Case 1:13-cv-06326-TPG Document 381 Filed 10/23/15 Page 1 of 86
`
`PREET BHARARA
`United States Attorney for the
`Southern District of New York
`By: PAUL M. MONTELEONI
`
`MARGARET GRAHAM
`
`JAIMIE L. NAWADAY
`
`CRISTINE I. PHILLIPS
`Assistant United States Attorneys
`One Saint Andrew’s Plaza
`New York, New York 10007
`Telephone: (212) 637-2219/2923/2275/2696
`Facsimile: (212) 637-0084
`E-mail: paul.monteleoni@usdoj.gov
`
` margaret.graham@usdoj.gov
`
` jaimie.nawaday@usdoj.gov
`
` cristine.phillips@usdoj.gov
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`
`UNITED STATES OF AMERICA,
`
`
`
`Plaintiff,
`
`- against -
`PREVEZON HOLDINGS LTD.,
`PREVEZON ALEXANDER, LLC,
`PREVEZON SOHO USA, LLC,
`PREVEZON SEVEN USA, LLC,
`PREVEZON PINE USA, LLC,
`PREVEZON 1711 USA, LLC,
`PREVEZON 1810, LLC,
`PREVEZON 2009 USA, LLC,
`PREVEZON 2011 USA, LLC,
`FERENCOI INVESTMENTS, LTD.,
`KOLEVINS, LTD.,
`
`
`
`Defendants,
`ALL RIGHT, TITLE AND INTEREST
`IN THE REAL PROPERTY AND
`APPURTENANCES KNOWN AS THE 20
`PINE STREET CONDOMINIUM, 20
`PINE STREET, NEW YORK, NEW YORK
`
`:::::::::::::::::::
`
`SECOND AMENDED VERIFIED
`COMPLAINT
`No. 13 Civ. 6326 (TPG)
`ECF Case
`
`:
`:
`
`::::::
`
`

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`Case 1:13-cv-06326-TPG Document 381 Filed 10/23/15 Page 2 of 86
`Case l:13—cv—06326—TPG Document 381
`Filed 10/23/15 Page 2 of 86
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`:::::::::::::::::::::::::::::::::::::::::::::::
`
`10005, UN"T
`
`‘I816 (“?0 .3 N+'.
`
`STRfifiT, UNIT
`
`1816”),
`
`ANY AND ALL
`FUNDS ON DfiPOS T
`BANK OF AMfiR CA ACCOUNT NJMBI
`
`L*J
`
`/U
`
`N
`
`**********8O
`
`OF ?RfiVfi7ON
`
`SOHO USA LLC (THE
`
`“PRfiVfi7ON SOHO ACCOUNT"),
`
`ANY AND ALL FUNDS ON DfiPOS T
`
`N
`
`BANK OF AMfl? CA ACCOUNT NJMBEQ
`{fiLD N THfi NAM1
`
`**********6O
`
`71
`
`ANY AND ALL
`
`FJNDS ON DfiPOS T
`
`N
`
`BANK OF AM*% CA ACCOUNT NJMBER
`N THfi NAM1
`
`********>|<*8349 H4:TlD
`
`ANY AND ALL FUNDS ON DfiPOS T
`
`N
`
`BANK OF AMfiR CA ACCOUNT NJMBER
`N THfi NAM1
`
`**********9‘]
`
`07 HfiLD
`
`OF ?RfiVfi7ON
`
`9009 USA, LLC
`
`(TTE
`
`“PRfiVfi7ON ?0
`
`09 ACCOUNT”),
`
`ANY AND ALL FUNDS ON DfiPOS T
`BANK OF AMfiR CA ACCOUNT NJMBER
`84 {fiLD N THfi NAM1
`
`10005, UNIT 1816 (“20 PINE
`STREET, UNIT 1816”),
`ANY AND ALL FUNDS ON DEPOSIT IN
`BANK OF AMERICA ACCOUNT NUMBER
`**********8293 HELD IN THE NAME
`**********8? 93 {fiLD N THfi
`OF PREVEZON ALEXANDER LLC (THE
`OF ?RfiVfi7ON ALfiXANDfiR LLC (TTE
`“PREVEZON ALEXANDER ACCOUNT”),
`“PRfiVfi7ON ALfiXANDfiR ACCOUNT"),
`ANY AND ALL FUNDS ON DEPOSIT IN
`BANK OF AMERICA ACCOUNT NUMBER
`**********8084 HELD IN THE NAME
`OF PREVEZON SOHO USA LLC (THE
`“PREVEZON SOHO ACCOUNT”),
`ANY AND ALL FUNDS ON DEPOSIT IN
`BANK OF AMERICA ACCOUNT NUMBER
`**********6021 HELD IN THE NAME
`OF PREVEZON SEVEN USA LLC (THE
`OF ?RfiVfi7ON
`SfiVfiN USA LLC (TTE
