WHO GETS THE ACES AND THE KINGS?
By Emily TOPOL
The lawsuits of Natasha Kagalovsky in Russia and of a group of depositors [of Inkombank] in America may spell the beginning of the demise of the Bank of New York.
John Warden is going through difficult times. He faces a dilemma that can determine his professional future, perhaps even the relations between the two superpowers. A Harvard graduate, one of the most respected lawyers in the US, having emerged victorious from some of the highest profile trials of the 20th century, he must now uncover the secrets of the "mysterious Russian soul."
Presently the 60-year-old Warden is known to many in connection with his representing the computer tycoon, multi-billionaire, Bill Gates, in a lawsuit brought by the American government against his company-monopoly Microsoft. Yet few know that Mr. Warden also leads a team of lawyers of Sullivan and Cromwell hired to rescue the Bank of New York in the Russian money laundering scandal.
A week ago a new card was thrown on the green felt of the table at which "Russiangate" is played. During a February 29 press conference in Moscow BONY's former senior vice-president, Natasha Gurfinkel-Kagalovsky, announced that she had commenced a lawsuit against her former employers. A new word had been added to the vocabulary of the average educated American, previously consisting of "da", "nyet", "troika" and "babushka" (with the accent on "bush" and the infrangible belief that "ba-bush-ka" means a kerchief). This new word is "Sa-vye-lov-sky", which refers to the Savyolovsky Inter-municipal (regional) People's Court of Moscow. It is here that Kagalovsky chose to file her suit against the Bank of New York.
The American press diligently, but without much enthusiasm, reported on the event noting that Russian courts have never awarded amounts of money, even remotely resembling those sought in Kagalovsky's suit "in the defense of her honor and dignity" (Kagalovsky alleges that her marred honor was worth US$270 million). BONY management also responded with their standard PR brush-off: "The lawsuit has no foundation and we intend to vigorously defend our interests"
Everything seems clear. An offended former employee of the BONY sues her former chiefs hoping to punish the offenders. However, why would a citizen of the United States, Kagalovsky, chose to bring the oldest New York bank to justice in a regional court near the Byelorussian Railroad Station in Moscow? Let's get back to the chronology of events at the "Russiangate" gaming table.
February 14. The New York Times reports that Lucy Edwards-Pritsker and her husband, Peter Berlin, after several months of seclusion in London have decided come to New York to give themselves up to American authorities. Readers are reminded that Lucy and Peter, both ex-Russian citizens, were indicted by the US Attorney Office in New York in connection with illegal banking operations in October of last year.
February 15. Edwards and Berlin arrive at New York's Kennedy International Airport, where they are promptly handcuffed by awaiting FBI agents.
February 16. Lucy and Peter pled guilty to money laundering, a grave crime they've never been accused of, in a Manhattan Federal court packed with reporters and plain-clothed special agents. Speaking in the lingo of cardsharps: "hearts out - queen and jack are surrendered".
February 17. Natasha Gurfinkel, a former boss and girlfriend of Queen Lucy also goes to court, not via lower Broadway in New York but via the Dmitrovsky Highway in Moscow. Not to admit her guilt but to make indignant accusations. How is that for spades? Is it a coincidence or a carefully planned move?
MN learned from a source "close to the green table", that although Kagalovsky has not yet been officially charged, she remains, using legal terminology, one of the "primary subjects" of continuing investigation by the FBI and New York's federal prosecutors.
On the day Kagalovsky appealed to Russian justice to protect her dignity and business reputation The Wall Street Journal, quoting unidentified sources, reported that Edwards and Berlin were going to turn in more than 20 employees of the BONY, including Natasha's closest colleague, senior vice president of the bank and an offspring of Russian nobility, Vladimir Kirilovich Galitzyne. (Mr. Galitzyne still officially works at BONY and so far has not been charged with any wrongdoing).
Another peculiar detail. Three high-ranking BONY officers are named in Kagalovsky's lawsuit: Chairman of the Board of Directors Thomas A. Renyi, Deputy Chairman Alan R. Griffits and Chief Administrative Officer of the Bank, Charles E. Rappold. Kagalovsky says that it was they who gave the press false information about her trying "to cover up for bank employees of American origin who were actually involved with the accounts currently under investigation".
Kagalovsky's lawsuit can be viewed as a warning shot. "Natasha is one of the few who knows everybody's cards", said my source. To the question whether she had shuffled the deck, the source smiled, "Perhaps she was standing near the dealer."
