Judge Allows DOJ To Fix Ukraine Money-Laundering Suit

By Nate Beck       

Law360 (January 3, 2023, 4:07 PM EST) — A Florida federal judge has given the government a chance to amend its complaint seeking to seize proceeds from the sale of a 29-story tower in Kentucky allegedly connected to a Ukrainian money-laundering scheme after a magistrate judge identified problems with the case.

U.S. District Judge Darrin Gales on Friday adopted the conclusions of a magistrate judge who found in September the government had improperly named an entity that owned PNC Plaza tower in downtown Louisville, Kentucky, as a defendant in its civil asset forfeiture case.

Judge Gales allowed the government to amend its complaint in one of a series of actions to recover money the former owners of Ukrainian lender PrivatBank, Ihor Kolomoisky and Gennadiy Boholiubov, allegedly stole from the bank and used to buy U.S. real estate.

Even as the government brought its foreclosure action against the PNC Park tower in August 2020, a sale on the property was pending. The government argued it targeted Optima CBD Investments in PNC Corporate Plaza Holdings LLC — an entity created to own the tower — to avoid disrupting a third-party buyer.

Magistrate Judge Jonathan Goodman in September, however, took issue with prosecutors naming the entity as a defendant in the action, noting that decision could create jurisdictional problems for the government’s case. He suggested the government should be given the chance to amend its complaint.

“The United States tried to fit a square peg into a round jurisdictional hole but was unable to accomplish the process smoothly,” the judge wrote.

Defendants in the case argued it was too late for the government to fix its complaint, according to court papers. 

“As the Magistrate Judge noted, the government’s attempt to ‘fit a square peg into a round jurisdictional hole’ was improper,” said Marc Kasowitz, who represents the defendants, in a statement. “We believe the amended complaint the government intends to file is similarly deficient and subject to dismissal yet again.” 

Prosecutors, however, in a Dec. 14 motion said amending the complaint to remove reference to the entity and instead name proceeds from the tower’s sale as a defendant in the civil forfeiture action would solve the problems with its initial complaint. The government argues Kolomoisky and Boholiubov used money laundered from PrivatBank to buy the tower for $77 million in 2011.

The tower was sold to a third party in November 2020 for $22.2 million — with the U.S. Marshal’s Service seizing the sale proceeds, according to court papers.

“There is no serious question that the complaint traces funds from PrivatBank to PNC Plaza and beyond,” the government argued.

Prosecutors claim Kolomoisky and Boholiubov used a web of companies and worked with two Miami-based associates to launder more than $5 billion from PrivatBank — ultimately forcing the Ukrainian government to bail out the bank to stop a financial crisis.

Kolomoisky and Boholyubov argue Ukrainian courts have cleared loans they received from their former bank of impropriety. Prosecutors claimed the two businessmen obtained that result only after filing more than 150 lawsuits in Ukraine after the U.S. government moved to seize their assets.

The government is also seeking to recover money it argues Kolomoisky and Boholiubov laundered through a 19.5-acre office park in Dallas and a 22-story office building in Cleveland.

The government did not immediately respond to requests for comment Tuesday.

Three entities affiliated with Kolomoisky and Boholiubov — Optima Ventures LLC, Optima 7171 LLC and Optima 55 Public Square LLC — have also initiated arbitration before the International Centre for Settlement of Investment Disputes against the U.S., accusing the DOJ of overstepping its authority.

Korf, Laber and the corporate entities are represented by Howard M. Srebnick and Zaharah Markoe of Black Srebnick Kornspan & Stumpf PA, Devin “Velvel” Freedman, Robert T. Dunlap and Colleen Smeryage of Roche Freedman LLP, and Marc E. Kasowitz, Mark P. Ressler and Joshua Paul of Kasowitz Benson Torres LLP.

The government is represented by Deborah Connor, Shai D. Bronshtein and Rachel Goldstein of the DOJ’s Criminal Division.

The case is U.S. v. All Right to and Interest in PNC Corporate Plaza Holdings LLC Held, Controlled, or Acquired, Directly or Indirectly, by Optima CBD Investments LLC and/or CBD 500 LLC, case number 1:20-cv-23278, in the U.S. District Court for the Southern District of Florida.

–Editing by Philip Shea.

Update: This story has been updated to include comment from the defendants’ attorney.