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PRESS

Emanuel Zeltser helps expose Russian money laundering

Bank of New York Chairman Is Accused
Of Profiting on Russian Schemes in Suit
By Paul Beckett
 
09/12/2000
The Wall Street Journal
(Copyright (c) 2000, Dow Jones & Company, Inc.)

NEW YORK -- In the latest legal challenge stemming from Bank of New York Co.'s Russia-related business, a shareholder lawsuit alleges that the bank's chairman personally profited from complex Russian schemes that moved money to offshore accounts -- allegations the bank denied as "baseless."

The claims, contained in an amendment to a shareholder derivative action filed last year in Manhattan federal court, are the first that seek to tie Chairman Thomas A. Renyi to the bank's alleged involvement in the illicit transfer of money from Russia. It also contends that the bank's board ignored warning signs that the bank's Russian clients had been infiltrated by organized crime and failed to ensure that the bank was adequately protected.

"Both the original suit and the amended complaint are baseless, and the bank unequivocally rejects the scurrilous claims against its executive officers and directors," the bank said in a statement. "The Bank of New York will vigorously defend itself and fully expects to prevail."

The allegations include, but extend beyond, previously disclosed activities involving a former Bank of New York official, Lucy Edwards, and her husband, who have pleaded guilty to a broad conspiracy to launder money through three New York-based accounts at the bank. From 1995 until last year, about $7 billion was transferred through the accounts from Russia. Bank of New York hasn't been charged with any wrongdoing and has been cooperating with an investigation by the Manhattan U.S. attorney's office.

The amended suit, unsealed late last week, alleges that 54-year-old Mr. Renyi, the bank's chairman since 1998, was paid an unspecified amount through interests assigned to him in offshore companies that received funds allegedly stolen from Russian banks. Integral to the money-moving operation was Inkombank, a now-moribund Russian bank that in the 1990s maintained a "correspondent" banking relationship with Bank of New York, which allowed Inkombank to transfer dollars around the world.

Mr. Renyi "was assigned various percentage interests in different offshore accounts under the code name `Smith,' " the 65-page amended complaint says. It alleges Mr. Renyi "was paid" through six companies incorporated in several different countries. Among the evidence cited is an alleged 1994 meeting in a New Jersey hospital between Mr. Renyi and Inkombank's chairman.

But people close to the bank said Mr. Renyi had never been to that hospital, in Westwood, N.J., and wasn't responsible for the bank's Russian business in January 1994, at the time the meeting allegedly took place. The lawsuit also claims the bank's board, despite accounts from the press and government agencies that Russian banks had been infiltrated by organized crime, "intentionally or recklessly failed to assure itself that BONY had implemented an adequate and independent system of monitoring and control of its correspondent wire transfer business."

The amended suit was filed by New York securities class-action firm Milberg Weiss Bershad Hynes & Lerach. But the people close to the bank said it was based almost entirely on unsupported allegations provided by Emanuel Zeltser , a director of the New York-based American Russian Law Institute and a longtime critic of Inkombank.

"We have given them every opportunity to provide corroborating data and they haven't," one person close to Bank of New York said.

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