Thread: US strikes $5.8m deal on Russia money-laundering case

US strikes $5.8m deal on Russia money-laundering case

Settlement closes decade-long probe into real-estate scheme

14 HOURS AGO by: Kara Scannell in New York

US authorities have reached a $5.8m settlement with an organisation linked with Russian money-laundering allegations, bringing to an end a decade-long drama involving corrupt government officials, a mysterious death, and New York real estate.

Prosecutors with the US attorney’s office in Manhattan announced the settlement late Friday.

A civil forfeiture trial was scheduled for Tuesday.US authorities alleged $1.9m that was allegedly stolen from the Russian Treasury through a convoluted $230m tax refund fraud scheme was laundered through a web of shell companies into luxury residential and commercial properties in New York.

“We will not allow the US financial system to be used to launder the proceeds of crimes committed anywhere – here in the US, in Russia, or anywhere else,” said acting US Attorney Joon Kim.

The settlement is three times the amount prosecutors traced to the defendant Prevezon, a Cyprus real estate holding company controlled by Denis Katsyv, a Russian, and its subsidiaries.

The alleged scheme was uncovered in 2007 by Sergei Magnitsky, a Russian lawyer hired by Hermitage Capital Management, a hedge fund that was the alleged victim of the scheme.

Mr Magnitsky was arrested in Russia and died, aged 37, while in custody spurring the US Congress to pass a law allowing the president to impose visa bans and sanctions on human rights violators.

Prosecutors filed the civil lawsuit in 2013 against Prevezon. Lawyers for Prevezon had maintained their client knew nothing about the tax fraud and were engaged in legitimate business transactions on behalf of a client, Leonid Petrov.

The case shed a spotlight on the murky world of Manhattan real estate, where laws allowing for secrecy have been abused to hide assets.

Critics have called for more transparency about ownership.

A report by the Treasury Department’s Financial Crimes Enforcement Network found 30 per cent of all-cash purchases it reviewed involved owners flagged by banks as having suspicious source of funds.

The allegations also inflamed tensions between the US and Russia.Prosecutors allege corrupt government officials from the Interior Ministry raided Hermitage’s offices in Moscow taking computer servers and dozens of boxes of documents, including its corporate seals.

Authorities allege the officials were members of an organised ring that used the stolen documents and corporate seals to re-register three Hermitage portfolio companies, which they then filed lawsuits against.

Using the large monetary judgements from the phony lawsuits, the organisation sought tax refunds. Corrupt Russian tax officials approved refunds valued at Rbs5.4bn many on the same day they were filed, according to the lawsuit.

Hermitage, led by Bill Browder, learned about one of the lawsuits from a court bailiff and hired Mr Magnitsky to investigate. Mr Magnitsky uncovered the alleged scheme, was arrested by the Interior Ministry and died in prison.

In 2012 the US passed the Magnitsky Act, which was expanded in December to cover abusers in any country.

To date there are 44 Russians on the list.Russia retaliated by banning Americans from adopting Russian orphans and barring 18 Americans from entering the country, including Preet Bharara, then the Manhattan US attorney who brought the case against Prevezon later that year.

The US attorney’s office is also investigating whether associates of President Donald Trump had connections to Russia during the campaign.

Mr Bharara was fired earlier this year when Mr Trump cleaned house removing all 46 holdover prosecutors from the Obama administration.

Some Democratic US lawmakers are now questioning whether Mr Trump interfered in the investigation by firing James Comey, the director of the FBI .

Russian authorities have said Mr Browder is a criminal; he was found guilty in absentia of tax evasion. Mr Browder has denied the charges.

Mr Browder is on the government’s witness list.The proceeds of the fraud passed through layers of shell companies and bank accounts linked to the ring and into Manhattan real estate, prosecutors allege.

Records from one of the banks were lost in a fiery truck crash.Prevezon had argued in court filings that the US could not trace the allegedly corrupt proceeds to its accounts or prove that the officials behind Prevezon knew about the tax refund fraud scheme.

Among the properties the US is seeking are apartments at 20 Pine Street and a luxury high-rise near the United Nations.

https://www.ft.com/content/31fd3496-...d-13beb0903fa3

Russian elite invested nearly $100 million in Trump buildings