RICO V. RACKETEERS: STILL ALIVE AND WELL
I am writing to point out some of the more important factual errors and omissions in Sarah Carey's April 16, 2004 submission entitled "RICO v. Russia: A Lost Cause" regarding three cases which our firm, Marks & Sokolov, LLC, filed in the U.S.; the purpose of my submission is not to argue the merits of the cases. As an initial matter, I would note that the defendants alleged to have committed acts of racketeering, including extortion, murder, bribery, and money laundering, were persons; Russia has never been named as a defendant in a case which we filed.
First, the allegations of Norex Petroleum Limited v. Access Industries, Inc. et al. and Base Metals SA et al. v. Russian Aluminum et al. did not "depend heavily on unsubstantiated allegations made in Russian newspaper articles," as Ms. Carey suggests.
In Norex, the plaintiff alleged that defendant Tyumen Oil Company ("TNK") and others, seized control of various oil companies through physical force and corruption of court proceedings. Alex Rotzang, the chairman of Yugraneft, which was seized by TNK personnel armed with machine guns, submitted a sworn declaration that TNK officer German Khan physically threatened him before the takeover. Evidence of TNK's corruption of Russian proceedings involving subsidiaries of Sidanco, an oil company owned in part by BP-Amoco and George Soros, went well beyond "press clippings"; after all, it is of public record that Secretary of State Madeline Albright blocked an Export-Import Bank guaranty of a loan benefiting TNK because of its acts. The guaranty was only permitted after certain assets taken from the subsidiaries were returned to BP-Amoco's control. The Norex court record is replete with documents which BP-Amoco and its allies submitted to the U.S. government detailing corrupt conduct. In addition, the record included a document produced by the C.I.A. labeled "top secret" in which it is stated that defendant Simon Kukes, then of TNK, now of Yukos, admitted bribing Russian officials. Norex submitted detailed reports from Russian legal experts explaining how the proceedings were corrupted. The defendants did not submit a single declaration denying this conduct. An appeal is pending. Although Ms. Carey is on the board of Yukos, she did not disclose her link to Mr. Kukes to the readers of Johnson's List. I believe it is likely that her firm provides legal services to some of the other defendants in the Norex matter; if so, this should have disclosed, too.
In Base Metals, the plaintiffs alleged that defendants took control of the Novokuznetsky Aluminum Zavod ("NKAZ") through extortion and corrupting court proceedings. Mikhail Zhivilo, who managed NKAZ prior to the takeover, and his brother, Yuri, submitted sworn declarations that defendants Mikhail Chernoi and Oleg Deripaska threatened to kill them; Yuri's declaration also detailed Mr. Deripaska's admission that Mr. Chernoi and he were responsible for murdering American Felix Lvov, who competed against them for control of another aluminum plant. The plaintiffs also alleged that defendants seized control and shares of Kochkanarsky Gok ("Gok"), a vanadium plant, through extortion and corrupting court proceedings. Jalol Khaidarov, who managed the plant before the seizure, and Joseph Traum, whose company owned Gok shares, submitted sworn declarations that defendant Iskander Makmudov and his ally, Izmailovo mafia chief Anton Malevsky, threatened their lives and arranged for Russian police to falsely arrest them based on planted drugs. Mr. Khaidarov also detailed how defendants bribed Kemerevo regional Governor Aman Tulyevev. Another witness submitted a declaration explaining how Tulyevev routinely corrupted court proceedings in Kemerevo. Incredibly, our firm found an article written by defendants' own legal expert detailing that the Gok takeover was corrupted. The defendants did not submit a single declaration denying the extortion or that the proceedings concerning the Gok shares were corrupted. An appeal is pending. I am informed that Ms. Carey and her firm represent Mr. Deripaska; if this is true, one would think she should have disclosed this.
In the Archangel Diamond Corp. (ADC) v. Lukoil and AGD case, the plaintiff alleged that it was defrauded by defendants. ADC submitted the sworn declaration of its CEO, Timothy Haddon, that the defendants sent over 75 fraudulent communications into Colorado, where ADC was based, falsely representing that they would honor their agreements in order to induce ADC to expend funds for their benefit. In affirming the dismissal of the case, the Colorado Appeals court literally ignored binding Colorado Supreme Court caselaw which provides for Colorado courts to exercise personal jurisdiction over persons who send fraudulent communications into the state. As a result, a motion for reconsideration has been filed. I do not know whether Ms. Carey and her firm represent Lukoil.
Second, her suggestion that these cases had "tenuous" connections to the U.S. is simply wrong. In Base Metals, six Defendants were American companies operated out of New York City and managed by an American defendant; in Norex, seven Defendants were Americans, six resident in New York City. In both cases, companies and persons based in the U.S. are alleged to have masterminded the illegal conduct. ADC was based in Colorado. Nonetheless, rather than hearing the merits of the cases, the Norex and Base Metal courts dismissed them pursuant to the doctrine of forum non conveniens, often abused by courts seeking to reduce their workload, finding Russia "more convenient" even though plaintiffs' key witnesses will not travel to Russia because of undenied threats on their lives and the past procurement of false criminal proceedings, something of which a director of Yukos might have some familiarity.
Our firm is not alone in believing that America has a compelling interest in exercising jurisdiction to hear claims like these; the U.S. Department of Justice feels the same way. Former Ukrainian prime minister Pavel Lazerenko is literally being tried today on charges of racketeering, including extortion, in federal court in California and criminal charges against Americans who allegedly bribed government officials in Kazakhstan and Azerbajan are pending in New York. In the well known Films by Jove v. Berov case, Judge Traiger in the Eastern District of New York retained jurisdiction and ultimately found that even the Supreme Arbitrazh Court in Russia is corrupted and, thus, rejected its decision. Unlike the Southern District of New York, where Norex and Base Metals were filed, many American courts, such as Colorado, Delaware, and New Jersey, employ a much more restrictive forum non doctrine. To be sure, our firm will be filing new cases again American and Russian interests who have engaged in racketeering in the U.S. in appropriate forums shortly.
Third, her suggestion that there is a "crucial difference" in civil cases and criminal matters, such as that involving former Yukos Chairman Mikhail Khodorkovsky, in Russia is ludicrous. Judges in the Russian general courts may and do sit on both civil and criminal matters; there is nothing to suggest that judges in criminal cases are more susceptible to corruption than in civil cases. Rather, Ms. Carey appears to be defending the Russian civil courts generally while preserving the option to criticize the criminal proceeding against Mr. Khodorkovsky. Putting aside that she ignores that Mr. Khodorovsky's attorneys have attacked the impartiality of the Russian arbitrazh courts which froze his shares in Yukos, as noted above, she did not disclose her position as a director of Yukos, in describing Mr. Khodorkovsky's case. In addition, I believe that her firm has represented Yukos in a variety of matters; if so, these are facts the readers of the Johnson's List would want to know.
Finally, Ms. Carey omits that appeals are pending in Base Metals and Norex and that the motion for reconsideration is pending in ADC as stated above. As the first President George Bush once said, "It's not over until the fat lady sings." Regardless of whether Ms. Carey honestly believe that corruption is not a significant problem in Russian courts or shapes her beliefs to suit the economic interests of her clients, it is too early to sing that obtaining justice in the U.S. is a "lost cause" based on two cases which are not finally decided, particularly given the stunning findings in Films by Jove. In any case, the failure of two New York courts to exercise jurisdiction over Americans and their co-conspirators who are alleged to have used this country as a base for criminal activity is hardly something to sing about.