Case 16-132, Document 118, 02/16/2016, 1705679, Page1 of 74
`
`16-132To Be Argued By:
`
`PAUL MONTELEONI
`
`United States Court of Appeals
`FOR THE SECOND CIRCUIT
`Docket No. 16-132
`
`UNITED STATES OF AMERICA,
`Plaintiff-Appellee,
`
`—v.—
`
`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,
`
`Defendants-Appellees,
`(Caption continued on inside cover)
`
`ON APPEAL FROM THE UNITED STATES DISTRICT COURT
`FOR THE SOUTHERN DISTRICT OF NEW YORK
`
`BRIEF FOR THE UNITED STATES OF AMERICA
`
`PAUL MONTELEONI,
`CRISTINE PHILLIPS,
`MARGARET GARNETT,
`Assistant United States Attorneys,
`Of Counsel.
`
`PREET BHARARA,
`United States Attorney for the
`Southern District of New York,
`Attorney for the United States
`of America.
`
`
`
`16-132To Be Argued By:
`
`PAUL MONTELEONI
`
`United States Court of Appeals
`FOR THE SECOND CIRCUIT
`Docket No. 16-132
`
`UNITED STATES OF AMERICA,
`Plaintiff-Appellee,
`
`—v.—
`
`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,
`
`Defendants-Appellees,
`(Caption continued on inside cover)
`
`ON APPEAL FROM THE UNITED STATES DISTRICT COURT
`FOR THE SOUTHERN DISTRICT OF NEW YORK
`
`BRIEF FOR THE UNITED STATES OF AMERICA
`
`PAUL MONTELEONI,
`CRISTINE PHILLIPS,
`MARGARET GARNETT,
`Assistant United States Attorneys,
`Of Counsel.
`
`PREET BHARARA,
`United States Attorney for the
`Southern District of New York,
`Attorney for the United States
`of America.
`
`
`
`Case 16-132, Document 118, 02/16/2016, 1705679, Page2 of 74
`
`FERENCOI INVESTMENTS, LTD., KOLEVINS, LTD., ANY AND
`ALL ASSETS OF PREVEZON HOLDINGS, LTD., ANY AND ALL
`ASSETS OF PREVEZON ALEXANDER, LLC, INCLUDING
`BUT NOT LIMITED TO ALL RIGHT, TITILE AND INTEREST IN
`THE REAL PROPERTY AND APPURTENANCES KNOWN AS
`ALEXANDER CONDOMINIUM, 250 EAST 49TH STREET, NY NY
`10017, UNIT COMM3, AND AND ALL FUNDS ON DEPOSIT IN
`BANK OF AMERICA ACCT #483044568293, HELD, ANY AND ALL
`ASSETS OF PREVEZON SEVEN USA, LLC, INCLUDING BUT
`NOT LIMITED TO ALL RIGHT, TITILE AND INTEREST IN THE
`REAL PROPERTY AND APPURTENANCES KNOWN AS 127
`SEVENTH AVE. AKA 166 WEST 18TH STREET RETAIL UNIT #2,
`NY NY AND ANY AND ALL FUNDS ON DEPOSIT IN BANK
`OF AMERICA ACCT#483041746021 HELD IN THE NAME OF
`PREVEZON SEVEN USA L.L.C., THE PREVEZON SEVEN
`ACCOUNT, ANY AND ALL ASSETS OF PREVEZON PINE USA,
`LLC, INCLUDING BUT NOT LIMITED TO ALL RIGHT, TITILE
`AND INTEREST IN THE REAL PROPERTY AND APPURTE-
`NANCES KNOWN AS THE 20 PINE STREET, NY NY 10005, UNIT
`2308 (20 PINE STREET, UNIT 2308), ANY AND ALL ASSETS OF
`PREVEZON 1711 USA, LLC, INCLUDING BUT NOT LIMITED TO
`ALL RIGHT, TITLE AND INTEREST IN THE REAL PROPERTY
`AND APPURTENANCES KNOWN AS THE 20 PINE STREET
`CONDOMINIUM, 20 PINE STREET, ANY AND ALL ASSETS OF
`PREVEZON 1810, LLC, ANY AND ALL ASSETS OF PREVEZON
`2009 USA, LLC, INCLUDING BUT NOT LIMITED TO ALL
`RIGHT, TITLE AND INTEREST IN THE REAL PROPERTY AND
`APPURTENANCES KNOWN AS THE 20 PINE STREET, NY NY
`10005, UNIT 1816, ANY AND ALL ASSETS OF FERENCOI
`INVESTMENTS, LTD., ANY AND ALL ASSETS OF KOLEVINS,
`LTD., AND ALL PROPERTY TRACEABLE THERETO., 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, ANY AND ALL FUNDS ON DEPOSIT IN BANK
`OF AMERICA ACCOUNT NUMBER 8293 HELD IN THE NAME
`OF PREVEZON ALEXANDER, LLC, ANY AND ALL FUNDS ON
`DEPOSIT IN BANK OF AMERICA ACCOUNT NUMBER 8084
`HELD IN THE NAME OF PREVEZON SOHO USA, LLC, ANY AND
`ALL FUNDS ON DEPOSIT IN BANK OF AMERICA ACCOUNT
`
`
`
`Case 16-132, Document 118, 02/16/2016, 1705679, Page3 of 74
`
`NUMBER 6021 HELD IN THE NAME OF PREVEZON SEVEN
`USA, LLC, ANY AND ALL FUNDS ON DEPOSIT IN BANK OF
`AMERICA ACCOUNT NUMBER 8349 HELD IN THE NAME OF
`PREVEZON 1711 USA, LLC, ANY AND ALL FUNDS ON DEPOSIT
`IN BANK OF AMERICA ACCOUNT NUMBER 9102 HELD IN THE
