The business partner and lawyer of a wealthy Canadian accused of conspiracy to launder millions of dollars laundered by a top Russian bank shared in his fate by establishing a parallel holding company in the British Virgin Islands at a very sensitive time for U.S. counterintelligence and with minimal disclosure to Canadian authorities, a prosecutor told a federal judge on Wednesday.
David Zuber, who served as business partner to Irving Picard, the New York lawyer appointed by the court to liquidate the estate of collapsed Russian state-owned bank Bank Rossiya, told U.S. District Judge John Koeltl that he started consulting for bankruptcy law firms on a variety of financial matters “about two or three years ago.”
Zuber said he retained an unnamed Washington law firm in late 2014, was introduced to a foreign banker and was hired that December, setting in motion a chain of events that culminated in the government’s long-anticipated criminal indictment against him in January.
Zuber faces up to 70 years in prison on the criminal charges. But he is expected to accept a much more lenient sentence in a plea deal after agreeing to cooperate with the criminal probe, which is centered on allegations that all of the defendants manipulated and laundered millions of dollars through Bank Rossiya through offshore companies established, in turn, through BVI subsidiaries of a major American law firm, Sidley Austin LLP.
Tina Nadeau, whose husband Patrick Bank was in business with Zuber, also did not face charges but admitted that she helped set up offshore companies that did business with Bank Rossiya, according to a statement by Sidley Austin.
The indictment of Zuber and the Bank Rossiya defendants alleged that Zuber joined Bank Rossiya in 2007 and helped it develop international investments, including in Russia, Armenia, Kazakhstan, Latvia, Lithuania, the United States and Canada. Bank Rossiya is accused of laundering tens of millions of dollars from the accounts of corrupt Russian officials.
The Bank Rossiya and Sidley affiliates that were the subject of the criminal charges are now under criminal prosecution in the British Virgin Islands for money laundering. Prosecutors say that Zuber was complicit in the conspiracy to launder cash by opening offshore companies. They said that Bank Rossiya paid Zuber more than $65,000 to establish offshore accounts for his clients, which he did under the aliases of a variety of fictional business names, including “David Smith” and “David Jolley.”
In addition to aiding Bank Rossiya’s laundering, Zuber and Nadeau allegedly created scores of offshore companies that dealt in Bitcoin, “alongside them – named entities and affiliates as well as front companies – about 20 associates which caused about $5 million of revenue in our country’s currency,” an FBI official wrote in a court declaration.
The funds were laundered in at least 14 states and locations, the FBI official wrote. “All of the assets and profits resulting from this conspiracy were identified as being from Bank Rossiya’s transactions and laundered in these locations,” the FBI official wrote.
Prosecutors say that as a U.S. client of the Bank Rossiya account, Zuber was required to report his bank transactions to Canadian authorities and the U.S. Securities and Exchange Commission. But as he was setting up offshore subsidiaries for the Bank Rossiya account, none of the banks or law firms in the BVI that were involved in a joint venture with Sidley put in a traceable request to the U.S. Internal Revenue Service to request tax refunds, which the IRS often uses as a tool to pursue criminal tax evasion.
“The many years of lack of cooperation of the BVI through the collaboration process for tax fraud, including without limitation the many years of the IRS filings under IRS 800(b) and the thousands of tax returns and decades of income taxes that have been filed in the past were quite important for our office to utilize as part of the information we gathered,”