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PRESS

Emanuel Zeltser helps expose Russian money laundering

Russian bank clients sue BoNY Depositors claim New York bank knew about fraud
By James Kim
Oct. 8, 1999

Depositors of a failed Russian bank sued the Bank of New York on Thursday, charging that BoNY helped the Russian bank defraud customers.

The Russian bank, Inkombank, had its banking license revoked by Russian officials in Moscow a year ago.

Ever since, it has been dogged by controversy, as depositors and creditors sought to retrieve money.

Plaintiffs' lawyers say depositors lost more than $500 million. The lawsuit, filed in federal court in Manhattan, alleges that Inkombank executives embezzled from the bank, with the knowledge and help of BoNY. ''It (BoNY) facilitated theft from thousands of depositors,'' says Harold Hoffman, a lawyer for the depositors, who are mainly Russian citizens.

BoNY says the lawsuit is without merit and that it will pursue a vigorous defense.

Before it collapsed, Inkombank was a top client of BoNY, which is now at the center of a global probe of money laundering charges.

In particular, investigators are studying whether Russian banks or other institutions channeled ill-gotten money through BoNY. Like other Russian banks, Inkombank had a ''correspondent'' account with BoNY, through which it was able to transfer money for itself and clients. BoNY earned lucrative fees in return. The suit alleges that BoNY officials:

• Knew about various loans by Inkombank in Russia designed to let executives steal.
• Helped formulate stock transactions using shell companies that allowed Inkombank officials to steal funds.
• Knew that Inkombank submitted false information to the Federal Reserve Board, the New York State Banking Department and the Securities and Exchange Commission as it applied to sell shares and open an office in the USA.

The lawsuit follows one by BoNY shareholders, who charged that BoNY management behaved recklessly in developing Russian clients.

The depositors' attorney team includes Emanuel Zeltser, who has tangled with Inkombank in another lawsuit. That suit produced reams of evidence that might be used in this action.

Depositors will likely present a detailed report from the Central Bank of Russia. ''We're confident we'll be successful in proving what we've alleged,'' Hoffman says.

Exec quits, saying BoNY let her 'swing in the wind'
By James Kim
Wed., Oct. 13, 1999

Natasha Kagalovsky, head of Bank of New York's Eastern European division, which figures prominently in an international money-laundering probe, resigned Tuesday.

In a letter to CEO Thomas Renyi, the former senior vice president expressed dismay that ''not once during this investigation has the Bank seen fit to publicly or privately defend me and let it be known that there is not one negative thing to say about me or how I performed my job.''

So far, the investigation has produced an indictment of one BoNY executive, Lucy Edwards, who worked in the Eastern European Division. A federal indictment alleges she was involved in a scheme to illegally transfer $7 billion through BoNY accounts. Kagalovsky has not been charged with any wrongdoing.

Kagalovsky was put on paid leave in August as press reports thrust the investigation into the public eye. Two of her top clients were Inkombank and Menatep, Russian banks linked to organized crime by a CIA report.

Portions of Kagalovsky's letter were made public by her lawyer, Stanley Arkin, who declined to make her available for an interview. The bank acknowledged her resignation and wished her well.

Asked if he knew of any illegal activity by BoNY clients, Renyi told Congress last month that if there were such indications, ''I feel confident that the relationship manager would have done something about it and closed the accounts.''

In her letter to Renyi, Kagalovsky wrote: ''I do understand your concerns . . . but none of them justify leaving me to swing in the wind.

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