Judgment in Izvestia Libel Case Overturned

A Palo Alto businessman’s default libel judgment against the Soviet newspaper Izvestia was overturned by a Los Angeles federal judge who also allowed a Soviet bank to retain the $465,000 he had ordered frozen on the businessman’s behalf, it was reported Tuesday.

U.S. District Judge David V. Kenyon agreed with the Soviets and the U.S. Department of Justice that he should overturn the judgment he issued in favor of Raphael Gregorian, who had sued because Izvestia had called him a spy and wrecked his medical supply import business in the Soviet Union.

Gregorian, 57, represented by Los Angeles attorney Gerald Kroll, won the $414,000 judgment against Izvestia and two Soviet export companies in October, 1985, after the Soviets failed to appear in court to present their case.

Kroll then set about to locate Soviet money and property in the United States, initially seizing a Russian-language typewriter belonging to Izvestia’s Washington correspondent. Then he persuaded Kenyon to put a freeze on the $456,000 in Soviet Bank for Foreign Trade funds on deposit at the Bank of America’s international trade division in New York City.

Fast Decision Sought

New York attorney Martin Popper, representing the Soviet bank, then petitioned Kenyon to overturn the libel judgment and to grant a fast decision on the frozen funds, contending that the Bank for Foreign Trade was losing millions of dollars because of the tie-up.

Popper argued that the Bank for Foreign Trade is an independent entity and that none of its assets belong to two Soviet trading companies targeted by Kroll.

But Kroll claimed that the Bank for Foreign Trade was the payment arm for the Soviet export firm Medexport and that its funds were a legitimate target for seizure.

The State Department asked Kenyon to grant a full hearing so that attorneys for the Soviets could present their side.

Kroll said he was disappointed by Kenyon’s ruling Tuesday, but would not make further comment until he could read the order.

Last month, Kroll charged that one of three Soviet officials granted visas by the State Department to come to the United States in an effort to overturn the judgment was a KGB agent. “It’s absolutely incredible that the State Department would allow this type of individual to enter the country,” Kroll fumed.

But a State Department spokesman said official policy precluded comment on reports or accusations against people as possible foreign agents.

Kroll was disturbed because the State Department and the Department of Justice were helping the Soviets obtain a hearing before Kenyon, declaring that they were siding with the Soviets.

The deputy assistant secretary of state responsible for Soviet relations urged Kenyon in December to reopen the libel case and defer any judgments in the interest of arms control talks and other foreign policy matters.