Feds Tell Judge Russian Forfeiture Deal Hangs in Limbo

MANHATTAN (CN) – The Department of Justice’s eleventh-hour settlement of a $230 million forfeiture action involving looted Russian money for a fraction of that amount raised eyebrows on Capitol Hill back in May.

Negotiated by a Moscow-based attorney in the Trump family’s inner circle, the $5.9 million seemed to all House Democrats to be too small, but new revelations from a federal court in Manhattan may compound their concerns.

On Thursday afternoon, a federal prosecutor here urged a judge to reopen the case’s shut docket to ensure collection.

Without court intervention, Assistant U.S. Attorney Paul Monteleoni warned, “The funds are going to stay frozen until the end of time.”

Prosecutors here brought the underlying case in connection to the 2007 raid of a U.S. hedge fund’s offices in Moscow.

Two years later, Hermitage Capital Management’s accountant Sergei Magnitsky died in a Russian prison under mysterious circumstances, after he claimed to have discovered that members of a Russian criminal organization used the stolen corporate identities to collect $230 million in fraudulent tax refunds that they funneled into Manhattan real estate.

After New York-based prosecutors took up Magnitsky’s cause in 2013, U.S.-Russian relations took a nosedive. The Kremlin banned then-U.S. Attorney Preet Bharara in retaliation, and lobbied regularly to kill the case, which evaporated days before trial this past May.

The abrupt settlement aroused continuing controversy: Slamming the deal as paltry, all 17 House Democrats sitting on the House Judiciary Committee pointed to Trump ties at the center of the case.

Prevezon, the Cyprus-based real estate firm claiming the funds, was represented by Natalia Veselnitskaya, a Moscow-based attorney who met with Donald Trump Jr. to seek opposition research on Hillary Clinton.

At Thursday afternoon’s hearing, the firm’s other attorney Faith Gay denied that her client used “nefarious means” to get rid of the case.

“From our perspective, it is a great deal,” said Gay, hand-waving what she called the “castigation in the press that we got too good of a deal.”

Prosecutor Monteleoni also took a rosy view of the settlement, which he noted ended up being three times the amount of Prevezon’s alleged ill-gotten gains.
“Ultimately, we have a contract,” he said. “We think it should be enforced.”

Under the terms of the settlement, Prevezon would pay the settlement once a Dutch court released money that had been frozen in the Netherlands.

On Oct. 15, however, the Dutch government refused to release the funds because they pursued their own forfeiture action.

Gay said that Prevezon’s assets have been frozen around the globe, and the firm has no alternative means to pay that settlement.
“Our client’s assets have been frozen since 2013 — all of them, worldwide,” she said.

Federal prosecutors want to reopen the case to attempt to bring an enforcement action.

Otherwise, Monteleoni said, “The funds are going to stay frozen until the end of time.”

Veselnitskaya, the Trump family-tied attorney, did not appear in court.

U.S. District Judge William Pauley III denied the Moscow-based attorney’s request for temporary immigration parole to argue the case last week.

His Nov. 3 ruling noted the political backdrop behind the already intriguing case.

“In view of recent revelations regarding Russia’s outsized influence, there may have been more to this money laundering case than a few luxury condominiums at 20 Pine Street,” he wrote.

The next hearing will take place on Dec. 14 at 11:30 a.m.

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