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Bank of New York former exec
settles lawsuit against BoNY, will testify against BoNY opponents as part
of agreement
by: Rod DOZOROV in Moscow and Maria BERDNIKOVA
in New York
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NEW YORK, NOV. 6, 2001 (MT) The hearing scheduled in the Moscow District Court for the Saveliev District on November 14 in the matter of Natasha Gurfinkel Kagalovsky vs. the Bank of New York likely will not go forward. Moscow sources familiar with the controversy say that the Bank of New York and its former senior vice president, Kagalovsky, settled their differences and that BoNY agreed to allow Kagalovsky to exercise millions of dollars in stock options. According to sources, she will also get an undisclosed amount from confidential offshore accounts.
However there is a catch: in exchange for the generous settlement Kagalovsky has agreed to testify on BoNY’s behalf in a lawsuit brought by BoNY shareholders in New York Federal Court. By letter dated November 6, 2001, BoNY lawyer, Richard Klapper of Sullivan & Cromwell informed all lawyers involved in the federal lawsuit that “as part of an agreement entered into last week between the Bank of New York Co., Inc. (“BNY”) and Natasha Gurfinkel Kagalovsky, Ms. Kagalovsky has agreed to make herself available for deposition [in the federal lawsuit.]”
The New York law firm of Milberg Weiss Bershad Hynes & Lerach, LLP brought suit against the bank’s directors alleging massive corruption and negligence by BoNY’s highest echelon, including its CEO, Thomas Renyi, in October 1999.
Kagalovsky, 47, who gained world-wide notoriety in 1999 in connection with the BoNY money laundering scandal, sued her former employer in Moscow court, accusing BoNY of wrongly suspending and libeling her in connection with an international money-laundering investigation in order “to cover up for the bank’s employees of American origin” who were truly involved in the questioned activity. Seeking $270 million in damages, the lawsuit also named as defendants BoNY’s three top executives, Thomas A. Renyi, Alan R. Griffith, vice chairman for international operations; and Charles E. Rappold II, chief administrative officer.
Immediately after filing the lawsuit, Kagalovsky appeared at a press-conference in Moscow and said that she had been unfairly singled out because of her Russian origins and in order to distract attention from "serious problems in other parts of the bank." Kagalovsky's New York lawyer, Stanley Arkin, said at the time that she was also considering filing additional suits in the U.S. and UK. A spokesman for the Bank of New York stated at that time that the Kagalovsky lawsuit was "a nuisance and entirely without foundation." Now, twenty months later, Kagalovsky is prepared to testify on behalf of her former adversaries.
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| Natasha Kagalovsky and her lawyer speaking at a press conference in Moscow... |
.. while Lucy Edwards and her husband plead guilty to money laundering in Manhattan Federal court |
Sources familiar with the federal lawsuit in New York said that BoNY desperately needs to rebut mounting evidence of corruption uncovered in the New York lawsuit and that settling with Kagalovsky in Moscow "will generate less fallout."
On the same day that Kagalovsky filed her lawsuit in Moscow, Lucy Edwards, another former BoNY vice president who worked under Kagalovsky pled guilty in New York to federal charges of fraud and money laundering. Edwards is said to be cooperating with the continuing FBI investigation and is awaiting sentencing. Prosecutors say seven billion dollars were transferred from Russia through BoNY accounts set up by Edwards and her husband Peter Berlin, who also pled guilty to money laundering using BoNY accounts. Edwards also testified in the federal lawsuit, but took the Fifth Amendment with respect to nearly every question.
“BoNY must be getting desperate if it intends to rely on what appears to be bought and paid for testimony” said one lawyer familiar with federal lawsuit, “either that, or they believe that New York juries are really stupid.”
Kagalovsky was not immediately reachable for comment.
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