- The Washington Times - Monday, November 13, 2000

Brazil's lawsuit claimed fraud

The D.C. Court of Appeals recently upheld a judgment against a local import-export company sued by the Brazilian government for $18.7 million in damages.

The court turned down an appeal by Inter-Trade, Inc., which claimed it lost the lawsuit only because its owners missed a deposition before trial. As a result, Inter-Trade said it had inadequate opportunity to respond to charges of fraud and breach of contract before a lower court jury ruled against it.

A D.C. Superior Court judge had prohibited Inter-Trade, which is no longer in business, from presenting evidence at trial because it did not send anyone to a pretrial deposition.

The company also ignored a court order to deliver some of its corporate records to the court and the attorneys of the Brazilian government agency, which is called CNPq-Conselho Nacional de Desenvolvimento Cientifico e Tecnologico.

The Brazilian government claimed that Inter-Trade's management conspired to misappropriate government money from a fund that was supposed to be used for college scholarships. Instead, the lawsuit said, Inter-Trade's owners used the money to purchase raw materials, chemicals and equipment that it resold to private companies in Brazil.

The companies consisted of three Brazilian manufacturers. The lawsuit also claimed that Inter-Trade delivered equipment that was unfit for its intended manufacturing purpose.

Inter-Trade was owned by a Brazilian family that lived in the Washington area. The company president, Jose Mario Fontes Sr., was held personally liable for part of the multimillion-dollar judgment. His son and wife were absolved of liability.

Mr. Fontes declined to comment on the case when contacted by The Washington Times.

Inter-Trade argued in its written responses that it had already settled part of the dispute with at least one of the Brazilian companies. It also raised procedural objections, such as saying the case should be decided in federal court instead of the D.C. Court of Appeals.

However, because Inter-Trade failed to produce the requested records or to appear at the deposition, the trial judge prohibited the company from presenting the evidence at trial. The court also would not let Inter-Trade witnesses testify.

In its ruling against Inter-Trade, the trial court made the Fontes family personally liable for the judgment against the company. Personal liability against corporate directors normally is allowed only if the directors are using the company for fraudulent purposes. Otherwise, companies can be liable for debts no greater than the value of the company.

On appeal, Inter-Trade argued that the trial court's refusal to allow the company to present evidence was too extreme of a sanction and an abuse of discretion.

The only change the D.C. Court of Appeals made to the trial court's decision was to absolve Mr. Fontes' wife, son and attorneys of liability. The appeals court said only Jose Mario Fontes Sr. could be linked to a "willful" refusal to cooperate.

"The extreme sanction complained of here was preceded by lesser sanctions which were not successful in getting Fontes, Sr. to comply with the discovery requests," the D.C. Court of Appeals said. "Therefore, we find no abuse of discretion in the trial court's order as to him."

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