No settlement on offer in Russia-Bank of NY adviser
By Simon Shuster
MOSCOW, July 7 (Reuters) - There is no settlement on the table in Russia's $22.5 billion lawsuit against the Bank of New York Mellon Corp. (BK.N), even as prosecutors exert public pressure that may be aimed at ending the case, a bank adviser said.
Russian prosecutors have enlisted U.S. legal heavyweights G. Robert Blakey and Alan Dershowitz as expert witnesses, and the prosecution last week published a U.S. academic's letter to U.S. Federal Reserve Chairman Ben Bernanke attacking the bank's "optimism" over the case.
Since last May, the Russian government has been seeking compensation from the bank after its former vice president, Lucy Edwards, used shell companies and Bank of New York accounts to move more than $7 billion out of Russia in the late 1990s.
For more than a year, the case has been held up by procedural issues, most recently over a question about whether Russia has the right to try a case based on the U.S. Racketeering Influenced and Corrupt Organisations (RICO) Act in its own courts.
But last week the courtroom was packed with reporters and foreign experts, attracted by the stellar cast of U.S. witnesses enlisted by both sides of the case.
Meanwhile, the letter to Bernanke -- written by a U.S. academic, Kenneth Thomas, retained by the Russian government's lawyers to make an economic analysis of the case -- warned of "systemic risks" from the case, and called on U.S. regulators to set aside reserves to cover a judgment against the bank.
"This (publication of the letter) has everything to do with trying to coerce the bank into a settlement," said an adviser to the Bank of New York, who spoke on condition of anonymity.
"But I can assure you that there is not one dollar on the table," he said by phone from New York.
PUSHING FOR SETTLEMENT
Lawyers representing the Russian side, from Miami-based law firm Podhurst Orseck, approached the bank with a settlement offer even before filing the case last year, sources with both the prosecution and defence have said.
They offered to settle for $600 million, and then proposed a smaller amount after the bank refused, the bank's adviser said.
Steven Marks, the lead attorney for Russia in the case, confirmed that his firm had made the offer to settle, but has not disclosed the amount, saying only it is a "tiny fraction" of the $22.5 billion now being sought.
He added that Aaron Podhurst, a partner at the firm who was then a board member of Mellon Corp., was one of the lawyers to make the initial settlement offer. Months later, Mellon and the Bank of New York merged. Podhurst has since left the board.
In reviving the 10-year-old money-laundering case, the lawyers have based their claim on the U.S. RICO law.
The most high-profile witness at last week's hearings was Blakey, the jurist and law professor who wrote the RICO law in 1970 and has agreed to testify against the bank.
The bank has admitted to gross negligence in monitoring its staff. It was never charged with money-laundering or any other crime in the United States.
The bank's star witness has been former U.S. Attorney General Richard Thornburgh, who has advised the court to dismiss the case, saying in written testimony that foreign courts have no right to adjudicate RICO claims. [ID:nL20760378]
Dershowitz did not attend the hearings last week.
With the next hearing scheduled for July 28, it is not clear whether Blakey, who is 72, will return to testify, but he said that a settlement is almost certain to end the case soon.
"They'll come to some figure that they can both live with," he said," Blakey told Reuters in an interview before the hearings last week.
The prosecution's Miami legal team is working on a contingency fee basis of 29 percent, which means it will be paid for its services only in case of a judgment or settlement, according to statements made in court.
Marks, the lawyer for the prosecution, expressed doubt that a settlement was possible.
"I don't think they have enough common sense to do it," Marks said. (Editing by Jason Neely)