`“PREVEZON SEVEN ACCOUNT”),
`“PRfiVfi7ON Sfi VfiN ACCOUNT”),
`ANY AND ALL FUNDS ON DEPOSIT IN
`BANK OF AMERICA ACCOUNT NUMBER
`**********8349 HELD IN THE NAME
`OF PREVEZON 1711 USA, LLC (THE
`OF ?RfiVfi7ON
`‘711 USA, LLC (TTE
`“PREVEZON 1711 ACCOUNT”),
`“PRfiVfi7ON T7 ‘1 ACCOUNT"),
`ANY AND ALL FUNDS ON DEPOSIT IN
`BANK OF AMERICA ACCOUNT NUMBER
`**********9102 HELD IN THE NAME
`OF PREVEZON 2009 USA, LLC (THE
`“PREVEZON 2009 ACCOUNT”),
`ANY AND ALL FUNDS ON DEPOSIT IN
`BANK OF AMERICA ACCOUNT NUMBER
`**********8242 HELD IN THE NAME
`OF PREVEZON PINE USA, LLC (THE
`“PREVEZON PINE ACCOUNT”),
`ANY AND ALL FUNDS ON DEPOSIT IN
`BANK OF AMERICA ACCOUNT NUMBER
`**********5882 HELD IN THE NAME
`OF PREVEZON 2011 USA, LLC (THE
`“PREVEZON 2011 ACCOUNT”),
`ANY AND ALL FUNDS ON DEPOSIT IN
`BANK OF AMERICA ACCOUNT NUMBER
`
`ANY AND ALL
`
`FUNDS ON DfiPOS T
`BANK OF AMfiR CA ACCOUNT NJMBEK
`47 {fiLD N THfi NAM1
`**********8?
`
`N
`
`OF ?RfiVfi7ON
`
`“PRfiVfi7ON ?
`
`P Nfi USA, LLC (TTE
`
`Nfi ACCOUNT"),
`
`ANY AND ALL FJNDS ON DfiPOS T
`
`N
`
`BANK OF AMfiR CA ACCOUNT NJMBER
`N THfi NAM1
`
`**********58
`
`87 HfiLD
`
`OF ?RfiVfi7ON
`
`?011 USA, LLC (TTE
`
`“PRfiVfiZON 70
`
`‘1 ACCOUNT"),
`
`ANY AND ALL
`
`FUNDS ON DfiPOS T
`
`BANK OF AMfiR CA ACCOUNT NUMBER
`
`2
`
`

`
`Case 1:13-cv-06326-TPG Document 381 Filed 10/23/15 Page 3 of 86
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`:::::::::::::::::::::::::::::::::::::::::::::::
`
`**********9128 HELD IN THE NAME
`OF PREVEZON 1810 USA, LLC (THE
`“PREVEZON 1810 ACCOUNT”),
`APPROXIMATELY $1,379,518.90
`HELD BY THE UNITED STATES AS A
`SUBSTITUTE RES FOR ALL RIGHT,
`TITLE AND INTEREST IN THE REAL
`PROPERTY AND APPURTENANCES
`KNOWN AS THE 20 PINE STREET
`CONDOMINIUM, 20 PINE STREET,
`NEW YORK, NEW YORK 10005, UNIT
`2009 (THE “20 PINE STREET, UNIT
`2009 SALE PROCEEDS”),
`APPROXIMATELY $4,429,019.44
`HELD BY THE UNITED STATES AS A
`SUBSTITUTE RES FOR ALL RIGHT,
`TITLE AND INTEREST IN THE REAL
`PROPERTY AND APPURTENANCES
`KNOWN AS ALEXANDER CONDOMINIUM,
`250 EAST 49th STREET, NEW YORK,
`NEW YORK 10017, UNIT COMM3 (THE
`“250 EAST 49th STREET, UNIT
`COMM3 SALE PROCEEDS”),
`APPROXIMATELY $1,046,530.04
`HELD BY THE UNITED STATES AS A
`SUBSTITUTE RES FOR ALL RIGHT,
`TITLE AND INTEREST IN THE REAL
`PROPERTY AND APPURTENANCES
`KNOWN AS THE 20 PINE STREET
`CONDOMINIUM, 20 PINE STREET,
`NEW YORK, NEW YORK 10005, UNIT
`2308 (THE “20 PINE STREET, UNIT
`2308 SALE PROCEEDS”),
`APPROXIMATELY $894,026.21 HELD
`BY THE UNITED STATES AS A
`SUBSTITUTE RES FOR ALL RIGHT,
`TITLE AND INTEREST IN THE REAL
`PROPERTY AND APPURTENANCES
`KNOWN AS THE 20 PINE STREET
`CONDOMINIUM, 20 PINE STREET,
`NEW YORK, NEW YORK 10005, UNIT
`1711 (THE “20 PINE STREET, UNIT
`1711 SALE PROCEEDS”),
`
`3
`
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`::::::::::
`
`::
`
`Defendants in Rem.