`NAME OF PREVEZON 2009 USA, LLC, ANY AND ALL FUNDS ON
`DEPOSIT IN BANK OF AMERICA ACCOUNT NUMBER 8242
`HELD IN THE NAME OF PREVEZON PINE USA, LLC, ANY AND
`ALL FUNDS ON DEPOSIT IN BANK OF AMERICA ACCOUNT
`NUMBER 5882 HELD IN THE NAME OF PREVEZON 2011
`USA, LLC, ANY AND ALL FUNDS ON DEPOSIT IN BANK OF
`AMERICA ACCOUNT NUMBER 9128 HELD IN THE NAME OF
`PREVEZON 1810 USA, LLC, 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, 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, APPROXIMATELY
`$1,046,530.04 HELD BY THE UNITED STATES AS A SUB-
`STITUTE RES FOR ALL RIGHT, TITLE AND INTEREST IN THE
`REAL PROPERTY AND APPURTENANCES KNOWN AS THE 20
`PINE STREET CONDOMINIUM, 20 PINE, 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 S, 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, AND ALL PROPERTY
`TRACEABLE THERETO,
`
`—v.—
`
`Defendants,
`
`HERMITAGE CAPITAL MANAGEMENT LTD.,
`Movant-Appellant.
`
`
`
`Case 16-132, Document 118, 02/16/2016, 1705679, Page4 of 74
`
`TABLE OF CONTENTS
`
`
`
`PAGE
`Preliminary Statement . . . . . . . . . . . . . . . . . . . . . . . 4
`Statement of Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
`A. The Russian Treasury Fraud . . . . . . . . . . . . 7
`B. Hermitage’s Retention of Baker &
`Hostetler . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
`C. The Complaint and Its Relation to Baker
`& Hostetler’s Work for Hermitage . . . . . . . 11
`D. The Emergency Pre-Discovery Trial Date
`and Notice to the Court of the Conflict . . . 15
`E. The First Disqualification Motion and
`Baker & Hostetler’s Representations to
`the Court . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
`F. The Government’s Partial Summary
`Judgment Motion and Baker &
`Hostetler’s Accusations . . . . . . . . . . . . . . . 18
`G. The Second Disqualification Motion and
`Judge Griesa’s Grant of the Motion. . . . . . 20
`H. Judge Griesa’s Grant of Certification to
`Defendants, Sua Sponte Withdrawal of
`the Disqualification Decision, Reversal of
`that Decision, and Denial of Certification
`to Hermitage . . . . . . . . . . . . . . . . . . . . . . . . 21
`I. The Emergency Stay from this Court . . . . 25
`
`
`
`
`
`
`Case 16-132, Document 118, 02/16/2016, 1705679, Page5 of 74
`
`ii
`
`PAGE
`
`ARGUMENT:
`POINT I—Judge Griesa Clearly Abused His
`Discretion by Not Ordering Disqualification . . 28
`A. Applicable Law . . . . . . . . . . . . . . . . . . . . . . 28
`1. Successive Representation Conflicts
`Generally . . . . . . . . . . . . . . . . . . . . . . . 28
`2. Crime Victim Interests . . . . . . . . . . . . 31
`B. Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . 32
`1. Judge Griesa Clearly Erred in
`Finding the Matters Not
`Substantially Related . . . . . . . . . . . . . 32
`2. Judge Griesa Erred as a Matter of
`Law in Finding Hermitage Not
`Cognizably Adverse to Prevezon . . . . . 38
`a. Judge Griesa’s Finding of No
`Substantial Relationship or
`Trial Taint Is Contrary to the
`Cases Protecting Crime Victim
`Interests and Nonparty Rights . . 39
`i. Hermitage Has an Interest
`in Disqualification as a
`Crime Victim . . . . . . . . . . . . . 39
`ii. Hermitage Has an Interest
`in Disqualification as an
`Affected Nonparty . . . . . . . . . 44
`
`
`
`Case 16-132, Document 118, 02/16/2016, 1705679, Page6 of 74
`
`iii
`
`PAGE
`
`iii. Refusal to Disqualify Here
`Is Contrary to the Law on
`Crime Victim and Nonparty
`Rights . . . . . . . . . . . . . . . . . . . 47
`3. Judge Griesa’s Placement of the
`Burden on Hermitage to Identify
`Confidences is Contrary to the Law
`of this Circuit . . . . . . . . . . . . . . . . . . . . 50
`4. Judge Griesa Misapplied this Court’s
`Precedent in Refusing to Disqualify
`Based on His View of the Equities . . . 53
