On May 12, 2017, the United States settled its asset forfeiture and money-laundering case against Prevezon Holdings just days before that case was scheduled to go to trial, with both sides claiming the $5.9 million settlement as a victory. The facts behind United States v. Prevezon Holdings, 319 F.R.D. 459 (S.D.N.Y. 2017), were the stuff of spy novels, involving an alleged elaborate Russian tax fraud, a web of supposed money laundering involving multiple shell companies and international bank accounts, and the death in prison of Sergei Magnitsky (after alleged mistreatment), a Russian lawyer investigating the facts surrounding the tax fraud. Indeed, efforts of Prevezon’s Russian lawyer, Natalia Veselnitskaya, during last year’s Presidential campaign to have sanctions named for Magnitsky lifted, in part through a meeting with members of the Trump campaign, only added to the drama surrounding this case. Just days before the case settled, Judge Willian H. Pauley III, who was to preside over the trial, issued a decision on a motion in limine filed by the government, addressing interesting, albeit far from headline-grabbing questions concerning application of the hearsay rule to foreign records the government intended to introduce at trial. Although that trial now will not take place, the hearsay analysis is worthy of note, and we discuss Judge Pauley’s decision below.
‘U.S. v. Prevezon’
The government’s case against Prevezon turned to a substantial extent on the government’s ability to trace funds linked to the alleged Russian tax fraud into the accounts of Prevezon and the other defendants. The government needed various bank records to establish the movement of funds between the accounts in question, but the Russian Federation declined to provide those records, leaving the U.S government lawyers with a series of evidentiary hurdles to overcome. The government had access to copies of those records which were contained in two sets of files: a Russian criminal case file generated during prosecution of the Russian tax fraud, and a file from a Russian arbitration proceeding that was also connected to that scheme. The bank records in the criminal case file consisted of records produced by certain banks accompanied by transmittal letters identifying the documents as bank records and bearing the banks’ official seals (the Attested Records), and records seized by Russian officials during raids of certain financial institutions (the Seized Records). The motion in limine sought to overcome the hearsay obstacles posed by trying to admit copies of bank records contained in the criminal and arbitration case files, none of which could be authenticated by traditional means.
