American Russian
Law InstituteEx-BankNy Exec Guilty in Russia Case
February 16, 2000
Filed at 4:51 p.m. ET
By ReutersNEW YORK (Reuters) - A former Bank of New York Co. Inc. (BK.N) executive and her husband pleaded guilty on Wednesday to charges that they were part of a Russian money laundering conspiracy that moved $7 billion through accounts at the bank.
Lucy Edwards, 41, a former vice president in Bank of New York's Eastern European division, and her husband Peter Berlin, 45, both Russian-born, also pleaded guilty in Manhattan federal court to helping Russian banks conduct illegal activities in the United States as part of the scheme.
The banks, Depozitarno-Kliringovy Bank (DKB) and Commercial Bank Flamingo, established branches in the United States without obtaining licenses from the Federal Reserve Bank.
During the plea hearing, the couple, facing a possible maximum jail term of five years on each of two counts, said they were paid $1.8 million in commissions for their help and hid the income from the Internal Revenue Service in offshore accounts.
The case against the two contained the most serious charges filed so far in the international money laundering probe that began in 1998.
Three Berlin-controlled companies, whose accounts at Bank of New York were used to launder the money, also pleaded guilty. The companies were Benex International Col, BECS International LLC and Lowland Inc.
Prosecutors charged that the three firms were merely ''front'' companies for the defendants' co-conspirators and the Russian banks they controlled.
The couple, who had been living in London since 1996, voluntarily surrendered to U.S. authorities. Their lawyer, T. Barry Kingham, said they had cooperated with the Federal Bureau of Investigation and other federal authorities and would continue to do so.
At the hearing, Edwards implicated Svetlana Kudryavtsev, 49, another former Bank of New York employee, to whom the couple allegedly paid $500 a month to help with the scheme.
Kudryavtsev, who had been an international banking associate at the Bank of New York's Eastern European division, was indicted last month for lying to Federal Bureau of Investigation agents investigating the scheme.
Edwards, a petite woman in a black suit dwarfed by her tall husband, appeared calm at the hearing and smiled occasionally at Berlin before the proceeding began. She softly, but unemotionally, read a lengthy statement giving details of the couple's wrongdoing.
``I deliberately closed my eyes to what I knew was illegal activity,'' she told U.S. District Judge Shirly Wohl Kram.
Edwards said she was suspicious of the Russian banks. ``I was aware that personnel for DKB were on occasion in fear of their customers and afraid to leave the bank because they said customers with machine guns were waiting for them,'' she said.
Edwards and Berlin were charged in a document known as an ''information,'' filed by prosecutors. It replaced the grand jury indictment in which they were first charged last year.
In the information, Edwards and Berlin were named in two counts that each carry a possible maximum of five years in prison. They also agreed to forfeit to the United States more than $1 million in proceeds from their criminal conduct, including their London residence and the contents of two Swiss bank accounts.
Berlin and Edwards admitted that between late 1995 and September 1999 they were part of the money-laundering conspiracy that allowed Russians to defraud their government by wiring money out of the country to avoid customs duties and taxes.
The money-transmitting scheme was also used for other criminal activity, including the payment of $300,000 in ransom to the kidnappers of a Russian businessman.
The scheme began in 1995 when the couple entered into an agreement with co-conspirators, including individuals who allegedly controlled DKB.
They agreed that Berlin would open an account at the Bank of New York and gain access to electronic banking software available to certain of the bank's customers. The software, called micro/Ca$H-Register, allowed the conspirators to make wire transfers to Bank of New York by themselves.
Early in 1996 Berlin opened a corporate account at the Bank of New York in the name of Benex. The bank authorized Benex to use the software and Edwards installed it in a computer located in the New York City borough of Queens.
DKB allegedly then issued daily instructions from its offices in Moscow for the transfer of funds out of the Benex account to a large number of third parties around the world.
Later that year Berlin opened a second account at the Bank of New York in the name of Becs that was used for the same purpose.
The charges alleged that in 1998 the conspirators told the couple they would acquire control of Flamingo Bank and wanted to set up a new Bank of New York account. Berlin then opened a third account using the name Lowland. Russian members of the conspiracy traveled to the United States and set up an office for Lowland in Jersey City, N.J.
In April 1999, Flamingo began using the Jersey City office to direct funds through the Lowland account.
As part of her plea, Edwards, whose original name the earlier indictment gave as Ludmilla Pritzker, also admitted that she used her position at the Bank of New York to help hundreds of Russian nationals, most of them affiliated with the Russian banking industry, to enter the United States illegally.
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