have been well known; and no amount of due diligence on the part of Cargill could have uncovered the massive fraud and misconduct that lead to Refco s bankruptcy.

On the other hand , New York law

, absent a

novation or specific

severally liable for the breaches
circumstances presented here , no novation or release of Respondents ' obligations to Claimant

was ever
transfer/assignment ,
nor the handwritten notation on Respondents ' August 15 ,

2005 ,

letter to

Claimant , can relieve Respondents of their joint liability with Refco for Refco s breaches of the

Agreement under New York law.

Proximate Cause and Damages
Claimant's damages of $54 million were a direct consequence of Refco s breaches of the Agreement; that is, among other things , Refco s October 13 , 2005 moratorium on trading and
withdrawals; liquidation of the account; and

account to Claimant. Refco s bankruptcy limited Claimant' s ability to recover its damages from

Refco occasioned by the breaches of the Agreement; the bankruptcy and bankruptcy law neither excused those breaches nor Respondents ' joint liability therefor.

As conceded by Claimant in its final submissions , it is reasonable to expect that Stilton will receive 43.33 % of its $54 million in damages " from " Refco in the bankruptcy proceedings , we note leaving approximately $30. 6 million due and owing from Respondents. (In this regard that Cargill " caused" the transfer of the Agreement and , while both Respondents are responsible
here ,
Cargill "

caused" the dissolution of

respect to the " preference claim " of $20 million

payment prior to bankruptcy was not a breach ofthe Agreement.)
Claimant' s request for interest dating back to the breach (October 2005) is

damages due from Respondents could not be " fixed" until the Panel heard and
proofs and allegations of the parties as set forth in this Award. Finally, each party shall bear its
own costs of this proceeding, including attorneys ' fees.

Accordingly, as and for an AWARD herein:

Case 1:08-cv-00361-JJF

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Page 10 of 35

Case No. 50 148 T 00217 07 Stilton and CISFS/Cargill Final Award of Arbitrators

1. Respondents shall pay to Claimant the sum of THIRTY MILLION, SIX
THOUSAND DOLLARS and NO CENTS ($30 600, 000. 00), plus interest at the legal rate from
the date of this Award until said sum is paid in full; provided , however , that Respondents shall be

given credit for any monies paid to Claimant on account of its $54 million claim in bankruptcy
court in excess of $23.4 million.

2. The
Resolution (" ICDR"

totaling TWENTY

DOLLARS AND NO CENTS ($22 650. 00) shall be borne by the
compensation and expenses of the Arbitrators totaling

HUNDRED FORTY DOLLARS AND NO
Claimant and 50% by Respondents.

840. 00) shaH be borne 50% by

3. This Award is in full and

, counterclaims

defenses and off-sets properly submitted to the jurisdiction of the Arbitrators in this proceeding;
and any claim or counterclaim not specifically granted herein is nonetheless deemed DENIED.

4. This A ward may be executed in any number of counterparts, each of which shall be an
original , and all of which together shall be deemed to be the Final Award in this matter.

We hereby certify that , for the purposes of Article 1 of the New York 1958 on the Recognition and Enforcement of Foreign Arbitral Awards , this Final Award
made in New York , New York , U.

Date

John F. Byrne , Esq.

Date

Joanne Barak , Esq.

Date

Peter CoHins, Esq.

Case 1:08-cv-00361-JJF

Document 21-2

Filed 07/15/2008

Page 11 of 35

Case No. 50 148 T 00217 07 Stilton and CISFS/Cargill Final Award of Arbitrators

1, John F. Byrne , Esq. , do hereby affirm upon my Oath as Arbitrator that individuals described in and who executed the foregoing instrument, which is my Final Award.

Date

John F. Byrne , Esq.

I, Joanne Barak , Esq. , do hcreby affirm upon my Oath as Arbitrator that I am one of the
individuals described in and who executed the foregoing instrument, which is my Final Award.

Date

Joanne Barak , Esq.

