I know I’m not the only one who suspected three days ago, after the “Veselnitskaya meeting” story broke, that the media and congressional Democrats would rush to suggest that President Trump got rid of federal prosecutor Preet Bharara so he could tank the civil case against Prevezon Holdings, Natalia Veselnitskaya’s Russian money-laundering client.
And rush they have. On Wednesday, Democratic members of the House of Representatives sent Attorney General Jeff Sessions a letter demanding to know why the Prevezon case was settled by the Justice Department for $6 million in May 2017.
The question itself is not uninteresting, as a general matter. The monetary figure has little meaning, as we’ll see. The point that the case was settled just a couple of days before the civil trial was to start is what’s of interest.
But the implication that Trump orchestrated any of the dealings in the matter is unsupported by any facts in evidence. Moreover, if Trump or his associates had improper relationships with Russians connected to the Prevezon case, U.S. authorities would have known that for months – if not years.
It is ridiculous for the Democrats to play-act at this point, forwarding indignant letters to the attorney general when the FBI and/or NSA presumably have had the answer since before Trump was even nominated by the GOP. Obama had Trump and his associates under “back door” electronic surveillance throughout the 2016 campaign, and – as leaked repeatedly by unnamed “U.S. officials” – the Obama administration had access to whatever Russian communications it wanted to run queries on during the same period. If there was collusion related to Prevezon Holdings, someone in the Obama administration would have known that before Trump took office.
(That’s kind of the double-edged sword of the campaign of “leaks from U.S. officials.” If they knew so much, back in 2015 and 2016, why are we only hearing about it now?)
But the new theme about the Prevezon Holdings case is yet another one that falls apart on inspection.
The big deal that wasn’t
In the first place, Preet Bharara, formerly the U.S. Attorney for the Southern District of New York (SDNY), was one of 46 U.S. attorneys whose resignations Trump requested on taking office. Trump’s move was unremarkable. What was unusual was Bharara’s refusal to resign, and the caterwauling of Democrats and the media about the issue.
Oddly, Democrats and the media didn’t care about any of the other attorneys being asked to resign. It was Bharara’s case, in which Trump ultimately fired him, that they made a big deal of. (I recall wondering at the time why they were going through such motions about one lone prosecutor.)
Why “$230 million” is a misleading figure
The second-place point requires a little background. The Prevezon Holdings case, which we’ve referred to before, involved money-laundering of some of the funds swindled from UK investment firm Hermitage Capital, through tax fraud in Russia. The timeframe of this was in 2007-08. Sergei Magnitsky uncovered the convoluted path of the fraud operation for Hermitage founder William Browder, and was later detained in a Russian prison and reportedly tortured to death. (The evidence is strong that his death was, in fact, the result of torture and abuse, including the withholding of medical care, in prison.)
Prevezon washed up on the shores of New York in 2009, in the form of investments in New York City real estate, some of which were partially funded by the swindled money from Hermitage. The real estate investments constituted part of the money-laundering scheme.
The total amount stolen from Hermitage is routinely given as $230 million. There’s no reason to doubt that figure. But the amount that U.S. prosecutors could reasonably lay claim to in a civil forfeiture case – which is what Bharara brought in the SDNY – was far less than $230 million.
If you’ve been paying attention in the last 24 hours, you know that much of the left’s indignation about the May 2017 settlement centers on the recovery of “only” $6 million from Prevezon, when the total amount of stolen dough was $230 million.
But hardly any of it became implicated in money-laundering through U.S. assets. The U.S. never had any right to go after Prevezon for $230 million in ill-gotten gains. And we didn’t.
The original civil case brought in September 2013 sought the forfeiture of about $22-23 million in Prevezon assets, some in the United States and some in overseas accounts. (My count is a total of about $23.7 million. Later media reporting gave the forfeiture goal in the case as $22 million.)
