BUSINESS

RICO Author Says BONY Lawsuit is Valid

By Alex Nicholson

Bloomberg

MOSCOW — The author of a U.S. anti-racketeering law told a Moscow judge that Russian courts have the right to hear a lawsuit seeking $22.5 billion from Bank of New York Mellon Corp., the world’s biggest custodian of financial assets.

G. Robert Blakely, the professor of law who drafted the U.S. Racketeer Influenced and Corrupt Organizations Act, said the suit can be tried in the Moscow Arbitration Court as long as Russian customs authorities do not use the law to seek criminal penalties. The case stems from claims that the bank failed to stop a money-laundering scheme in the 1990s.

The Russian Customs Service sued Bank of New York last year, accusing it of helping to transfer more than $7 billion out of the country illegally in the 1990s.

The bank is seeking to dismiss the case on the grounds that the Moscow Arbitration Court does not have jurisdiction to hear the dispute.

“They’re not asking for criminal sanctions,” Blakely, a professor of law at the University of Notre Dame in Indiana, told the court on Monday. “If they were asking for criminal sanctions they couldn’t get them.”

Bank of New York spokesman Kevin Heine said the claim was “invalid under U.S. and Russian law.” Blakely has said in the past that foreign application of RICO was not appropriate, Heine said.

The Bank of New York said in 2005 that it failed to report suspicious transactions and paid $14 million to end two criminal probes in the U.S. Lucy Edwards, a former Bank of New York vice president in London, and her husband, Peter Berlin, who ran companies with accounts at the bank, told U.S. officials in 2000 that they conspired to use the bank to move more than $7 billion out of Russia. They were sentenced to five years’ probation.

The customs service argues that the 2005 agreement, in which the bank acknowledged that its employees acted illegally, is sufficient to prove in a civil case that the bank harmed Russia when government coffers were running low.

“That would amount in our system to an admission of liability,” Blakely said.

Customs lawyers argue that a civil RICO case entails a “lower burden of proof” and does not require exhaustive evidence that a crime was committed.

“It is a total misrepresentation of the facts,” Heine said. “The bank was never charged with any crime and did not admit or accept responsibility for a crime.”

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