Revealed: A Former FBI Director’s Double Game With Stolen Russian Money
This investigation was conducted jointly with the Dossier Center and Estonian outlets Delfi and Eesti Päevaleht.
Earlier this month, the Estonian Finance Ministry announced it had hired a major American law firm, headed by a controversial former FBI director, to spend the next two years, at a cost of at least 3 million euros, digging into widely reported allegations of international money laundering through Nordic banks.
In normal circumstances, such a deal would be seen as an unmitigated PR coup in the deeply pro-American Baltic state. But in this instance the firm, Freeh Sporkin & Sullivan LLP, is run by senior managing partner Louis Freeh, a former federal court judge and ex-FBI director who recently defended one of the alleged money launderers in U.S. court. And the Finance Ministry for which Freeh and his law firm are contracted to work is headed by the racist leader of a far-right political party, now part of Estonia’s tenuous coalition government with centrist and conservative parties.
Freeh has also been named “the leader of the advisory team to the Estonian state,” as per an Estonian press report. Several sources in the Estonian government, speaking on the condition of anonymity, said that Freeh’s appointment to such a role has raised eyebrows in Tallinn.
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For one thing, in the past year Freeh has had to register as a foreign lobbyist for his work, alongside Alan Dershowitz, to defend Israeli billionaire Dan Gertler, who was twice sanctioned by the Trump administration for his “opaque and corrupt mining and oil deals in the Democratic Republic of the Congo,” as the U.S. Treasury Department phrased it in December 2017. For another, Freeh is personally and professionally close to Rudolph Giuliani, the former New York City mayor turned personal attorney to Donald Trump, who featured heavily in the president’s impeachment saga.
In 2018, Giuliani, acting on a retainer from the Freeh Group, the former FBI director’s international consultancy, was petitioning Bucharest to free Gabriel “Puiu” Popoviciu, a Romanian-American businessman convicted of a massive real estate fraud and sentenced to seven years in prison. Giuliani has also worked with two now-indicted Ukrainian-born businessmen, Lev Parnas and Igor Fruman, in an attempt to uncover compromising material on Joe Biden, Trump’s opponent in the forthcoming U.S. presidential contest. Giuliani shows no signs of choosing more responsible overseas associates. He is now working with a quartet of questionable Ukrainians to peddle conspiracy theories about Biden and his family. These include “a fugitive, a tainted former prosecutor, and the son of a KGB officer who also was trained in Russian spy techniques,” according to BuzzFeed.
Of his partnership with Estonia, Freeh noted in a press statement, “I will first of all provide legal advice and representation to the government of Estonia in connection with the now well-known and suspected money-laundering activities by various Nordic banks, acting through their Estonian and other Baltic branch networks, whereby billions of U.S. dollars were transferred and routed, in violation of local or international law and Estonian regulatory authority.
“One of the goals of our work is to align Estonia closely with the various U.S. law enforcement and regulatory agencies, and to provide investigative assistance in furtherance of their actions.”
One U.S. law enforcement agency, the Department of Justice, might find it an ironic turn of events given that, only three years ago, Freeh was arguing against it in a civil asset forfeiture and civil penalties case brought against Prevezon Holdings Limited, LLC, an accused money launderer linked to one of the very same frauds Estonia claims its financial institutions were used to whitewash. One of the Nordic banks Freeh is tasked with investigating—the Danish-owned Danske Bank, whose Estonian branch the Estonian government shuttered last year—was even included in a U.S. government exhibit as part of that civil asset forfeiture case.
Prevezon, a Cyprus-based company, is owned by Denis Katsyv, the son of Pyotr Katsyv, a prominent Russian oligarch and the vice president of the state-owned Russian Railways. The Southern District of New York, where Freeh once presided as a federal judge before assuming the FBI directorship in 1993, alleged in a 2013 indictment that the company had laundered close to $2 million, mainly through the New York real estate market. That amount was a fraction of what the U.S. government argued was the predicate offense, a $230 million Russian tax fraud committed in 2007 by a transnational organized crime syndicate working in league with Russian government officials.
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The tax fraud, commonly referred to as the Magnitsky affair, was named for Sergei Magnitsky, a Russian legal adviser turned whistleblower who methodically exposed how it was done and who had done it. Magnitsky tried repeatedly to get his government to investigate the crime he uncovered, only to be arrested and framed for it by the very people he identified as the perpetrators. He died in a Moscow prison in 2009 after being denied urgent medical care and physically beaten, conditions which several human-rights monitors say amounted to an act of state murder.