`
`A DEBT OF 3,068,946 EUROS OWED
`BY AFI EUROPE N.V. TO PREVEZON
`HOLDINGS RESTRAINED BY THE
`GOVERNMENT OF THE NETHERLANDS
`ON OR ABOUT JANUARY 22, 2014
`(THE “AFI EUROPE DEBT”),
`and all property traceable
`thereto,
`
`
`:
`
`Plaintiff the United States of America (the “Government”),
`
`by its attorney Preet Bharara, United States Attorney for the
`Southern District of New York, for its verified complaint (the
`“Complaint”) alleges, upon information and belief, as follows:
`INTRODUCTION
`This action is brought by the Government pursuant to
`1.
`18 U.S.C. §§ 981(a)(1)(A), 985, and 1956(b)(1) seeking the
`forfeiture of certain property involved in laundering the
`proceeds of a Russian tax refund fraud scheme and the imposition
`of civil money laundering penalties.
`2.
`The Government’s claims arise out of the laundering of
`proceeds of a criminal enterprise in Russia in a complicated
`series of transactions including real estate purchases in the
`Southern District of New York. As set forth in more detail
`below, upon information and belief, a Russian criminal
`organization including corrupt Russian government officials (the
`“Organization”) defrauded Russian taxpayers of approximately 5.4
`
`4
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`Case 1:13-cv-06326-TPG Document 381 Filed 10/23/15 Page 5 of 86
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`billion rubles, or approximately $230 million in United States
`dollars, through an elaborate tax refund fraud scheme. After
`perpetrating this fraud, members of the Organization have
`undertaken illegal actions in order to conceal this fraud and
`retaliate against individuals who attempted to expose it. As a
`result of these retaliatory actions, Sergei Magnitsky, a Russian
`attorney who exposed the fraud scheme, was falsely arrested and
`died in pretrial detention. Members of the Organization, and
`associates of those members, have also engaged in a broad
`pattern of money laundering in order to conceal the proceeds of
`the fraud scheme. This money laundering activity has included
`the purchase of pieces of Manhattan real estate with funds
`commingled with fraud proceeds.
`3.
`By this Complaint, the Government seeks forfeiture of
`all right, title and interest in the following property:
`a.
`ALL RIGHT, TITLE AND INTEREST IN THE
`REAL PROPERTY AND APPURTENANCES KNOWN AS THE
`20 PINE STREET CONDOMINIUM, 20 PINE STREET,
`NEW YORK, NEW YORK 10005, UNIT 1816 (“20
`PINE STREET, UNIT 1816”),
`b.
`ANY AND ALL FUNDS ON DEPOSIT IN BANK OF
`AMERICA ACCOUNT NUMBER **********8293 HELD
`IN THE NAME OF PREVEZON ALEXANDER LLC (THE
`“PREVEZON ALEXANDER ACCOUNT”),
`c.
`ANY AND ALL FUNDS ON DEPOSIT IN BANK OF
`AMERICA ACCOUNT NUMBER **********8084 HELD
`IN THE NAME OF PREVEZON SOHO USA LLC (THE
`“PREVEZON SOHO ACCOUNT”),
`
`5
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`Case 1:13-cv-06326-TPG Document 381 Filed 10/23/15 Page 6 of 86
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`ANY AND ALL FUNDS ON DEPOSIT IN BANK OF
`d.
`AMERICA ACCOUNT NUMBER **********6021 HELD
`IN THE NAME OF PREVEZON SEVEN USA LLC (THE
`“PREVEZON SEVEN ACCOUNT”),
`e.
`ANY AND ALL FUNDS ON DEPOSIT IN BANK OF
`AMERICA ACCOUNT NUMBER **********8349 HELD
`IN THE NAME OF PREVEZON 1711 USA, LLC (THE
`“PREVEZON 1711 ACCOUNT”),
`f.
`ANY AND ALL FUNDS ON DEPOSIT IN BANK OF
`AMERICA ACCOUNT NUMBER **********9102 HELD
`IN THE NAME OF PREVEZON 2009 USA, LLC (THE
`“PREVEZON 2009 ACCOUNT”),
`g.
`ANY AND ALL FUNDS ON DEPOSIT IN BANK OF
`AMERICA ACCOUNT NUMBER **********8242 HELD
`IN THE NAME OF PREVEZON PINE USA, LLC (THE
`“PREVEZON PINE ACCOUNT”),
`h.
`ANY AND ALL FUNDS ON DEPOSIT IN BANK OF
`AMERICA ACCOUNT NUMBER **********5882 HELD
`IN THE NAME OF PREVEZON 2011 USA, LLC (THE
`“PREVEZON 2011 ACCOUNT”),
`i.
`ANY AND ALL FUNDS ON DEPOSIT IN BANK OF
`AMERICA ACCOUNT NUMBER **********9128 HELD
`IN THE NAME OF PREVEZON 1810 USA, LLC (THE
`“PREVEZON 1810 ACCOUNT”),
`j.