That figure, in fact, was a heroic one, given the amount of the swindled funds that had actually been distributed to Prevezon for laundering. According to the initial filing by the SDNY, out of $230 million, only about $850,000 had been transferred via the various foreign cut-outs involved to Prevezon, and then used to buy real estate in New York. (See Exhibit B, bottom at link, for a graphic presentation.)
The 2013 SDNY filing basically valued the total amount invested in NYC property, including profits realized in resales that had taken place before the case was brought, along with incidental Prevezon monies in related accounts, and argued that the entire amount should be forfeited because stolen funds were used in some of the transactions, and they were all by the same company.
But in 2014, long before any Trump met with Natalia Veselnitskaya, a federal judge ordered the SDNY to narrow the complaint down, reportedly to avoid implicating unrelated Prevezon assets. Nearly three years ago, therefore – during the Obama administration – the total forfeiture being sought was reduced in a revised SDNY complaint to $14 million, with New York real estate representing $10 million of that, and $4 million of it residing in a bank account in the Netherlands.
In the same revised complaint, the SDNY increased the total amount of swindled funds thought to have been used directly for real estate purchases in New York by about $1.1 million. This brought the total calculated “fraud funds” being laundered to a bit over $1.9 million.
Now we have the background to look intelligently at the settlement in May 2017, which was for just under $5.9 million from Prevezon. The acting U.S. District Attorney, Joon Kim, proclaimed satisfaction with the result (top link), since the U.S. had recovered three times the amount of the “fraud funds” involved ($1.9 million), and had basically split the difference on the value of the NYC real estate investments.
What would Preet Bharara do?
Did the SDNY secure a good deal here? That depends on how you define a good deal. Consider how Preet Bharara defined it in a mortgage-fraud settlement with Bank of America in 2014 (see my post from March, linked above). Prosecuting BoA for $3 billion in bad loans sold to Fannie and Freddie, Bharara sought a $2.1 billion fine – out of which the federal judge ordered BoA to pay $1.27 billion.
Interestingly, as noted, again, in my Bharara post, an appeals court overturned that judgment:
Starting with the bank judgments, it’s worth noting that one of Bharara’s most notorious victories, a $1.3 billion judgment against Bank of America in 2014, was later voided by a federal appeals court in 2016, because the “trial evidence fail[ed] to demonstrate the contemporaneous fraudulent intent necessary to prove a scheme to defraud.” An interesting outcome for a fraud case, and one that may raise questions about the trial judge as well as the prosecutor.
But that’s more of an aside. Consider that every penny of the fraud BoA was charged with was committed inside the United States and involved U.S. assets, over which an American prosecutor would have inarguable rights to sue. With Prevezon, on the other hand, only the U.S. assets held or traded by Prevezon would fall inarguably in American jurisdiction.
It doesn’t appear out of line in monetary terms for a federally negotiated forfeiture to be $5.9 million, on $10 million of New York real estate whose purchase involved $1.9 million in demonstrated “fraud funds.” Especially after the initial experience with Judge Thomas P. Griesa, who told the SDNY to limit its forfeiture aspirations on Prevezon’s overseas assets.
The outrage over the “$6 million” figure thus turns out to look an awful lot like another nothingburger.
As for the settlement occurring two days before the trial was to begin, we’ll see what Jeff Sessions has to say. But one interesting aspect of the case all along has been that William Browder, who was very anxious to get the Magnitsky Act passed in 2012, has been far less anxious to testify in the Prevezon case.
The case involves money-laundering of some of the funds stolen from Browder’s Hermitage Capital, and would have represented a high-profile venue in which to showcase the shenanigans of Russian actors involved in retaliating against Sergei Magnitsky. But Browder – an expat who took UK citizenship in 1998 – has been oddly resistant to participating, going so far as to flee from U.S. federal agents trying to deliver subpoenas to him.
I don’t pretend to have the answers on why Browder has been so reluctant, or whether his behavior figured in the decision to settle rather than hold a trial.