`POINT II—This Court Has Jurisdiction . . . . . . . . . 56
`A. Applicable Law . . . . . . . . . . . . . . . . . . . . . . 56
`B. Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . 58
`CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
`
`
`TABLE OF AUTHORITIES
`
`Cases:
`Agilent Techs., Inc. v. Micromuse, Inc.,
`2004 WL 2346152 (S.D.N.Y. Oct. 19, 2004) . 29, 33
`Bennis v. Michigan,
`516 U.S. 442 (1996) . . . . . . . . . . . . . . . . . . . . . . . . 40
`Board of Educ. of City of N.Y. v. Nyquist,
`590 F.2d 1241 (2d Cir. 1979) . . . . . . . . . . . . . . . . 30
`
`
`
`Case 16-132, Document 118, 02/16/2016, 1705679, Page7 of 74
`
`iv
`
`PAGE
`
`Castillo v. Estelle,
`504 F.2d 1243 (5th Cir. 1974) . . . . . . . . . . . .31, 39
`Cheng v. GAF Corp.,
`631 F.2d 1052 (2d Cir. 1980) . . . . . . . . . . . . . . . . 30
`Cole Mech. Corp. v. Nat’l Grange Mut. Ins. Co.,
`2007 WL 2593000 (S.D.N.Y. Sept. 7. 2007) . . . . . 45
`Conticommodity Servs., Inc. v. Ragan,
`826 F.2d 600 (7th Cir. 1987) . . . . . . . . . . . . . . . . 57
`Coopers & Lybrand v. Livesay,
`437 U.S. 463 (1978) . . . . . . . . . . . . . . . . . . . . . . . . 57
`Davis v. Stamler,
`494 F. Supp. 339 (D.N.J. 1980) . . . . . . . 32, 40, 42
`DeFazio v. Wallis,
`459 F. Supp. 2d 159 (E.D.N.Y. 2006) . . . . . . . . . . 29
`Emle Indus., Inc. v. Patentex,
`478 F.2d 562 (2d Cir. 1973) . . . . . . . . . . . . . passim
`Enzo Biochem., Inc. v. Applera Corp.,
`468 F. Supp. 2d 359 (D. Conn. 2007) . . . . . . . . . . 45
`Evans v. Artek Systems Corp.,
`715 F.2d 788 (2d Cir. 1983) . . . . . . . . . . . . . passim
`Firestone Tire & Rubber Co. v. Risjord,
`449 U.S. 368 (1981) . . . . . . . . . . . . . . . . . . . . . . . . 57
`GAF Corp. v. Cheng,
`450 U.S. 903 (1981) . . . . . . . . . . . . . . . . . . . . . . . . 30
`Gov’t of India v. Cook Indus., Inc.,
`569 F.2d 737 (2d Cir. 1978) . . . . . . . . . . . . . . . . . 29
`
`
`
`Case 16-132, Document 118, 02/16/2016, 1705679, Page8 of 74
`
`v
`
`PAGE
`
`GSI Commerce Solutions, Inc. v. BabyCenter,
`618 F.3d 204 (2d Cir. 2010) . . . . . . . . . . . . . .28, 53
`Hempstead Video, Inc. v. Inc. Vill. of Valley Stream,
`409 F.3d 127 (2d Cir. 2005) . . . . . . . . . . . . . .30, 47
`Hull v. Celanese Corp.,
`513 F.2d 568 (2d Cir. 1975) . . . . . . . . . . . . . . . . . 56
`Illaraza v. Hovensa, L.L.C.,
`2012 WL 1154446 (D.V.I. Mar. 31, 2012) . . .35, 46
`In re City of New York,
`607 F.3d 923 (2d Cir. 2010) . . . . . . . . . . 57, 58, 60
`Kevlik v. Goldstein,
`724 F.2d 844 (1st Cir. 1984) . . . . . . . . . . . . . . . . . 45
`Liu v. Real Estate Inv. Group, Inc.,
`771 F. Supp. 83 (S.D.N.Y. 1991) . . . . . . . . . . . . . 52
`Lorber v. Winston,
`2012 WL 5904522 (E.D.N.Y. Nov. 26, 2012) . . . . 45
`Lund v. Chemical Bank,
`107 F.R.D. 374 (S.D.N.Y. 1985) . . . . . . . . . . .31, 45
`Madukwe v. Del. State Univ.,
`552 F. Supp. 2d 452 (D. Del. 2008) . . . . . . . . . . . 40
`Marino v. Ortiz,
`484 U.S. 301 (1988) . . . . . . . . . . . . . . . . . . . . . . . . 58
`Mohawk Indus., Inc. v. Carpenter,
`558 U.S. 100 (2009) . . . . . . . . . . . . . . . . . . . . . . . . 57
`Palmer v. City of Chicago,
`806 F.2d 1316 (7th Cir. 1986) . . . . . . . . . . . . . . . 59
`
`
`
`Case 16-132, Document 118, 02/16/2016, 1705679, Page9 of 74
`
`vi
`
`PAGE
`Red Ball Interior Demolition Corp. v. Palmadessa,
`908 F. Supp. 1226 (S.D.N.Y. 1995) . . . . . . . . . . . 29
`Richardson-Merrell, Inc. v. Koller,
`472 U.S. 424 (1985) . . . . . . . . . . . . . . . . . . . . .57, 58
`Satina v. N.Y. City Hum. Res. Admin.,
`2015 WL 6681203 (S.D.N.Y. Nov. 2, 2015) . .44, 49
`Scantek Med., Inc. v. Sabella,
`693 F. Supp. 2d 235 (S.D.N.Y. 2008) . . . . . . .31, 45
`Tradewinds Airlines, Inc. v. Soros,
`2009 WL 1321695 (S.D.N.Y. May 12, 2009) . 30, 47
