Legal News

From $22b to $14m: Bank of New York Settles with Russia

By Ashby Jones

This just in, from the NYT: the Bank of New York Mellon has reached an agreement to settle a $22.5 billion lawsuit by the Russian government for $14 million. The deal was reportedly reached after the two sides made a separate deal for a trade-financing pact. Click here here and here for earlier LB coverage.

According to the Times, Alexei Kudrin, the Russian finance minister, told legislators that the giant American bank will cover legal costs incurred during the two-year suit.

The Russian Federal Customs Service in 2007 sued BONY over an illegal wire transfer scheme from the 1990s, in which two Russian émigrés - one of whom worked for BONY - moved $7.5 billion to American accounts from Russia via unlicensed wire transfers. They later pleaded guilty to various offenses under U.S. law.

BONY, under a non-prosecution agreement with the DOJ, acknowledged failure to properly monitor wire transfer activity and paid a fine of $14 million. In the suit, the Russians claimed they, too, should be awarded a fine, to the tune of $22.5 billion. The Customs Service, represented by the Miami law firm Podhurst Orseck, based its suit on the U.S.'s RICO statute.

As part of a broader deal reached, the parties will restart a five-year, $400 million trade-finance agreement with Russian state banks, which would help pay for imports and exports.

"This will be done in parallel, as an act of good will, to demonstrate the bank's desire to work with Russia, to demonstrate this at a difficult time, when the Russian economy is in need of financial resources." Mr. Kudrin told legislators. "It has nothing to do costs of the court case, and is not an admission of guilt."

The Russian customs service was represented by Podhurst Orseck, led by Steven C. Marks. Bank of New York was represented by Boies, Schiller & Flexner, led by Jonathan Schiller.

Full post as published by Law Blog - WSJ.com on September 16, 2009 (boomark / email).