“2nd Circuit Orders Pillsbury to Repay $3.6M Fraud-Funded Retainer” —

• “The U.S. Court of Appeals for the Second Circuit has affirmed an order requiring Pillsbury Winthrop Shaw Pittman to turn over more than $3.6 million from a $4 million retainer, holding that the firm violated an asset freeze by using a convicted technology executive’s fraud proceeds to defend him in proceedings stemming from the scheme.”
• “The unanimous panel upheld U.S. District Judge Richard Berman’s order requiring Pillsbury to deposit $3,612,601.76, plus any gains, with the court. That was the amount remaining when the firm learned of the freeze in September 2020.”
• “Pillsbury argued that the $4 million became its property when it received the money as an advance-payment retainer, nine days before the freeze was imposed. The panel found the money was covered regardless of who owned it because Pillsbury held it for Rogas’s benefit.”
• “Rogas co-founded NS8, which offered fraud-detection software to e-commerce merchants. According to the SEC, he falsified the company’s bank statements every month for 2½ years, allowing NS8 to overstate its revenue and raise approximately $149 million from investors.”
• “The SEC began investigating NS8 after receiving an anonymous employee tip in July 2019. It subpoenaed NS8 and Rogas that November and again in March 2020, but Rogas continued falsifying bank statements through June, according to the opinion.”
• “A Sept. 2 engagement letter called for a $15,000 replenishing retainer. On Sept. 9, PhutureCorp wired Pillsbury $4 million.”
• “The Second Circuit said no engagement letter documented the larger payment. A Sept. 14 amendment continued to describe the $15,000 arrangement without mentioning the $4 million.”
• “Pillsbury learned of the freeze on Sept. 18, when approximately $3.61 million remained. The firm argued that the order did not reach the money because the retainer became Pillsbury’s property when it was deposited into the firm’s operating account as an advance payment for legal services.”
• “The panel disagreed, finding that Pillsbury held the money for Rogas’s benefit to finance his defense. It also traced the retainer to the fraud: PhutureCorp had received $10 million of Rogas’s profits from NS8’s stock repurchases.”
• “Judge Amalya Kearse wrote that Pillsbury violated the freeze by using profits Rogas received from his fraud ‘to defend him in the government’s actions against him for that fraud.'”
• “The SEC said it did not learn of the $4 million retainer until September 2022, nearly two years after the freeze was imposed. A Pillsbury response to the commission’s request for Rogas’s financial information listed $3.61 million as his ‘Unencumbered Asset’ held at ‘Pillsbury (Escrow).'”
• “A May 2024 Justice Department letter said prosecutors told Pillsbury during November 2020 phone calls that the retainer contained fraud proceeds and should not be used for legal fees. Without conceding the accuracy of DOJ’s information, Pillsbury ‘agreed not to further dissipate’ the approximately $3.7 million remaining.”
• “By February 2024, the Justice Department understood that Pillsbury had billed approximately $2 million against the retainer. Pillsbury partner William Sullivan told Berman at a July hearing that the firm had continued billing and exhausted it. The opinion does not say when the firm resumed drawing on the funds or why it did so after its 2020 agreement with the Justice Department.”

For those like me, who need some context for the following story, vai Wikipedia :

• “The International Centre for Settlement of Investment Disputes (ICSID) is an international arbitration institution established in 1966 for legal dispute resolution and conciliation between international investors and States. ICSID is part of and funded by the World Bank Group, headquartered in Washington, D.C., in the United States.”
• “It is an autonomous, multilateral specialized institution to encourage international flow of investment and mitigate non-commercial risks by a treaty drafted by the International Bank for Reconstruction and Development’s executive directors and signed by member countries.[3][4] As of May 2016, 153 contracting member states agreed to enforce and uphold arbitral awards in accordance with the ICSID Convention.”

