Case 1:19-mc-00262-JMF Document 5 Filed 05/28/19 Page 1 of 6

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

In re Application of HERMITAGE :
CAPITAL MANAGEMENT LIMITED :
For Judicial Assistance to Conduct :
Discovery for Use in Foreign Proceeding :

APPLICATION FOR DISCOVERY FOR USE IN FOREIGN PROCEEDINGS

COMES NOW Hermitage Capital Management (“Applicant” or “Hermitage”), by and through

counsel Duncan Levin, Esq. and for its Application for Discovery for Use in Foreign Proceedings
pursuant to 28 U.S.C. §1782, states:

I. SUMMARY OF APPLICATION

1. Hermitage seeks discovery of specific documents and testimony in this judicial district
which are necessary for Hermitage’s defense of a new criminal proceeding brought against the founder
and chief executive officer of Hermitage, William Felix Browder (“Mr. Browder”), by the Ministry of
Internal Affairs in the Russian Federation (“Russia”).

2. The criminal proceeding was filed as an indictment on December 11, 2018 by the
Prosecutor General’s office in the Russian Federation in Moscow charging Mr. Browder to have
engaged in a criminal conspiracy to commit tax fraud, engage in a false bankruptcy, and embezzle
funds from Russia, as well as to carry out “other serious and extremely serious crimes,” assisted by
Hermitage, employees of Hermitage, and lawyers working for Hermitage. (Indictment, City of
Moscow, 11 December 2018, Criminal Case No. 11801007754000244, Exhibit A, in Russian and in
English translation, hereafter “Indictment.”)

3. The 11 December 2018 Indictment of Mr. Browder, Hermitage and related persons
is the most recent in a series of politically-motivated prosecutions undertaken by Russian authorities
in retaliation against Mr. Browder for his human rights campaign to hold corrupt Russian authorities
accountable for their role in a fraud and murder of Hermitage’s lawyer, Sergei Magnitsky (“Mr.
Magnitsky”). This campaign has resulted in the enactment of the Sergei Magnitsky Rule of Law
Accountability Act of 2012 (PL 112-208), the Global Magnitsky Human Rights Accountability Act of
2014 (PL 114–328), as well as similar legislation in Canada, Estonia, Gibraltar, Latvia, Lithuania, and
the United Kingdom, targeting violators of human rights who have engaged in grand corruption.

4. For many years, Mr. Browder and Hermitage have been targeted by Russia in a series
of criminal proceedings brought by Russian authorities, as set forth in a Declaration of Jonathan M.
Winer (“Declaration”), with the most recent being the December 11, 2018 indictment.

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5. Hermitage seeks discovery of specific documents in this judicial district which are
necessary for Hermitage’s defense of this latest criminal action in Russia.

6. In the Russian proceeding, Hermitage must again prove that it was targeted by an
ongoing conspiracy involving grand corruption in Russia facilitated by corrupt Russian officials and
organized criminals (the “Criminal Enterprise”). This conspiracy has been described in detail by the
U.S. Department of Justice in an asset forfeiture case brought in this district, U.S. v. Prevezon Holdings
Ltd., (13 CV 6326), in 2013, whose factual assertions provide a comprehensive background to the
facts regarding the conspiracy and Russia’s retaliation against Mr. Browder and Hermitage.

7. In particular, to defend itself, Hermitage must prove that certain Russian officials and
private citizens entered into a conspiracy in 2007 to re-register to themselves three investment
companies owned by the Hermitage Fund (the “Hermitage Companies”), to have these three hijacked
companies apply for and receive fraudulent tax returns of over $230 million from the Russian
Treasury, and then to launder these proceeds through bank accounts in Russia and throughout the
world, including the United States, for use by the ultimate beneficiaries of the conspiracy.

8. This defense is necessary because in the current Russian proceeding, Russian

authorities are contending that Mr. Browder and Hermitage were the persons who engaged in these
frauds, although they were in fact uncovered by Mr. Browder, Hermitage, and their lawyer, Mr.
Magnitsky, who was arrested by Russian authorities for reporting the crime, held in prison, denied
medical care, beaten, tortured, and killed in Russia in 2009.

9. Mr. Browder and Hermitage seek to prove that the Russian proceeding against them
is not merely political in nature and retaliatory, but being used to protect members of the Criminal
Enterprise from exposure of their corruption, theft of government funds, and money laundering. This
proof is central to their defense of the criminal charges in the Russian proceeding.

