Russia a no-show at $22 billion Bank of NY suit

By Simon Shuster

MOSCOW (Reuters) - The Russian government did not attend a hearing of its $22.5 billion lawsuit against the Bank of New York Mellon Corp on Monday, but a lawyer for the government said it remained determined to press its case.

Since last May, Russia has been seeking compensation from the bank after its former vice president, Lucy Edwards, helped illegally transfer $7 billion out of Russia in the late 1990s through Bank of New York accounts.

The bank denies the allegations against it. Russia's federal customs service, the plaintiff in the case, said it would be too busy to attend, according to a letter read to the court by Judge Lyudmila Pulova.

"Because we are engaged with other matters that are particularly important, we will not be able to continue with the case until after October 15," Pulova quoted the letter as saying.

She added that it had been faxed to the court on the morning of the hearing, which she allowed to proceed without the plaintiffs.

Reached by telephone, Maxim Smal, the customs service lawyer who sent the fax, said that he hopes to continue arguing the Russian government's side as soon as possible.

"But of course the final decision on that is in the hands of the people at the top," he said, adding that the situation should not be taken as a sign that the government is easing its legal action against the bank.

"There are no such discussions," Smal said.

The judge had initially set all-day hearings for both Tuesday and Wednesday, disregarding the plantiffs' absence. Later in the day, she changed her mind and set the next hearing for November 13, a spokesman for the bank said.

U.S. RETRACTION

The litigation is being closely watched by investors and clients of Bank of New York Mellon, which is the world's largest custodian of financial assets. Some analysts have downgraded the bank's stock citing the risk of a judgment against it.

If the court finds in favor of Russia's customs service, it could open the floodgates for further lawsuits to reclaim billions in damages from rampant capital flight in the 1990s.

Moving on with expert testimony despite the plaintiff's absence, the bank brought in former U.S. Attorney General Richard Thornburgh.

Thornburgh said his testimony would focus in part on the correction of a press release issued in 2005 by the U.S. Attorney's office.

The U.S. Attorney's office had said in the three-year-old press release that the bank admitted "criminal responsibility" for the actions of its rogue vice president, Edwards. The Russian government's case is based largely on the bank's admissions of responsibility in the United States.