As The Daily Beast reported Wednesday, three Russian witnesses in a federal asset forfeiture case—one tied to the most infamous Russian corruption and money-laundering scandal to emerge under Vladimir Putin’s presidency—amassed over $50,000 in hotel and dinner expenses during their four-day depositions in Manhattan.
In a separate twist to this story, one of the witnesses in the case, Denis Katsyv, may have tried to cut a deal with the FBI for an out-of-court settlement; or, to be more exact, his influential father, Petr Katsyv, did.
Petr Katsyv is the vice president of Russian Railways, the country’s state-run rail monopoly, as well as the former vice premier of the Moscow regional government. He allegedly offered to “provide information about criminal activity in Russia” as part of a quid pro quo arrangement with the feds that presumably would have allowed his son to retain his share of the Prevezon assets. Petr Katsyv on Thursday denied the allegation, which was first disclosed in a publicly available docket filed with the U.S. District Court’s Southern District of New York, calling it a “provocation” in the Russian press.
The U.S. attorney is attempting to permanently seize $14 million in assets belonging to a Cyprus-registered company called Prevezon Holdings, Ltd. and its many subsidiaries, including bank deposits and proceeds from the sale of several expensive New York real estate properties. The money, the U.S. government says, came from a $230 million tax fraud perpetrated in 2007-2008 by a Russian organized crime syndicate, members of whom were police officers, tax officials and intelligence agents. That fraud was exposed by Sergei Magnitsky, a Russian tax lawyer who was framed for a tax crime himself, then tortured to death in prison.
According to a letter to Judge Griesa by Preet Bharara, the U.S. attorney prosecuting the case, in February 2014, Special Agent John Penza of the FBI met in Rome with Denis Katsyv at the latter’s request and at the arrangement of an unnamed third party. Bharara insists that this meeting took place without the foreknowledge or involvement of the U.S. attorney’s office, which only found out about it after being “told by the FBI that Denis Katsyv and his father Petr Katsyv wanted to meet again, this time with counsel for the Government, to provide information about criminal activity in Russia.” The FBI, Bharara writes, told the two Russians that any such follow-up meeting would require the consent of Denis Katsyv’s New York lawyer.
In the event, the second meeting set for September 2014 in Hungary never took place, initially because of Petr Katsyv’s unavailability but ultimately because, according to Bharara, the “Government learned for the first time that Petr Katsyv wanted this meeting to negotiate a settlement of the instant action. Upon learning this, the Government refused to meet with Petr Katsyv, precisely because it did not wish to have contact with a purported intermediary for Denis Katsyv without the presence of New York counsel.”
In a separate letter filed to the New York Southern District Court, John Moscow, Denis Katysv’s attorney, disputes Bharara’s chronology of these events and their context, but does offer a clue as to the third party who introduced his client to FBI Agent Penza: “an Israeli gentleman who represented that he was a consultant in forfeiture cases and could assist Mr. Katsyv in this case.”
As it happens, one of Katsyv’s other companies, the Israel-registered Martash Investment Holding Ltd., had $8 million confiscated by the Israeli government as part of a 2005 settlement, following a separate investigation into money laundering. According to a petition filed with the District Court of Tel Aviv, Maratash was accused of manipulating its assets to either avoid issuing financial reports or to issue incorrect ones.
In 2012, Swiss authorities also froze over $7 million of Prevezon’s deposits in Swiss banks after campaigners affiliated with Justice for Sergei Magnitsky, a London-based group that advocates on behalf of the murdered lawyer, discovered that it had come from the $230 million tax fraud, and the Swiss attorney general opened a criminal case on money laundering. Other Prevezon funds, linked to its investment in AFI Europe, a Dutch company, have also been frozen in the Netherlands, following a U.S. request.