`APPROXIMATELY $1,379,518.90 HELD BY THE
`UNITED STATES AS A SUBSTITUTE RES FOR ALL
`RIGHT, TITLE AND INTEREST IN THE REAL
`PROPERTY AND APPURTENANCES KNOWN AS THE 20
`PINE STREET CONDOMINIUM, 20 PINE STREET, NEW
`YORK, NEW YORK 10005, UNIT 2009 (THE “20
`PINE STREET, UNIT 2009 SALE PROCEEDS”),
`k.
`APPROXIMATELY $4,429,019.44 HELD BY THE
`UNITED STATES AS A SUBSTITUTE RES FOR ALL
`RIGHT, TITLE AND INTEREST IN THE REAL
`PROPERTY AND APPURTENANCES KNOWN AS
`ALEXANDER CONDOMINIUM, 250 EAST 49th STREET,
`NEW YORK, NEW YORK 10017, UNIT COMM3 (THE
`“250 EAST 49th STREET, UNIT COMM3 SALE
`PROCEEDS”),
`
`6
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`Case 1:13-cv-06326-TPG Document 381 Filed 10/23/15 Page 7 of 86
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`APPROXIMATELY $1,046,530.04 HELD BY THE
`l.
`UNITED STATES AS A SUBSTITUTE RES FOR ALL
`RIGHT, TITLE AND INTEREST IN THE REAL
`PROPERTY AND APPURTENANCES KNOWN AS THE 20
`PINE STREET CONDOMINIUM, 20 PINE STREET, NEW
`YORK, NEW YORK 10005, UNIT 2308 (THE “20
`PINE STREET, UNIT 2308 SALE PROCEEDS”),
`APPROXIMATELY $894,026.21 HELD BY THE UNITED
`STATES AS A SUBSTITUTE RES FOR ALL RIGHT,
`TITLE AND INTEREST IN THE REAL PROPERTY AND
`APPURTENANCES KNOWN AS THE 20 PINE STREET
`CONDOMINIUM, 20 PINE STREET, NEW YORK, NEW
`YORK 10005, UNIT 1711 (THE “20 PINE STREET,
`UNIT 1711 SALE PROCEEDS”)
`m.
`A DEBT OF 3,068,946 EUROS OWED BY AFI
`EUROPE N.V. TO PREVEZON HOLDINGS RESTRAINED
`BY THE GOVERNMENT OF THE NETHERLANDS ON OR
`ABOUT JANUARY 22, 2014 (THE “AFI EUROPE
`DEBT”),
`and all property traceable thereto,
`(the “Defendants in Rem”).
`4.
`The Government also seeks civil money laundering
`penalties against PREVEZON HOLDINGS, LTD. (“PREVEZON HOLDINGS”);
`PREVEZON ALEXANDER, LLC (“PREVEZON ALEXANDER”), PREVEZON SOHO
`USA, LLC (“PREVEZON SOHO“), PREVEZON SEVEN USA, LLC (“PREVEZON
`SEVEN”), PREVEZON PINE USA, LLC (“PREVEZON PINE”), PREVEZON 1711
`USA, LLC (“PREVEZON 1711”), PREVEZON 1810, LLC (“PREVEZON
`1810“), PREVEZON 2009 USA, LLC (“PREVEZON 2009”), and PREVEZON
`2011 USA, LLC (“PREVEZON 2011”) (collectively the “Prevezon
`Entities”); FERENCOI INVESTMENTS, LTD. (“FERENCOI”); and
`KOLEVINS, LTD. (“KOLEVINS”) (FERENCOI, KOLEVINS and the Prevezon
`Entities collectively, the “Defendants in Personam”) in an
`
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`Case 1:13-cv-06326-TPG Document 381 Filed 10/23/15 Page 8 of 86
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`amount to be determined at trial.
`JURISDICTION AND VENUE
`This Court has jurisdiction over this action pursuant
`5.
`to 28 U.S.C. §§ 1345 and 1355(a) and (b)(1)(A).
`6.
`Venue is proper pursuant to 28 U.S.C. § 1355(b)(1)(A)
`because acts and omissions giving rise to the forfeiture took
`place in the Southern District of New York.
`FACTUAL ALLEGATIONS
`PREVEZON HOLDINGS, LTD. (“PREVEZON HOLDINGS”) is a
`7.
`holding company incorporated and registered in the Republic of
`Cyprus. It was incorporated on September 26, 2005 and has been
`registered in New York State as a foreign business corporation
`since November 12, 2009.
`8.
`DENIS KATSYV has been the sole shareholder of PREVEZON
`HOLDINGS (either in his own name alone or in his own name and in
`the name of another company he wholly owns) since June 19, 2008.
`9.
