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. Last Updated: 07/27/2016

Couple Admit Guilt in Bank Probe




In a breakthrough development in the Bank of New York scandal, former bank executive Lucy Edwards and her husband, Peter Berlin, pleaded guilty Wednesday to charges they were part of a money-laundering conspiracy.


The couple also admitted accepting a $1.8 million bribe to arrange an elaborate scheme apparently linked to the Russian mob, The Associated Press reported.


Their pleas, entered in a U.S. federal court in New York, were the first major admissions in a case said to involve as much as $10 billion that moved through the bank from Russia.


Edwards and Berlin said they allowed Russian bankers to set up unlicensed banking operations in Queens, New York, and Jersey City, New Jersey, so they could launder large amounts of money and evade taxes in Russia and the United States.


Edwards told the court that in late 1995 she was approached by a group of Russian bankers and the meeting resulted in her husband opening an account at the Bank of New York that created the possibility for illegal banking. Edwards said she and her husband were paid a percentage of the money that was transferred.


"We were paid substantial commissions for doing very little work," Edwards told the court, the AP reported.


She said she helped Depozitarno-Kliringovy Bank and Commercial Bank Flamingo establish branches in the United States without obtaining licenses from the Federal Reserve Bank, Reuters reported.


"I was aware that personnel for DKB were on occasion in fear of their customers and afraid to leave the bank because they said customers with machine guns were waiting for them," she was quoted as saying.


Edwards and Berlin appeared before U.S. District Court in Manhattan after voluntarily surrendering to the FBI the day before. They flew to New York on Tuesday from London.


As major players in the worldwide money-laundering scheme, Edwards and Berlin may be able to implicate Russian businesses and officials who used the couple's financial services from 1996 to 1999.


"I'm 99 percent sure that names will be named," Yury Skuratov, the suspended prosecutor general, said in an interview Wednesday. "Those two are the key figures in the investigation. They served as a bridge between Russian businesses and the Western financial world.


"The question is whether Russia will be willing to use this information," said Skuratov, who was suspended after pursuing investigations into alleged Kremlin corruption.


The Bank of New York investigation was launched in 1998 after suspicious transactions through the accounts of Berlin's companies, Benex International Co. and Becs International LLC, caught the attention of auditors.


Both companies have been implicated in the case, as has Torfinex Corp. and its president, Alexei Volkov.


The charges to which Edwards and Berlin pleaded guilty Wednesday include illegal money transfers, conspiracy to defraud the Internal Revenue Service, running an illegal money-transmitting business and tax evasion.


They also agreed to forfeit more than $1 million in proceeds from their criminal conduct, Reuters said.


The investigation became public last August with allegations that the money in question came from International Monetary Fund loans to Russia. Some later reports suggested the money belonged to Russian mobsters.


"There were different types of money going through those accounts - perfectly clean and legal transactions, "black" money from criminal cartels and gangs, as well as "gray" money, such as gains from tax evasion and other financial violations," Skuratov said.


The public sensation caused by the scandal was so great that it roiled relations between Washington and Moscow. It triggered a congressional inquiry, which touched on investigations into allegations of corruption involving Russia's business titans and then-President Boris Yeltsin's family.


Further reports suggested that the funds belonged to Russian officials who tried to protect their earnings from treasury bills from the August 1998 financial crisis.


A Russian delegation including the deputy heads of major law enforcement agencies paid a visit to the U.S. investigators last fall. But Federal Security Service director Nikolai Patrushev said they were given no new information.


Vladimir Putin, the prime minister at the time, welcomed the news, announcing that "luckily" the allegations that the money had originated with the IMF were not confirmed.


The Russian press played the scandal as a Western attempt to blacken the face of Russia and Russian business.


The investigation into Bank of New York activities later concluded that the illegally transferred funds were most likely to have come from Russian businesses trying to avoid paying taxes and import duties.


U.S. investigators' seeming reluctance to give information on the case to Russia might be explained by concerns about the credibility of Russian officials, Skuratov said.


Tycoons and Kremlin insiders Boris Berezovsky and Roman Abramovich "would know about it in less than three hours," Skuratov said.


It was unclear Wednesday whether Edwards and Berlin, both Russian born, would start naming various figures in Russia as participants in the money-laundering scheme.


Reports this week have suggested that the couple's cooperation with the FBI could be aimed at high-placed officials with the Bank of New York.


Federal and state banking regulators formally sanctioned the Bank of New York last week.


But even if sufficient evidence implicating someone in Russia were to be produced, it was difficult to predict Wednesday if they could be prosecuted in the Bank of New York money-laundering case.


According to Skuratov, Russian law does not allow Russian citizens to be extradited to the United States. "An investigation and trial would have to take place here," he said.


Yury Shchekochikhin, a State Duma deputy who represented Russia at the hearings in the U.S. Congress in September, said some heads could roll should Edwards and Berlin start talking.


"Nowadays, to boost popularity, Putin actually needs to successfully spin and complete a large-scale corruption case," Shchekochikhin said.


However, he was skeptical that the development in the Bank of New York scandal could result in a major fight against corruption in Russia.


"I'm afraid that in reality it will be a case of one group of oligarchs who have won in the recent political struggles fighting against those who have lost," he said.