At just 38 years old, Denis Katsyv has amassed a multimillion-dollar empire in international real estate development and the automotive industry. Having a well-connected father, who from 2001 to 2012 served as the Moscow region’s minister of transport and from 2004 to 2012 as the vice premier of Moscow region, can only have helped. Denis Katsyv owns MosOblTrans-1, a corporate car company—think Uber for oligarchs—employing more than 600 drivers and 500 vehicles. It caters to the Moscow region, which is geographically larger than Switzerland and boasts several regional government clients, such as the Department for Sports, Culture, Tourism, and Youth; the Administrative-Transport Inspectorate; and the State Housing Inspectorate.
MosOblTrans-1 is wholly owned by another of Denis Katsyv’s leasing companies, Inavto, which earned $48 million in revenue between 2004 and 2012, and made a net profit of $4.7 million, according to filings with the Russian Statistical Committee.
Over the last decade, several Russian media outlets have remarked on the apparent conflict of interest in Petr Katsyv’s government role, which put him in a position to influence the awarding of contracts to private transport companies, and his son’s remunerative enterprises relating to the same sector. Private citizens and civil society groups have also noted this, usually with dire consequences.
Olga Larina, the 70-year-old owner of Stroidormash Plant, an industrial machine manufacturer, had claimed that her property was being stolen through fraud to enrich the Katysvs. She is now serving a suspended five-year sentence for defaming Petr Katsyv, and had to pay him a $20,700 fine. Dmitry Baranovsky, the deputy head of the Russian NGO Spravedlivost (“Justice”), raised alleged corruption in the Katsyv family. He’s now serving 17 years in jail for fraud and defamation. His colleague Andrei Stolbunov, the head of Spravedlivost, is similarly accused of defaming Petr Katsyv; he’s now seeking asylum abroad.
So what “criminal activity in Russia” did the elder Katsyv want to share with the FBI in exchange for a deal for his son? According to Petr Katsyv, the whole tale of furtive and future meetings with the FBI is bogus. “You can tell them that I never met with anyone and do not intend to meet with anybody,” he told the Russian online news service RBK on Thursday.
“[A]s for questions about the legal cases underway, the trials—those are for my son, he has both American and Russian lawyers, you can address all questions [to him]. These provocations go on constantly, it’s no longer funny.”
But Katsyv’s denial may not go down so easily in Moscow.
In October, Putin fired Petr Katsyv’s boss, Vladimir Yakunin, from the presidency of Russian Railways in a move that convulsed Russia’s business community and led to speculation about how the Kremlin planned to deal with oligarchs suspected of the faintest whiff of disloyalty. Yakunin, after all, had been one of Putin’s confidants—an ultraconservative industrialist who got his start, along with the KGB lieutenant-colonel, in 1990s St. Petersburg. Yakunin was also a prominent member of Putin’s inner circle. But it seems that his son Andrei’s eyebrow-raising decision to apply for British citizenship—which Putin is said to have considered a “betrayal”—sealed Yakunin’s fate.
Andrei Yakunin owns a £4.5 million mansion in London’s posh Hampstead district and had undertaken plans to build half a billion dollars worth of hotels in close proximity to train terminals all across Russia, buying land from a subsidiary that belonged to his father’s company. (Given the expanse of territory in which it operates, Russian Railways is also the nation’s second-largest landowner.)
Reuters uncovered that possible conflict of interest in a 2012 investigation, as did Russia’s Federal Security Service (FSB) and its state financial monitor in a special report produced for Putin. Andrei Yakunin denied any wrongdoing at the time, but his father nevertheless seems to have paid the price.
“They continued to extort money from the company even after the president said ‘enough is enough,’” one source close to the Yakunin family told the independent TV channel Dozhd in October.
So suffice it to say, legal documents suggesting that Petr Katsyv was ready to inform on colleagues or known criminals in Russia to save his own son’s fortune in the U.S. will not go unnoticed in Moscow. For eight years the Kremlin has not only resisted every domestic or international attempt to seek redress for Magnitsky’s murder or for the Hermitage tax fraud but has instead gone after any and all who have exposed these crimes. And now Russia is in a renewed cold war with the United States. An oligarch ready to flip for the feds? A pink slip should be the least of Petr Katsyv’s worries.