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.