Meanwhile, however, I suspect it would pay off to find out where the $5.9 million came from to pay Prevezon’s judgment. Prevezon Holdings was never more than a set of shell companies created to usher money through. Identifying who paid the judgment might well tell us more about the timing of the settlement than anything Sessions knows.
Obama and Hillary: Not what you probably think, on the Magnitsky Act
Something left entirely out of this week’s MSM rehash of the Magnitsky Act is that Hillary Clinton and Barack Obama both opposed and dragged their feet over it. This was noted, with displeasure, at the time – by left-wing media outlets (e.g., here and here).
Breitbart reported on Wednesday, in fact, that a Hillary-staff email from 2015 referred to spiking a Bloomberg story that implied Hillary’s opposition to the Magnitsky Act was connected to her financial involvement – through the Clinton Foundation – with Russia.
With the help of the research team, we killed a Bloomberg story trying to link HRC’s opposition to the Magnitsky bill to a $500,000 speech that WJC gave in Moscow.
On the other hand, [score]John McCain[/score] was key to getting the bill shepherded through Congress, and ultimately getting the right people – including Browder – to pressure Hillary and Obama to drop their objections.
This is as good a place as any to insert a Public Service Announcement: McCain has posted an alert at his Facebook page that the photo of him with Russian lawyer Mark Feygin, posted by Natalia Veselnitskaya at her Facebook page, had nothing to do with Veselnitskaya or her representation of Russian Denis Katsyv or Prevezon Holdings. McCain’s meeting with Feygin took place in April 2015, and was related to freeing a Ukrainian imprisoned in Russia:
The photo in question shows Mark Feygin and me, a Russian opposition lawyer working to free Nadiya Savchenko, Ukraine’s first female military pilot and Member of the Ukrainian Parliament who had been abducted by pro-Russian separatists and illegally imprisoned in Vladimir Putin’s Russia.
Veselnitskaya didn’t take the photo, and was never in the senator’s office. She apparently found it at Mark Feygin’s site, and posted it eight months later. So please stop spreading the speculation that McCain has a connection to Veselnitskaya. Thank you.
One more interesting tidbit about the Magnitsky Act. In December 2016, a second nation adopted a Magnitsky law, targeting human-rights abusers from other countries (namely Russia) for visa denials. The nation, oddly enough, was Estonia.
The unlikelihood of Estonia just happening to be so forward-leaning with a Magnitsky law recedes, however, when you take into account how deeply embedded George Soros’s very first Open Society foundation is in Estonia (the Open Estonia Foundation), and the close relationship Soros himself has had for decades with the country’s long-time president, Toomas Hendrik Ilves (who finally left office just weeks before the law was passed).
George Soros was also an associate of the late Lebanese-born billionaire Edmond Safra, who co-founded Hermitage Capital with William Browder in 1996. In 1998, Browder and Safra consulted with Soros – then the biggest outside investor in Russia – on the best way to fight a shady bond-sale dilution of the value of Hermitage’s holdings in Russian company Sidanco. Much in Soros’s own style, the Hermitage pair fought back with an aggressiveness unprecedented for foreign investors. They put a dent in an oligarch on that occasion, gaining some dubious fame for the exploit.
Browder, in other words, knows Soros, and had closer-than-usual professional connections with him starting over 20 years ago.
If there’s any nexus of knowledge and motivation that would bring together detailed insight into the Prevezon-Magnitsky case, the desire to undo Trump’s 2016 electoral triumph, and the desire to punish Putin, it would be the Soros network. Worth keeping in the back of your mind.
Kenneth Rapoza noted in an article at Forbes in August 2016 that the chief organization tracking Russian-related money-laundering – an organization that duplicated much of Sergei Magnitsky’s work, and has also alleged some $20 billion in Russia-related fraud through Eastern Europe – is the Organized Crime and Corruption Reporting Project, or OCCRP. OCCRP is mainly funded by the Open Society Institute – and USAID. Seems to be a lot of that going around.