Case 1:19-mc-00262-JMF Document 6 Filed 05/28/19 Page 1 of 12

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

In re Application of HERMITAGE :
CAPITAL MANAGEMENT LIMITED to
Take Discovery For Use in Actions
Pending in the Russian Federation :

DECLARATION OF JONATHAN M. WINER

I, Jonathan M. Winer, pursuant to 28 U.S.C. §1746, declare as follows:

1. I am a lawyer admitted to practice law in Washington, D.C. and

Massachusetts and practice law from offices at 1946 Calvert Street NW No 3,

Washington DC 2009. I am outside counsel to Hermitage Capital Management Limited

(“Hermitage”). I am responsible for advising Hermitage and its founder and Chief

Executive Officer, William Browder, with respect to a criminal action involving

Hermitage, its executives, and its Russian counsel which is currently pending in Russia.

Purpose of Declaration

2. The purpose of this declaration is to convey certain aspects of my personal

knowledge of the pending foreign proceeding, to describe certain information that I have

learned from source documents about a Criminal Conspiracy that has given rise to the

pending foreign proceeding, and to explain why Hermitage requires discovery of

additional information within this jurisdiction in order to prove the extent of this

conspiracy in the ongoing criminal proceeding it is defending in Russia. In this

declaration, I disclose only the knowledge or information Hermitage has previously

shared (or is preparing to share) with U.S. and other law enforcement and regulatory

authorities, or in previous proceedings brought in Russia or by Russian authorities in

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other countries. Hermitage expressly preserves its attorney-client and work product

privileges with respect to its communications with counsel and the trial preparation

efforts of counsel.

Applicant Seeking Discovery under §1782 to Defend Itself in Foreign Proceeding

3. Hermitage is an investment advisory firm. In its work, Hermitage

primarily has advised the Hermitage Fund, a Russia-dedicated investment fund. Since

2007, Hermitage, its officers, employees, and certain Moscow-based law firms who had

undertaken work for Hermitage have been victimized by a series of official actions

undertaken by Russian officials and private actions undertaken by private persons,

operating in concert, to engage in a major criminal conspiracy (the “Criminal

Enterprise”). The Criminal Enterprise includes both corrupt Russian officials, including

some at the senior level of the Russian government, as well as Russian criminals not

officially employed by the Russian state. The conspiracy originated in the theft in

December 2007 by the Criminal Enterprise through fraud of $230 million in taxes paid by

Hermitage to the Russian Treasury. The conspiracy has continued through the laundering

of those funds to purchase goods and services in many countries outside of Russia,

including in the United States.

4. The conspiracy has also involved retaliation against Hermitage for its

actions to expose the conspiracy. The retaliation has included Russia initiating a series of

politically-motivated, civil and criminal cases against Hermitage and those associated

with it, as well as the initiation of efforts to arrest Mr. Browder through INTERPOL,

which INTERPOL has consistently rejected as political in nature, but which in 2018 also

led to Mr. Browder’s detention in Spain until Spanish officials recognized that the

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Russian request was politically motivated. Russia’s efforts to secure Mr. Browder’s

arrest to face trial in the current foreign proceeding have been ongoing. The early history

of the initiation of foreign proceedings by the Criminal Enterprise against Hermitage, Mr.

Browder and related persons is described in a Declaration by Hermitage’s attorney, Neil

Micklethwaite, on July 27, 2009, filed with the Court in an earlier §1782 Application

made on July 28, 2009. (“Micklethwaite Declaration,” Exhibit 1).

Background on the Foreign Proceeding

5. In the 2007 $230 million fraud, the Criminal Enterprise used an elaborate

fraud scheme to secure the improper refund of funds paid to the Russian Treasury by

Hermitage. After perpetrating this fraud, members of the Criminal Enterprise undertook

illegal actions in order to conceal this fraud and retaliate against individuals who

attempted to expose it, including Sergei Magnitsky (“Mr. Magnitsky”), a Russian

attorney working for Hermitage and Hermitage’s law firm, who exposed the fraud

scheme and reported it to Russian officials. In response, these corrupt officials ordered

Mr. Magnitsky to be arrested and investigated for the crimes he reported to them,

subjecting him to abuse which led to his death in a Moscow prison in 2009. The details of

these events are set out at length in the Micklethwaite Declaration. (See Exhibit 1)

6. The U.S. Department of Justice has recognized the existence of this

conspiracy against Hermitage by the Criminal Enterprise, and its retaliation against Mr.