`U.S. Catholic Conf. v. Abortion Rights Mobilization,
`487 U.S. 72 (1988) . . . . . . . . . . . . . . . . . . . . . .57, 59
`Unified Sewerage Agency of Wash. County v. Jelco,
`646 F.2d 1339 (9th Cir. 1981) . . . . . . . . . . . .58, 61
`United States v. Alex,
`788 F. Supp. 359 (N.D. Ill. 1992) . . . . . . . . . passim
`United States v. Armedo-Sarmiento,
`524 F.2d 591 (2d Cir. 1975) . . . . . . . . . . . . . . . . . 32
`United States v. DiTommaso,
`817 F.2d 201 (2d Cir. 1987) . . . . . . . . . . . . . . . . . 32
`United States v. Fawell,
`2002 WL 1284388 (N.D. Ill. June 10, 2002)
` . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31, 32, 39, 42
`United States v. Gordon,
`334 F. Supp. 2d 581 (D. Del. 2004) . . . . . . . .31, 39
`
`
`
`Case 16-132, Document 118, 02/16/2016, 1705679, Page10 of 74
`
`vii
`
`PAGE
`
`United States v. James,
`708 F.2d 40 (2d Cir. 1983) . . . . . . . . . . . 31, 44, 48
`United States v. Maynard,
`743 F.3d 374 (2d Cir. 2014) . . . . . . . . . . . . . . . . . 43
`United States v. Prevezon Holdings,
`617 F. App’x 56 (2d Cir. 2015) . . . . . . . . . . . . . . . 54
`United States v. Stout,
`723 F. Supp. 297 (E.D. Pa. 1989) . . . . . . 42, 55, 61
`Wheat v. United States,
`486 U.S. 153 (1988) . . . . . . . . . . . . . . . . . . . . . . . . 56
`Zalewski v. Shelroc Homes, LLC,
`856 F. Supp. 2d 426 (N.D.N.Y. 2012) . . . . . . . . . 52
`Zerger & Mauer LLP v. City of Greenwood,
`751 F.3d 928 (8th Cir. 2014) . . . . . . 31, 45, 46, 48
`
`Statutes, Rules & Other Authorities:
`18 U.S.C. § 1956(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . 11
`18 U.S.C. § 1956(c)(7)(A) . . . . . . . . . . . . . . . . . . . . . . 12
`18 U.S.C. § 1961(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . 12
`18 U.S.C. § 2314 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
`18 U.S.C. § 3771 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
`18 U.S.C. § 3771(d)(3) . . . . . . . . . . . . . . . . . . . . . . . . 61
`28 U.S.C. § 1292(b) . . . . . . . . . . . . . . . . . . . . . . . .21, 59
`28 U.S.C. § 1782 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
`
`
`
`Case 16-132, Document 118, 02/16/2016, 1705679, Page11 of 74
`
`viii
`
`PAGE
`Federal Rule of Civil Procedure 26(f) . . . . . . . . . . . . 15
`Fed. Prac. & Proc. § 3911.2 . . . . . . . . . . . . . . . . . . . . 59
`Sergei Magnitsky Rule of Law Accountability Act of
`2012, Pub. L. No. 112-208, 126 Stat. 1496 . . . . . 23
`
`
`
`Case 16-132, Document 118, 02/16/2016, 1705679, Page12 of 74
`
`
`
`
`
`
`
`
`
`United States Court of Appeals
`FOR THE SECOND CIRCUIT
`Docket No. 16-132
`
`UNITED STATES OF AMERICA,
`
`
`
`Appellee,
`
`—v.—
`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,
`Defendants-Appellants,
`
`
`FERENCOI INVESTMENTS, LTD., KOLEVINS, LTD., ANY
`AND ALL ASSETS OF PREVEZON HOLDINGS, LTD., ANY
`AND ALL ASSETS OF PREVEZON ALEXANDER, LLC,
`INCLUDING BUT NOT LIMITED TO ALL RIGHT, TITILE
`AND INTEREST IN THE REAL PROPERTY AND
`APPURTENANCES KNOWN AS ALEXANDER
`CONDOMINIUM, 250 EAST 49TH STREET, NY NY 10017,
`UNIT COMM3, AND AND ALL FUNDS ON DEPOSIT IN
`BANK OF AMERICA ACCT #483044568293, HELD, ANY
`AND ALL ASSETS OF PREVEZON SEVEN USA, LLC,
`INCLUDING BUT NOT LIMITED TO ALL RIGHT, TITILE
`AND INTEREST IN THE REAL PROPERTY AND
`APPURTENANCES KNOWN AS 127 SEVENTH AVE. AKA
`166 WEST 18TH STREET RETAIL UNIT #2, NY NY AND
`
`
`
`Case 16-132, Document 118, 02/16/2016, 1705679, Page13 of 74
`
`
`
`2
`
`ANY AND ALL FUNDS ON DEPOSIT IN BANK OF
`AMERICA ACCT#483041746021 HELD IN THE NAME OF
`PREVEZON SEVEN USA L.L.C., THE PREVEZON SEVEN
`ACCOUNT, ANY AND ALL ASSETS OF PREVEZON PINE
`USA, LLC, INCLUDING BUT NOT LIMITED TO ALL RIGHT,
`TITILE AND INTEREST IN THE REAL PROPERTY AND
