11 January 2016 – On 8 January 2016, New York district court judge Thomas Griesa reversed his previous decision to disqualify lawyer John Moscow and New York law firm Baker Hostetler.
The new decision allows Baker Hostetler and John Moscow to continue acting as defence counsel for Prevezon, a Cyprus company owned by the son of a senior Russian government official, accused by the US Justice Department of acquiring Manhattan properties with the proceeds from the $230 million fraud uncovered by Sergei Magnitsky, Hermitage’s murdered Russian lawyer. Baker Hostetler previously represented Hermitage as a victim of the same crime.
The judge’s decision came three weeks after he had disqualified John Moscow and Baker Hostetler on the same set of issues, concluding it would be improper for them to continue as defence counsel given the violation of New York Rules of Professional Conduct and Baker Hostetler’s duty to their former client, Hermitage.
The US government’s case against Prevezon seeks the forfeiture of New York property and bank accounts worth US$14 million and money laundering fines. In their complaint, the government highlights millions of dollars in payments received by Prevezon from shell companies from the $230 million Russian fraud, that were falsely described as payments for over 500 Italian bath tubs and auto spare parts – goods that Prevezon never delivered to anyone.
The series of disqualification motions filed by Hermitage came as a result of Baker Hostetler and John Moscow switching from assisting Hermitage in 2008-2009 with identifying perpetrators of the US$230 million fraud and bringing its beneficiaries to the US Department of Justice, to representing the alleged beneficiaries of the same fraud against the U.S. Justice Department’s lawsuit four years later.
In 2008, Hermitage hired New York lawyer John Moscow and his law firm Baker Hostetler after Hermitage’s Russian lawyers who exposed the Russian government complicity in the US$230 million fraud came under attack from the Russian authorities.
John Moscow was a recognized expert in fighting Russian organised crime and money laundering from his previous work in the New York District Attorney’s Office. Together with his new firm, Baker Hostetler, he developed a strategy of issuing requests for information to US banks and seeking legal action from the US Department of Justice, including the forfeiture of U.S. assets of perpetrators and beneficiaries.
As a result of the work of John Moscow and subsequent work by other Hermitage lawyers, in September 2013, the US Justice Department launched a US forfeiture case in relation to Denis Katsyv’s company Prevezon in the New York district court.
Baker Hostetler and John Moscow then switched sides and began to work as defence counsel for the alleged money launderers after previously helping the victim of the same crime. Most recently, as one of defence strategies Baker Hostetler and John Moscow accused Hermitage of committing the same $230 million fraud which John Moscow was helping to defend them against in 2009.
The US Government who supported Hermitage’s motion to disqualify John Moscow and Baker Hostetler said:
“The egregious situation seen here, where an attorney for a victim attempts to switch sides to represent a beneficiary of the offence, is extremely rare, and it is even rarer that such attorney would go further and accuse his former client, the victim, of committing the offence.”
On 15 December 2015, Hermitage filed a motion with New York district court seeking to disqualify Baker Hostetler and John Moscow for breaching the duty of loyalty to Hermitage as former client, citing the New York Rules of Professional Conduct.
On 18 December 2015 judge Griesa approved Hermitage’s request to disqualify John Moscow and Baker Hostetler.
The judge then changed his mind, and last Friday reversed his decision. To justify his new decision, judge Griesa concluded that the right of Prevezon to their choice of counsel is greater than the right of Hermitage to not be betrayed by their former lawyers.
“Perhaps most importantly, disqualification would mean depriving Prevezon of its right to the counsel of its choice. While this right is not absolute, it imposes a high burden on the party seeking disqualification. The balance of the relevant factors tips toward denying the motion to disqualify,” said judge Thomas Griesa in his opinion.
In filings supporting Hermitage’s motion to disqualify Baker Hostetler, the U.S. Department of Justice warned of the chilling effect that a negative decision could have on future cases.
“Victims considering retaining attorneys to represent their interests will be aware that their counsel can be paid to accuse them of committing that very offence and to defend the perpetrator. This precedent will understandably have a “chilling effect,”… deterring crime victims from retaining attorneys to investigate and to inform the Government of offences, as those attorneys will be permitted to be turned against them by well-resourced perpetrators,” said the U.S. government.
Hermitage intends to appeal the ruling to the United States Court of Appeals for the Second Circuit, one of the thirteen United States Courts of Appeals which has appellate jurisdiction over New York, Connecticut, and Vermont.
For more information, please contact:
Justice for Sergei Magnitsky Campaign
+44 207 440 1777
e-mail: info@lawandorderinrussia.org
Twitter: @KatieFisher__