Peter Collins, Esq. , do hereby affirm upon my Oath as Arbitrator that I am one of the
individuals described in and who executed the foregoing instrument , which is my Final Award.

Date

Peter Collins , Esq.

Case 1:08-cv-00361-JJF

Document 21-2

Filed 07/15/2008

Page 12 of 35

Case 'No. 50 148 T 00217 07 Stilton and CISFS/Cargill Final Award of Arbitrators

I. Respondents shall pay to Claimant the sum of TIllR TY MILLION, SIX HUNDRED
THOUSAND DOLLARS and NO CENTS ($30, 600 000. 00), plus interest at the legal rate ITom the date of this Award until said sum is paid in full; provided , however , that Respondents shall be

given credit for any monies paid to Claimant on account of its $54 million claim in bankruptcy
court in excess of $23.4 million.

2. The
totaling TWENTY DOLLARS AND NO CENTS ($22,650. 00) shall be borne by the
Resolution (" ICDR"

compensation and expenses of the Arbitrators

HUNDRED FORTY DOLLARS AND NO CENTS ($38 840. 00) shall be borne
Claimant and 50% by Respondents.

3. This Award is in full and

, counterclaims,

defenses and off-sets properly submitted to the jurisdiction of the Arbitrators in this proceeding;
and any claim or counterclaim not specifically granted herein is nonetheless deemed DENIED. 4. This Award may be executed in any number of counterparts , each of which shall be an

original, and all of which together shall be deemed to be the Final Award in this matter.

We hereby certify that, for the
1958 on the Recognition and Enforcement of Foreign Arbitral Awards, this Final Award was
made in New York, New York, U. S.A.

4~/"f(
Date

Date

Joanne Barak , Esq.

Date

Peter Collins , Esq.

Case 1:08-cv-00361-JJF

Document 21-2

Filed 07/15/2008

Page 13 of 35

Case No. 50 148 T 00217 07 Stilton and CISFS/Cargill Final Award of Arbitrators

I, John F. Byrne, Esq. , do hereby affirm upon my Oath as Arbitrator that I am one of the
individuals described in and who executed the foregoing instrument, which is my Final Award.

Date

cj~
Joanne Barak , Esq.

, Joanne Barak. Esq. , do hereby affkm upon my Oath as Arbitrator that I am one of the
individuals described in and who executed the foregoing instrument, which is my Final Award.

Date

, Peter Collins, Esq. , do hereby afikm upon my Oath as Arbitrator that I am one of the
individuals described in and who executed the foregoing instrument, which is my Final Award.

Date

Peter Collins, Esq.

Case 1:08-cv-00361-JJF
,.,..,1 . L..a. "~JO J. ..Jr;;. r- rum.

Document 21-2
10:

Filed 07/15/2008
lclcc'tcrcr't

Page 14 of 35
I-'age

""'KU::J~~H T::J

:~"'b

Case No. S~i1ton

50146 T 00117 01

and CISFS/C:u-giU FII\a1 AW3Id of

. R"ponde""
THOUSAND DOLLARS and NO CENTS ($30
the dare OF,,,,, A ward unli, said SO" i. PlUd io full;

600 000. 00).

pi.. "It...., at th. I"""

. Srx HUNDRED

'''y mo"i., paid 10 CI.im.n, ou ""'"'unt

P~v"',~ h--."
of;"

COUrt ill

4 mjUion

that """'"''''''''' shall b. $54 mil)ion dIU" in bankruptc.

r",..

2. The

Resolutton ("ICDR" -iog 1WENty TWO DOLLARS AND NO n1VJ"S ($22 650. 00) shall COmp,",,,,,,,, and
'h. MlitrarD", t""'Dng HUNDRED FORTY DOLLARS ANO NO

C.-

fa, Di'pute

tho 1'HIR1Y ~IG1iT TIfOUSAND EIGHT

parti., ,.. i"",",d;

Clail1lal\( and .sO% by Rt::spoodcnts.

