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Russia v. Bank of New York

Critical pieces in Forbes and in Canada's Financial Post about a curious lawsuit launched by the government of Russia against Bank of New York over its role in a notorious money-laundering scheme eight years ago. As Reuters summarizes the background, a former executive at the bank and her husband pleaded guilty in 2000 to a conspiracy to move $7 billion from Russian sources out of the country through money orders drawn on the bank. Per the WSJ's account (sub-only), "Much of the money was from Russian exporters who avoided paying Russian customs duties." A year and a half ago, the bank agreed to pay $38 million and overhaul its anti-fraud safeguards to end two U.S. criminal investigations.

The Russian government sued Bank of New York in May, and here's where things get curiouser: it sued in a Moscow court, but has hired American plaintiff's lawyers -- Podhurst Orseck of Miami -- who say (per the WSJ) that "the damages sought are calculated according to U.S. law." And that apparently means the application of treble-damage principles to the entire $7 billion that got sluiced through the back channels, adding up to a very cool $22.5 billion. Per the Financial Post piece, by Peter Foster, "It seems enterprising U.S. lawyers may have approached the Russian Federation and suggested applying U.S. triple damage laws" to produce the whopping damages demand.

The WSJ reports that in its statement, "Bank of New York said it had been approached by lawyers 'purporting to represent' the Russian government 'who claimed to be able to dispose of the matter for a tiny fraction of the amount now claimed.'" The executive at the center of the money-laundering scheme and her husband, incidentally, both of whom pleaded guilty at the time, are assisting the Russian government in the suit.



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.