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1782 Discovery Blog: Marks & Sokolov Obtained Bank Records Revealing $42 Million Fraudulently Transferred From An International Diamond Mining Company To Shell Trading Companies Through New York Based Banks

by | Sep 25, 2020 | 1782 Blog | 0 comments

          The U.S. offers a very powerful litigation tool for participants in foreign court proceedings to obtain bank records, documents and witness testimony from sources within the U.S., even if such evidence is unobtainable through the foreign court’s rules.   This procedure, authorized under 28 U.S.C. §1782, can be a relatively quick and efficient method for obtaining crucial information to win a case.  There is no need to obtain Letters Rogatory or pursue discovery through the Hague Evidence Convention. 

          In August 2019, Marks & Sokolov obtained an order in the Southern District of New York authorizing a large international diamond mining company to take Section 1782 discovery from certain US banks regarding wire-transfer and account information of former executives of an African company and several international shell trading companies, which were involved in siphoning funds from the African company.  Discovery was requested for use in a contemplated shareholder derivative action to be brought outside of the US.  After subpoenas were served and in the fall of 2019, the New York banks produced significant wire and banking records revealing payments exceeding $10 million from the African company to suspected shell companies in the BVI and Bahamas and to three former officers.

          In February 2020, after analyzing the produced documents that revealed additional suspicious transactions, Marks & Sokolov requested and obtained Court permission to serve supplemental subpoenas upon the New York banks requesting records relating to two suspicious individuals and a certain trading entity.  The subsequent bank document production revealed an additional $12 million in suspicious transfers involving the suspected shell companies. 

          During the period under investigation, over $4 million was paid from the African company through shell intermediate companies to its former executives.  In total, as of August 2020, Section 1782 revealed $42 million in suspicious transactions believed to be part of a fraudulent scheme to siphon funds from the African company.      

    On August 31, 2020, in response to the newly discovered wire transactions, Marks & Sokolov again requested permission to serve supplemental subpoenas on the New York banks to obtain additional records relating to fraudulent transfers.  On September 1, 2020, the Court granted the request and supplemental subpoenas were served.  This Section 1782 discovery provides the hard evidence the international mining company will need to successfully litigate its contemplated derivative suit.

Sergey Sokolov is the Managing Director of the Moscow office of Marks & Sokolov, LLC. With over 25 years of professional experience, Sergey advises clients from around the world in Mergers and Acquisitions, commercial real estate and international trade matters. Sergey has successfully represented clients in commercial litigations and arbitrations. He frequently serves as an expert on Russian law in foreign proceedings and has provided expert opinions in numerous U.S. proceedings. Prior to Marks & Sokolov, Sergey was counsel for the International Finance Corporation (a member of the World Bank).  He earned his undergraduate business degree and law degree from St. Petersburg State University.

Thomas C. Sullivan is an attorney in the Philadelphia office of Marks & Sokolov LLC. Mr. Sullivan represents Western, Russian and Ukrainian clients in complex commercial disputes including civil RICO, securities fraud, Foreign Corrupt Practices Act, Convention on the International Sale of Goods and ICC Arbitration matters.  He has litigated numerous Section 1782 discovery matters throughout the United States and was recently published in Obtaining U.S. Discovery For Use In Non-U.S. Tribunals Pursuant To 28 U.S.C. § 1782 (Chapter 7), Juris Publishing, LLC, 2020.

United States:                                                          Russia
Marks & Sokolov, LLC                                              OOO Marks & Sokolov
1835 Market Street, 17th Fl.                                   21/5 Kuznetsky Most, Entrance 1, Suite 612
Philadelphia, PA,19103                                            Moscow, 107996, Russia
Phone: (215) 569-8901                                            Tel: +7 (495) 626-0606