`APPURTENANCES KNOWN AS THE 20 PINE STREET, NY
`NY 10005, UNIT 2308 (20 PINE STREET, UNIT 2308),
`ANY AND ALL ASSETS OF PREVEZON 1711 USA, LLC,
`INCLUDING BUT NOT LIMITED TO ALL RIGHT, TITLE
`AND INTEREST IN THE REAL PROPERTY AND
`APPURTENANCES KNOWN AS THE 20 PINE STREET
`CONDOMINIUM, 20 PINE STREET, ANY AND ALL ASSETS
`OF PREVEZON 1810, LLC, ANY AND ALL ASSETS OF
`PREVEZON 2009 USA, LLC, INCLUDING BUT NOT
`LIMITED TO ALL RIGHT, TITLE AND INTEREST IN THE
`REAL PROPERTY AND APPURTENANCES KNOWN AS THE
`20 PINE STREET, NY NY 10005, UNIT 1816, ANY AND
`ALL ASSETS OF FERENCOI INVESTMENTS, LTD., ANY
`AND ALL ASSETS OF KOLEVINS, LTD., AND ALL
`PROPERTY TRACEABLE THERETO., 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, ANY AND ALL FUNDS ON
`DEPOSIT IN BANK OF AMERICA ACCOUNT NUMBER 8293
`HELD IN THE NAME OF PREVEZON ALEXANDER, LLC,
`ANY AND ALL FUNDS ON DEPOSIT IN BANK OF
`AMERICA ACCOUNT NUMBER 8084 HELD IN THE NAME
`OF PREVEZON SOHO USA, LLC, ANY AND ALL FUNDS ON
`DEPOSIT IN BANK OF AMERICA ACCOUNT NUMBER 6021
`HELD IN THE NAME OF PREVEZON SEVEN USA, LLC,
`ANY AND ALL FUNDS ON DEPOSIT IN BANK OF
`
`
`
`Case 16-132, Document 118, 02/16/2016, 1705679, Page14 of 74
`
`
`
`3
`
`AMERICA ACCOUNT NUMBER 8349 HELD IN THE NAME
`OF PREVEZON 1711 USA, LLC, ANY AND ALL FUNDS ON
`DEPOSIT IN BANK OF AMERICA ACCOUNT NUMBER 9102
`HELD IN THE NAME OF PREVEZON 2009 USA, LLC, ANY
`AND ALL FUNDS ON DEPOSIT IN BANK OF AMERICA
`ACCOUNT NUMBER 8242 HELD IN THE NAME OF
`PREVEZON PINE USA, LLC, ANY AND ALL FUNDS ON
`DEPOSIT IN BANK OF AMERICA ACCOUNT NUMBER 5882
`HELD IN THE NAME OF PREVEZON 2011 USA, LLC, ANY
`AND ALL FUNDS ON DEPOSIT IN BANK OF AMERICA
`ACCOUNT NUMBER 9128 HELD IN THE NAME OF
`PREVEZON 1810 USA, LLC, 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,
`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,
`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, 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 S, 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
`
`
`
`Case 16-132, Document 118, 02/16/2016, 1705679, Page15 of 74
`
`4
`
`JANUARY 22, 2014, AND ALL PROPERTY TRACEABLE
`THERETO,
`
`Defendants,
`
`—v.—
`HERMITAGE CAPITAL MANAGEMENT LTD.,
`Movant-Appellant.
`
`
`BRIEF FOR THE UNITED STATES OF AMERICA
`
`
`
`
`
`
`
`Preliminary Statement
`Movant-appellant Hermitage Capital Manage-
`ment Ltd. (“Hermitage”) appeals from an Opinion
`and Order entered on January 8, 2016, in the United
`States District Court for the Southern District of New
`York, by the Honorable Thomas P. Griesa, United
`States District Judge, denying Hermitage’s motion to
`disqualify counsel for defendants-appellants Prevezon
`Holdings Ltd. and several related real estate compa-
`nies (collectively, “Prevezon” or the “defendants”).
`On September 10, 2013, the United States filed a
`civil forfeiture and money laundering penalty com-
`plaint, 13 Civ. 6326 (TPG), against Prevezon, in the
`United States District Court for the Southern District
`of New York. The case was assigned to Judge Griesa.
`On October 11, 2013, John Moscow, Esq., and Baker
`& Hostetler LLP entered notices of appearance on
`behalf of Prevezon.
`
`
`
`Case 16-132, Document 118, 02/16/2016, 1705679, Page16 of 74
`
`
`
`5
`
`On December 15, 2015, Hermitage moved to dis-
`qualify Mr. Moscow and Baker & Hostetler from rep-
`resenting Prevezon. The motion was granted by
`Judge Griesa on December 18, 2015. On January 8,
`2016, following further briefing, Judge Griesa re-
`versed his December 18 order, denying Hermitage’s
`motion and reinstating Prevezon’s counsel. Trial of
`the case against Prevezon was set for jury selection
`on January 27, 2016, and opening statements on Feb-
`ruary 1, 2016.
