UPDATE 1-Russia govt a no-show at $22bln Bank of NY suit
(Adds postponement of next hearing)
By Simon Shuster
MOSCOW, Oct 6 (Reuters) - The Russian government did not attend a hearing of its $22.5 billion lawsuit against the Bank of New York Mellon Corp (BK.N) 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 Oct. 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 [of the customs service]," 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 Nov. 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 judgement against it.
If the court finds in favour 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.
In the correction, which is dated July 29, 2008, U.S. Attorney Michael Garcia said the bank did not admit criminal culpability with respect to the subject of the U.S. investigation.
"This shows that there are no building blocks for this case coming out of the Southern District of New York," where the U.S. investigation was based, Thornburgh told Reuters during a recess on Monday.
Smal, the customs service lawyer, said the Russian government's case relies less on the wording of the press release than on the wording of the non-prosecution agreement with the U.S. government.
In that agreement, the bank admitted to gross failures in monitoring its staff and to lax compliance with banking regulations.
The bank was never charged with any crime in the United States. Edwards pleaded guilty to involvement in a money laundering ring. (Editing by Paul Bolding)