840. 00)

sbaU h.

bo"" 50% by

. 11,;, A ward i, in

dcf"",.. and off.,....
and any .I.im or co"nlerclailol1o, ,pecifically
nus A Ward may be
is

non"hel.., d=ned OENIIID

original .

IIIuj all of

wJ;;eh

together sI"dl be deemed to he

, each of which shall be un thc Final A ....Id in tJU, malter.

that fur thc 1958 on 'he Rccog";1im. and Enfomem.."
made in New York,

We he....y certify

New York, U S.A.

Aw",ds. thi,

Final Awaro ~as

DatI:

John F. Byrne,. Esq.

~1ffDL
Dare

SJ~

' J
JOaJu1C H.

Petl.T Collil1s , Esq,

Case 1:08-cv-00361-JJF
I'IHT - Cl- Ct:Jt:JO

Document 21-2

Filed 07/15/2008
10: 12122"15727"1

Page 15 of 35
Page:6/6

r ;..)C

r- rom:

c~
Stihno "lid

Pillal A. ward

CISFSrCargJU

Joh.

F. By"", . Esq.

. do hom,y om""

individuals d",cobad in and who

-n'".

.pon

my 0,,", as A.bitrnror rho, I .m 0'.

of Ute

Date
Joh" F. Byrne , Esq.

, Joanne Barak,
individ..I, degcribed in

I:sq.

, do hereby affinn upon my
Q.S

Arbitrator that 1 am on~ ofrhc
. which i. my Final Awn'd.

~t)

~al~

211PL

:JI4K
Joanne H rak, Esq.

, Peter Collins, E5q. , do hereby affirm individual.!l d~sclibed in and who executed the foregoing illJ!ilnlmellt, which i~

Dnre

Peter Collins, Esq.

Case 1:08-cv-00361-JJF

Document 21-2

Filed 07/15/2008

Page 16 of 35

Case No. 50 148 T 00217 07 Stilton and CISFS/Cargill Final Award of Arbitrators
HUNDRED THOUSAND DOLLARS and NO CENTS ($30, 600 000. 00), plus interest at the legal rate from
the date of this A ward until said sum is paid in full; provided, however, that Respondents

I. Respondents shall pay to Claimant the sum of THIRTY MILLION , SIX

given credit for any monies paid to Claimant on account of its $54 million claim in
court in excess of $23.4 mi1lion.

2. The

TWO THOUSAND SIX DOLLARS AND NO CENTS ($22 650. 00) shall be borne by the
totaling TWENTY

Resolution (" ICDR"

compensation and expenses of the Arbitrators

HUNDRED FORTY DOLLARS AND NO
Claimant and 50% by Respondents.

840. 00)

shall be borne
, counterclaims

3. This Award is in full and

defenses and off-sets properly submitted to the jurisdiction of the Arbitrators in this
and any claim or counterclaim not specifically granted herein is nonetheless deemed DENIED. 4. This A ward may be executed in any number of counterparts , each of which
original , and a1l of which together shaH be deemed to be the Final Award in this matter.

We hereby certify that , for the 1958 on the Recognition and Enforcement of
made in New York , New York , U.

, this Final Award

Date

John F. Byrne , Esq.

Date

Joanne Barak , Esq.

f\1~ 2

DJ

2 ~o 6'
Peter Collins, Esq.

Date

Case 1:08-cv-00361-JJF

Document 21-2

Filed 07/15/2008

Page 17 of 35

Case No. 50 148 T 00217 07 Stilton and CISFS/Cargill
Final Award of Arbitrators

, John F. Byrne , Esq. , do hereby affinn upon my Oath as Arbitrator that I am one of the
individuals described in and who executed the foregoing instrument , which is my Final Award.

Date

John F. Byrne , Esq.

, Joanne Barak , Esq" do hereby affinn upon my Oath as Arbitrator that I am one of the
individuals described in and who executed the foregoing instrument , which is my Final Award.

Date

Joanne Barak, Esq.

