Can a U.S. bank get a fair trial in Moscow?
To a significant extent Marks has based his case on the language in that Nov. 8, 2005, press release from the U.S. Attorney's office that states that the Bank of New York has "admitted its criminal conduct." The bank's admission of criminal conduct is crucial to Marks' argument for resetting the statute-of-limitations clock, and it also helps get past a jurisdictional hurdle posed by Russian law: Arbitrazh courts, being commercial courts, aren't supposed to get involved in interpreting criminal laws (be they Russian or American).
Fortune, however, has learned that that critical language in the release was apparently referring to a different investigation entirely. The nonprosecution agreement dealt not only with the Manhattan federal prosecutors' probe of the Edwards-Berlin affair but also with a simultaneous inquiry conducted by Brooklyn federal prosecutors. That probe was related to unconnected wrongdoing on Long Island at an Island Park branch of the Bank of New York that involved fraudulent loan applications.
Last month the U.S. Attorney's offices for both the Eastern and Southern Districts of New York (Brooklyn and Manhattan, respectively) belatedly amended the confusing joint press release.
It now states that the Bank of New York "admitted its criminal conduct with respect to the Eastern District of New York investigation" - i.e., the Island Park matter. A spokesman for the Southern District, which handled the Edwards-Berlin probe, tells Fortune that the changes were made "to correct inaccuracies." Biben, the Bank of New York's deputy general counsel, says, "We'd raised with the U.S. Attorney's office the fact that the press release was being used [by the plaintiffs] in a way that was inconsistent with the nonprosecution agreement."
Does the recent clarification of the press release wipe out Marks' argument that the bank has admitted criminal conduct? After Fortune informed Marks that the press release had been amended, he e-mailed back, "It is absolutely amazing that Justice would amend the release some three years later during pending civil litigation to potentially help the wrongdoer.... This should be troubling to all of us that Justice is apparently subject to such influence and that the bank has so much power."
He notes subsequently, however, that since the bank accepted "responsibility" for what had happened in the nonprosecution agreement - wording that has not been changed - the Bank of New York still unambiguously admitted criminal responsibility.
When asked why "responsibility" must mean "criminal responsibility," Marks wrote, "Please tell me that you are kidding.... This was a criminal investigation, not a civil one, so what other responsibility could the U.S. Justice Department and law enforcement attorneys who prosecute criminal cases possibly mean?"
Marks has signed up some marquee names to endorse the strength of Russia's RICO case. In addition to Blakey, this past June he nabbed the most famous criminal law professor in the country, Harvard's Alan Dershowitz. On June 25, Dershowitz submitted an 18-page affidavit (appended to a 70-page résumé) arguing, among other things, that "international application of civil RICO would be supportive of United States interests" in that it would help battle "global money-laundering" and "terrorism."
In the portion of his affidavit that lays out the facts of the case, however, Fortune noticed that some of the most dramatic allegations Dershowitz cited - for instance, that the Bank of New York "intentionally failed to ... report known evidence of suspected criminal wrongdoing ... even after that evidence came to the attention of senior Bank of New York executives" - are not quotations from the nonprosecution agreement, as his affidavit suggests, but rather quotations from the confusing, subsequently amended press release. And, yes, they are quotations relating to the wrong case - the Island Park case.
Repeatedly advised by Fortune of this apparent mistake, Dershowitz did not respond. Likewise apprised, Marks wrote that he (Marks) was "tied up" and wouldn't have time "to re-review all of the materials to fully respond" for a couple of days. Reminded nine days later that he still hadn't replied, Marks sent this cryptic response: "The nonprosecution agreement does involve admissions of liability in our case, and if there is still any doubt, we stand by Professor Dershowitz's statements in this regard."
Pretrial hearings are scheduled to resume next month in Moscow. The Bank of New York, of course, has hired its own roster of legal stars, including former Attorney General Thornburgh; former federal appellate judge Abner Mikva (a member of the House Judiciary Committee when RICO was enacted); the author of the leading treatise on RICO, Greg Joseph; and 17 experts on Russian law. Yet it's hard to believe that this suit will play itself out to the end. The bank continues to press its case to U.S. and Russian government officials, arguing that this sort of spectacle is not in Russia's long-term interest if it wishes to attract and maintain Western business investment. There are likely to be rifts within the Russian government itself over the wisdom of this kind of case.
"We've done business in Russia for a very long time," says the Bank of New York's Biben. "We have clients who appreciate our services and want to continue to use us as partners."
If the case cannot be resolved through governmental channels, however, the bank may have no choice but to settle rather than risk litigating in a forum that appears to lack both the expertise and independence to render an impartial result.