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US court decides not to hear dispute in Gazprom, Lazarenko case

January 12, 2012, 13:58 UTC+3
They will consider the case without public hearings and make a decision based on documents already received by the court, the court official said
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WASHINGTON, January 12 (Itar-Tass) — The Washington Court of Appeals has decided not to hear dispute on the appeal of Russia’s natural gas monopoly Gazprom against a lower court’s decision to refuse payment of 140 million US dollars to the company from the accounts of former Ukrainian Prime Minister Pavel Lazarenko, a court’s senior aide told Itar-Tass on Wednesday.

The dispute was scheduled for Thursday. However, according to the court representative, the judges ruled that they would not hold the hearing. They will consider the case without public hearings and make a decision based on documents already received by the court, the court official said.

She added that she does not know the reasons for the judges’ decisions. However, she said, dispute is heard not on every case.

The court representative also said that the verdict will be delivered by the same judges who were to hold the hearing - specifically, Judges Harry Edwards, Merrick Garland, Janice Rogers Brown. The court representative stressed that they have “no deadline” for making a decision.

The United States demands to recover in its favour about 260 million US dollars from Lazarenko’s accounts in some Western countries, as the US side believes that the funds had been obtained illegally. Gazprom 140 million dollars from this sum. It was to receive the money under a contract with United Energy Systems of Ukraine (UESU). The Russian company claims that Lazarenko simply stole the money.

Nevertheless, in March 2011, District Judge Paul Friedman excluded Gazprom from the list of plaintiffs. According to his verdict, the Russian company failed to prove its claim.

Representative of the US Department of Justice Anthony Vitarelli said for his part that the former Ukrainian prime minister did not steal money from Gazprom. The fact that United Energy Systems of Ukraine had a debt to Gazprom, the same as probably to others, has no relation to the Lazarenko case, he said.

Friedman ruled last March that Gazprom, represented by Winston & Strawn, has failed to prove a property interest in the disputed funds.

The energy company’s lawyers, including Winston litigation partner W. Gordon Dobie, said in the US Court of Appeals for the D.C. Circuit that Gazprom, a state-owned utility, supplied natural gas to Ukraine during Lazarenko’s time in office. Lazarenko unlawfully acquired money that belonged to Gazprom, the lawyers said.

Gazprom’s lawyers argue that the United Energy Systems of Ukraine did not pay the company the full cost of the gas under certain contracts, instead diverting money to Lazarenko. The company’s attorneys claim Gazprom is a fraud victim. But Friedman said in his decision that “Gazprom nowhere contends that the funds transferred from UESU to Mr. Lazarenko were the only financial resources with which UESU could have paid its contractual debt to Gazprom.”

The attorneys for Gazprom also said the Justice Department is “largely ignoring the overwhelmingly foreign character of the case.” The company’s lawyers said in a brief filed this month that “the wrongdoers, the victims, the source of the proceeds, the current location of the proceeds and the substantive unlawful conduct are all entirely foreign.”

“The government has not argued, and there is no reason to think, that litigating the rights to the foreign assets in the courts of Russia or the asset-holding countries would allow the wrongdoers (Lazarenko and his associates) to retain their ill-gotten gains,” Gazprom’s attorneys said. The lawyers also said in the brief that “rather than acknowledge that it is in it for the money, the government implies that its ‘public policy interests’ involve criminal law enforcement.”

Prosecutors in the DOJ asset-forfeiture and money-laundering section said Gazprom is an unsecured creditor. Federal courts, DOJ lawyers said, “have consistently held that unsecured creditors lack standing to claim against the defendant-assets of their debtors in civil forfeiture proceedings.”

A DOJ Criminal Division attorney, Anthony Vitarelli, also said in a court filing in November that Lazarenko did not steal from Gazprom and therefore the company is not a victim.

“The fact that UESU owed Gazprom money—as, presumably, it owed to several parties—does not put Gazprom in UESU’s shoes regarding the legal effects of Lazarenko’s criminal conduct,” Vitarelli said in the brief.

D.C. Circuit judges Merrick Garland and Janice Rogers Brown, sitting with Senior Judge Harry Edwards, were to hear the dispute on January 13.

Pavel Lazarenko headed the Ukrainian government in 1996-1997. In 2006, after a long trial in the United States, he was sentenced to 9 years in prison for money laundering.

Lazarenko was elected to the Verkhovna Rada (parliament) in March 1998, where he headed the parliamentary faction of his political party Gromada. Gromada frequently sided with the parliamentary faction of Alexander Moroz. In December 1998, Lazarenko was detained on money-laundering charges as he crossed by car from France into Switzerland. In a few weeks, he was released on bail in the amount of three million dollars.

Meanwhile, details of his arrest in Switzerland led to a political scandal in Ukraine. Apparently, Lazarenko attempted to cross the Swiss border with a valid Panamanian passport even though Ukrainian law prohibits dual citizenship.

The public uproar was, in part, instigated by Kuchma's administration who pressed for Lazarenko’s arrest. The parliament finally acquiesced to waive Lazarenko's parliamentary immunity on 17 February 1999. However, Lazarenko fled the country on the eve of the parliamentary vote.

He initially stopped in Greece, but was later detained in the New York JFK airport on 20 February 1999 on suspicion of illegally entering the United States. Reportedly, Lazarenko had a stack of documents with him, including a Ukrainian diplomatic passport with an outdated US visa, and requested political asylum.

Subsequently, Lazarenko was transferred to a jail in San Francisco, since his family owned a ranch in California. In 2000, the Ukrainian authorities requested his extradition after charging him over the 1996 killing of Yevgeny Shcherban and two attempts on the lives of high-ranking officials. The office of the Prosecutor General of Ukraine also claimed that Lazarenko instigated the assassination of Vadim Getman in late April 1998.

In the United States, Lazarenko was put on trial for money-laundering, corruption, and fraud. Attorney Daniel Horowitz represented Lazarenko on charges arising out of his operation of the Ukrainian gas business, Doron Weinberg represented him regarding charges of extortion of a business partner. The judge dismissed more than half the charges but allowed the remaining charges to be presented to the jury for decision. In late May 2004, a federal jury in San Francisco found him guilty of using his position to get rich through a series of business schemes. In October 2005, Lazarenko stated his intention to return to Ukraine in order to run in the March 2006 parliamentary elections.

Lazarenko is incarcerated at the Federal Correctional Institution in Dublin, California. On 19 November 2009 US District Court Judge Charles Breyer cut Lazarenko's sentence from 108 to 97 months in prison. The court took into account the fact that the Ninth Circuit Court of Appeals had dismissed his conviction on approximately half the counts of conviction leaving convictions only for acts committed 17 years ago. In November 2009 Ukrainian Interior Minister Yury Lutsenko stated that if Lazarenko returns to Ukraine he will be detained as he is on the international wanted list.

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