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. Last Updated: 07/27/2016

BoNY Case Hits a Legal Obstacle

The Federal Customs Service's $22.5 billion lawsuit against the Bank of New York hit a snag Thursday when the bank's local office refused to act as a defendant at the first court hearing in the case.

Moscow Arbitration Court Judge Lyudmila Pulova adjourned the case to Tuesday to allow the customs service to study documents from the bank's office that say why it refused.

The customs service is accusing the bank of laundering $7.5 billion from 1996 to 1999 and is claiming three times that amount in damages, citing U.S. law. Its lawyers said that Russian businesses illegally wired the money abroad to import goods at a lower price.

The bank in 2005 admitted breaching the law and reached a $38 million settlement with U.S. prosecutors. But the Russian government did not receive compensation for lost taxes under that settlement.

BoNY representatives in Moscow did not show up for the trial Thursday. "They didn't come because they don't consider themselves a defendant," Pulova told the legal team representing the customs service.

BoNY's local office said it was not responsible for the bank's headquarters in the United States, customs service lawyer Maxim Smal said by telephone after a brief look at the bank's papers.

"I didn't expect that there are several Banks of New York in America," Smal said. "We need to understand the mutual relations between these companies."

Kevin Heine, a spokesman for BoNY in the United States, said: "We have been complying with the court's procedures and the court is taking some preliminary objections under consideration. We continue to believe the claim has no merit."

The lawyers representing the Federal Customs Service may have made a faux pas when they targeted the bank's local office, said Yury Vorobyov, a senior lawyer at the law firm Pepeliaev, Goltsblat & Partners.

Complainants can file their lawsuits in the country of a representative office only when that office was the cause of the offense through its activity, Vorobyov said.