`TIMOFEY KRIT is a director of PREVEZON HOLDINGS and
`was the sole shareholder of PREVEZON HOLDINGS from August 29,
`2006 to June 18, 2008.
`10.
`ALEXANDER LITVAK is a business partner of KATSYV and
`has been the beneficial owner of the bank accounts of PREVEZON
`HOLDINGS at UBS, master number ending in 81, including U.S.
`dollar account number ending in 81.60Y (the “PREVEZON HOLDINGS
`8160 Account”) and Euro account number ending in 81.70U (the
`
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`Case 1:13-cv-06326-TPG Document 381 Filed 10/23/15 Page 9 of 86
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`“PREVEZON HOLDINGS 8170 Account”), since December 16, 2005.
`11.
`The New York limited liability companies PREVEZON
`ALEXANDER, LLC (“PREVEZON ALEXANDER”), PREVEZON SOHO USA, LLC
`(“PREVEZON SOHO”), PREVEZON SEVEN USA, LLC (“PREVEZON SEVEN”),
`PREVEZON PINE USA, LLC (“PREVEZON PINE”), PREVEZON 1711 USA, LLC
`(“PREVEZON 1711”), PREVEZON 1810, LLC (“PREVEZON 1810”),
`PREVEZON 2009 USA, LLC (“PREVEZON 2009”), and PREVEZON 2011 USA,
`LLC (“PREVEZON 2011”) (the “PREVEZON SUBSIDIARIES,” together
`with PREVEZON HOLDINGS, the “PREVEZON ENTITIES”), are
`subsidiaries of PREVEZON HOLDINGS that are wholly owned by
`PREVEZON HOLDINGS together with KATSYV, through a different
`company he wholly owns. The PREVEZON SUBSIDIARIES share the
`same counsel as PREVEZON HOLDINGS.
`12.
`FERENCOI INVESTMENTS, LTD. (“FERENCOI”) is a British
`Virgin Islands company founded in 2003 and beneficially owned by
`KATSYV.
`KOLEVINS, LTD. (“KOLEVINS”) is a British Virgin
`13.
`Islands company founded in 2004 and beneficially owned by
`LITVAK. KRIT is listed as the sole director and shareholder of
`KOLEVINS.
`Hermitage Capital Management Limited (“Hermitage”) is
`14.
`an investment advisory firm. Hermitage has primarily advised
`the Hermitage Fund, an investment fund focused on investments in
`Russia. Until 2006, the Hermitage Fund was the largest foreign
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`Case 1:13-cv-06326-TPG Document 381 Filed 10/23/15 Page 10 of 86
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`portfolio investor in Russia.
`15.
`HSBC Private Bank (Guernsey) Limited (“HSBC Guernsey”)
`is a Guernsey-based entity that served as trustee to the
`Hermitage Fund during all relevant periods.
`16.
`OOO Rilend (“Rilend”), OOO Parfenion (“Parfenion”),
`and OOO Makhaon (“Makhaon”) are Russian Hermitage Fund portfolio
`companies owned by HSBC Guernsey as trustee through two
`shareholding vehicles, but, as set forth in more detail below,
`fraudulently re-registered to members of the Organization in
`2007 as part of the fraud scheme giving rise to this action.
`17.
`Sergei Magnitsky was a Russian attorney who
`represented Hermitage in investigating the activities of the
`Organization, who was arrested at the direction of a member of
`the Organization, and who died in pretrial detention on November
`16, 2009 at the age of 37.
`I.
`THE $230 MILLION FRAUD SCHEME
`A. Overview
`18.
`Upon information and belief, in 2007 the Organization
`engaged in an elaborate tax refund fraud scheme resulting in a
`fraudulently-obtained tax refund of approximately $230 million
`(the “$230 Million Fraud Scheme”). As part of the $230 Million
`Fraud Scheme, members of the Organization stole the corporate
`identities of the Hermitage portfolio companies Rilend,
`Parfenion, and Makhaon (the “Hermitage Companies”), and then
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`Case 1:13-cv-06326-TPG Document 381 Filed 10/23/15 Page 11 of 86
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`used these stolen identities to make fraudulent claims for tax
`refunds.
`In order to procure the refunds, the Organization
`19.
`fraudulently re-registered the Hermitage Companies in the names
`of members of the Organization, and then orchestrated sham
`lawsuits against these companies. These sham lawsuits involved
`members of the Organization as both the plaintiffs (representing
`sham commercial counterparties suing the Hermitage Companies)
`and the defendants (purporting to represent the Hermitage
`Companies). In each case, the members of the Organization
`purporting to represent the Hermitage Companies confessed full
`liability in court, leading the courts to award large money
`judgments to the plaintiffs.
`20.
`The purpose of the sham lawsuits was to fraudulently
`generate money judgments against the Hermitage Companies.