The Magnitsky affair has prompted seven countries, including the United States, the United Kingdom and Estonia, to pass Magnitsky Acts aimed at sanctioning gross human-rights violators, not only in Russia but anywhere. (In yet another ironic twist, a sequel piece of U.S. legislation, the Global Magnitsky Act, was used in sanctioning Dan Gertler, Freeh’s other client.)
It is estimated that close to $10 million may have been laundered through different foreign accounts held by the now-shuttered Estonian branches of Danske Bank. Two of these accounts belonged to Castlefront LLP and Megacom Transit Limited, companies named by the Department of Justice as recipients of the stolen Russian tax money.
Eugene Sullivan, co-managing partner for Freeh, Sporkin & Sullivan, wrote in a statement to The Daily Beast that neither the law firm “nor any of its Partners has ever represented Prevezon Holdings Ltd.,” and that the law firm “has never been retained by Prevezon, nor entered into any letter of engagement with it or for its benefit, or ever been paid or compensated either directly or indirectly by or regarding Prevezon.”
Memoranda filed by both the defense and prosecution in The United States of America v. Prevezon Holdings Limited expressly name Freeh individually, but not his firm, as “settlement counsel” for the company. According to Freeh, Sporkin & Sullivan’s website, Freeh is indeed the “senior managing partner” of the firm. Moreover, The Daily Beast has seen digital correspondence sent by Freeh to other members of Prevezon’s defense team, in which he refers to his negotiation with U.S. attorneys to resolve the case on behalf of the defendant. These emails were sent from Freeh’s law firm email account.
Followup questions asked of Freeh, Sporkin & Sullivan to clarify the disparity between the public record and the firm’s contention that none of its partners ever represented Prevezon went unanswered by publication time.
The Prevezon case dragged on for four vertiginous years and was subject to claims of conflicts of interest, exaggerated legal expenses and much else. The case was settled in 2017. The defendant agreed to pay close to $5.9 million in damages, almost three times the amount Prevezon had been accused of laundering in the United States, although less than half the worth of what the Department of Justice had frozen in the company’s American assets. As part of the settlement, which Freeh was retained to negotiate, Prevezon was not obliged to admit to any wrongdoing and those assets were released.
Even after the case was settled, however, it wasn’t quite finished.
One overseas Prevezon holding, a Dutch subsidiary valued at 3 million euros, which had been seized at the U.S. government’s request, was released as part of the settlement. It was immediately then re-seized in connection to a separate and independent Dutch investigation into Prevezon’s alleged money laundering, leading the defendant to argue, unsuccessfully, that it shouldn’t be made to pay the $5.9 million to the United States until the Dutch matter was resolved.
More notorious still was the breakout celebrity of this operatic legal wrangle: Nataliya Veselnitskaya, the 44-year-old Russian lawyer retained by the Katsyv family to represent Prevezon in U.S. court. Veselnitskaya became such a prominent U.S. media figure that she was parodied in SNL by Tina Fey after a much-publicized effort to peddle what an intermediary claimed was opposition research on Hillary Clinton at a meeting at Trump Tower in June 2016. In reality, Veselnitskaya was there to lobby the Trump campaign to lift Russia sanctions imposed by the U.S. Magnitsky Act.
She now also stands accused of playing a double game. In January 2019, the Southern District of New York indicted Veselnitskaya for obstruction of justice in the Prevezon case, alleging that she had misled the court by failing to disclose that while she was representing the defendant she also helped draft the Russian Prosecutor’s Office findings in response to request for information by the U.S. government under the Mutual Legal Assistance Treaty, or MLAT. “These supposed findings,” the indictment reads, “purported to exonerate all Russian government personnel of the Russian Treasury Fraud, to exonerate [Prevezon] of receiving proceeds of the Russian Treasury Fraud” and to accuse, among others, Sergei Magnitsky of committing the fraud himself.
Veselnitskaya, the indictment states, made a false declaration to the court stating that she had “filed a request with the Prosecutors Office of the Russian Federation which was denied.” In fact, she “participated in drafting the Russian MLAT Response in cooperation with the Russian Prosecutor” and had “received assistance from the Russian prosecutor in filing a complaint with the Prosecutor General’s Office seeking the Russian MLAT response.”
