Ex-Bank of N.Y. Officer Sues It for $270M

NEW YORK - Former Bank of New York senior vice president Natasha Kagalovsky sued the company and three of its top executives in a Moscow court Tuesday for $270 million in damages.Ms. Kagalovsky supervised Lucy Edwards, a former vice president who pleaded guilty in U.S. District Court in New York last month to money laundering and other charges. Ms. Edwards and her husband, Peter Berlin, who also pleaded guilty, were accused of setting up and controlling accounts at Bank of New York through which $7 billion of funds from Russia are believed to have been transferred since 1996. Ms. Edwards was fired last August.

The lawsuit said Ms. Kagalovsky's career as head of Bank of New York's Eastern European unit was irreparably harmed when she was put on administrative leave last August after a massive probe into possible money laundering of Russian funds through accounts at the bank became public.

The suit contends that the bank's action misled the public into connecting Ms. Kagalovsky's name to the scandal by suggesting she was in charge of the accounts being investigated and that Bank of New York refused to publicly clear her.

Ms. Kagalovsky also claims that Bank of New York "unfairly" singled her out because of her Russian origins and because she is married to a prominent Russian businessman, according to a statement.

A Bank of New York spokesman said, "The suit is entirely without foundation."

Ms. Kagalovsky, who has not been accused of wrongdoing, resigned in October while still on administrative leave. She is asking for $200 million in damages from the bank; $50 million from Thomas A. Renyi, chairman and chief executive officer; and $10 million each from Alan R. Griffith, vice chairman, and Charles E. Rappold, chief administrative officer.

- Liz Moyer


4 Lazard Execs to Start Private Equity Firm

NEW YORK - Four Lazard Freres & Co. executives, led by deputy chairman Steven Rattner, said they would leave the investment banking partnership to set up a firm specializing in private equity investments in the communications and media industries.The new firm, Quadrangle Group, was unveiled Tuesday in a statement by Mr. Rattner and his three partners - David A. Tanner, Peter R. Ezersky, and Joshua L. Steiner. While primarily focused now on private equity investing, the firm may add more financial services for communications and media clients, the statement said. Communications and media are two of the hottest sectors attracting private equity investments, it said.

The defections come as Lazard is preparing to merge its independently run London, New York, and Paris operations into a single company.

Mr. Rattner has been deputy chairman of Lazard since the summer, and before that he was deputy chief executive. He started and led Lazard's communication group in 1989 after joining the firm from the former Morgan Stanley & Co., where he also started a communications practice. In the late 1970s and early 1980s, Mr. Rattner was a reporter for The New York Times.

Mr. Tanner was a managing principal at Lazard and co-chief of the firm's U.S. private equity business. Mr. Ezersky was a managing director and head of Lazard's worldwide media and communications practice, and Mr. Steiner was a managing director in that group.

Four outsiders who are heavy hitters in the communications and media industries are to advise Quadrangle - Barry Diller, chairman and chief executive officer of USA Networks Inc.; Amos Hostetter, chairman of AT&T's broadband and Internet services unit; Craig McCaw, founder of Nextlink Communications; and Brian Roberts, president of Comcast Corp.

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