`Judge Griesa denied Hermitage’s motion to certify
`the issue for immediate interlocutory appeal and to
`stay the trial. Hermitage filed a motion with this
`Court for an emergency stay of proceedings in the
`District Court, including the trial, pending resolution
`of its appeal. The Government filed an affirmation in
`support of that motion. A motions panel of this Court
`heard oral argument on Hermitage’s motion on Janu-
`ary 22, 2016, and issued a stay pending appeal on
`January 25, 2016.
`
`Statement of Facts
`As described in the Second Amended Complaint,
`filed on October 23, 2015 (Docket Entry 381),1 the
`—————
`“A.” refers to the appendix filed with Her-
`1
`mitage’s brief on appeal; “SPA” refers to the special
`appendix filed with Hermitage’s brief on appeal;
`“CA.” refers to the redacted version of the confidential
`appendix filed with Hermitage’s brief on appeal; “SA”
`refers to the supplemental appendix filed with the
`Government’s brief on appeal; “Def. Stay Br.” refers
`
`
`
`Case 16-132, Document 118, 02/16/2016, 1705679, Page17 of 74
`
`6
`
`
`Government is seeking the forfeiture of property and
`the imposition of civil money laundering penalties on
`Prevezon for the New York laundering of the pro-
`ceeds of a complex Russian tax fraud scheme. In
`2007, a Russian criminal organization including cor-
`rupt Russian government officials (the “Organiza-
`tion”) defrauded the Russian treasury of approxi-
`mately $230 million, through an elaborate scheme
`(the “Russian Treasury Fraud”). Prevezon received a
`portion of these proceeds through an international
`network of shell companies and laundered it by pur-
`chasing Manhattan real estate using funds that, at a
`minimum, had been commingled with fraud proceeds.
`The Government’s claims are based on money
`laundering and thus require proof of a specified un-
`lawful activity. The specified unlawful activities al-
`leged in the Second Amended Complaint either con-
`sist of or derive from the Russian Treasury Fraud. As
`Prevezon disputes many of the relevant details, the
`Government expects that a substantial portion of the
`trial will necessarily consist of the Government prov-
`ing the specifics of how the Russian Treasury Fraud
`—————
`to Prevezon’s brief opposing Hermitage’s emergency
`stay motion before this Court; “Gov. Stay Aff.” refers
`to the Government’s affirmation supporting the mo-
`tion; “Docket Entry” refers to an entry in the District
`Court’s docket; “Compl.” refers to the Second Amend-
`ed Complaint filed in the District Court (found at
`A. 300-81); and “Decl.” refers to the draft declaration
`prepared by Baker & Hostetler in its previous repre-
`sentation of Hermitage (found at CA. 4-28).
`
`
`
`Case 16-132, Document 118, 02/16/2016, 1705679, Page18 of 74
`
`7
`
`
`was committed. The defense filings in the District
`Court make clear that Prevezon, through its counsel
`Baker & Hostetler, intends to contest this proof by
`accusing Hermitage of committing the Russian
`Treasury Fraud. Although the Government also ex-
`pects to advance theories at trial that could establish
`a specified unlawful activity regardless of the identi-
`ties of the perpetrators of the Russian Treasury
`Fraud, the culprits’ identities could be decisive if the
`jury rejects these other theories. Thus, whether the
`Government prevails against at trial may ultimately
`turn on whether Prevezon succeeds in convincing the
`jury that Hermitage committed the Russian Treasury
`Fraud.
`
`A. The Russian Treasury Fraud
`As alleged in the Second Amended Complaint, the
`Russian Treasury Fraud involved the theft of three
`corporations from a fund associated with Hermitage
`and the use of these stolen corporations to make false
`tax refund applications. The Hermitage Fund is a
`foreign investment fund advised by Hermitage that
`invested in Russia in the early 2000s. (A. 308-10
`(Compl. ¶¶ 14, 18-19)). Members of the Organization
`stole the corporate identities of three portfolio com-
`panies of the Hermitage Fund (the “Hermitage Com-
`panies”) and used these stolen identities to file fraud-
`ulent claims for tax refunds with the Russian gov-
`ernment. (A. 310-11 (Compl. ¶¶ 19-21)). This scheme
`was a variant of a well-known criminal practice in
`
`
`
`Case 16-132, Document 118, 02/16/2016, 1705679, Page19 of 74
`
`8
`
`
`Russia referred to as corporate raiding, or “reider-
`stvo.”2
`To steal the identities of the Hermitage Compa-
`nies, members of the Organization caused officers
`from the Russian Interior Ministry to search the
`Moscow offices of the Hermitage Fund and its law
`firm in mid-2007, and to confiscate the original corpo-
`rate documents of the Hermitage Companies. (A. 312-
`13 (Compl. ¶¶ 24-25)). Using these documents, mem-
`bers of the Organization fraudulently re-registered
`ownership of the Hermitage Companies away from
`their rightful owner—HSBC Private Bank (Guernsey)
`Ltd. (“HSBC Guernsey”), trustee for the Hermitage
`Fund—into the names of three convicted criminals
`(A. 313-14 (Compl. ¶¶ 26, 28)), using an order from
`an apparently bogus arbitration court (A. 313-14
`(Compl. ¶ 27)).
