A Landmark Suit
The Russian Federal Customs Service is suing The Bank of New York over an illegal money laundering scheme whereby several of BONY’s executives moved $7.5 billion from Russia to accounts at the Bank via unlicensed wire transfers during the 1990s. In late 2005 The Bank of New York agreed to pay the American government $38 million in fines, which was one of the largest ever assessed against a bank in the U.S. for money laundering. The Bank of New York paid these fines as part of a non-prosecution agreement the Bank signed with the U.S. Department of Justice whereby BONY admitted and acknowledged its criminal conduct, according to a DOJ press release.
The case against the Bank of New York hinges on the Russian Court’s interpretation and application of U.S. RICO law. BoNY has argued that the RICO claim is being misapplied in this case. But Russia’s legal team maintains that not only is the application of RICO proper, but given the specific elements of RICO that are involved; the legal arguments against the bank are extremely compelling. Each side has been asked by the Court to provide expert testimony regarding RICO and its applicability in this case.
G. Robert Blakey, universally considered to be the foremost authority on RICO law, will be testifying on behalf of the Russian Customs Service. Blakey was the principal draftsman of the RICO Act of 1970. In addition to authoring the original legislation, he has written and lectured extensively on the subject and both U.S. and foreign courts--including the United States Supreme Court--when interpreting RICO laws, regularly reference his opinions and written scholarship on RICO.
The Bank of New York plans to argue that "the U.S. Congress never intended that the U.S. RICO statute be applied to foreign courts," according to a release from Bank of New York Mellon.
BoNY, for its part, hired career politician and former Nixon appointee Dick Thornburgh to give an opposing view on RICO. Thornburgh will have a formidable task trying to debate the legal subtleties of RICO, such as “congressional intent”, with Professor Blakey. Dick Thornburgh may try to divine the original intent of congress back in 1970, but during that period Blakey was actively deliberating with members of congress, while he was drafting the actual legislation. It is very difficult to argue with somebody who can say, “I know the correct interpretation of the RICO statute, because I wrote it.”
Even if the Russian courts decide against the bank, which many experts predict will happen, lawyers for BONY insist that it would be difficult for the plaintiff to collect on the money outside of Russia. The Bank also claims that it is prepared to fight against collection of a judgment in courtsin 90 countries around the world, where it does have significant assets. Mr.Dershowitz and other leading international legal experts disagree with the Bank’s rosy forecast.
"It would be very embarrassing for the bank to run around the world arguing that the judgment of a United Nations country is not enforceable," Mr. Dershowitz said. "They would look like they were trying to evade justice, so if there is a judgment against the bank, they will pay it.
The Bank of New York is arguing that the Russians are trying to collect back taxes that were lost when Russian companies laundered the money. According to American and European law, a foreign country cannot use courts in America to collect taxes. "It is not a tax issue, because there are all the elements of financial fraud," Mr. Dershowitz said, adding, "The plaintiffs will be able to demonstrate substantial losses."
RICO
Under RICO, a person or group who commits any of 35 crimes within a 10 year period and has committed those crimes with similar purpose or results can be charged with racketeering. The racketeer must forfeit all ill-gotten gains and interest in any business gained through a pattern of “racketeering activity”.
Despite its harsh provisions, a RICO-related case is considered easy to prove in court, as it focuses on patterns of behavior as opposed to criminal acts.
There is also a provision for private parties to sue. A “person damaged in his business or property” can sue one or more “racketeer”. A civil RICO action, like many lawsuits based on federal law, can be filed in either a state or federal court.
Both federal and civil components allow for recovery of treble damages (damages in triple the amount of actual/compensatory damages). The $7.5 Billion dollars laundered out of Russia has been trebled to $22.5 Billion dollars in Russia's civil RICO suit against The Bank of New York.
Although its primary intent was to deal with organized crime, Professor Blakey, principle draftsman of the RICO statute said that Congress never intended it to merely apply it to the Mob. He once told Time, “We don’t want one set of rules for people whose collars are blueor whose names end in a vowel and another set for those whose collars are white and have Ivy League diplomas.”
Applying RICO Internationally
"RICO was clearly intended for international application," Mr. Dershowitz said. "There is no such thing as local American law; you have to look at global terrorism, global organized crime, and global banking. It would strip RICO of much of its power if it were interpreted only to apply domestically.
