Soviet Bank Can Intervene in Libel Case

The Soviet Union’s Bank for Foreign Trade may intervene on a limited basis in the case of a Palo Alto businessman who won a $413,000 judgment in his libel suit against the Soviet newspaper Izvestia, a Los Angeles federal judge said Friday.

In his ruling, U.S. District Judge David V. Kenyon restricted the bank’s arguments to the single issue of who owns $456,413 frozen by Kenyon’s order granting judgment to Raphael Gregorian last June. Kenyon set a hearing for Thursday, but it may not be necessary. On Wednesday, lawyers representing the Soviet agencies named in Gregorian’s libel action will appear before Kenyon to argue that he should set aside his default judgment, granted after the Soviets declined to defend themselves. They maintained that U.S. courts have no jurisdiction over the Soviet Union.

Kenyon is empowered by federal rules of law “to vacate judgments whenever appropriate to accomplish justice.” The U.S. government is supporting the contention by Soviet officials that this country’s Foreign Sovereign Immunities Act prohibits libel claims.

In filing suit in January, 1985, Gregorian, 56, owner of a Palo Alto medical equipment import-export firm, claimed he had been falsely accused of being an American spy.

As a result, he said, his 14-year business of importing medical and laboratory equipment into the Soviet Union had been virtually “wiped out.” He sought $320 million in damages.

Attorney Sol Scope, representing the Bank for Foreign Trade, maintained at Friday’s hearing that Kenyon’s judgment had been levied against the wrong funds. He said three Soviet officials will testify about ownership of the money.

The Bank for Foreign Trade claims it is an independent agency that carries out foreign exchange operations and does not hold assets for other Soviet agencies.