Truly, BONY lawyer, Mr. Warden has much to think about. As long as the focus remains on a group of the bank employees comprising its Eastern European Division, which Kagalovsky headed, the bank itself is relatively safe. But if it can be demonstrated that its Board of Directors took part in criminal activities, BONY will face criminal prosecution and may be shut down or change hands.
According to the same source, the critical factor in the fate of Alexander Hamilton's brainchild is not even the FBI's criminal investigation. Two civil lawsuits initiated against the Bank of New York at the onset of the scandal are beginning to play an increasing role in "Russiangate".
One was filed on behalf of hundreds of thousands of shareholders of the bank itself. Plaintiffs are represented by one of the larger and more aggressive law firms in the US: Milberg, Weiss, well known for their recent victories retrieving billions of dollars for Holocaust victims. The second lawsuit against BONY commenced in the name of 121 thousand depositors of the Russian bank, Inkombank, recently declared bankrupt. Plaintiffs' lawyers in that case are Harold Hoffman, Mark Herlihy and Emanuel Zeltser. Boris Kuznetsov, a well known Moscow lawyer, complements the team of lawyers from the Russian side. Both the cases are so-called class actions and are pending in the US District Court for the Southern District of New York. According to US laws, one or several plaintiffs (of a large group of victims) may sue to recover on behalf of all the members of the group, or the "class", whose damages stem from similar wrongful acts of defendants. Simply speaking, one sues-everybody collects.
Both lawsuits allege that BONY management assisted several unsavory Russian entrepreneurs to launder money through the Bank of New York. The amounts sought by the lawsuits are in billions of dollars, and the lawyers slowly but persistently are moving to their goals through the corridors of American casuistry. BONY's interests in both these lawsuits are represented by the lawyers of Sullivan and Cromwell, headed by Mr. Warden. Thus, US law enforcement agencies are not the only ones who are trying to, "break the bank" in this game, so to speak. "Civil actions are having serious effect on criminal investigations and the future of banks and their management" noted the source close to the investigation of "Russia-gate". "Quite possibly, plaintiffs' lawyers possess more evidence discrediting the bank and its top management than even the Government agencies". According to the source, this phenomenon is explained, on the one hand, by the fact that MiIberg, Weiss, having significant financial resources, retain the best private detectives to conduct investigations in the US, Switzerland, Great Britain and in many of offshore jurisdictions. On the other hand, Zeltser and Kuznetsov, who have participated in similar lawsuits in the USA and Europe for many years, have amassed large amount of evidence incriminating the BONY management, including, perhaps, its Chairman of the Board of Directors Mr. Renyi, and his colleagues and his "comrades in grief", defendants in the Moscow court. According to some the lawyers for Russian and American plaintiffs have joined forces which greatly enhances their positions. Both the FBI and the lawyers persistently decline comment as regards their cooperation.
It is also noteworthy that Kagalovsky filed her suit in Moscow after BONY filed a motion in American court to dismiss the claims of the Moscow plaintiffs, Inkombank's depositors. In this motion Mr. Warden relies upon conclusions of a professor of Russian law from the University of Virginia (which, in addition to Harvard, Warden himself graduated). In the court papers the Virginia expert on Russian Law, Paul B. Stefan 3d, argues that in Russia during Khrushchev's time (which, in this expert's opinion, began in 1953) courts "acquired all the necessary attributes of official courts designed to follow laws", and therefore are excellent forums of justice. Relying on thorough understanding of Russian reality of his alma-mater colleague, Warden categorically states that the case against the BONY must be heard in Moscow.
What Messrs. Warden and Stefan III did not take into consideration, while puffing on their aromatic Virginia cigars was what Berdyayev referred to as the "mysterious Russian soul". Former Leningradian Kagalovsky quickly figured out (not without the help of her American lawyer Stanley Arkin and her Russian lawyer Henry Reznik), that Warden, arguing that Russian courts provided excellent forums to sue BONY, won't be able to argue against the entry of the decision of the Savyelovsky Court in the US when time comes to collect on the judgment. Perhaps the Virginia expert also forgot to warn his illustrious friend and colleague about the fact that the Moscow court near the Byelorussian Station may adjudicate this case in two to three months, not four or five years, the usual duration of civil cases in the US. Obviously, Kagalovsky's victory in Moscow is not certain, however, one of the lawyers for the depositors intimated to me that in this game he would confidently place his bets on Natasha. If his intuition is correct Warden has complicated, the already complex position of his client: the American Federal Court may enforce decision of its Savyelovsky colleagues based on the statements of Warden himself, who obviously could not foresee such a trap.
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