On Thursday, the fifth anniversary of the enactment of the Magnitsky Act, the U.S. law named for the lawyer who exposed a $230 million fraud from the Russian Treasury, a prosecutor called on a federal judge to enforce a settlement agreement in which an entity accused of laundering those funds agreed to pay $5.9 million.
The U.S. government reached the settlement with Prevezon Holdings Ltd., which was founded by Russian businessman Denis Katsyv, in May on the eve of a trial in the forfeiture case against Prevezon.
But assets that Prevezon had planned to use to pay the settlement have since been seized by the Dutch government.
Appearing at oral arguments, Quinn Emanuel Urquhart & Sullivan partner Faith Gay said the U.S. government has not been acting in good faith with respect to the settlement agreement and that it “worked in secrecy” with the Kingdom of the Netherlands to seize Prevezon’s assets.
“The government frustrated what we thought was a good faith effort to have the assets released,” Gay said. “There’s no question.”
But prosecutors said that the United States did not request that the Netherlands seize Prevezon’s funds and has asked the Dutch government to release the debt.
They argue in court filings that payment was due 15 days after the government struck the settlement agreement with Prevezon and that waiting for the Netherlands to turn over Prevezon’s money could make the case stretch on for years.
Appearing for the government at the hearing, Assistant U.S. Attorney Paul Monteleoni said previous drafts of the settlement contained protections for Prevezon in the event that its money would get seized by the Dutch, but that Prevezon ultimately signed an agreement that contained no such protections.
“This is not a case where this situation was unanticipated,” Monteleoni said. U.S. District Judge William Pauley III of the Southern District of New York reserved judgment on the government’s motion to enforce the settlement.
In addition to Monteleoni, Assistant U.S. Attorneys Cristine Phillips and Tara La Morte are working the case.
Quinn Emanuel associate Renita Sharma also appeared at the hearing for Prevezon.
The hearing was held on the fifth anniversary of the ratification of the Magnitsky Act, a sanctions statute named for Sergei Magnitsky, the Russian lawyer who exposed the Russian Treasury fraud and who was beaten to death while in a Moscow prison.
The law, originally intended to impose sanctions on Russian officials with ties to Magnitsky’s death, has since been broadened to allow the government to enforce it upon those who commit human rights abuses anywhere in the world.
The Treasury heist was pulled off by a Russian criminal syndicate that assumed the identities of three funds controlled by the Hermitage Fund, which was founded by Bill Browder, a client of Magnitsky’s who lobbied for the law that carries the late attorney’s namesake and who called for both American and Dutch authorities to seize Prevezon’s assets.
Prevezon received a $1.96 million cut of the Treasury heist and the company invested the money in New York and European real estate.
The government had initially sought to seize $13.8 million and alleges that Prevezon laundered roughly $580,000 of the proceeds by investing in Manhattan real estate, including property at 20 Pine St. in Manhattan’s Financial District.
Among the government’s submitted exhibits in the Prevezon case is a November letter from Assistant U.S. Attorney General Stephen Boyd to John Conyers Jr.—then the ranking member of the U.S. House Committee on the Judiciary who has since resigned amid allegations of sexual harassment—stating that the U.S. Attorney’s Office for the Southern District of New York has not had contact with the Trump administration or members of President Donald Trump’s family regarding the Prevezon case.
Boyd also wrote that the settlement amount was a resolution to the case that was “highly favorable” to the American government.
The letter also stated that the U.S. Attorney’s Office in Manhattan has had no contact with Russian lawyer Natalia Veselnitskaya, who successfully defended Katsyv in a money laundering case and who appeared at the hearing on Thursday via speakerphone but stayed silent.
In the months leading up to the 2016 U.S. presidential election, Veselnitskaya took part in a meeting with Donald Trump Jr., Jared Kushner and Paul Manafort at Trump Tower that raised questions about cooperation between Russia and Trump’s presidential campaign.
According to a list of talking points that Veselnitskaya took with her to the Trump Tower meeting, which were obtained by Foreign Policy, the Russian attorney spent much of the meeting calling for a repeal of the Magnitsky Act.