Tuesday, October 25, 2016

Conflicts From Russia, with...




Here's an update on a matter we noted earlier this year: "Law Firm Booted Off $230M Russian Mob Case" --
  • "Baker Hostetler cannot now represent the accused perpetrator of a $230 million fraud linked to the Russian mob since the white-shoe law firm already represented one of the scheme's victims, the Second Circuit ruled, calling the circumstances of the case 'extraordinary.'"
  • "One victim of the Russian treasury fraud, according to Monday's ruling, is Hermitage Capital Management. In 2007, the U.S. hedge fund's Moscow office was raided by members of the Russian mob. It is undisputed that the perpetrators stole corporate identities of Hermitage's portfolio funds to fraudulently claim tax refunds from Russia. Reuters reported that a Hermitage entity eventually retained Baker Hostetler to investigate the crime, trace the proceeds, and report their findings to U.S. prosecutors between 2008 and 2009. Once the U.S. government filed its action, however, Prevezon hired Baker Hostetler for its defense. Though the move prompted a motion to disqualify by Hermitage, accusing the firm of having "switched sides," Baker Hostetler insisted that no conflict existed because both Prevezon and Hermitage were innocent."
  • "Earlier this year, U.S. District Judge Thomas Griesa found no conflict-of-interest in what appeared to be Baker Hostetler's game of legal musical chairs. 'This case is not about Hermitage, nor is this case centrally focused on the Russian fraud,' Griesa wrote on Jan. 8. 'Even if it were, to the court's knowledge, Hermitage was never the target of a U.S. investigation for the Russian fraud, let alone an actual lawsuit. In this way, Moscow did not 'switch sides,' nor is he now accusing a former client of the 'same crime' that he was 'retained to defend against.''
  • "The Second Circuit unanimously disagreed in a scathing, 37-page opinion on Monday. 'If crime victims fear that the attorneys they hire may turn against them, they may be less likely to assist government in its investigations,' U.S. Circuit Judge Rosemary Pooler wrote for a three-judge panel. Pooler said the 'extraordinary circumstances' of this case require the rarely granted writ of mandamus. 'It is rare that a nonparty, nonwitness will face the risk of prosecution by a foreign government based on the potential disclosure of confidential information obtained during a prior representation,' the 37-page opinion states. 'That real risk, however, coupled with the misapplication of the law by the district court, outweighs the delay and inconvenience to Prevezon of obtaining new counsel.'"

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