`Members of the Organization purporting to represent the
`Hermitage Companies then used those money judgments to seek tax
`refunds. The basis of these refund requests was that the money
`judgments constituted losses eliminating the profits the
`Hermitage Companies had earned, and thus that the Hermitage
`Companies were entitled to a refund of the taxes that had been
`paid on these profits. The requested refunds totaled 5.4
`billion rubles, or approximately $230 million.
`21.
`Members of the Organization who were officials at two
`
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`Case 1:13-cv-06326-TPG Document 381 Filed 10/23/15 Page 12 of 86
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`Russian tax offices corruptly approved the requests on the same
`day that they were made or the next business day, and
`approximately $230 million was disbursed to members of the
`Organization, purporting to represent the Hermitage Companies,
`two days later.
`B. Planning of $230 Million Fraud Scheme and Fraudulent Re-
`Registration of Hermitage Companies
`22.
`On information and belief, the $230 Million Fraud
`Scheme began on or about April 28, 2007, when key members of the
`Organization flew to Larnaca, Cyprus to plan the crime. On that
`date, ARTEM KUZNETSOV, then a Lieutenant Colonel in Russia’s
`Interior Ministry, flew with DMITRY KLYUEV, a convicted
`fraudster, the owner of the Russian bank Universal Savings Bank
`(“USB”), and on information and belief the mastermind of the
`Organization, from Moscow to Larnaca on a private jet. On
`information and belief, they were met in Larnaca two days later
`by PAVEL KARPOV, then a Major in Russia’s Interior Ministry, as
`well as two lawyers, ANDREY PAVLOV and his wife YULIA MAYOROVA,
`all of whom flew together from Moscow on Aeroflot SU-487.
`PAVLOV had known KLYUEV since 2001 and had provided him legal
`services from time to time.
`23.
`On May 5 and 6, 2007, the Interior Ministry officers
`KUZNETSOV and KARPOV, and the lawyers PAVLOV and MAYOROVA,
`returned to Moscow. On May 8, 2007, the convicted fraudster
`
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`KLYUEV was met in Larnaca by OLGA STEPANOVA, the head of Moscow
`Tax Office No. 28, and her then-husband VLADLEN STEPANOV, who
`flew to Larnaca together on Aeroflot SU-237. Subsequently,
`KLYUEV, STEPANOVA, and STEPANOV returned to Moscow.
`24.
`Approximately one month later, on or about June 4,
`2007, KUZNETSOV led approximately 25 officers in a search of
`Hermitage’s office in Moscow. The officers removed Hermitage’s
`computer server, virtually all of its computers, and dozens of
`boxes of confidential financial documents and records. Later
`that day, KUZNETSOV joined approximately 25 officers in a search
`of the offices of Firestone Duncan, a law firm that was advising
`HSBC Guernsey and Hermitage. The officers seized the original
`statutory and financial documents of the Hermitage Companies
`(Rilend, Parfenion, and Makhaon), as well as Firestone Duncan’s
`computer server and other computers and documents. The officers
`who identified themselves during these searches were from the
`Moscow office of the Interior Ministry.
`25.
`Among the items seized in the searches of Hermitage’s
`and Firestone Duncan’s offices were the corporate stamps, the
`official charters, the original tax certificates, and original
`registration certificates (the “corporate documents and seals”)
`for Rilend, Parfenion, and Makhaon. In denying requests from
`Hermitage to return the corporate documents and seals, the
`Russian Interior Ministry subsequently confirmed that these
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`documents and seals, which were seized in the searches led by
`KUZNETSOV, remained in the custody of his colleague KARPOV.
`26.
`Unbeknownst to Hermitage or HSBC Guernsey, members of
`the Organization used the seized corporate documents and seals
`to fraudulently re-register ownership of Rilend, Parfenion, and
`Makhaon with the Russian corporate registry. The ownership of
`these companies was fraudulently transferred in the registry
`from the shareholding vehicles of HSBC Guernsey, which had been
`holding them in trust for the Hermitage Fund, to OOO PLUTON
`(“PLUTON”), a Russian company wholly owned by VICTOR MARKELOV,
`identified by court documents as a former sawmill employee who
`had been convicted of manslaughter in 2002.
`27.
`Part of the process of transferring ownership of the
`Hermitage Companies to PLUTON in the corporate registry involved
`obtaining a court judgment confirming the change of ownership.
`On June 15, 2007, a body purporting to be the permanent
`arbitration court of the corporation OOO DETOKS issued a ruling
`stating that full ownership of the Hermitage Companies was
`transferred to PLUTON. On July 30, 2007, the arbitration court
`of the Tatarstan Republic (a federal subject of Russia)
`confirmed the purported DETOKS arbitration court ruling
`transferring ownership of the Hermitage Companies to Pluton.
`However, on information and belief, DETOKS does not operate a
`genuine arbitration court. DETOKS has no discernible presence
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`on Russian legal databases, and the registered headquarters for
`DETOKS is a dilapidated residential building, photographs of
`which are attached hereto as Exhibit A.
`28.
