The U.S. Department of Justice recently closed a civil forfeiture case against two Armenian brothers and businessmen who had been accused of using bribes to purchase a multimillion-dollar luxury estate in Beverly Hills.
Artyom Khachatryan, Gurgen Khachatryan and their U.S. company, WRH, Inc. — represented by Dallas partner Ephraim “Fry” Wernick of Vinson & Elkins — obtained what Wernick called a rare letter from the DOJ that explicitly closed the case and stated the DOJ has no other investigations into the men. The DOJ usually closes a case without issuing such a letter, Wernick said.
The letter came last month amid a settlement between the Khachatryans and the government that allows the U.S. to sell the brothers’ Beverly Hills mansion, which had been at the center of the Justice Department’s investigation.
The settlement dictates the Khachatryans will receive 15 percent of the sale’s proceeds. The other 85 percent will go to the U.S. government which, according to a press release this week, intends to transfer “some or all” of the proceeds to the Republic of Armenia, where criminal prosecutions over the payments remain pending. The family is engaged in discussions to resolve those matters, Wernick added.
The settlement is a significant win for the brothers, Wernick said, because the investigation has caused a distraction to their business interests in Europe and Asia. The family, which has businesses in the areas of hospitality, telecommunications and agriculture, has denied any wrongdoing, Wernick said.
“DOJ looked at this — the world’s best investigative service and prosecutors — and realized there is no case to be brought,” Wernick said.
A politically motivated referral from the Armenian government triggered the DOJ’s investigation, Wernick claimed. The brothers’ father, Gagik Khachatryan, is a former minister of finance in Armenia, and the government that came into power in 2018 targeted his family, Wernick said.
The brothers had listed for sale the luxury estate in Holmby Hills, a premier neighborhood in Beverly Hills and home to the Playboy Mansion, in January 2022. The following April, the DOJ filed a forfeiture complaint regarding the property.
The Khachatryans’ lawyers filed a motion to dismiss the complaint, but the court stayed the case to allow the DOJ to complete its investigation, Wernick said.
“The rules are very favorable to the government, allowing the government time with a very modest showing of progress, while the $63 million property in this case is totally tied up and, meanwhile, our clients are accused of this corruption,” Wernick said.
The DOJ declined to comment.
According to a DOJ press release, the estate was purchased in 2011 by a trust benefitting the Khachatryan brothers with funds from an Armenian businessman. The brothers said the funds were loans while the government’s investigation looked into whether they were bribes, according to the DOJ.
The money flow was transparent, Wernick said, but his legal team faced a unique challenge of explaining how the loans were repaid, he said.
“They were repaid in multiple instances within Armenia. There were recordkeeping issues there because these were private businessmen working with one another. So we had to develop a good deal of witness testimony, chain of custody testimony,” Wernick said. “A lot of this money was paid years and years ago. So coming up with the documentation and the testimony that helped prove up those facts were critical.”
Wernick, a former federal prosecutor and supervisor over the DOJ’s criminal fraud section, said he came to represent the Khachatryans after an industry colleague in Europe referred him. He said his clients proposed the settlement to put the situation behind them.
“We have every reason to believe we would ultimately be successful in the U.S.,” Wernick said. “The entire case is based on a theory of a crime. DOJ closed its investigation into that theory without taking any enforcement action after a full investigation. That alone is incredibly important to our clients.”
The Khachatryans were also represented by V&E partner Christopher W. James, senior associate Peter T. Thomas, and associates Robert Wu, Elizabeth A. Matthews, Nataly Farag, Karina A. Pereira, Katherine Galvin and Danny Kim.
The case was prosecuted by Margaret A. Moeser and David Hunter Smith of the Department of Justice and E. Martin Estrada, Mack E. Jenkins, Jonathan Galatzan and Maxwell K. Coll of the U.S. Attorney’s Office in the Central District of California.