Browder, Hermitage, their associates and their lawyers, and provided a detailed account

of the conspiracy’s operations, including abusive use of foreign legal proceedings by

Russian authorities participating in the conspiracy, in an asset forfeiture case brought in

this District, U.S. v. Prevezon Holdings on September 10, 2013 (13 CV6326) (Exhibit 2)

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and settled on May 17, 2017 for the full amount of the funds ($5,896,33.65) derived from

crimes undertaken by the Criminal Enterprise laundered into New York real estate and

then frozen by the United States. (Exhibit 3)

7. The U.S. Congress has recognized the existence of this conspiracy, and in

response to the killing of Mr. Magnitsky by Criminal Enterprise enacted legislation to

punish those involved and the broader phenomenon of human rights violations being

carried out by corrupt officials, as set forth in the Sergei Magnitsky Rule of Law

Accountability Act of 2012 (PL 112-208) in 2012 (Exhibit 4).

8. Russian President Vladimir Putin has denounced the U.S. Magnitsky Act

(and the similar laws in enacted in other countries) and in public statements has directed

Russia’s Prosecutor General, Yury Chaika, among others, to target Mr. Browder and

Hermitage in what are obviously retaliatory actions. From 2007 to the present, Russia has

undertaken a series of investigations, civil and criminal cases, and trials in Russia against

Mr. Browder, other Hermitage officials (including the deceased Mr. Magnitsky,

posthumously), and Hermitage. For example, on December 11, 2013, Mr. Browder and

the deceased Mr. Magnitsky were each found guilty by a Russian court, Mr. Magnitsky

posthumously, frauds for activities that had previously been reviewed and found to be

lawful. (Exhibit 5) On December 29, 2017, Moscow’s Tverskoy District Court sentenced

Mr. Browder to nine years behind bars in absentia, following a second set of convictions,

this time for alleged bankruptcy fraud. In this case, another officer of Hermitage, Ivan

Cherkasov, was also convicted. The court also upheld a civil action by Russian

authorities against Mr. Browder and Mr. Cherkasov for 4.2 billion rubles ($63.4 million)

and barred them from doing business in Russia for three years. (Exhibit 6)

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Current Foreign Proceeding

9. On December 11, 2018, Mr. Browder was again indicted by Russia in a

Moscow court in a case now alleging that he, Mr. Cherkasov, and other officers and

employees of Hermitage, as well as an external law firm, violated Russian tax laws more

than 20 years ago, in 1997, by engaging in a criminal conspiracy relating to the firms and

funds involved in the original tax $230 million refund fraud. This is the crime that was

actually undertaken by the Criminal Enterprise with the participation of corrupt Russian

officials, which Mr. Magnitsky investigated and exposed, and reported to Russian

authorities, prompting his arrest, imprisonment, torture, and death in a Russian prison.

This latest Russian indictment is a continuation of the retaliation undertaken by Russian

authorities against Mr. Browder, Hermitage, and those associated with Hermitage. This

pending foreign criminal proceeding in Russia requires Mr. Browder and Hermitage,

whose tax payments to Russia were those targeted for fraudulent refunds in the $230

million fraud, to undertake a vigorous and effective defense. (Russian December 11,

2018 Indictment, in Russian and in English translation, Exhibit 7)

10. This pending proceeding in Russia is the foreign legal proceeding for

which Hermitage now seeks discovery pursuant to 28 U.S.C. §1782.

Use of U.S. Banks for Transactions Involving the $230 million Frauds

11. At the center of its defense to Russia’s politically-motivated case against

Hermitage is Hermitage’s ability to prove that the $230 million in funds defrauded from

the Russian Treasury were laundered by members of the Criminal Enterprise for the

benefit of both private persons and corrupt Russian officials.

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12. Accordingly, Hermitage has been actively engaged in seeking to trace all

of the proceeds of the $230 million fraud, to demonstrate that these funds were stolen not

by Hermitage, as charged by the Russian government in the pending foreign proceeding,

but by the Criminal Enterprise. Hermitage has devoted substantial resources and

investigative expertise to tracing these proceeds, which is continuing. Hermitage now has

evidence tracing the laundering of some of the funds from their origination at the Russian

Treasury through a series of shell companies through banks in such jurisdictions as

Estonia, Latvia, Lithuania, and Moldova (among others), and from these jurisdictions to a

number of other countries, including Austria, Canada, Denmark, France, Germany, Italy,

Norway, the United Kingdom, and the United States, among others, through the use of

correspondent banking relationships. These include correspondent banking relationships

with U.S. banks which handle funds through their correspondent accounts for other banks

that have laundered some of these proceeds.

13. I provide two schematic diagrams as Exhibits that show the two methods

by which the Criminal Enterprise used U.S. banks based in New York to clear

transactions involving the funds laundered from these proceeds and related frauds.

