A federal court refused to dismiss a civil forfeiture case against members of a Russian criminal organization holding real estate in New York City (United States v. Prevezon Holdings Ltd., S.D.N.Y., No. 1:13-cv-06326, 8/7/15).
The U.S. District Court for the Southern District of New York ruled Aug. 7 that the federal government had sufficiently connected a $230 million tax fraud against the Russian Treasury to the subsequent laundering of such funds through the purchase of Manhattan real estate for the case to go forward.
Judge Thomas P. Griesa said the government's allegations support a reasonable belief that Prevezon Holdings Ltd.—“whether or not it knew every detail of the upstream laundering—knew or was willfully blind to the fact that the funds were proceeds of unlawful activity.”
Griesa added that the Prevezon described in the complaint didn't “operate like a legitimate real estate company, but rather like one with the intent to conceal the proceeds of a fraud.”
Prevezon and the other two defendants, Kolevins Ltd. and Ferencoi Investments Ltd., were all run by the same individuals.
The scheme began when members of the criminal organization stole the corporate identities of three portfolio companies of the Hermitage Fund with the assistance of officers of the Russian Interior Ministry, who searched the companies' offices and confiscated their original corporate stamps and documents.
The criminal organization reregistered the companies away from their proper owners and then concocted false debts of the companies for which they obtained judgments from Russian arbitration courts. The organization used the judgments to claim Russian tax refunds of about $230 million.
The funds passed through several foreign bank accounts, with some of the funds going to the former head of the Moscow tax office, according to the complaint.
The complaint alleged that one of the wire transfers passed through the Southern District of New York, giving the court jurisdiction. According to the complaint, $1.9 million of the fraudulently obtained funds was used by Prevezon to purchase real estate in Manhattan.
Griesa said that although wire fraud couldn't apply as the specified unlawful activity, under the money laundering statute, 18 U.S.C. Section 1956, an offense against a foreign nation including the misappropriation, theft or embezzlement of public funds by a public official was “enough to allow the claims to proceed.”