10. The discovery Hermitage seeks from within this District covers a portion of the
conspiracy that touches U.S. soil, which is the routing of the proceeds of the fraud through U.S. bank
accounts connected to the real wrongdoers to enable them to settle and clear dollar-denominated
transactions. Hermitage seeks to establish that all of the funds generated by the Criminal Enterprise
from the $230 million fraud were converted for the use of participants in the Criminal Enterprise,
including corrupt Russian officials, laundered through a series of international banking transactions,
including a number in New York, and then used by members of the Criminal Enterprise and their
associates. To date, Hermitage has successfully traced the routing of some of the proceeds of the fraud
through U.S. bank accounts, but only partially traced pathways for other portions of the proceeds
generated by the fraud, and related frauds, which took place in 2006.

11. Each of the entities from which Hermitage seeks discovery (the “New York Banks”)
is located in the Southern District of New York and headquartered here. Applicant’s request falls
squarely within the letter of 28 USC §1782, the federal statute that authorize district courts to grant
applications for in-district discovery for use in foreign proceedings.

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12. The four discretionary factors the Supreme Court articulated in Intel Corp. v. Advanced
Micro Devices, Inc., 542 U.S. 241, 255 (2004) (“Intel”), weigh strongly in favor of granting discovery.
The documents of third parties that are found in Manhattan are beyond the jurisdictional reach of
Russian courts. Russian courts have not indicated any hostility to judicial assistance from United States
federal courts. Applicant’s request does not circumvent any decision of a Russian court or a Russian
discovery rule, and it is consistent with the scope of discovery allowed under the Federal Rules of Civil
Procedure. The Application should be granted.

II. LEGAL BASIS FOR THE APPLICATION

13. Applicant Hermitage Capital Management, founded in 1996, is a leading global

investment advisory firm specializing in emerging markets. Hermitage has a reasonable interest in
obtaining judicial assistance for discovery because Hermitage’s chief executive officer and founder is
the principal defendant in a foreign criminal proceeding relating to fraudulent refunds taken the stolen
companies, as set forth in the Indictment.

14. In defending against previous Russian proceedings, as well as the current one, and
preparing this Application, Hermitage has brought to bear its own investigative expertise and
substantial resources. Declaration ¶12. Hermitage has made this Application because it intends to
defend itself from the wrongful Russian claim that it engaged in the $230 million fraud by tracing all
of the proceeds of the fraud to those who actually participated in it and benefitted from it. Hermitage
is undertaking this tracing by painstakingly building detailed analyses of the flows of funds from the
Russian Treasury through the array of shell corporations and offshore vehicles the Criminal Enterprise
used to launder the funds through a series of banks. These include the New York Banks which have
provided correspondent banking services in dollars for accounts held in New York on behalf of
foreign financial institutions. Declaration ¶13 and ¶14.

15. Hermitage has information that a substantial part of the fraudulent tax refunds paid to
the stolen Hermitage companies was converted to dollars through correspondent accounts in New
York. Hermitage accordingly seeks information regarding the amounts dates, originators, and
recipients of dollar payment wires from accounts in New York providing correspondent banking
services to banks at which Hermitage has been able to trace funds to the fraudulent tax returns.
Declaration ¶15-¶18. Hermitage has limited its request to the time period in which these banks handled
transactions involving funds from the conspiracy and/or the Criminal Enterprise. Thus, Hermitage
hopes to find out specific information commonly transmitted when wires are processed which could
shed light on the beneficial ownership of the recipient accounts.

16. The Applicant believes this information will provide further critical evidence of the
movements of funds of the $230 million stolen from the Russian Treasury, further enabling Hermitage
to trace those stolen funds, and to defend itself from the Russian proceeding by showing who actually
laundered and benefitted from the fraud, and their connection to the corrupt officials engaged in
prosecuting Mr. Browder, Hermitage, and those associated with them.

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17. Hermitage seeks discovery from each of the New York Banks specified in the
Declaration ¶17, regarding wire transfers they received from specific correspondent accounts
associated with the tax refund frauds at the beneficiary banks specified in the Declaration ¶18. In 2009,
Hermitage requested a similar §1782 subpoena from this Court (“2009 Application”), which was
granted. See “In re Application of Hermitage Capital Management Limited or Judicial Assistance to
Conduct Discovery for Use in a Foreign Proceeding,” No. M19-116 (LTS), Part 1 (Misc Division)
(Exhibit B.)