, Peter Collins , Esq. , do hereby affinn upon my Oath as Arbitrator that I am one of the
individuals described in and who executed the foregoing instrument , which is my Final Award.

M~
Date

Peter ColJins , Esq.

Case 1:08-cv-00361-JJF

Document 21-2

Filed 07/15/2008

Page 18 of 35

EXHIBIT

Case 1:08-cv-00361-JJF
F'RCJ'1 ;

Document 21-2

Filed 07/15/2008
PHONE NO.

Page 19 of 35

5tH -tDf\
Customer Name

Account Number

Foreign Exchange Account Agreement

CIS

FINANCIAL SERVICES , INC.
Suite 2300 23.3 S. Wacker Drive Chicago, Illinois 60606

()/04194

DCT 17 . 97 14: 17

809+ 363+ 2538

PAGE. 02

EXHIBIT 3

SIHAAAOO19

Case 1:08-cv-00361-JJF
F'ROM : TRAD I

Document 21-2

Filed 07/15/2008
PHONE NO.

Page 20 of 35
: 8139+363+2638

FOREIGN EXCHANGE ACCOUNT AGH.EEMENT

~t-i \

~I\

\l\teJ"f\.Q\-uY\Ct ~

~d.dt~J cr.
Account Number

Customer Name

TO:

CIS Financial Services. Inc. 233 S. Wacker Drivl:, Suite 2300 Chicago. Illinois 60606
Fonip
) 10 ael as broker for !he uad8rsij..ned (hereinafter refem4 10 , in respect III all Iud! O, C foreiJn 2xdwlce ac~ulllS
''ccwnrO
CUSII'IIICr") in any

In c:oniidcratioll of Ih~ A/I,eement 01'

has or may II any liIn~ hllYe ...ill1 CISFS or its succesrors , includiq aecounU

on,-!he-counter

IS foDow.:

1. Scope of IfIi. A(:ICelDeat; JliJkJ.

"'bid! schrdulc ml)' be lII1c:NIed

agrecmmt ,JCClSFS and the Customer.

All trlnsaclioll$, IIId all CUJ1Omcl' , mDlI be eovcmcd by tile tcnnI of this
fhc merit (it any)

(I) A

F_rrt

means a Call1net wilen Ihe V~lue Date is 1\

Ih~ CISFS shaJl
ot

lelSt one BusiDess DI)' lata- thIIII the
the Valua J

CuslOmcr ill wri!ina: or by Idcx
IC:nns apply,
Ibis

Conlr8Cl sIll/I

he",b)' void. The leon, of each

"arc=n\,

whieh is se- month.
MarMI rg/lle

sel ruM in Ihe
Cuslomer. The CuslOmcr undcnlanlls and IWOsnizcs
-----in Ft'reisn E"ehange are

lIICans \he U, S. Doll., Value, de=minl'd II)'
tlt&t CISFS dctermlMI it would n:cei~e if

in ill solc , !iserctlon.
marlctL -

1000~~~~L!.nt~
(h)

lold lI1e relBVlDt oollucra! for

immediate delIvery In the

se'f'~lulalor)' orp,niz.'tion
UJpcello sud1

o~ersitht. Beann; lIIis In
aWlle of \he risks inherent in the trading or Foreil:l1
finllnei&lly !\tile 10 belli such risk5 and
2. Odini'ioos.

Ope" P"si,;o.. SfH1/

mew any

(i) A

Co,,',ocl m.an. a Conll'lCl

second B.uincu Diy
howevCl', Iha wilh n:spoe! 10 8IIY Spol Con\Ja01 involv!n& \hI

EuroPC6l\ CUIRIIC)' Unit (BCU).

