Dershowitz Says BoNY Will Not Be Permitted to Challenge the Collection of a Russian Judgment in U.S.
MOSCOW, July 31 /PRNewswire/ -- Harvard University law professor Alan
Dershowitz testified in a Moscow court on Tuesday that a Russian court could
apply U.S. RICO laws to Russia's $22.5 billion lawsuit against the Bank of New
York Mellon (NYSE: BK).
Prof. Dershowitz told the Russian court, 'To limit RICO to the U.S. courts
would undercut the remedial and liberal will of Congress in enacting the
statute.'
G. Robert Blakey, principal author of the U.S. Racketeer Influenced and
Corrupt Organizations Act (RICO) agreed, 'As a witness to the birth of RICO in
the U.S. Congress, I can say that the law was in no way restricted for use
only in the U.S., and if the Russian court decides to apply civil RICO to this
case, it would be absolutely correct in doing so.' Blakey testified before
presiding Judge Lyudmila Pulova.
Criminal or Civil
Bank of New York has argued that RICO is a criminal statute and that the
Moscow Arbitrazh Court is a commercial court and does not have jurisdiction to
decide criminal cases. Dershowitz testified that the case being brought by
Russian Federal Customs is a civil RICO case and the Moscow Arbitrazh Court
could consider a civil RICO claim despite not having jurisdiction over
criminal cases.
Dershowitz told the court, 'The Russian Arbitrazh Court, like a state
court in the U.S., has no jurisdiction over criminal RICO cases -- or over any
criminal cases. But just as a U.S. state court can consider a civil RICO
claim, so too can the Moscow Arbitrazh court. Civil RICO is just that; a civil
cause of action based on unlawful conduct specified in the RICO law.'
A Russian judgment is Enforceable in the U.S.
Under cross examination, Prof. Dershowitz testified that if the Russian
court issued a judgment against BoNY, the bank would be prohibited from
contesting its enforceability in a U.S. court.
'In the Pavlov case, BoNY argued that the Russian courts were an
appropriate forum in which to litigate that case -- a case that grew out of
the same unlawful conduct as is involved in this case. Because they sought to
have the Russian court litigate the Pavlov case, they would be estopped from
arguing that the judgment of the Russian court is unenforceable in the United
States,' Dershowitz explained.
Renowned banking analyst Richard Bove of Ladenburg Thalmann & Co stated in
a March research report that 'Bank of New York made the mistake of arguing on
a case entitled Pavlov vs. Bank of New York that the United States had no
jurisdiction but that the Russians did. The bank argued 'the Russian courts
are clearly an adequate, available and much more convenient forum for the
resolution of this dispute.' Ouch!! This weakens the argument that Russia has
no authority in these cases,' said Bove.
Citing specific case history, Bove warned investors in the research report
that a Russian judgment against the bank would be collectible. 'There is
precedence, which suggests that the United States and European courts will
enforce rulings made by the Russians.'
Similarities to Enron and WorldCom
A major problem for the bank is its expansive global presence, which would
spread the court proceedings across numerous jurisdictions. Even if the bank
were able to win collection battles in many jurisdictions, it would still most
likely lose the war.
New York University Professor Linda Silberman, who co-writes a leading
text on recognition of judgments and co-heads the American Law Institute's
Enforcement Project added, 'The defendant has a host of good defenses. But if
I were the defendant's lawyer, I'd be worried. All the plaintiff needs to do
is find one weak link.'
The sheer logistics of fending off legal assaults in some 90 countries,
while trying to effectively manage a global banking giant would be an
overwhelming task. Richard Bove sees the worldwide litigation scenario as a
major disruption to the bank's operations. He stated in his report that the
Bank of New York, 'is facing an extraneous event that may now drain management
as much as the big Enron and WorldCom suits drained the universal banks.'
Ruling on RICO Imminent
The court will reconvene on Monday, August 4 at which time it expects to
hear testimony from any remaining expert witnesses. Lawyers for the Bank of
New York, however, have told the court they will not be able to make any of
their more than 20 expert witnesses available for testimony on Monday and
requested a continuance. The court denied the request, sighting the
impracticality of accommodating so many witnesses' schedules. Previously, the
hearing was continued to July 28th pursuant to the bank's July 3rd request
when it said its expert witness Dick Thornburgh would be available to testify.
However, neither Mr. Thornburgh nor the banks other experts, Abner Mikva or
Jed Rubenfeld made themselves available for the July 28th hearing. The bank
now claims it may not be able to get its experts to cooperate sufficiently in
order to get their live testimony before the court.
According to Steven Marks, lead counsel for the Russian Federal Customs
Service, 'The bank's constant procedural objections appear to be aimed at
staging a future challenge on due process.' But Marks disagrees with that
strategy, saying, 'In reality, the court has been exceedingly tolerant of the
bank's demands.' Marks contends that, 'if this case were in the U.S. instead
of in Russia where BONY wanted, a judgment would probably already be entered
against the bank for its admitted criminal misconduct and most likely, the
bank and/or its counsel would have been the subject of numerous sanction
orders for its inappropriate conduct.'
Upon completion of expert testimony, the court will render a decision on
whether it will choose to apply civil RICO law or not. The implications to
both sides could not be higher.
SOURCE Podhurst Orseck, P.A.