18. Since 2009, Hermitage has been able to use the information gathered as a result of that
subpoena successfully to trace the movements of a majority of the illicit funds generated by the $230
million fraud and used by the Criminal Enterprise, and to determine the major foreign banks through
which most of the funds moved. This tracing remains incomplete. Completing it is essential to
Hermitage’s defense of its case in Moscow.

19. In 2004, the United States Supreme Court clarified several inter-circuit splits regarding
the factors that district courts should consider in granting §1782 applications. See Intel Corp. v. Advanced
Micro Systems, 542 U.S. 241 (2004). Each of these factors weights in favor of granting this application.

20. First, none of the New York Banks from whom discovery is sought is a party to the
pending Russian proceeding. Declaration ¶21. None of the information contained in their records of
correspondent banking transactions can be found in Russia, or in other jurisdictions. Declaration ¶19
and ¶20. This is not an attempt to find in the United States what could just as easily be uncovered in
Russia through discovery in the pending criminal case.

21. Second, despite the sensitive nature of the conspiracy which Hermitage has uncovered,
which includes the participation of Russian government officials, no Russian tribunal has displayed
hostility to the discovery of evidence that is material to the facts relating to the case – whether that
evidence comes from within or without Russia. Declaration ¶22.

22. Third, this Application does not circumvent any Russian discovery rule or restriction
on the gathering of proof, nor does it follow on the heels of an unsuccessful effort to obtain the same
or similar discovery in the pending proceeding. Declaration ¶22.

23. Finally, the Application is tailored to cover the time frame over which the funds from
the Hermitage fraud, and related frauds, were laundered. Declaration ¶17. It references and is limited
to tracing the proceeds of the conspiracy through the laundering process that took place in foreign
banks and through the New York Banks through correspondent banking relationships. Declaration
¶12- ¶18.

III. ENTITIES FROM WHOM HERMITAGES SEEKS DISCOVERY RESIDE

WITHIN THE SOUTHERN DISTRICT OF NEW YORK

i. Bank of America NA (NY) 115 W. 42nd St, New York, NY 10036

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ii. Bank of China, NY 1045 6th Ave, New York, NY 10018

iii. Bank of New York Mellon (NY) 240 Greenwich Street, New York, NY 10286

iv. BNP Paribas USA (NY) 787 7th Ave, New York, NY 10019

v. Citibank NA (NY) 388-390 Greenwich St. New York, NY 10013

vi. Commerzbank AG (NY) 225 Liberty St, New York, NY 10286

vii. Credit Agricole CIB NY 1301 6th Ave, New York, NY 10019

viii. Deutsche Bank Trust Co Americas 60 Wall St, New York, NY 10005
(NY)

ix. JP Morgan Chase Bank NA (NY) 383 Madison Avenue, New York, NY 10017

x. Mashreqbank Psc., New York 255 5th Avenue New York, NY 10016
Branch

xi. Standard Chartered Bank (NY) 1095 6th Ave #37, New York, NY 10036

xii. UBS AG Stamford 1285 Avenue of the Americas New York, NY

10019

xiii. Wells Fargo Bank NA (NY) 150 E 42nd St, New York, NY 10017

IV RELIEF REQUESTED

24. Applicant proposes to serve the New York Banks with subpoenas in the form attached
hereto as Exhibit C.

25. These subpoenas are directed to parties located in this District. For the reasons set
forth above, Applicant believes these parties have discoverable information that Applicant or its
attorney will use in the Indictment in Russia described above.

26. Mr. Browder is a defendant in the pending criminal case brought by Russia on
December 11, 2018. Russian prosecutors have used the preceding criminal cases they have brought
against Mr. Browder, Mr. Cherkasov, Hermitage, and others associated with them as the basis for
issuing international arrest notices through INTERPOL, and continue efforts to have Mr. Browder
detained and returned to Russia. Declaration ¶4. For these reasons, time is of essence. Applicant asks
that this Court consider this Application and issue its ruling so that the subpoenas can be served and
any post-service proceeding can take place before the current return date of the subpoenas. A
proposed order is attached hereto as Exhibit D.

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WHEREFORE, for the foregoing reasons and based upon the Declaration of Jonathan M.
Winer and the exhibits attached thereto, Applicant Hermitage respectfully requests that this Court
issue an Order allowing Applicant to issue subpoenas in the form attached hereto as Exhibit C.

Respectfully submitted,

Duncan P. Levin, Esq.

Counsel for Applicant
Hermitage Capital Management
(212) 330-7626

cc: All parties (via ECF)