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Parloff on Russia v. Bank of New York Mellon

Over the past couple of years I've repeatedly expressed fascination (here, here, here, here, and here) with the lawsuit in a Moscow commercial court in which the government of Russia is invoking the RICO law -- America's RICO law, that is, not some equivalent on its own books -- to demand that Bank of New York pay compensation over a ten-year-old episode in which rogue bank employees opened a channel that allowed Russian exporters and others to move money out of the country without official oversight. To begin with, there's the sheer size of the sum demanded: $22.5 billion, an artifact of RICO's damage-trebling provisions as well as an optimistic view of underlying damages. Then there's the issue of the application of our distinctive RICO law in other countries' courts over actions and damages occurring overseas, which seemed like a momentous sort of precedent, even though the plaintiffs hired prominent lawprofs Alan Dershowitz and Robert Blakey to testify that it was just fine. In addition, there was the question of whether the Russian courts would prove a forum adequately protective of the rights of an entity being sued by the Russian government (although Dershowitz piquantly dismissed such concerns: "Who are we to cast aspersions on a country's legal system?") Then there was the role being played by Miami injury lawyer Steven Marks, who openly pitched the lawsuit to the Russian government; while he's hardly the first stateside lawyer to sell the idea of litigation against U.S. companies to foreign sovereigns, that trend in itself is one that deserves closer attention. Finally, there was the curious circumstance that the rogue employees, who had pleaded guilty for their role in the scheme to evade the bank's internal controls, had found it worth their while to assist the plaintiffs in the advancement of the suit.

Now Fortune legal analyst Roger Parloff has published a thoroughly devastating analysis of the lawsuit in the form of a lengthy article for the Sept. 29 issue of the magazine and a series of follow-up blog posts here, here, and here. Among Parloff's findings:

* In arguing the suit's merit, Marks has placed great weight on the bank's supposed admission of criminal culpability in the related federal enforcement action. In fact, however, his support for that proposition rests on a clumsily worded press release by Manhattan federal prosecutors which covered developments in two entirely different cases against the bank. The language about admitting culpability referred to the other, relatively minor case. When the issue became salient in the Russian litigation, the U.S. attorney's office issued a letter flatly rebutting Marks's interpretation as erroneous, to which he responded with apparent fury by accusing the prosecutors of seeking to protect wrongdoers.

* An affidavit by plaintiff's expert and Harvard lawprof Alan Dershowitz had relied on the incorrect reading of the original press release, raising (at least) the question of how carefully experts such as Dershowitz investigate the factual underpinnings of such suits before proffering their hired opinions. And Notre Dame's Robert Blakey, along with two other experts retained by Marks to support the suit, had appeared only two years ago as co-counsels in a different case where the brief argued that Russian courts could not provide an adequately impartial forum to a foreign party locked in a dispute with powerful Russian interests. Blakey now says his name appeared on the other brief by mistake and disclaims having any opinion on the impartiality issue.

* It seems Marks has cut himself in for a 29 percent stake in the proceeds, which (speaking of extraterritoriality) seems at odds with the Russian courts' own principles prohibiting as unethical the payment to lawyers of contingent fees.

* Marks's strategy for dodging RICO's statute of limitations depended on the press release now exposed as bogus, which supposedly alerted the Russian government to a case it would not previously have known to file. Without that grounds for suspending the statute of limitations, the case would fail even aside from its ultra-dubious merits.

* And Marks' strategy for keeping alive the confusion between the two cases appears to hinge on the statement of a lawyer with no publicly evident involvement in the case at all, Barry Hartman, who passed along the prosecutors'-press-release error in a continuing legal education presentation; the supposed relevance of this lawyer is that he practices at the same 1,235-lawyer firm (K&L Gates) as former AG Dick Thornburgh, who is involved in the case on the bank's side. At least such is the most plausible interpretation of the frantic spinning of Burson-Marsteller's Miami office, which is repping the plaintiffs. "How weak can a case get?" asks Parloff's headline. And how many prominent American legal academics on retainer does it take to keep such a weak case going?

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Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.