1'01 till
(a)

Business Day following tbe Tl'lde DIu;
with r~""", to the United
however, that with mpcct ITI1 Spot S. DoUns and Ccadian Businel.l (l ay followil\& \he Trade DI!C.
Contract involvin& only

means, Ivs/IleU DtI)!

which
Sunday) in N.:w York City. 8I1d with respeCt to MY country omel
than the United SIAItS ,

any day on whic!l

Tradl Do", ""~h resptClto any CGn/I'ICI

business totller than a
financial CCI'u:r ofthe releVlII1 oountr)'.
(b) COluroul mellls an 8QI'CClIICI\! (1;)

the Contract Is entered into between
l:1I:eepl in !be

Cutoff, bu~ lido.. Iht
as its

S. Business Day.
Dollar. II any

for the delivcr)' of D specified amounl of a. speclt!ed rell.m for a specified amounl of I dltrcrcnt spocilied curllllt)' for -'CItlement on a specirrcd Vallie Dlte.
cUrTencies Ire rel.."d

S. Doll,,, ral,,~ means the lIJIolIIIl of U. S. momenl i" time which would ren&ll

~l~...t J

S. Dollu. It ClSFS' then

ContrlQl "

m~,,"J II Spot Connaa or I
II)

prC'Vajlin~ txcItIr1ge ratn
such Forel~ CwrSlley.
v,,"'. DOle

dc1incd klow). or bolb. .. (e) Oolly

CIII"JTmelllS \ho poinl in lime

means. with respect 10 any
Diy

by CIMS
OOI'sldercd to ha~t IS

settlement dale speeiCLed in \he confirmallon n:latins

pNti~lar
1Jnilccl S~I\CS IlId, fbr

it! \he

Daily CUlDff will occur at D time ~e1ectcd solely by CISfS
may (d) ~U1 (rom dlY 10 clAy. meMS 1'hc

Contr&Cl, l~e counlry In wlUeh the Pon:isa Cul'l'cncy II the lawCul cUlTency.
Bankruplcy Code of 19711

F.d6,a/ 8tJ11A:r"plcy

II U. C. ~10r , e\SC-q.
(c) 1''''1;1('' CII,n,,')! countric. "" IpeclIied in Schedule 1 IlLIdled 10 this

