Bank One-Ups Uncle Sam in $250M Forfeiture Case

     (CN) – A hunt by the United States for $250 million it traced to a corrupt former prime minister of Ukraine must bend to intervention by an Antiguan bank, a federal judge ruled.
     Jurors had convicted Pavel Ivanovich Lazarenko in 2004 of laundering ill-gotten gains through banks worldwide. The United States has since sought forfeiture of more than $250 million scattered throughout banks in Antigua and Barbuda, Guernsey, Liechtenstein, Lithuania and Switzerland.
     Over nearly a decade, the government successfully dismissed seven would-be intervenors and survived a motion to dismiss its action.
     Posing a tougher thorn, however, is the contest to the forfeiture filed by the European Federal Credit Bank, or Eurofed, of Antigua.
     “Here the plaintiff’s winning streak comes to an end, because the court concludes that Eurofed, acting by and through its appointed liquidators, has standing to contest the forfeiture of the defendant assets that are located in Antigua and Barbuda,” U.S. District Judge Paul Friedman wrote Monday. “As for the remaining assets to which Eurofed lays claim, however – those located in Lithuania and Switzerland – the court agrees with the plaintiff that Eurofed has not demonstrated its standing to contest their forfeiture.”
     Eurofed’s liquidation status did not immediately grant the U.S. government access to the funds, according to the 63-page ruling.
     “Although an Antiguan company in liquidation may no longer do with its assets whatever it wishes, that company is still an ongoing business concern, duty-bound under Antiguan law and court order to carry on its affairs as necessary while consolidating its assets and distributing them to its shareholders after paying off any debts,” Friedman wrote. “The court therefore rejects the plaintiff’s suggestion that the moment such a company enters liquidation, its assets are ripe for the plucking in a forfeiture action that the bank has no right to contest.”
     Friedman also rejected Uncle Sam’s claim that Eurofed’s Lazarenko-related funds “did not become assets of the bank” because they were merely “held in a custodial or safekeeping relationship.”
     “The plaintiff’s evidence, while suggestive, is far too limited and ambiguous to support a judgment, without any further factual development, that Eurofed held the money of Lazarenko and his affiliated companies in a custodial or fiduciary capacity, rather than as traditional cash deposits,” the ruling states.
     Eurofed holds a “colorable ownership interest” to $2 million in assets held at Bank Julius Baer & Company Ltd., in Antigua and Barbuda. It failed, however, to lay claim to additional assets in Lithuania and Switzerland.
     The U.S. government estimates that Eurofed formerly held more than $100 million on deposit for Lazarenko’s benefit.
     “While the plaintiff’s myriad arguments have put Eurofed through its paces, not one of these arguments carries the day,” Friedman wrote. “Eurofed, acting by and through its liquidators, has demonstrated that it has a colorable ownership interest in the defendant assets located in Antigua. It therefore has standing to contest the forfeiture of those assets, and its claim to them will survive the plaintiff’s motion for summary judgment,”
     He added: “That Eurofed has satisfied the criteria necessary to establish standing at the summary judgment stage, however, ‘may not revisit the issue at later stages in the litigation.'”
     In 2011, the U.S. government forfeited its right to nearly $2.5 million in Lazareno-related assets – held in two Eurofed correspondent accounts at Bank of America in San Francisco – by botching forfeiture proceedings.
     Lazarenko won reversal of a $19 million restitution award he was ordered to pay to his co-conspirator, Peter Kiritchenko, in 2010.

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