Stopping America’s adversaries from abusing our courts

OPINION:

Last month in a reprint from an old policy playbook, the Biden administration expelled 10 Russian officials and announced new sanctions over the Kremlin’s election interference and malicious cyberattacks, including the infamous SolarWinds breach. The Treasury Department prohibited U.S. financial institutions from purchasing Russian bonds from the Russian Central Bank and sanctioned Russian companies.

The dilemma for U.S. policymakers is that neither sanctions nor diplomatic expulsions have ever successfully induced any change in the nefarious behavior of KGB operative who runs the Kremlin — President Vladimir Putin. 

There might be more precise and effective options worth considering to target the real source of Mr. Putin’s power, and the best place to start is the U.S. judicial system. 

For centuries, Russia has been notorious for endemic bureaucratic corruption. Often even the most mundane public service requires a bribe. Weaponizing corruption on an industrial scale, Mr. Putin has transformed his country into an autocratic kleptocracy.

Having served in the KGB and as director of Russia’s ruthless Federal Security Service (FSB), Mr. Putin also holds a black belt in judo, a key principle of which is to use an opponent’s strength against them. Thus, Mr. Putin exploits the wide-open U.S. judicial system to fill his personal treasure chest, reward his most loyal supporters and attack political and commercial enemies. 

The Kremlin routinely engages in corporate raiding — “reiderstvo” in Russian — by illegally seizing lucrative private-sector assets, while arresting and sometimes jailing the legitimate owners. In 2003, Mr. Putin directed the bankruptcy and transfer of oil giant Yukos to state-owned Rosneft. Yukos CEO Mikhail Khodorkovsky was exiled from Russia after serving ten years in prison. 

Corrupt law enforcement and courts target those who flee overseas by transforming spurious arrest orders into Interpol international “red notices” and exploiting the American judicial system and its legal procedures, especially through discovery and bankruptcy cases. The Central Bank of Russia has long been targeting Russian financial institutions for political retribution, state-sanctioned extortion and unlawful self-enrichment. 

Until 2011, Sergey Poymanov was the majority shareholder of Pavlovskgranit (P-Granit), a Russian company engaged in granite mining and production. During the 2008 financial crisis, a Russian court allowed the state bank Sberbank to acquire more than 50% of P-Granit’s shares. Mr. Poymanov, whom Russian courts declared bankrupt in 2016, filed dozens of complaints seeking to protect his assets, but all were denied. Instead,he found himself targeted in multiple criminal investigations.

Seeking $750 million in damages, Mr. Poymanov filed a complaint against Sberbank in U.S. federal court in New York. Rejecting the complaint, the federal judge refused “to second-guess the conduct of the Russian bankruptcy proceeding” and stayed the lawsuit. 

The U.S. court’s treatment of Mr. Poymanov has become commonplace. It was one of many examples of the American judiciary’s failure to come to grips with the widespread corruption of Russia’s courts and Moscow’s exploitation of our own legal system. 

Russia, unfortunately, is not the only one of our adversaries exploiting this legal vulnerability. 

In 2017, U.S. lithium battery manufacturer A123 Systems sought to sell a portion of its shares after encountering financial difficulties. Chinese buyer Wangxian retracted its purchase offer when, amid significant congressional opposition, it was told it must undergo a national security review by an interagency Committee on Foreign Investment in the United States. But once A123 Systems filed for bankruptcy in U.S. courts, Wangxian rushed to purchase the shares at auction while avoiding the national security scrutiny. 

The Biden administration should consider three steps to ensure the judiciary is incorporated into the defense of our national security. 

First, the House and Senate Judiciary Committees should hold expert hearings to shed light on how our adversaries exploit our judicial system. 

Second, the intelligence community should offer national security briefings and training to state and federal judges, so they have a greater appreciation of the extent to which their courts are being used by our adversaries. 

Third, the Justice and State Departments should coordinate to help victims of corrupt foreign government abuse, including evaluating claims and identifying the proper forum for those targeted to seek retribution. 

Democrats and Republicans regularly trade partisan attacks, too often without seeking the common ground necessary to defend our nation from foreign adversaries. The Biden administration should make it a priority to build a bipartisan consensus on closing the loopholes in our judicial system, loopholes that can do grave harm to our national security. 

• Daniel N. Hoffman is a retired clandestine services officer and former chief of station with the Central Intelligence Agency. His combined 30 years of government service included high-level overseas and domestic positions at the CIA. He has been a Fox News contributor since May 2018. Follow him on Twitter @DanielHoffmanDC.