Osher elpilaliz.ed It,,,,. In
provided f,,, herein,

~~~ . ~ I

Q(;IQ...,o:.,...?o:.,,:.

por.i= DI,

SIHAAAOO20

Case 1:08-cv-00361-JJF
FROM : TRAD

Document 21-2

Filed 07/15/2008
PHONE NO.

Page 21 of 35

3. IIYPDt~cC8lioll;

For ca, )h

Open Pn,juon, Jbc Illn or loss. if any. if oom~uled

by 1IS!.umiJII thai \he
rn..-ke. &I die rclevan.
for tIM Value DI1e 01

(I) Tile

Hcurilles, and other property In !!Ie be c.arriod in ClSfS'
lIypolhc~d 01 rchypolheelled separately or in

the CoaIl'lCl, IS de\=nined solely by

CISI1S. The U.s. DoUar Value of
and/or losles, if any, Is oompuud by uSllfl'liIIS fIIat the or los:. Is oonvonod inlO U, S. Dollars in the mllrkcl II !/Ie

ctlMr socwitics IItd plOpcny for 1M sum due 10 CISFS thereon or
lor a ;reller lum. and without

sceur;uc& or proptrty remlin in

releVlIIt fol8ip C?I~anF Date ,'f \hI Contrad, IS
S. lloU8/' Value ofJhe cain or 10J! oteach Open Position

CI$FS.

will I,e IW'pte\l
DoIIBl Valu. of Gains II1d Lcwe& on
(ui) ClSP~

(II) As ,"uri\)' tbr
!he Customer ..regs 10 deposit and malnwn CISFS &I ilS held office In Chica&o. lIIino" , or olhu location or

account IS CISFS mlY
follows:
(i) Only

ncmn:lle~er
LoSsel

Net U. S. Doll.. Value of GaIns and
S. Dollar

MlrlM Vllue ofCoIIUlraJ.

this AsRemenl
for IIIe putpOsC$ of this

(iv) CISF:; will C4/11pUIC

Total Required Initial CoUll eraJ" and " TolII Required Mt.lnlCNnCc

sohedule by notiJ'yin;1he Custom,r in wrllinl. shall be cfI'cetive imrned~.ly upon receipt
by /he CUSIC"",r. The valUf of ""y CoU,Iera! provided by

omoU'1IS III the

(1) )' or'~

lIIe CUlOmcr shall be subject Sthcdulc 1 of this Atreemont. CISFS'
CollauJ81 m.y be

Open IWO cUll'llleios. (e. e. all Cenlnets l)rtlWl Pounds IIId GcmIan Marks) the quantity 01 that

,:urreacy speWicd IS the
~hodule J 01

qualifications

A:ntI11llDt shall be divlc!cd by the

The Custom~r $hall cxcoUIt II1d cIcliv~ ludl pledle or daposil IIrmnenlS i~ctudilli
security agrumenu rn r"'luuced by C1SJ'S. Such
Conll'''U and all other other propen)' of the dcllvend. ;onvcyed, ITInslCmd. asigned rn paid Ie CISPS
or comil1$ inlO CISFS'

Defined Qulnllty" in ;chcd\ll~ J or this .Auocmllll. Tbt

IUllllity speoUled u

". IICptive in ins",,"s wlMa

:tie fint cuneacy of !lie cumacy pair, and
l!ItcrwUe , ",UI be ~18d the " Unit-Equivalent"

(2)
.,.ult/plied by the lIIis Alrecmem IS II\f "RIIqllill:d Initial ('.clllleral pc; R.cqulred Initill l!n!I-Eq~i\'aIe ,!r'~lQmlll~. CoIIDluaI" tbr t~ pArticulu Opm

II'C hereby pled;ed ro ClSFS II1d shall he subject

"ewiry
CuSloml:l"s obliGlltions to CISFS-w. ci... thIS Agr.unetU

the ContnlOls. The
~8riMts -to"

Cim. iJiitihecuJlOI'ACT ncfdi

(3)

markctlble tiLle 10 all CollaleraJ Ind
delive:red 10 CISFS Is
any leind. ellilTU , pledeel or cneumbrJl1cc' or

Total Required Initial CoUllcni" i5 by ~crecatin, Ibe ' Rfquilcd Injtill Collllcn'" lor all Open Po,itions.
of eaclt Open Po.ilion will he multiplied by the amount specified in ScbcdDle 3 of tbi$ Agreement as lIIe " Required MainlCllllloc
ColIllCrsI pcr Unil-Equivalent"
RoquiYCd MAinlCJllllCC CoUmrlll" COf \he