`PLUTON then registered new charters for the Hermitage
`Companies, and the Russian corporate registry shows that HSBC
`executives who had previously served as directors of the
`Hermitage Companies were replaced by individuals with criminal
`records: MARKELOV became fraudulently listed as director of
`Parfenion, VIACHESLAV KHLEBNIKOV, a convicted extortionist and
`burglar, became fraudulently listed as director of Makhaon, and
`VALERY KUROCHKIN, a convicted burglar, became fraudulently
`listed as director of Rilend.
`C. Forging of Backdated Contracts and Filing of Sham
`Lawsuits Against Hermitage Companies
`29.
`On information and belief, the members of the
`Organization who had stolen the corporate identities of the
`Hermitage Companies used the seized corporate documents and
`seals to forge backdated contracts with sham commercial
`counterparties for use in sham lawsuits against the Hermitage
`Companies.
`The forged contracts involved three sham
`30.
`counterparties, LOGOS PLUS, INSTAR, and GRAND AKTIVE. The
`forged contracts were virtually identical in form, purporting to
`require the Hermitage Companies to supply securities to the sham
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`counterparty and to compensate the sham counterparty for its
`lost profits for failing to supply the securities. Indeed, the
`forged contracts between LOGOS PLUS, INSTAR, GRAND AKTIVE, and
`the Hermitage Companies were essentially identical except that
`the parties to the contracts and the figures had been changed.
`31.
`The forged contracts contained multiple suspicious
`features. The contracts between LOGOS PLUS and the Hermitage
`Companies purported to require LOGOS PLUS, a company with total
`capital at the time of approximately U.S. $300, to pay the
`Hermitage Companies approximately U.S. $500 million to buy
`securities. Additionally, the forged contracts included
`extensive confidential information about the Hermitage Companies
`including bank account information, information on assets and
`holdings, custodian banks, and addresses of registration and
`incorporation of the Hermitage Companies. Such information was
`confidential, but was contained in the records that had been
`seized from Hermitage and Firestone Duncan on or about June 4,
`2007. Moreover, although referencing confidential information,
`the contracts contained various mistakes and inaccuracies,
`including referencing bank accounts that had not yet been
`opened, and using addresses that were incorrect as of the
`relevant time.
`32.
`Further, the LOGOS PLUS contracts referred to a power
`of attorney given an individual named Alexandr Strazhev
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`authority to sign on behalf of LOGOS PLUS. This power of
`attorney identified Strazhev by reference to a passport number.
`The passport number corresponded to a passport not issued to
`Strazhev but to a third person, who had reported the passport as
`missing in 2005.
`33.
`The forged contracts were used by LOGOS PLUS, INSTAR,
`and GRAND AKTIVE to file a series of sham lawsuits against the
`Hermitage Companies in arbitration courts in Moscow, St.
`Petersburg, and Kazan (the capital of the Tatarstan Republic) in
`or about July to November of 2007.
`34.
`In these sham lawsuits, the Hermitage Companies were
`purportedly represented by attorneys; these attorneys were, in
`fact, entirely unknown to Hermitage or HSBC Guernsey. These
`attorneys included PAVLOV and MAYOROVA, the lawyers who had
`flown to Larnaca in or about April 2007 with KARPOV and, on
`information and belief, had met there with other members of the
`Organization including KARPOV’s colleague KUZNETSOV, who had led
`the June 2007 searches. Hermitage and HSBC had no prior
`knowledge of or acquaintance with the attorneys that purported
`to represent the Hermitage Companies in these sham lawsuits, and
`had never hired them or authorized their appointment in any way.
`These lawyers were not in fact representing Hermitage or HSBC
`but were, on information and belief, members of the Organization
`relying on forged powers of attorney.
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`The lawyers purporting to represent the Hermitage
`35.
`Companies appeared in the sham lawsuits, and, instead of
`mounting any actual defense of the claims, acknowledged the
`validity of the forged contracts and conceded full liability.
`36.
`These sham lawsuits were not truly contested
`proceedings but instead were orchestrated with members of the
`Organization on both sides, for the purpose of fraudulently
`obtaining large money judgments against the Hermitage Companies
`on the basis of the forged contracts. Indeed, PAVLOV, one of
`the attorneys appearing as counsel purportedly on behalf of the
`Hermitage Companies in sham St. Petersburg proceedings against
`LOGOS PLUS, appeared as counsel for plaintiff GRAND AKTIVE –
`that is, suing the Hermitage Companies – in the sham Kazan
`proceedings.
`37.
`Ultimately, between July 30, 2007 and December 11,
`2007, the courts in St. Petersburg, Moscow, and Kazan awarded
`judgments totaling at least approximately U.S. $973 million
`against the Hermitage Companies on the basis of the fraudulent
`legal proceedings.
`D. Tax Refunds Based on Fraudulently Procured Judgments
`38.
