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U.S. For First Time Defends Prevezon Money-Laundering Settlement

Russian lawyer Natalya Veselnitskaya traveled to the United States in June 2016 as part of the ongoing pretrial maneuvering for Prevezon. It later emerged that during that visit, she met with U.S. President Donald Trump’s son, Donald Jr., along with a Russian-American lobbyist, and Trump’s then-campaign manager, Paul Manafort.

WASHINGTON -- U.S. prosecutors have for the first time publicly defended a much-criticized decision to settle an alleged money-laundering case, a case that stemmed from a massive Russian tax-fraud scheme and has rippled through U.S.-Russian relations.

A letter filed on December 12 and signed by Assistant Attorney General Stephen Boyd said that prosecutors in the U.S. Attorney’s Office in the Southern District of New York had no contact with President Donald Trump, his administration’s personnel, his relatives, or his campaign officials regarding the case, known informally as Prevezon.

"The decision to settle was made by career… prosecutors based on the merits and on a conclusion that the proposed settlement represented a highly favorable resolution of the case for the United States," said the letter, which was stamped November 9.

The Prevezon case officially dates back to 2013, when U.S. authorities sought to seize about $14 million in assets from the company, which was registered in Cyprus and largely owned by well-connected Russian businessman Denis Katsyv.

Tax-Fraud Scheme

U.S. officials alleged that the assets, mainly Manhattan real estate, came from a $230 million tax scheme, uncovered about six years earlier, to defraud the Russian government.

That tax-fraud scheme, which Moscow acknowledged occurred, was revealed in part by Russian whistle-blower Sergei Magnitsky, who died in a Moscow jail in 2009 after suffering what his supporters said amounted to torture.

Magnitsky's death led to the passage of a U.S. law in 2012 that punished Russians allegedly connected to Magnitsky's death and the original tax-fraud case. The law infuriated the Kremlin, and led to President Vladimir Putin banning all adoptions of Russian children by Americans.

With thousands of pages of evidence, affidavits, and bank records detailing byzantine transfers of money, the Prevezon case had been scheduled to go to trial on May 15.

On May 11, in a pretrial conference, attorneys from the prosecution and the defense had sparred over the nature of financial records obtained in Russia and the credibility of a translator used by Prevezon's Russian lawyers.

On May 12, however, the two sides announced a settlement, with Prevezon admitting no wrongdoing and agreeing to pay $6 million.

The timing of the settlement announcement raised eyebrows for many observers. The settlement came two months after the U.S. attorney overseeing the case, Preet Bharara, was fired after refusing to resign in what the White House said was a routine turnover of Justice Department appointees.

Whistle-blowing Russian lawyer Sergei Magnitsky died in a Moscow prison in 2009. (file photo)
Whistle-blowing Russian lawyer Sergei Magnitsky died in a Moscow prison in 2009. (file photo)

It also came amid mounting scrutiny of interactions by Trump associates with Russian officials. FBI Director James Comey was fired earlier that same week for what Trump later said was Comey's handling of the bureau's investigation of those Russian ties.

There’s no indication that the timing of Comey's firing and the Prevezon settlement were connected.

In July, Democratic lawmakers wrote to the Justice Department demanding an explanation for the timing of the settlement and suggesting possible unethical actions.

Prevezon's U.S. counsel initially was the law firm Baker Hostetler, but a judge kicked it off the case amid questions about the firm's earlier legal work for Magnitsky’s employer, Hermitage Capital Management.

The letter by Assistant Attorney General Boyd said that a series of court rulings in the days before the May 12 settlement had "lent support to the Government's theory of the case and its ability to use certain key pieces of evidence."

Secretive Lobbying Group

Prevezon's main Russian lawyer was Natalya Veselnitskaya, who traveled to the United States in June 2016 as part of the ongoing pretrial maneuvering for Prevezon.

It later emerged that during that visit she met with Trump's son, Donald Jr., along with a Russian-American lobbyist and Trump's then-campaign manager, Paul Manafort.

Veselnitskaya's meeting with Trump also included discussion of the adoption ban that the Kremlin instituted in 2013.

Veselnitskaya was also involved in setting up a secretive lobbying group that sought to undermine the Magnitsky legislation and an expanded version that was passed in December 2016.

In October, Veselnitskaya petitioned the U.S. court, seeking permission to travel to the United States in connection with efforts to make the $6 million settlement payment. Lawyers for Prevezon told the court that half of that amount had been scheduled to come from a Dutch bank account that U.S. officials had requested frozen.

The U.S. attorney’s office "did not have any direct communication with [Natalya ] Veselnitskaya regarding the settlement," it said.

Last month, U.S. prosecutors asked a judge to enforce the $6 million settlement agreement.

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    Mike Eckel

    Mike Eckel is a senior correspondent reporting on political and economic developments in Russia, Ukraine, and around the former Soviet Union, as well as news involving cybercrime and espionage. He's reported on the ground on Russia's invasion of Ukraine, the wars in Chechnya and Georgia, and the 2004 Beslan hostage crisis, as well as the annexation of Crimea in 2014.