Lawyers for Customs Service Miss Hearing in BoNY Case

The Federal Customs Service did not attend a hearing of its $22.5 billion lawsuit against the Bank of New York Mellon on Monday, but a lawyer for the service said it remained determined to press its case.

Since May, Russia has been seeking compensation from the bank after its former vice president, Lucy Edwards, helped illegally transfer $7 billion out of Russia in the late 1990s through BoNY accounts.

The bank denies the allegations against it. The customs service said it would be too busy to attend until after Oct. 15, according to a letter read to the court by Judge Lyudmila Pulova.

Maxim Smal, the customs service lawyer who sent the fax, said he hoped to continue arguing the government's side as soon as possible.

"But of course, the final decision on that is in the hands of the people at the top," he said, adding that the situation should not be taken as a sign that the government was easing its legal action against the bank.

The judge had initially set all-day hearings for both Tuesday and Wednesday, disregarding the plaintiffs' absence. Later in the day, she changed her mind and set the next hearing for Nov. 13, a spokesman for the bank said.

Moving on with expert testimony despite the plaintiff's absence, the bank brought in former U.S. Attorney General Richard Thornburgh.

Thornburgh said his testimony would focus in part on the correction of a news release issued in 2005 by the U.S. attorney's office.

The office had said in the three-year-old release that the bank admitted "criminal responsibility" for the actions of its rogue vice president, Edwards. The Russian government's case is based largely on the bank's admissions of responsibility in the United States.

In the correction, dated July 29, 2008, U.S. Attorney Michael Garcia said the bank did not admit criminal culpability with respect to the subject of the U.S. investigation.

"This shows that there are no building blocks for this case coming out of the Southern District of New York," where the U.S. investigation was based, Thornburgh said during a recess Monday.

Smal, the customs service lawyer, said the government's case relied on the wording of the nonprosecution agreement with the U.S. government, where the bank admitted to gross failures in monitoring its staff and to lax compliance with banking regulations.