Diagram 1, attached hereto as Exhibit 8, shows money laundering of the criminal

proceeds through U.S. correspondent banks in which a foreign bank involved in

laundering the funds from these proceeds and related frauds has a direct account with the

U.S. correspondent bank. Diagram 2, attached hereto as Exhibit 9, shows money

laundering of the criminal proceeds through U.S. correspondent banks in which the

foreign bank involved in laundering the funds from these proceeds and related frauds use

a “nested correspondent banking” relationship to move the funds to the U.S.

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correspondent bank, and thus a non-direct account with the U.S. correspondent bank. The

only difference between the direct and non-direct laundering cases is the existence of

intermediary correspondent banks, otherwise known as “nested correspondent banking”

accounts in the latter case.

14. An Excel Spreadsheet, attached hereto as Exhibit 10, provides the full list

of accounts Hermitage is seeking, provided in the following format and sequence. First,

the Spreadsheet lists each of thirteen (13) US clearing banks through which the funds

from these proceeds and related frauds were laundered; it then lists the beneficiary bank

which has the direct relationship with the U.S. correspondent bank. In all, there are thirty

-five (35) such beneficiary banks. It then lists for each of these beneficiary banks any

further intermediary banks through which illicit funds previously moved (the “nested

correspondents” used for non-direct accounts). It then provides the account numbers

through which Hermitage believes the proceeds of the frauds it is tracing were deposited

and whose records Hermitage seeks at each U.S. correspondent bank, based on the U.S.

correspondent bank’s relationship with each of the beneficiary banks.

The Request for Documents from the U.S. Bank Accounts

15. Hermitage now seeks discovery in this jurisdiction of documents and

testimony essential to its defense by determining the scope of the conspiracy and its

beneficiaries, the mechanisms by which they laundered the $230 million in illicit

proceeds, and specific transactions undertaken through the United States involved in the

layering process through which the laundering was effectuated. In the decade since

Hermitage was granted its earlier §1782 subpoena request, Hermitage has uncovered a

number of additional banking relationships used to carry out money laundering relating to

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the $230 million frauds and related frauds by the Criminal Enterprise, including through

correspondent banking in the United States, which took place within the period from

January1, 2006 through January 1, 2014.

16. Hermitage has found that the Criminal Enterprise has conducted a

substantial amount of its laundering activities in dollar-denominated transactions. Each of

these transactions must ultimately go through settlement activities in the United States

because the transactions are denominated in dollars. To accomplish this, foreign banks

handling the laundering of the illicit proceeds of the Criminal Enterprise use their

correspondent banking accounts at U.S. banks, based in New York (the “New York

Banks”), to complete the clearing and settlement process of these dollar-denominated

transactions.

17. Accordingly, Hermitage seeks further records held by the New York

Banks which would help Hermitage defend itself in the foreign proceeding brought

against Hermitage by Russian authorities in Russia. As set forth in the Excel Spreadsheet

in Exhibit 10, on information and belief, these records include some of the proceeds of

the $230 million fraud and related frauds laundered through the following banks which

have correspondent banking relationships through accounts held in thirteen (13) New

York Banks (listed in the alphabetic order below), during the period from January 1, 2006

through January 1, 2014:

i. Bank of America NA (NY) SWIFT: BOFAUS3N

ii. Bank of China, NY SWIFT: BKCHUS33

iii. Bank of New York Mellon (NY) SWIFT: IRVTUS3N

iv. BNP Paribas USA (NY) SWIFT: BNPAUS3N

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v. Citibank NA (NY) SWIFT: CITIUS33

vi. Commerzbank AG (NY) SWIFT: COBAUS3X

vii. Credit Agricole CIB NY SWIFT: CRLYUS33

viii. Deutsche Bank Trust Co Americas (NY) SWIFT: BKTRUS33

ix. JP Morgan Chase Bank NA (NY) SWIFT: CHASUS33

x. Mashreqbank Psc., New York Branch SWIFT: MSHQUS33

xi. Standard Chartered Bank (NY) SWIFT: SCBLUS33

xii. UBS AG Stamford SWIFT: UBSWUS33

xiii. Wells Fargo Bank NA (NY) SWIFT: PNBPUS3NNYC

18. As set forth in the Excel Spreadsheet in Exhibit 10, the beneficiary banks

which were the recipient of the proceeds of the $230 million fraud and related frauds, and

which used the U.S. correspondent banks listed above for dollar clearance are:

