Thursday, November 4, 2010
Court Tosses Restitution Award to Money-Laundering Co-Conspirator
By STEVEN M. ELLIS, Staff Writer
Former Ukraine Prime Minister Pavel Lazarenko, who was convicted in the United States on charges of money laundering and conspiracy while in office, does not have to pay $19 million in restitution to a co-conspirator, the Ninth U.S. Circuit Court of Appeals ruled yesterday.
A Ukrainian businessman who claimed that Lazarenko forced him to pay kickbacks while using political power to crush the man’s competitors failed to show “exceptional circumstances” that would allow restitution despite his complicity in the scheme, a three-judge panel said.
A federal jury in San Francisco convicted Lazarenko in 2004 after prosecutors said he siphoned more than $200 million from the Ukraine while in office from 1996-1997 and before that while serving as a provincial governor, and laundered it through American banks.
Lazarenko was arrested in 1999 when he tried to enter the United States while fleeing corruption charges. He was also convicted of wire fraud and interstate transportation of stolen property, but a Ninth Circuit panel threw those charges out in 2008.
One of Lazarenko’s co-conspirators, Ukrainian businessman Peter Kiritchenko, sued in the U.S. District Court for the Northern District of California seeking restitution under the Mandatory Victims Restitution Act of 1996 and the Victim and Witness Protection Act of 1982.
Kiritchenko contended that Lazarenko, as a condition of doing business in the region, forced him to agree to give one of Lazarenko’s relatives a 50 percent stake in Kiritchenko’s agricultural and metals business, Agrosnabsbyt, and to pay 50 percent of all profits to accounts Lazarenko controlled. Prosecutors at Lazarenko’s criminal trial detailed similar schemes, and said the former official used his power to disadvantage businesses that refused to pay.
Lazarenko opposed restitution but the United States government neither endorsed nor objected to the request. U.S. District Judge Charles R. Breyer concluded that Kiritchenko was a “victim” of Lazarenko’s extortion and awarded Kiritchenko $19 million.
On appeal, Lazarenko-now joined by the government-argued that Kiritchenko could not be both a participant in the scheme and a victim of it.
Judge Susan P. Graber wrote that the plain text of the acts gave co-conspirators “just as much right to restitution” as innocent victims. However, she said, a literal application would lead to “absurd results,” so the plain text did not control and the issue presented was the scope of restitution to which a co-conspirator was entitled.
Kiritchenko, pointing to the Ninth Circuit’s 1992 ruling in United States v. Sanga 967 F.2d 1332, argued that a co-conspirator/victim was entitled to restitution whenever the harm arose from criminal conduct in which he or she did not participate.
In Sanga, the court upheld a restitution order in favor of a woman the defendant smuggled from the Philippines into Guam and then forced into a sexual relationship. The court concluded that the woman was a limited co-conspirator insofar as she agreed to and acted to facilitate her own smuggling, but said she was not barred from recovery by virtue of her initial participation.
Graber, however, contrasted Kiritchenko’s relationship with Lazarenko. She noted that Kiritchenko was named as Lazarenko’s co-conspirator, willingly participated in most of the conspiracy despite knowing that his own past victimization was the source of the laundered money, and profited greatly from the overall criminal enterprise.
“Kiritchenko’s deep and willing complicity in the heart of the conspiracy, following his initial victimization, sharply distinguishes this case,” she wrote.
“Only in exceptional circumstances would Congress have intended that a coconspirator to a crime be entitled to restitution….The circumstances here do not constitute exceptional circumstances warranting departure from that general rule.”
Judges Consuelo M. Callahan and Carlos T. Bea joined Graber in her opinion.
The case is United States v. Lazarenko, No. 08-10185.
Copyright 2010, Metropolitan News Company