(4) The " Unit- Equi...llca('
(ii) The Cuslomer IgICCS
COUaleral in fucb lonn and In such

from lime: 10 time "'que.t orllly or 1n
Cu.Jtomer Iclcnowtedt:C-$ thai

,,"ounl &rid form of Colllleral may Ilso ~sutt in a

Open Position.
(5) Th~

such

for !ddillonal ColIllCI'll, The

additional Collllensl.
fai;) In 1111 wIlen suel1 Collltera) snail be .etunlly rCCiCived in

Mennin" by
(6) CISFS

Required Maintenance:

Collalenl' for all Optn Po,IUons.

Collatela! ....eoount Ind
'e:ceipt u detcrmined by ClSFS in jl" "DIe di$creuon.
(e) CISFS w\1l

MY liIIIe by notifyint the

writing. MY chin,. shill be .metivc
upon such nolification. The CuslDmu

soldy
followinl manlier:

s Collaleral A~unt
TotaJ II. S,
DoliAI'

ilia! InY chillies recanJin, ~reemenl may Rsult In 0

(i)

CISFS

CoII~.
times so "';at the
(I)
the

rcquc:.cts by
sdditional CollluTIII,

Market ValUt of ~lIatual" by aplOlalin;

DoIlI1' In /he Colllleral Acoount, (b) tho U. S. Dollar VaJuc of Ill)' Forricn Currcnciu in
the U. S.
001111 Valve a! the MarIt.-ct

(d) The Customu I,,~el Ie main,.in
row U. S. DoUIT Marltet V.lu~ olColllolCl'lJ" is

solely by CISfS, of olher Ac~unt. subj~ 10
qualifications
(ii) CISFS will compUt! the

than Or equ.1 to (USD) 2S0 OOO.OD

(Two hundRd fifty

Ihou;and). AND
S. DoliII' Vlllue
(II) me " Tolll

or G.,ns &lid Losse. on Open posilions " as follows:

U. S. Doll.. MAricer than or cqunl to /he "TotaJ Rt-quircd Jniti&l Collateral ' AND

SIHAAAOO21

Case 1:08-cv-00361-JJF
FRa1 : TRADI

Document 21-2

Filed 07/15/2008
__I.
PHONE NO.

Page 22 of 35
.. 1.4-'-'1
c;.-...h",r"1

: 81219+363+2638

(Hi) Th. " N.t

Collaa:raJ" is gR&~r Ihan or equlJ

Tolal

delivcrabk! therul\dcr, be,
7. Delivery or Forei21' C1!rre.cy,

~equired Msin~.nllnce Collllc:l'l."

(~) .1 II any tim~ on. or more of thc scelion J of thi$ deemed to have u . Collateral Odieien')' '' and ."all be obI lined 10 immcd~ly clelivlr
andlor Offsc:1 open positions condilion~.
Ii)
as to

Delivery pW'dlqcc in a n."or city in the coun~

foreiPl

is tile
(0'';'" CUMo....r in wrilil\l. die cumacy ,hili be S. Dollars chatl OJ wire tr&5f8l, AJI paymeau 10 b8 muk by

mett

Wilen tho CU'lOm" hl5 I " Collalc-ral Dencialey; not crellC UI)' FIe'" posilions. Uld m8)' trade onl)' 10 ofTs~
COI,"lnl positio!'~.

m.jor U.s. c~
paymetlt of amo IIII1J .s.y

'iJDuhancousl)' whh or prior

10 paymeat of

(ii) If CISFS
Cuslomer hu I Coll.eral

Customer WlI bod! and oonrmn m..tdlng IIlymenl imwctions.

ri&ht to o/h=l, olou oul, IIIdlor liquidate any
in !he CUS10/DCr',

8. E.ve." oIDeflulL
The occurrencc of Ollt or mole of \he tollowin8 ennls shall oanslllu/e
a " Default. untl.-r rhU A&J'eUnem:

OUI, and/or liquldatin& trI/IIIC'Iions may be madI in
manner $Qlely delCnnine4 by CISPS.

(iii) Th.
CoIlatelal in lilY of
CuslOmtI' henby repteSCIIIS paymCllt o(U.s, Doll. Cunds 10 CISI'S.

dill: lAd

(a) 1M
Illy Contra,:nlhen dlle;

CISFS muSt be paid immc:diacely upon der.enninalion by
its sole di,crelion, IhaI there i5 I nc:cd for addititml

(b) The
Jt$pcd to it admit in ",

unclu !be Fe4araI Banbuplc)' Code, (ii) not pay, 01

