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Chuck Lewis has gotten under a lot of people’s skin. For the past 16 years, Lewis and his Center for Public Integrity have been bent on exposing government waste, cronyism, campaign cash, and questionable ethics — often as loudly and as publicly as possible. But now, surprising adversaries are fighting back. Two Russian industrialists say the center was so hungry to paint a link between organized crime and a Richard Cheney-led Halliburton Co. that it cut corners in its investigative journalism and rushed an article to its Web site, where it could be read worldwide. The libel case, filed in the U.S. District Court for the District of Columbia, reflects the modern media age, in which the Internet has transformed international information-gathering and fostered an entirely new and different form of investigative media, with the Center for Public Integrity as an active participant. The Russians claim they were defamed by the article, which reported that the two men were allegedly involved in drug trafficking, money laundering, and other criminal activity. The suit names the center and the article’s authors as defendants. The center has stood by its reporting, refusing to remove the article, originally published in August 2000, from its Web site. It has asked U.S. District Judge John Bates to throw out the case, arguing that the article fairly and accurately reported allegations contained in official documents of the Russian government. Bates heard oral arguments on the center’s summary judgment motion in early February. If the suit survives, it could pose real problems for the center, which relies on its reputation as a nonpartisan watchdog to generate funding. And if the Russians prevail and the center is hit with a sizable damage award, a chilling message may be sent to anyone in the business of trying to investigate links between corporate fraud and government corruption. In recent years, powerful Russian oligarchs, including the plaintiffs in this case, have had a penchant for filing defamation suits, usually in Britain, Germany, or Australia, venues less friendly to journalists than is America. But as their business interests become global, they have moved to protect their reputations in the United States, as well. The case against the center appears to be the first time these oligarchs have sued for defamation in this country, media lawyers say. “One would expect in our complex international, political, and economic world that American media and American public interest groups that report on entities from other nations should expect that they will be sued for libel the same way they are sued by American citizens for libel,” says Rodney Smolla, dean of the University of Richmond School of Law. The plaintiffs, Mikhail Fridman and Pyotr Aven, have hired lawyers from the D.C. office of Akin Gump Strauss Hauer & Feld to litigate the case. They also have hired a journalism professor from Syracuse University — whom the defendants contend was paid $400,000 to prepare a lengthy report detailing a series of errors allegedly committed by the article’s authors — court papers say. Lewis, who stepped down as the center’s executive director in December, and Roberta Baskin, the center’s new leader, decline comment. “We’ve never commented on this. It has not been resolved,” says center spokeswoman Ann Pincus. Michael Sullivan, a partner at D.C.’s Levine Sullivan Koch & Schulz and lead attorney for the center, also declines comment. He refuses to say if the center has insurance to help weather a major judgment and cover litigation costs. PAPER CHASE At the Feb. 3 hearing, Sullivan conceded that the article could have been investigated more thoroughly if the reporters had more time, but he argued that deadlines are the nature of the news business. “Because Dick Cheney, it had been announced, was going to be the Republican vice presidential nominee, Mr. Lewis said to his colleagues, ‘This is an important story. We’ve got to get on this. We’ve got to get something out,’ ” Sullivan said. “ As Mr. Lewis testified, in the 24/7 world we live in today, news is perishable.” The dispute began in July 2000 when news reports surfaced that Cheney was likely to be George W. Bush’s pick for vice president. The center, well-known for its investigative reports on the role of money in politics, had recently unveiled a new effort — Public i — as a vehicle for weighing in on the news of the day. So when news of Cheney joining the Republican ticket broke, the center assigned two of its reporters — Knut Royce and Nathaniel Heller — to put together an article examining the relationship between Halliburton and the federal government. Heller began looking at Halliburton’s campaign contributions and lobbying data, in addition to the government contracts awarded the company over the previous decade. Meanwhile, Royce, a veteran investigative reporter at Newsday who was serving a one-year fellowship at the center, explored one specific contract that had been in the news — a $292 million U.S.-backed loan to the Tyumen Oil Co., a Russian company that had business dealings with Halliburton. In 1999, Tyumen had been seeking a loan from the U.S. Export-Import Bank to refurbish an oil field in Siberia. The loan was held up in a dispute with another oil company and the U.S. government. Royce, according to court papers, was interested in learning more about the loan dispute. In particular, Royce wanted to get his hands on the Central Intelligence Agency report used by U.S. officials to hold up the loan to Tyumen. Months earlier, the CIA report was examined in a January 2000 Washington Post op-ed article by David Ignatius. The Post reported that the CIA had prepared a 29-page investigative report on Tyumen that was classified as “secret.” According to the Post report, a portion of that document was labeled “criminal situation” and included allegations involving Tyumen’s management. Royce, court papers say, contacted a source of his at the CIA who would only confirm that the Post article was accurate. Royce also began looking into Tyumen. One of its key shareholders was Mikhail Fridman, the chairman of the board of Alfa Bank, one of Russia’s largest financial institutions. Royce found several articles in the Russian press stating that Fridman — and Alfa Bank President Pyotr Aven — were on a list of prominent businessmen who had come under scrutiny by the Security Committee of the State Duma for alleged criminal activity, including drug trafficking, bribe-taking, and