(CN) - A Cyprus company and its New York affiliates owe the United States more than $230 million for trying to launder the loot of an elaborate tax-fraud scheme cooked up by Russian mobsters and corrupt Russian officials, the U.S. government claims in a civil forfeiture action.
In its 63-page lawsuit in Manhattan Federal Court, the United States demands that Prevezon Holdings Ltd. and its New York subsidiaries forfeit "any and all assets" tainted by the Russian tax scheme.
The U.S. government claims "a Russian criminal organization, including corrupt Russian officials, defrauded Russian taxpayers of approximately 5.4 billion rubles, or $230 million in United States dollars, through an elaborate tax refund fraud scheme."
They did this by allegedly stealing the corporate identities of Hermitage Capital Management portfolio funds and then using the stolen identities to fraudulently claim tax refunds.
In the spring of 2007, Russian officials and key members of the mob met in Cyprus to plan the crime, according to the lawsuit. The conspirators allegedly included Artem Kuznetsov, a former lieutenant colonel in Russia's Interior Ministry, and reputed mob boss Dmitry Klyuev, a convicted fraudster who owned Russia's now-defunct Universal Savings Bank.
In early June 2007, Kuznetsov led about 25 officers in searching the offices of Hermitage and a law firm it had hired, the United States claims. The officers removed Hermitage's computer server, dozens of boxes of confidential records, and various corporate documents and seals, which they used to re-register the Hermitage portfolio companies Rilend, Parfenion and Makhaon under new owners - all criminals affiliated with the Russian mob.
The conspirators had a bogus arbitration court confirm the change of ownership, the U.S. government claims.
To procure the tax refunds, they "orchestrated sham lawsuits" against the Hermitage companies, with members of the crime group serving as both plaintiffs and defendants.
"In each case, the members of the organization purporting to represent Hermitage companies confessed full liability in court, leading the courts to award large money judgments to the plaintiffs," the lawsuit states.
These sham lawsuits were based on forged, backdated contracts with front businesses such as Logos Plus, Instar and Grand Arktive. The U.S. government says the contracts "contained multiple suspicious features." For example, one contract allegedly required Logos Plus, a company with about $300 in total capital, to pay the Hermitage companies $500 million to buy securities.
In less than five months, courts in St. Petersburg, Moscow and Kazan awarded judgments totaling more than $973 million against the Hermitage companies, the United States claims.
The schemers retaliated against anyone who threatened to expose their fraud, according to the lawsuit. Sergei Magnitsky, the Russian attorney who eventually revealed the fraud, was falsely arrested and died in pretrial detention at the age of 37, according to the lawsuit.
Though Magnitsky reportedly died of heart failure, the Human Rights Council concluded that he was beaten by eight prison guards with rubber batons, and the ambulance crew called to treat him was deliberately kept out of his cell for over an hour until he was dead, the United States claims.
The U.S. government says the Russian mob also tried to launder the $230 million in fraudulent tax refunds by purchasing Manhattan real estate "with funds commingled with fraud proceeds."
One such transaction involved the so-called "Alexander Condominium" at 250 East 49th Street, bought with money funneled through a Prevezon subsidiary, the government claims.
It wants Prevezon Holdings and its New York affiliates to forfeit all money and property stemming from the tax-refund scheme and to pay civil money-laundering penalties of at least $230 million.
"The defendants ... knew that the financial transactions were designed in whole or in part to conceal or disguise the nature, location, source, ownership, or control of the proceeds of the $230 million fraud scheme," the lawsuit states. "Accordingly, defendants in personam are liable to the United States for the value of the funds and monetary instruments involved in the transactions."
Prevezon did not immediately respond to requests for comment.
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