Bloomberg Law
March 18, 2022, 3:34 PM

Russian Oligarch Task Force Limits Role of Existing DOJ Unit

Ben Penn
Ben Penn

The Justice Department launched a task force to confiscate Russian oligarchs’ assets before consulting its team devoted to seizing foreign officials’ luxury items, with only one member of that unit since added to the new group’s staff, according to former U.S. prosecutors familiar with the process.

Attorneys leading a DOJ Criminal Division section that’s spent the past 12 years investigating politically-tied wealthy overseas officials first learned of the KleptoCapture task force when the White House and Attorney General Merrick Garland announced it to the public earlier in March, said four former prosecutors, speaking on condition of anonymity to share sensitive conversations.

Potentially sidelining the Money Laundering and Asset Recovery Section, or MLARS, which understands the legal and logistical complications of targeting luxury belongings of corrupt foreign elites, might undercut the high priority KleptoCapture’s success, said attorneys who previously served in the unit , and in other DOJ offices.

“I was a little disappointed that they did not put one of” the Kleptocracy team lawyers “at the head of” the task force, said former DOJ attorney Aixa Maldonado-Quinones, referring to a specialized sub-unit bringing international cases that’s housed within MLARS. “This is not a little kid’s game. I think the stakes are really high and I really hope they listen to the pros—I hope they listen to the kleptocracy unit.”

The one MLARS attorney DOJ identified on KleptoCapture’s staff is the task force’s new co-deputy, Michael Khoo, who comes from the MLARS sub-unit—the Kleptocracy Asset Recovery Initiative—established in 2010 to combat foreign official corruption by recovering its proceeds. Khoo, two fomer prosecutors confirmed, remains the only MLARS representative on the task force thus far.

When announcing the task force March 2, DOJ said it would pool experts in asset forfeiture, sanctions and export control enforcement, anti-corruption, anti-money laundering, tax enforcement, national security investigations, and foreign evidence collection. It’s being run out of the deputy attorney general’s office and is led by Andrew Adams, a veteran corruption prosecutor from the U.S. Attorney’s Office for the Southern District of New York.

KleptoCapture will investigate and prosecute individuals, banks, cryptocurrency exchanges, and others that help rich Russians hide or launder their luxury assets and money, a senior department official told reporters March 11.

The objectives of the task force emphasize sanctions evasion enforcement, which doesn’t fit directly in the MLARS portfolio, and other lawyers in the money-laundering section may collaborate with the new group without getting detailed to join it.

Task force spokesman Nicholas Biase declined to comment.

‘Very Specific Experience’

Kyle Freeny, who was part of the Kleptocracy Initiative before leaving DOJ in 2019 said her former colleagues have for years “made it their mission to go after both the perpetrators of foreign corruption if they’re within the U.S. jurisdiction and the proceeds of that corruption where they’ve been moved through the U.S. financial system.”

“As a consequence, I think they have very specific experience and knowledge with respect to the intricacies and the difficulties in seizing and ultimately forfeiting assets connected to overseas corruption,” Freeny said.

The MLARS kleptocracy team has built meaningful relationships with foreign law enforcement which will be particularly important since the Kremlin isn’t likely to cooperate with U.S. prosecutors.

“A lot of the” task force’s “results are going to depend on the kind of relationships that are built over years working with your counterparts and other jurisdictions. There are lessons learned from prior massive kleptocracy cases that you would think they would want to tap into,” said Evelyn Sheehan, a former U.S. prosecutor who specialized in assets forfeiture cases.

Missing Ingredient

Khoo’s hiring as co-deputy was reassuring to some DOJ alums. They applauded him as a fantastic prosecutor with relevant kleptocracy experience, such as seizing a luxury yacht bought via a Nigerian scheme.

Yet five former DOJ lawyers said they were also surprised that Mary Butler, who directs the Kleptocracy team and is an expert on Ukraine, hadn’t been announced as a task force member.

Butler is a veteran department prosecutor who was detailed to Ukraine in 2011 as an attaché legal adviser—a position her former colleagues said was intended to reward her for success as co-lead counsel in the trial of notorious lobbyist Jack Abramoff. Rather than a plush assignment, Butler’s tenure in Kiev overlapped with the deadly overthrow of Ukraine’s government starting in 2013, inserting her in tense diplomatic affairs through which she gained deep knowledge and contacts.

Quick Results?

Bill McMurry, who used to lead the FBI’s International Corruption Unit, teamed up with the Kleptocracy Initiative in its highest-profile case to date—the forfeiture of a 300-foot yacht and other goods belonging to Malaysian financier Jho Low, the fugitive wanted for looting the 1MDB fund intended for Malaysian citizens.

McMurry said there’s a difference between the task force’s focus on individuals who are evading sanctions and the Kleptocracy team’s work on longer-term investigations into criminal misconduct, which is then used as the basis for a civil forfeiture complaint.

While their mandates overlap, the task force appears “much more closely tied to efforts to diplomatically solve this crisis than working an individual asset forfeiture case,” McMurry said.

Another factor that could weigh against getting the Kleptocracy unit more involved in the task force, some former DOJ attorneys say, is its reputation for deliberation that may not meet the urgency of Biden’s desire for results.

“I’m sure the government’s going to lose some of these cases, but there’s apparently an appetite to spend a lot of money to do this,” said Andrey Spektor, a former assistant U.S. attorney who’s worked alongside the Kleptocracy Initiative. “I expect them to be very aggressive and maybe test the bounds of what the law is right now.”

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