embezzlement. One of these articles referenced a 1997 report prepared by Russia’s Federal Security Service, known as the FSB. Royce, according to court papers, was given a copy of the FSB report by one of his sources, identified as “a Russian-American specialist . . . who worked with the White House and Pentagon.” According to court papers filed in the defamation case, the FSB report alleged that Alfa Bank cooperated with the Russian mob; alleged that Fridman and Aven participated in the transit of drugs from Southeast Asia into Europe; and described a 1995 incident where the residents of one Russian town were poisoned after eating “narcotic-contaminated” sugar that was traced to a container leased by an Alfa Bank subsidiary. Royce, in court papers, claims that his source told him that while he could not verify all of the allegations in the report, the source was confident it was “bona fide and had originated with the FSB.” From another source, Royce received a second report. This one came from former CIA official Richard Palmer, who specialized in Russian matters and spent time in Russia in the early 1990s, according to court papers. Palmer told Royce that it was a memorandum given to him by a former KGB major, but the author wasn’t named. The KGB report, which the defendants claim was written in 1995, made similar allegations of drug trafficking and money laundering by Alfa Bank, Aven, and Fridman. Royce stated in court papers that Palmer could not substantiate the allegations himself, but vouched for the credibility of the KGB major. At that point, Royce was confident that there were two “discrete” sets of allegations levied against Alfa Bank and its owners, according to court papers. “The total body of information that was available at that time gave me a measure of comfort as well and provided a backdrop for me believing that the specific allegations indeed were credible,” Royce testified at his deposition, according to court papers. On Aug. 2, 2000, the center published Royce and Heller’s article on the Public i Web site as an investigative report entitled “Cheney Led Halliburton to Feast at Federal Trough: State Department Questioned Deal With Firm Linked to Russian Mob.” The article didn’t generate much interest in the mainstream U.S. media. It was Russian newspapers, such as the Moscow Times, that wrote about the piece. The center article also caught fire on the Internet, where it was picked up and distributed by several Web sites critical of Bush, Cheney, and Halliburton. One month later, Alfa Bank, Fridman, and Aven sued the center, claiming that several statements in the article — those detailing the criminal allegations — were defamatory. In an unusual move, the plaintiffs waived a jury trial. HOME FIELD International executives have begun to use the courts as a weapon to aggressively protect their reputations, but most cases have been filed overseas, where reporters enjoy less protection. First Amendment lawyer Bruce Brown of D.C.’s Baker & Hostetler, who isn’t involved in the case, says the center should consider itself lucky that the case was filed in the United States. In a 2003 interview with London’s Financial Times, Fridman discussed how allegations of criminal activity in the press had hurt his company’s business. “As the Russian economy becomes more globalized, the question of reputation becomes more important,” he said. “Foreign companies want to deal with those who have a good reputation.” Svetlana Smirnova, head of International Media and Public Relations for Alfa Bank, declines comment on the advice of Akin Gump. “The case is currently under consideration of a U.S. judge, and we are not willing to discuss the case publicly pending the release of his decision,” Smirnova wrote in an e-mail to Legal Times. Four years and several depositions later, the center has asked Judge Bates to throw out the suit on summary judgment. Akin Gump partners Daniel Joseph and Jonathan Spaeth, who represent the plaintiffs, declined comment on the case, noting that the judge is currently considering the motion. Heller, who shared the byline with Royce, did not return a call seeking comment. The core of the center’s defense is that the bank, Fridman, and Aven are public figures and that there is no evidence that the piece was motivated by actual malice — the legal standard that renders journalists liable only if they publish material recklessly or with knowledge that it is likely false. The center also claims that the common law privilege protecting journalists who report on official government documents should apply to the FSB and KGB reports. The plaintiffs, meanwhile, argue that their clients are not public figures. Rather, they say, the plaintiffs were thrust into the limelight by competitors who wanted to put them out of business. In court papers, the plaintiffs say they were virtually unknown in the United States until the center’s article was published and, therefore, should not be considered to be public figures under U.S. law. Regardless of whether they are deemed to be public figures, the plaintiffs claim they can show that the center published the article with actual malice. “There is considerable and concrete evidence, though it may be circumstantial, that these defendants had obvious reasons to doubt the credibility of the FSB and KGB documents on which the story was based,” plaintiffs’ lawyer Spaeth argued at the Feb. 3 hearing. To help make their case, the plaintiffs hired Joel Kaplan, a Syracuse University media professor, to examine the article, Royce’s reporting, and the center’s editorial process. Kaplan says that when he was hired, he didn’t think the plaintiffs had much of a case. That view, he says, changed after he analyzed documents and deposition testimony. (He says he cannot confirm what he was paid to serve as an expert.) “When I looked at some of the things [the center] had in their possession, I was very surprised,” Kaplan says. Spaeth pointed out at the hearing that Royce did not tell his editors that the source who faxed him a copy of the FSB report wrote on the cover sheet “Please don’t take this article as the gospel.” Spaeth also said that Royce made no efforts to find out who actually wrote the FSB report or what became of it. Knut Royce, who has spent much of his 30-plus-year career as an investigative reporter focusing on international policy, also declined to comment on the litigation, except to say, “I’ll be glad when it’s over.” Tom Schoenberg can be contacted at [email protected].

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