From Moscow to Manhattan, the Long Way

Barron’s

U.S. prosecutors are trying to seize millions of dollars in ritzy New York City real estate they say are laundered rubles linked to the death of Moscow lawyer Sergei Magnitsky.

Federal prosecutors last week 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 later when lawyer Sergei Magnitsky 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.” An order freezing the properties and related bank accounts was signed on Wednesday by U.S. District Judge Thomas P. Griesa.

The government’s civil 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 back then 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, he was arrested and died in prison a year later under suspicious circumstances. Barron’s reported on the case in detail in “Crime and Punishment in Putin’s Russia,” in our edition of 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 properties are owned by U.S. entities associated with a Cyprus corporation, Prevezon Holdings, 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, the complaint says, about $47 million worth of funds had arrived in the accounts of two corporations in Moldova, 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 of the headquarters for what prosecutors say were Moldovan shell companies that handled the $47 million in transfers (see photo at left).

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 Katsyvs 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 billionaire Israeli-Russian diamond dealer Lev Leviev. Africa-Israel declined to comment, but a source close to it said Prevezon is no longer a shareholder.

THE COMPLAINT AND New York property records show that Prevezon and associated New York companies spent nearly $24 million on the Manhattan properties, including five condo apartments in a Wall Street landmark built in 1928 as Morgan Guaranty Trust’s headquarters and recently converted to luxury residences by Leviev.

Prevezon has had most of these properties listed for sale in the past year or so, including a package offer of all five condos at 20 Pine St., at a $6 million asking price. The listings boasted of Sub-Zero kitchen appliances and “sybaritic” bathrooms appointed in stone, bronze, and exotic woods. In fact, Prevezon appears this year to have sold three of the properties covered by last week’s forfeiture demand, according to New York City records, including two retail spaces that brought Prevezon a combined total of $17.7 million—a nice gain over the $12.8 million that it paid. The government seeks forfeiture of Prevezon’s cash and real estate, plus penalties for money laundering.

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 didn’t responded to questions Barron’s sent him by e-mail. Our inquiries with the New York lawyer who handled Prevezon’s real-estate purchases, Gabriella Volshteyn, also went unanswered.

The feds are essentially endorsing the evidence collected by Magnitsky and by Bill Browder, founder and chief of the Hermitage Fund. Browder’s voluminous evidence also sparked money-laundering investigations in Switzerland, Cyprus, Lithuania, Latvia, Estonia, and Moldova. In December 2012, President Barack 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 that he alleged.

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. срочный займ на карту онлайн займы https://zp-pdl.com/emergency-payday-loans.php https://zp-pdl.com/apply-for-payday-loan-online.php онлайн займы