Veselnitskaya did not respond to a request for comment.
The basis for Veselnitskaya’s indictment was a cache of her leaked digital correspondence obtained by the Dossier Center and previously reported on last year by several news outlets including The Daily Beast.
In that same cache are several communications between Louis Freeh and Veselnitskaya. One, dated October 5, 2017, is from his Freeh’s Sporkin & Sullivan email address to Veselnitskaya and Imre Pakh, an Oyster Bay-based art collector whose involvement in the Prevezon case is unknown. Freeh updates Veselnitskaya and Pakh on his proposed settlement offer of $2.8 million (less than half of what Prevezon ended up paying) and writes that he “strongly” recommends keeping the case from going to trial, which “could cost several times this amount—and not have the important concessions we can get now.”
Among the questions The Daily Beast put to Freeh through his spokesperson was whether or not his co-counsel’s indictment for obstruction of justice retroactively complicates his work on behalf of Prevezon. (It is a matter of public record, after all, that the Estonian investigation involves the same entities implicated in the Magnitsky affair.) And whether his work for the company might constitute a conflict of interest with his new assignment with the Estonian government.
Freeh owes this lucrative contract to one man in the Estonian government—Finance Minister Martin Helme, the chairman of Estonia’s far-right Conservative People’s Party, known by its acronym EKRE. In 2013 Helme appeared on a domestic talk show and professed his desire for Estonia to remain a “white country,” saying with respect to its minuscule refugee population, “If you're Black, go back.” Upon being sworn in for his seat in Estonian parliament in May 2019, Helme and his father Mart Helme, a former Estonian ambassador to Russia and until this month chairman of EKRE, flashed the O.K. hand symbol, a gesture now commonly associated with white supremacists, during his swearing-in ceremony. Estonia’s President Kersti Kaljulaid walked out of that event, prompting Helme to refer to her as an “emotionally heated woman.”
A spokesperson for the Estonian Ministry of Finance said that selecting Freeh and his law firm was “left to the competence of” Helme alone, although it would not have consented to a contract with Freeh and his law firm had it determined there was any conflict of interest.
“In coordination with representatives of the Government of Estonia, I conducted the appropriate due diligence in connection with [Freeh, Sporkin & Sullivan] being engaged by” that government “and did not find any conflict which prevented that representation,” Eugene Sullivan, Freeh’s co-managing partner, wrote in a statement to The Daily Beast.
Yet the Prevezon case as a whole has resembled an ouroboros of contradictory political motives and revenue sources.
The original law firm for Prevezon, BakerHostetler, was disqualified from acting as counsel by the Second Circuit Court of Appeals owing to attorney John Moscow’s prior work for Hermitage Capital Management, the London-based investment company which Sergei Magnitsky represented and whose corporate assets were used to perpetrate the $230 million tax heist. Nevertheless, BakerHostetler, as Veselnitskaya’s leaked email cache showed, continued to work on the Prevezon matter and even helped draft the settlement agreement with the Southern District, in contravention of the court disqualification.
Another party to Prevezon’s defense was Fusion GPS, the Washington, D.C.-based strategic intelligence firm which commissioned former MI6 officer Christopher Steele to compile his now notorious “dossier” on the Trump campaign’s alleged ties to the Russian government—even while Fusion GPS was working with Veseltnitskaya, who now stands accused of having acted as an agent of that government.
Louis Freeh’s prior interventions into the murky world of overseas consulting have also led to near-satirical contradictions.
A major target in Rudolph Giuliani’s ongoing campaign to portray Joe Biden as corrupt has been the former vice president’s son Hunter, whose lucrative position on the board of Burisma, a Ukrainian gas company, coincided with his father’s demand for greater anti-corruption reforms by Kyiv. (There is no evidence that Biden used his office to curry favor for his son; the Ukrainian prosecutor whose sacking Biden had called for failed to investigate Burisma, among other suspect companies, for its business practices.) Yet one of Hunter Biden’s previous clients was Gabriel Popoviciu, the same disgraced Romanian-American real estate magnate Giuliani wound up representing. How did he wind up doing so? Because, according to The New York Times, Hunter Biden enlisted Freeh’s help in defending Popoviciu in 2016, which led directly to Giuliani’s retainer.
With additional reporting by Holger Roonemaa.
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