i. ABLV Bank (Latvia) SWIFT: AIZKLV22

ii. Alpha Bank (Cyprus) SWIFT: ABKLCY2N

iii. AS Blue Orange Bank (Latvia) SWIFT: CBBRLV22

iv. ATF Bank (Kazakhstan) SWIFT: ALMNKZKA

v. Bakai Bank (Kyrgyzstan) SWIFT: BAKAKG22

vi. Baltic International Bank (Latvia) SWIFT: BLIBLV22

vii. Baltic Trust Bank (Latvia) SWIFT: BATRLV2X

viii. Banca de Economii S.A. (Moldova) SWIFT: BECOMD2X

ix. Bank CenterCredit (Kazakhstan) SWIFT: KCJBKZKX

x. Bank of Cyprus (Cyprus) SWIFT: BCYPCY2N

xi. Bank Turanalem Bank (Kazakhstan) SWIFT: ABKZKZKX

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xii. Danske Bank (Estonia) SWIFT: FOREEE2X

xiii. Dubai Bank PJSC (UAE) SWIFT: DBXPAEAD

xiv. Emirates NBD (UAE) SWIFT: EBILAEAD

xv. Eurasia Savings Bank (Kyrgyzstan) SWIFT: KYRGKG22

xvi. Federal Bank of the Middle East (Cyprus) SWIFT: FBMECY2N

xvii. Hellenic Bank (Cyprus) SWIFT: HEBACY2N

xviii. LegBank (Ukraine) SWIFT: LEGBUAUX

xix. Mashreq Bank (UAE) SWIFT: BOMLAEAD

xx. National Bank of Abu Dhabi (UAE) SWIFT: NBABAEAA

xxi. National Bank of Dubai (UAE) SWIFT: NBDUAEAD

xxii. National Bank of RAS (UAE) SWIFT: NRAKAEAK

xxiii. Nordea Bank (Denmark) SWIFT: NDEADKKK

xxiv. Nurbank (Kazakhstan) SWIFT: NURSKZKX

xxv. Parex Bank (Latvia) SWIFT: PARXLV22

xxvi. PNB Banka (Latvia) SWIFT: LATBLV2X

xxvii. PrivatBank (Latvia) SWIFT: PRTTLV22

xxviii. Regionala Investiciju Banka (Latvia) SWIFT: RIBRLV22

xxix. Rietumu Banka (Latvia) SWIFT: RTMBLV2X

xxx. Standard Chartered Bank Dubai (UAE) SWIFT: SCBLAEAD

xxxi. Swedbank (Latvia) SWIFT: HABALV22

xxxii. The Cyprus Popular Bank (Cyprus) SWIFT: LIKICY2N

xxxiii. Trasta Komercbanka (Latvia) SWIFT: KBRBLV2X

xxxiv. Trasta Komercbanka (Cyprus) SWIFT: KBRBCY2N

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xxxv. UBS AG (Zurich) SWIFT: UBSWCHZH

xxxvi. Ukio Bankas (Lithuania) SWIFT: UKIOLT2X

xxxvii. UkrSibbank (Ukraine) SWIFT: KHABUA2K

xxxviii. Union National Bank (UAE) SWIFT: UNBEAEAA

19. The documents requested from these banks are not available in Russia,

where the foreign proceeding is based, as they reflect information on correspondent

banking activities involving financial institutions outside of Russia, rather than direct

transactions involving Russia or Russian banks.

20. These documents also are not available from the foreign respondent banks

who maintain correspondent banking relationships with the New York Banks specified

above. Hermitage has sought to obtain them in the home jurisdictions of these banks, and

has been told that there is no mechanism equivalent to the §1782 subpoena process

available in the United States which would enable them to secure these records.

21. None of the New York Banks from whom discovery is sought are parties

to the pending Russian proceeding in Moscow or to any other proceeding brought by

Russia in which Mr. Browder or Hermitage are a defendant.

22. Neither the Russian judicial system nor any of the courts in particular has

displayed hostility to the use of discovery obtained in the United States with the aid of the

federal district courts. Despite the sensitive nature of the conspiracy Hermitage has

alleged, which includes the participation of certain Russian government officials, no

tribunal in the foreign proceeding has displayed opposition to the discovery of evidence

that would establish the existence of the conspiracy – whether that evidence comes from

within or outside of Russia. Hermitage has not circumvented any Russian discovery rules

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or restrictions on the gather of proof in seeking assistance from the United States, nor

does the request follow an unsuccessful effort to obtain the same or similar discovery in

the pending proceeding in Russia.

23. The account records held by the New York Banks will, upon information

and belief, assist in the identification of the origins and ultimate beneficiaries of the

frauds and the identities of other members of the Russian Criminal Enterprise.

Ultimately, these materials will be central to both the defense of the Hermitage

executives and lawyers and to the successful recovery of the misappropriated Hermitage

Companies by their lawful owners through the foreign proceeding.

WHEREFORE, I respectfully request the Court grant Applicant’s application in its

entirety.

I declare under penalty of perjury under the laws of the United States of America that the
foregoing is true and correct.

Washington DC
Dated: May 20, 2019

__/s________________________________
Jonathan M. Winer

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