“Buried Hill: Arbitrator Disqualified Over Bias Concerns” —

• “On 11 February 2026, in Buried Hill v. Turkmenistan, the two remaining arbitrators, Mr Siqueiros and Mr Goldberg (the ‘Unchallenged Arbitrators’), accepted Buried Hill Serdar Limited’s (the ‘Claimant’) proposal to disqualify Professor Philippe Sands, KC, from the tribunal. Their decision was based on Articles 14(1), 57 and 58 of the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (the ‘ICSID Convention’) and Rule 23(1) of the 2022 ICSID Rules of Procedure for Arbitration Proceedings (the ‘ICSID Arbitration Rules’).”
• “The Decision addresses a recurring problem in international arbitration: whether the same arbitrator can serve in two separate cases involving different legal claims but many of the same facts, witnesses and documents, as well as the same underlying asset.”
• “The Unchallenged Arbitrators rejected the idea that parallel appointments are automatically disqualifying. What mattered was the unusually close overlap in witnesses, documents, the underlying asset and the order of the hearings, which they found created an evident risk of unconscious influence and an information imbalance within the ICSID tribunal.”
• “Buried Hill’s ICSID claim concerned its investment in the Serdar oil field, now known as the Dostluk field, in the Caspian Sea. It alleged that Turkmenistan breached its obligations under the Energy Charter Treaty (the ‘ECT’) by encouraging Buried Hill’s investment through governmental promises before abandoning those commitments and excluding Buried Hill from any future development of the field.”
  Separately, the Claimant was also pursuing an ICC arbitration against State Concern Turkmennebit under a 2013 Production Sharing Agreement.”
• “The factual overlap was nevertheless substantial: Buried Hill was the claimant in both cases, and both concerned the Serdar field. Turkmennebit was also described in the Decision as an instrumentality of Turkmenistan that Turkmenistan had not denied.”
• “The witness overlap was also extensive. All three factual witnesses who had submitted statements in the ICC Arbitration were also expected to testify in the ICSID case. The authors of two of the three expert reports submitted in the ICC Arbitration were also expected to provide expert evidence in the ICSID Arbitration.”
• “Professor Sands was already serving in the ICC Arbitration case when Turkmenistan appointed him to the ICSID tribunal. The ICC hearing on jurisdiction and the merits was expected to take place first, so he would likely hear and assess the shared witnesses before they appeared before the ICSID tribunal.”
• “The Claimant argued that Professor Sands’ role in both proceedings created a risk of unconscious influence and gave him access to information that the other arbitrators could not assess.”
• “Turkmenistan opposed the Disqualification Proposal. It responded that the cases involved different respondents, legal instruments, applicable laws and causes of action. It also argued that any information gap could be addressed because Buried Hill was represented by the same counsel in both proceedings and the ICC record could be placed before the ICSID tribunal.”
• “Professor Sands did not believe that resignation was necessary. He explained that experienced arbitrators frequently encounter similar facts and legal questions and that he considered each case independently. He further observed that assessing a witness in one case does not predetermine how the same witness will be assessed on another issue.”
• “The Unchallenged Arbitrators accepted the Claimant’s Proposal to disqualify Professor Sands. They held that actual dependence or actual bias did not need to be proved. Under Articles 57 and 14(1) of the ICSID Convention, proof of actual dependence or bias is not required. Actual dependence or bias did not need to be proved; an appearance of dependence or bias was sufficient, provided that the lack of the required qualities was ‘manifest’, meaning ‘evident’ or ‘obvious’. It must be objectively evaluated by a reasonable third party. A challenging party’s concerns are not enough on their own; they must be supported by objective evidence.”
• “An arbitrator serving in parallel proceedings does not by itself establish prejudgment or unconscious bias. It was held that arbitrators may still hear separate cases involving similar facts, legal questions, witnesses or measures without necessarily losing their independence or impartiality.”
• “Here, the decision rested on the combined effect of several circumstances: Professor Sands would hear many of the same witnesses, review related documents concerning the same asset, and take part in confidential ICC deliberations before the evidence was considered in the ICSID arbitration. In those circumstances, a reasonable third party would perceive an obvious risk that impressions formed in the ICC arbitration could influence Professor Sands’s assessment of the ICSID case.”
• “The Unchallenged Arbitrators concluded that Professor Sands’ continued participation would create an imbalance within the ICSID tribunal. They disqualified him and reserved the question of the costs arising from the Disqualification Proposal for a later stage.”