BakerHostetler.
BakerHostetler. (Photo: Diego M. Radzinschi/ALM)

Lawyers for an investment advisory firm that fell victim to a scheme to defraud $230 million from the Russian treasury want Baker & Hostetler, which represented a real estate firm that was accused of taking part in the scheme, to cough up $1.4 million in attorney fees.

Baker & Hostetler previously represented Prevezon Holdings, a real estate firm accused of helping to launder funds from the treasury fraud—including investing a portion of it in luxury apartments in Manhattan—that was the target of a civil forfeiture and money laundering suit prosecuted by the U.S. Attorney’s Office for the Southern District.

Late last week, Prevezon and the Southern District both announced that the parties reached a $5.9 million settlement to close the case.

The treasury fraud had originally been pinned on Hermitage Capital Management, an investment firm with offices in Moscow that were raided in 2007, along with a law firm representing the company.

Prosecutors say the criminal organization that stole files from Hermitage—which allegedly included officials from the Russian government—posed as officers from Hermitage and filed documents with sham companies to make it appear as if companies in Hermitage’s portfolio took $1 billion in losses.

The losses allowed the thieves to claim a $230 million tax refund.

In 2008, Hermitage hired John Moscow, a partner at Baker & Hostetler to investigate the fraud. Hermitage’s relationship with the firm lasted nine months, during which time Baker & Hostetler produced a draft of a subpoena for discovery for use in a foreign tribunal that was never used.

In 2013, after federal prosecutors brought their case against Prevezon, the real estate firm hired Baker & Hostetler. Hermitage moved to have the law firm disqualified, which Southern District Judge Thomas Griesa initially granted but later withdrew.

Meantime, Baker & Hostetler attorneys proceeded with a strategy to blame the treasury fraud on Hermitage and its founder William Browder.

In October, the U.S. Court of Appeals for the Second Circuit disqualified Baker & Hostetler from representing Prevezon.

Jacob Buchdahl, a partner at Susman Godfrey filed a motion on Tuesday on behalf of Hermitage to collect $1.4 million in attorney fees from Baker & Hostetler—the amount that it said was spent trying to disqualify the firm from the case.

“No client should ever have to watch its former lawyers be so disloyal,” the motion states. “And no client should have to bear more than a million dollars in fees and expenses to compel its former lawyers to do what the law requires: withdraw.”

Buchdahl did not respond to a request for comment.

When reached by phone, Moscow referred questions to fellow Baker & Hostetler partner Marc Antonetti, who said the firm does not comment on pending litigation against it.

“We will respond to the motion and the response will speak for itself,” he said.

In addition to Baker & Hostetler, Hermitage also hired Russian lawyer Sergei Magnitsky to investigate the treasury fraud.

Magnitsky publicly alleged that Russian officials were in on treasury fraud and he was arrested in 2008. He died in 2009 in jail. The death was attributed to untreated pancreatitis, The New York Times reported.

Russia’s own Presidential Human Rights Council has reported that Magnitsky was beaten and tortured in jail.

Prosecutors in Manhattan had requested that the Russian Federation produce bank records that they said were crucial to their case against Prevezon, but Russian officials instead provided irrelevant documents and a letter “purporting to exonerate all Russian officials and Prevezon personnel,” according to court papers.

But Nikolai Gorokhov, a Russian lawyer representing Magnitsky’s family, provided prosecutors with a ray of hope in the case: He viewed a criminal case file related to the treasury fraud at a courthouse in Russia, which contained bank records related to the fraud, and took photos.

Last week, Southern District Judge William Pauley III granted a motion in limine to admit Gorokhov’s evidence.

In October 2015, then-Southern District U.S. Attorney Preet Bharara sent a letter to Griesa saying that there were “well-founded concerns” that Gorokhov and his family could be endangered by individuals in Russia who wanted to keep him from testifying in the Prevezon case.

In March, just before he was scheduled to appear in court in Manhattan, Gorokhov fell from his fourth-floor apartment in Moscow; Russian media reported that he was attempting to winch a bathtub into the apartment.