become du:, (iil) rnd:e
(iv) apply hK',
I rcec~ct'. CWllDdiu , tnInU,
01 official (IIr it 0' In)' 1Ubmmia! pat

(t) The CUlIo"",r

Colllleral if the sequesud
conditionl lislell in be mtl.
~. Tradlll"

ilS propony, (v) inslilul2

lJ8nlauptq' Code or seel.illl
insolvent, or Stel:inc

111)' P'OCCI dln&1

order for ~11c111114ct'

,cgrcllrlizlltioll, &lTlJ\eemtllt. adJuruacnI or COmpotllion ofil ar its
.LI) n.c Customer acknowledges CISFS' to !he C\lSlDmn;-tl\e. nuni~--anilior-sI~-9pcIH'&sition.s which
\he CU$lOn1er nay

~orclllizll

d.bto und.:. lilY law telatlni
debtors. or 'fai~ 10 frlc-an--anawtr, or

mlintain or acq~lr. IhroullI CISPS.

Diller ple.Jln, dcayinc me /DItcrill III~gllion. of

. p.oocedi~ filed. aJainfl it. (vi) ~,. IIIY_ N"J!.9!f- ~..PJlIO,
(b) C:ISFS TC$""'CS Ibe (e) Wi1i1

luthorize I,r amcl any of the

lubpar8Ulph, or (vII) fUl

l"poinlme,,1 IIr proeecdlns 4esaibed in (e) below;
fat

wnc
ConlrlCIS Involving Ihe same rwo .uFrend., and

SpOI
(e) Wimllut

thc currenl da)', CISFS reserves tilt riShlto 10 olTsetlhe Op... Poclllon in the
I tal.r Value D1IIt.
(d) If for UlY reuiOn

!'tuiver.
appoinu;cl IiIr \he Cuslomer or Iny 5ub5untJJJ pITt or or I procco.dins described In (b) l!wIve shall br iJutilU\ed apilUt !he CurlOJ.er and ouch lppOinlmtnl conlilluas IIDdi5clwled or

slIch pro",;ding contin,,"
of30 oons.,eutive da)'~;

counlCrpllty 81th. prloe qllO~d ID die CuslOmer , CISFS willllave
no obliillion ID

ClI5lOmcr 81 me quOltd price.
(c) The Customu nco,nacs thai
electronic marto! Inlormllion an ollly indications of ."ehMiC leNa! exchan!!c rales Ivailable 10
5. Co",ml..inn..

(d) Any court. government or
seiu1 or
of any 5ubsta,uiaJ portion oflbe property !he

It may view
~, lUuttm. T.ICTlle , de.

Cu.nomu;

(c) Any
A.Gtccmc:nr or die 011 ""hicl1 it

. or CuS10mcr lUll fair or omit to

fact which io neuu.ary to mate me rcpR:'Clllllliona

bertln notl!li,I~ldi",;
The Cuslomer aerns
chargl::S for
(f) Th. Cuotc-mcr

commissions 0\ raleS spl(;ifi.d in ,!;eh..Jule 4 o(this "ClOom.nl.

provisions oflhis
(&) The CUSID'IIC\'

6. Olfs..lill~ C08rraca.
Whenever Wrt rnay ccist In II1Y Or

request f(tllll CISFS;
(h) The

fo,.,;,n ekchan&c ".ovidine for die purchas. and slle or IIIe
\h. ConlrecU as I silli1c

III. sDllle Value DRte, CISFS mi.)', in its sole diSCl'~on , .Iccl to

Avtemenc 10 wbiel\ it U .

Contno;ts. lilt !'ct ditTt:rcncc bctween \he arnoums p8)'obl. und.r !.h. cuncraeu, IUIdJe. dI. n~

of d~wl or

fblCica tJ(.;hlllge conttlCt, t!le dfDCI ofwhich is 10

PUfluant to. IJ1)' such

n~T 1? 'C?

809+363+2638

P~GE .

SIHAAAOO22

Case 1:08-cv-00361-JJF
FRCJ'1 : TRAD) I'-(j

Document 21-2

Filed 07/15/2008
PHONE t-().

Page 23 of 35

margIn Dr collalO,.al PlIYmcnl
(i) CISFS. in i~ sole

I'oniift f. xcbllllJ':
U. Mluu.

Acoounts Ihowin. IlNrlance in lIS favor.

protection to 1"""lnall: I/lil AtJ'tCmcnl IInd uerclscs III remodics
.s provided below
.. Relllediu.

!'neededl'; Corporlle JltS4lulion.

CISFS II1II1 aOI be requlrad CII)10mer un2ess IIId unlll all 11,11

In /he

Ihall be wirfac 101)' to
pa