`With the stolen corporate identities of the Her-
`mitage Companies in hand, members of the Organi-
`zation forged backdated contracts with fake commer-
`cial counterparties, pursuant to which the Hermitage
`Companies appeared to owe huge sums of money.
`(A. 314-16 (Compl. ¶¶ 29-32)). The counterparties,
`also controlled by members of the Organization, sued
`
`—————
`2 See generally, e.g., Philip Hanson, Reiderstvo:
`Asset-Grabbing in Russia, Chatham House (2014),
`available at https://www.chathamhouse.org/sites/
`files/chathamhouse/home/chatham/public_html/sites/
`default/files/20140300AssetGrabbingRussiaHanson1.
`pdf.
`
`
`
`Case 16-132, Document 118, 02/16/2016, 1705679, Page20 of 74
`
`9
`
`
`the stolen Hermitage Companies based on the forged
`contracts. (A. 316 (Compl. ¶ 33)). These lawsuits were
`sham proceedings in which members of the Organiza-
`tion represented both the counterparties and the
`Hermitage Companies, orchestrating the proceedings
`so as to fraudulently procure huge judgments against
`the Hermitage Companies. (A. 316-17 (Compl. ¶¶ 34-
`37)).
`Members of the Organization then used the
`fraudulently-procured judgments to apply for tax re-
`funds on behalf of the stolen Hermitage Companies,
`claiming that these judgments constituted losses ne-
`gating previously-earned profits and entitling the
`companies to a refund of the taxes the Hermitage
`Companies had paid in 2006 (i.e., before the compa-
`nies were stolen). (A. 317-19 (Compl. ¶¶ 38-41)). Tax
`officials working for the Organization corruptly ap-
`proved those refund requests, totaling $230 million,
`within one business day, and the full $230 million
`was paid just two days later. (A. 318-20 (Compl.
`¶¶ 40, 43-45)). The refunds were paid from the Rus-
`sian treasury to accounts the Organization had creat-
`ed in the name of the Hermitage Companies. (A. 328-
`29 (Compl. ¶¶ 77-79)).
`
`B. Hermitage’s Retention of Baker & Hostetler
`Hermitage discovered these fraudulent lawsuits
`after the fact and pursued legal recourse on several
`fronts. (A. 322-23 (Compl. ¶¶ 55-56)). Hermitage and
`HSBC hired counsel in Russia to file criminal com-
`plaints and appear in civil proceedings to contest the
`fraud. Facing retaliation in Russia (A. 323-24 (Compl.
`
`
`
`Case 16-132, Document 118, 02/16/2016, 1705679, Page21 of 74
`
`10
`
`
`¶¶ 58, 61-63)), Hermitage also hired John Moscow of
`Baker & Hostetler to investigate the true perpetra-
`tors of the Russian Treasury Fraud as part of a strat-
`egy to avoid Hermitage being falsely accused of com-
`mitting it. This retention involved almost $200,000 of
`billings and lasted for several months, during which
`(1) Mr. Moscow met with a supervisor in the United
`States Attorney’s Office for the Southern District of
`New York to attempt to convince the Office to inves-
`tigate (A. 117-18);3 and (2) Baker & Hostetler drafted
`a 25-page declaration in support of an application for
`a Southern District of New York subpoena pursuant
`to 28 U.S.C. § 1782 (CA. 4-28). This draft declaration
`set forth in detail the Russian Treasury Fraud, as
`Hermitage understood it at the time. The purpose of
`the subpoena was to obtain records from New York
`banks to assist Hermitage in tracing the proceeds of
`the Russian Treasury Fraud to their ultimate recipi-
`ents.
`Hermitage subsequently terminated its attorney-
`client relationship with Baker & Hostetler. A later
`declaration, completed by a different law firm, was
`used to successfully obtain a 28 U.S.C. § 1782 sub-
`
`—————
`3 Though it involved the same subject matter,
`that meeting did not ultimately result in the instant
`action. As set forth below, Hermitage contacted the
`Government again after developing additional infor-
`mation, leading to the filing of the complaint in this
`case.
`
`
`
`Case 16-132, Document 118, 02/16/2016, 1705679, Page22 of 74
`
`11
`
`
`poena for the bank records sought by the Baker &
`Hostetler draft declaration.4
`
`C. The Complaint and Its Relation to Baker &
`Hostetler’s Work for Hermitage
`Hermitage eventually made progress tracing the
`proceeds of the Russian Treasury Fraud, which were
`moved through an elaborate international money
`laundering network to recipients in Russia and else-
`where. Hermitage again provided that information to
`the Government, which investigated and ultimately
`filed the Complaint against Prevezon, seeking in rem
`forfeiture and civil money
`laundering penalties
`against the defendants, which are eleven related real
`estate companies that received some of the proceeds
`of the Russian Treasury Fraud and invested portions
`in Manhattan real estate.