`On information and belief, members of the
`Organization, purporting to represent the Hermitage Companies,
`used the fraudulently-obtained judgments against the Hermitage
`Companies to apply for a tax refund, and members of the
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`Organization who worked at two Russian tax offices corruptly
`approved the tax refund.
`39.
`As part of their theft of the corporate identities of
`the Hermitage Companies, members of the Organization
`fraudulently re-registered the Hermitage Companies so as to
`cause their taxes to be processed by two particular tax offices.
`Specifically, the corporate registry reflects that Rilend was
`re-registered to an address within the jurisdiction of Moscow
`Tax Office No. 25, and that Parfenion and Makhaon were re-
`registered to addresses within the jurisdiction of Moscow Tax
`Office No. 28. During the relevant period, the head of Moscow
`Tax Office No. 25 was YELENA KHIMINA, who on information and
`belief is a member of the Organization, and the head of Moscow
`Tax Office No. 28 was STEPANOVA, who had traveled to Larnaca in
`May of 2007 and on information and belief met with KLYUEV to
`plan the $230 Million Fraud Scheme.
`40.
`On December 21 and 24, 2007, after the fraudulently-
`obtained judgments were issued but before one of them came into
`legal effect, members of the Organization submitted applications
`on behalf of the Hermitage Companies for refunds totaling 5.4
`billion rubles or U.S. $230 million to Moscow Tax Offices No. 25
`and 28.
`The basis for the requested refund was that the
`41.
`cumulative U.S. $973 million judgments against the Hermitage
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`Companies from the sham lawsuits represented losses that were
`equal to, and thus negated, the profits the Hermitage Companies
`had made during the last tax year, entitling the Hermitage
`Companies to a refund of the taxes paid on those profits.
`42.
`In subsequent investigation, officials at Tax Offices
`No. 25 and 28 made witness statements claiming that amended tax
`returns were submitted in or about November of 2007 and claiming
`to have taken certain steps to verify the legitimacy of the
`claimed losses. These statements do not appear to be fully
`accurate. One official claimed, among other things, to have
`checked with the corresponding tax authorities whether the
`plaintiffs in the sham lawsuits had reported receivables
`corresponding to the fraudulently-obtained judgments, and to
`have found positive receivables reported. However, the forms
`INSTAR and GRAND AKTIVE actually filed with the tax authorities
`show zero receivables over all relevant time periods.
`43.
`One of the judgments on which the refund applications
`were based, by its own terms, did not go into legal effect until
`January 11, 2008.
`44.
`Nevertheless, on December 24, 2007 – the same day that
`most of the refund applications were filed and one business day
`after the others were filed – KHIMINA and STEPANOVA, as heads of
`Moscow Tax Offices 25 and 28, approved the U.S. $230 million in
`refunds, which on information and belief amounted to the largest
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`known tax refunds in Russian history.
`45.
`As set forth in more detail in Part III, below, on
`December 26, 2007, just two days after most of the applications
`were made, refunds totaling U.S. $230 million were paid from the
`Russian treasury to bank accounts established in the name of the
`Hermitage Companies but, on information and belief, controlled
`by members of the Organization, and then laundered into a number
`of accounts and pieces of real property around the world by
`members and associates of the Organization.
`E. Similarities between 2007 $230 Million Fraud Scheme and
`2006 Fraud Scheme
`46.
`The $230 Million Fraud Scheme is strikingly similar to
`what appears to have been a fraud scheme carried out by the
`Organization in 2006 involving two subsidiaries of Rengaz
`Holdings Limited (“Rengaz”), an offshore investment fund.
`47.
`On information and belief, in April 2006, two
`subsidiaries of Rengaz (the “Rengaz Companies”) were sued by
`purported commercial counterparties.
`48.
`The lawsuits were brought in the Moscow and Kazan
`Arbitration Courts, two of the same courts in which the sham
`lawsuits against the Hermitage Companies were brought.
`49.
`The lawsuits were based on contracts almost identical
`to the forged contracts between LOGOS PLUS, INSTAR, and GRAND
`AKTIVE and the Hermitage Companies. For example, the forged
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`contract between LOGOS PLUS and Parfenion, used in the $230
`Million Fraud Scheme, is essentially identical to the contract
`between one of the Rengaz Companies and its purported commercial
`counterparty, with only company names, dates, and sums changed.
`50.
`PAVLOV represented the plaintiffs in the lawsuits
`against the Rengaz Companies, similar to in the $230 Million
`Fraud Scheme (where he represented both the plaintiff and the
`defendant in different actions).
`51.
`The representatives purportedly acting on behalf of
`the Rengaz Companies acknowledged the validity of the contracts
`and conceded full liability, just as the lawyers purportedly
`acting on behalf of the Hermitage Companies did in the $230
`Million Fraud Scheme.
`52.
`Just as in the $230 Million Fraud Scheme, the
`plaintiffs were awarded judgments that fully offset the prior
`profits of the Rengaz Companies.
`53.
`These judgments