U.S. Seeks Ritzy NY Properties in Russian Money Laundering Case

Barron’s

Federal prosecutors Tuesday sought the forfeiture of $24 million worth of Manhattan real estate they say was purchased in part with funds connected to the notorious theft of $230 million from Russia’s Treasury in 2007. The crime assumed international importance when lawyer Sergei Magnitsky later died in the custody of Russian police he’d accused of complicity in the theft. Magnitsky was representing a Western-backed hedge fund that was victimized in the massive tax fraud.

“A Russian criminal enterprise sought to launder some of its billions in ill-gotten rubles through the purchase of pricey Manhattan real estate,” said Preet Bharara, the U.S. Attorney for the Southern District of New York, in a statement. “While New York is a world financial capital, it is not a safe haven for criminals seeking to hide their loot.”

The government’s complaint is the first U.S. law-enforcement response to the 2007 seizure of the Russian subsidiaries of Hermitage Capital, once the largest foreign investor in Russia. The complaint states that criminals stole the corporate identities of the money manager and used them to falsely claim the refund of $230 million for taxes that Hermitage had paid in prior years. When Moscow attorney Magnitsky presented evidence that he believed showed the involvement of police and tax officials, the complaint continues, Magnitsky was himself arrested and died in prison a year later under suspicious circumstances (as reported in “Crime and Punishment in Putin’s Russia,” Barron’s, April 18, 2011).

The luxury apartments and fancy retail spaces that are subject to Tuesday’s civil forfeiture complaint were discovered last summer by Barron’s as part of a journalism collaboration that included Russia’s Novaya Gayzeta and an Eastern European not-for-profit journalism group known as the Organized Crime and Corruption Reporting Project. The Manhattan properties are owned by U.S. entities associated with a Cyprus corporation, Prevezon Holding, whose name had turned up in Eastern European bank transfers after the Russian Treasury heist. The forfeiture complaint alleges that these funds were laundered proceeds from the tax scam, and names both the U.S. and Cyprus corporations as defendants.

The forfeiture complaint charges that the money came out of Russia’s Treasury in December 2007 and then went through the bank accounts of a dozen shell companies. By February 2008, about $47 million of the funds had arrived in the accounts of two corporations in Moldova, says the complaint, which in turn forwarded about $850,000 to the UBS bank account in Switzerland of Prevezon Holdings. Photos attached to the complaint showed the tumbledown residential addresses (see photo) of the headquarters for what prosecutors say were Moldovan shell companies that handled the $47 million in transfers.

When it received the Moldovan funds, the complaint alleges, Prevezon was controlled by a business associate of Denis Katsyv. A few months later, it says Prevezon became wholly-owned by Katsyv—whose father Petr Katsyv was a powerful Moscow public official who until recently ran the region’s big-spending transport agency. The Katsyv family figured in another public money laundering controversy in 2008, when Prevezon and the family’s accounts at a Tel Aviv branch of Bank Hapoalim were at the heart of Israel’s unsuccessful money laundering prosecution of two bank employees. In his 2010 decision to acquit the employees, the judge noted that the Kastyvs were never charged after a company owned by Denis made a financial settlement with Israeli authorities. The Katsyvs never commented on the case.

Prevezon went on a property spending spree in 2008, according to Tuesday’s complaint. It invested three million euros with a Dutch affiliate of Africa-Israel Investments, the London and Tel Aviv-listed development group run by the billionaire Israeli-Russian diamond dealer Lev Leviev. By deadline, Leviev did not reply to Barron’s queries. The complaint and New York property records show that Prevezon and associated New York companies then spent over $20 million on the Manhattan properties, including several luxury condos developed by Leviev in the Wall Street landmark that once was Morgan Guaranty Trust’s headquarters. The complaint cites a spokesperson for Denis Katsyv saying that the Moldovan transfers to Prevezon all predated his ownership and that Prevezon had no commercial dealings with the Moldovan companies. Denis Katsyv never responded to questions he asked Barron’s to send. Our inquiries with the New York lawyer who handled Prevazon’s real estate purchases—Gabriella Volshteyn— went similarly unanswered.

The federal complaint continues the anti-corruption crusade pursued by the Hermitage Fund’s co-founder and chief Bill Browder. His evidence also sparked money laundering investigations in Switzerland, Cyprus, Lithuania, Latvia, Estonia, and Moldova. In December 2012, President Obama signed into law the so-called Magnitsky Act, which barred U.S. visits or property ownership by those identified as having detained Magnitsky or having profited from the conspiracy he allegedly uncovered.

Russia has steadfastly denied that the Magnitsky affair was a case of corruption. Prosecutors there jailed a couple of low level criminals for the $230 million scam and said that no government officials were complicit in the budget theft. In a posthumous prosecution, Magnitsky was convicted of tax fraud in July 2013. Also this year, Russia assembled its own list of Americans banned from Russia for purported offenses against the rights of Russians. That list includes Bharara, the Manhattan U.S. Attorney, because of the 2012 conviction obtained by Bharara’s office against Russian arms merchant Viktor Bout. hairy women buy viagra online https://zp-pdl.com/fast-and-easy-payday-loans-online.php https://www.zp-pdl.com срочный займ на карту онлайн