`The Government’s claims against Prevezon allege
`money laundering, and thus almost uniformly require
`proof of transactions involving the proceeds of speci-
`fied unlawful activity. See 18 U.S.C. §§ 1956(a)(1),
`1957(a). The principal specified unlawful activity al-
`leged in the operative complaint is the Russian
`Treasury Fraud. (A. 361-66 (Compl. ¶¶ 150-64)). The
`Russian Treasury Fraud is alleged to constitute a for-
`eign
`corruption
`offense
`under
`18 U.S.C.
`§ 1956(c)(7)(B)(iv), which designates as a specified
`unlawful activity an offense under foreign law involv-
`—————
`4 Hermitage later provided the Government with
`the returns for this subpoena, which were then pro-
`duced in discovery in this action.
`
`
`
`Case 16-132, Document 118, 02/16/2016, 1705679, Page23 of 74
`
`12
`
`
`ing “bribery of a public official, or the misappropria-
`tion, theft, or embezzlement of public funds by or for
`the benefit of a public official.” (A. 361-62 (Compl.
`¶¶ 149, 152)). It is also alleged to constitute an of-
`fense involving foreign bank fraud under 18 U.S.C.
`§ 1956(c)(7)(B)(iii), which includes an offense involv-
`ing “fraud, or any scheme or attempt to defraud, by or
`against a foreign bank.” (A. 361-62 (Compl. ¶¶ 149,
`151)). The Second Amended Complaint also alleges
`two specified unlawful activities derivative of the
`Russian Treasury Fraud: (i) transfers of the proceeds
`of the Russian Treasury Fraud through the United
`States constituting transportation of stolen property
`in violation of 18 U.S.C. § 2314 (A. 361-63 (Compl.
`¶¶ 149-50, 154)); and (ii) earlier instances of money
`laundering as predicate offenses for later money
`laundering transactions (A. 361, 363 (Compl. ¶¶ 149,
`154-55); see 18 U.S.C. § 1956(c)(7)(A); 18 U.S.C.
`§ 1961(1)(B)).5
`Because the Russian Treasury Fraud underlies
`the specified unlawful activities alleged, the operative
`complaint in this action sets forth a detailed account
`of the Russian Treasury Fraud that is extremely sim-
`ilar to the draft declaration prepared by Baker &
`Hostetler in the course of its representation of Her-
`mitage. (Compare CA. 4-5 (Decl. ¶ 3) (summarizing
`$230 million fraud scheme) with A. 304-05, 309-11
`(Compl. ¶¶ 2, 18-21) (summarizing same fraud); CA.
`—————
`5 Of course, for the earlier transactions to consti-
`tute money laundering, some other specified unlawful
`activity must be proven.
`
`
`
`Case 16-132, Document 118, 02/16/2016, 1705679, Page24 of 74
`
`13
`
` 8
`
` (Decl. ¶ 12) (describing Russian law enforcement
`searches of offices of Hermitage and its law firm and
`seizures of computers and documents) with A. 312
`(Compl. ¶ 24) (describing same events); CA. 9 (Decl.
`¶¶ 15-16) (describing Hermitage first learning of
`sham lawsuit in October 2007 from St. Petersburg
`court) with A. 322 (Compl. ¶ 55) (describing same
`events); CA. 9-10 (Decl. ¶¶ 17-18) (describing fraudu-
`lent reregistration of stolen companies using corpo-
`rate records and documents seized in Interior Minis-
`try searches) with A. 312-13 (Compl. ¶¶ 25-26) (de-
`scribing same events); CA. 9-10 (Decl. ¶¶ 17, 19) (de-
`scribing forging of backdated contracts with one sham
`counterparty) with A. 314-15 (Compl. ¶¶ 29-31) (de-
`scribing same events and forging of backdated con-
`tracts with additional sham counterparties); CA. 11
`(Decl. ¶ 21) (describing errors in sham contracts and
`use of stolen passport) with A. 315-16 (Compl. ¶ 31-
`32) (describing same facts); CA. 10-11 (Decl. ¶ 20)
`(describing lawyers pu
Accessing this document will incur an additional charge of $.
After purchase, you can access this document again without charge.
Accept $ Charge
Still Working On It
This document is taking longer than usual to download. This can happen if we need to contact the court directly to obtain the document and their servers are running slowly.
Give it another minute or two to complete, and then try the refresh button.
A few More Minutes ... Still Working
It can take up to 5 minutes for us to download a document if the court servers are running slowly.
Thank you for your continued patience.
This document could not be displayed.
We could not find this document within its docket. Please go back to the docket page and check the link. If that does not work, go back to the docket and refresh it to pull the newest information.
Your account does not support viewing this document.
You need a Paid Account to view this document. Click here to change your account type.
Your account does not support viewing this document.
Set your membership
status to view this document.
With a Docket Alarm membership, you'll
get a whole lot more, including:
- Up-to-date information for this case.
- Email alerts whenever there is an update.
- Full text search for other cases.
- Get email alerts whenever a new case matches your search.
One Moment Please
The filing “” is large (MB) and is being downloaded.
Please refresh this page in a few minutes to see if the filing has been downloaded. The filing will also be emailed to you when the download completes.
Your document is on its way!
If you do not receive the document in five minutes, contact support at support@docketalarm.com.
Sealed Document
We are unable to display this document, it may be under a court ordered seal.
If you have proper credentials to access the file, you may proceed directly to the court's system using your government issued username and password.
Access Government Site
