October 7th, 2011
Econintersect: Yesterday GEI News reported on the suits by New York City, New York State, the U.S. Attorney’s office in New York and several other states to recover damages from Bank of New York Mellon for currency trading fraud alleged over a ten-year period. Reader RH has brought to our attention another interesting case brought against BNY Mellon four years ago by the Russian government, who accused the bank on money laundering. Follow up:
Follow up:According to Global Research (May 18, 2007):
The Federal Customs Service filed a lawsuit in Moscow on Thursday seeking $22.5 billion in damages from the Bank of New York for suspected money laundering, the service and its lawyer said.
The lawsuit could be linked to the money laundering charges brought against former Yukos chief Mikhail Khodorkovsky and his business partner Platon Lebedev earlier this year, a member of their defense team said.
The bank, the world's second-largest custodian of investor assets, dismissed the claims as being "totally without merit" and promised to mount a vigorous defense.
Customs service lawyer Maxim Smal accused the bank of involvement in "an illegal scheme" that helped Russian businesses bring money into Russia without paying taxes from 1996 to 1999, Interfax reported. He filed the lawsuit with the Moscow Arbitration Court.
The customs service confirmed the filing of a lawsuit against the Bank of New York in a statement later in the day, and said it would reveal more details at a news conference Friday.
The lawsuit stems from a confession by former BNY vice president Lucy Edwards in 2000, which followed a lengthy U.S. investigation into suspicious transactions at the bank, Smal said.
Several accounts that existed at the bank in the 1990s, Edwards said, were part of an illegal network that allowed Russian businesses to defraud their government of customs duties and tax revenues by transferring funds in and out of Russia in violation of currency controls.
Twenty-eight months later, the New York Times reported on September 16, 2009 that the BNY Mellon and the Russian government agreed to settle the case for the payment of Russia’s legal fees plus an additional $14 million. The Times indicated that this was far less than the $1 billion settlement that the Russian government had sought.
That is quite a comedown from the initial complaint for $22.5 billion in 2007.
The NYT gives some additional background. It seems that the Russian complaint was filed some two years after the U.S. government settled a different money laundering suit against the bank:
The[Russian] case spun out of the bank’s huge money laundering scandal of the late 1990s. A group of trial lawyers in Miami took the case on a contingency fee for the Russian government after the Bank of New York reached a $14 million settlement with the American government in 2005.
The bank conceded a rogue employee had laundered $7.5 billion from Russia through the bank in the 1990s, but said it had admitted no criminal wrongdoing.
It is curious that the going “kickback” from BNY Mellon for multibillion dollar money laundering schemes seems to be $14 million.
Another excerpt from the NYT discloses an additional curiosity:
Separately, the Bank of New York agreed to offer a line of credit to Russian state banks to finance import and export business, the finance minister, Aleksei L. Kudrin, said in testimony to Parliament. The $400 million loan on favorable terms, though, would be an “act of good will” not formally linked to the settlement, he said. “It has nothing to do with costs of the court case, and is not an admission of guilt.”