MOSCOW: The Russian government sought Thursday to make Bank of New York Mellon liable under U.S. racketeering laws for $22.5 billion in damages arising from a money-laundering scandal that helped undermine the Russian economy in the late 1990s.

The appearance of a team of pastel-clad trial lawyers from Miami, representing Russia, capped a long effort to enforce civil liabilities against the bank, which reached a settlement with the U.S. government in the case in 2005.

As the Russian economy struggled in the late 1990s and capital flight became a crippling problem, roughly $7.5 billion was improperly transferred out of the country through Bank of New York accounts to a shell company owned by the husband of a bank employee, Lucy Edwards. Both were later sentenced to five years' probation, and the bank, which admitted lax oversight, agreed to pay $14 million to the United States under the settlement.

In a novel legal theory, the attorneys - working on a contingency fee for the Russian Customs Committee - are seeking to apply the U.S. Racketeer Influence and Corrupt Organizations Act in a Russian court against the bank, which argues that the statute of limitations for new lawsuits has expired.

One of the attorneys for Russia, Steven Marks of the Podhurst Orseck law firm, argued that a new lawsuit is valid because the bank's settlement in 2005 qualified as a criminal admission of guilt, making it liable for civil damages.

The case, being heard at Basmany Court in Moscow, has attracted the attention of high-profile legal experts. Alan Dershowitz, the Harvard Law professor, prepared an affidavit in support of the Russian plaintiffs, and a former U.S. attorney general, Richard Thornburgh, prepared one on behalf of the bank.

On Thursday, the court heard testimony from experts on whether it could have jurisdiction under both U.S. and Russian law, and whether the RICO statute could be applied outside of the United States.

"I believe very strongly that in a time of globalization of banking, and globalization of money laundering, it would be a terrible tragedy if RICO laws were confined to the United States border," Dershowitz said by telephone. His affidavit was not accepted by the court because it was filed after a deadline; he did not come to Moscow to testify.

Thornburgh said no foreign court should hear cases under the RICO statute, a 1970s anti-organized-crime law that allows collection of civil penalties for certain criminal acts. "Only U.S. courts can adjudicate RICO," he said in an interview in Moscow.

Bank of New York Mellon also says that the improper wire transfers did not amount to a precursor crime under RICO, and that Russia's claim to damages was not supported by evidence.

The bank says the Basmany Court decision will never be upheld outside of Russia. The same court heard the politically tinged bankruptcy case against the oil company Yukos that ended in the company's dismantlement and drew criticism for alleged judicial irregularities. Still, Dershowitz, arguing for the Russian government agency, said the Bank of New York should observe the court's ruling. "A great bank founded by Alexander Hamilton will not want to be perceived as running away from judgment," he said.

In other legal disputes, officials in Russia, and, indeed, other countries, have objected to applying U.S. law to disputes outside of the United States. Exxon Mobil filed a suit against Venezuela in U.S., British and Dutch courts, and Cuban exiles have turned to U.S. law to enforce their rights against the government of the island.

Bruce Marks, a Philadelphia attorney who had filed RICO claims against the aluminum conglomerate controlled by the Russian billionaire Oleg Deripaska, testified in court Thursday as a witness for the customs agency. Steven Marks, the lead plaintiff attorney, specializes in major airline crash cases that fall under international law. He had also represented the governments of several South American countries seeking damages from U.S. tobacco companies.

In Russia, Steven Marks was authorized to seek damages on the cigarette claims with a 29 percent contingency fee; that agreement with the Russian customs committee was later extended to the Bank of New York case. Steven Marks says his payment terms are not material to the case.

Sara Rhodin contributed reporting.

www.iht.com/articles/2008/07/03/business/bony.php