Investors are scrambling to reassess the outlook for the Bank of New York Mellon following yesterday’s report in The New York Sun that the Russian government is suing the bank in a Moscow court for $22.5 billion.

There is also a growing concern among analysts over the value of the bank’s assets. Its stock fell the most of any company in the Standard & Poor’s 500 Index yesterday, plummeting 4.9% to $41.97. At issue is a money-laundering scheme from the 1990s, when two Russian émigrés moved $7.5 billion to American accounts from Russia via unlicensed wire transfers. The Russian Federation is suing under America’s Racketeer Influenced and Corrupt Organizations Act, with the next hearing scheduled for Monday; it is unclear when a judgment will be rendered. The Russian court rejected an earlier effort by the bank to dismiss the case, and analysts and legal experts say it is likely that the court will rule in Russia’s favor.

Those with a positive outlook on the Bank of New York argue a Russian ruling against the bank will not stand up in American or European courts. Suing under RICO is an improper application of American law in a foreign context, and, should the Russian government win a judgment, the decision will not stand up in other countries’ courts when Russia tries to collect, these people argue. In addition, they say the Russians are looking to recoup back taxes and lost revenue rather than pursue the criminal act of money laundering. Such efforts are not allowed under the so-called revenue rule that prevents foreign countries from using American courts to collect taxes. A similar law applies in the European Union and will make it tough for the Russians to collect any award should they win, these people say. The lawyers representing the Russian government applied a similar strategy to sue tobacco companies, and the cases were dismissed.

“The claim brought by U.S. plaintiff’s attorneys on behalf of the Russian Federal Custom Service purportedly based on U.S. law is completely invalid under U.S. law and would be quickly dismissed by a U.S. court,” said a lawyer, Jonathan Schiller, representing the Bank of New York Mellon. “None of the required key elements of a RICO claim have been alleged, much less established.”

The Bank of New York claims that the Russian justices — the suit is filed in the Moscow Arbitration Court — have “denied all due process and disregarded evidence,” added Mr. Schiller, who is a founder and managing partner of the firm Boies, Schiller & Flexner LLP.

There is also an issue of statute of limitation, and the Bank’s defenders argue that according to Russian law and American law, the countries allow just three years and four years, respectively, to prosecute a case. Because the money laundering occurred between 1996 and 1999, the time for prosecution has expired.

The Russians, however, argue the clock on the statute of limitation didn’t start ticking until 2005, when the Department of Justice announced its case against the bank and details regarding the money laundering were widely disseminated in Russia.

The Russian side also says that even if it cannot collect on the judgment from European or American courts, Bank of New York has enough funds elsewhere in the world to make this point moot. According to their argument, the bank’s arm in Russia, for example, generates billions of dollars in fees from doing business with Russian banks. While these fees are mostly paid to the bank’s branch in America, if Russia wins the lawsuit it may be able to capture the fees by going after the Russian banks that pay them. “It is the method of garnishing — garnishing wages from an employer before it is paid to the worker, so to speak,” a partner at Miami-based Podhurst Orseck, Steven Marks, who is representing the Russian Federation, said.

The Russians also point to Bank of New York’s foreign assets, including $27.3 billion in cash and balances due from other depository institutions as of Dec. 31, 2007, according to documents from the Federal Financial Institution Examination Council, which facilitates public access to bank information. Of that amount, $25.1 billion was cash and balances due from other banks in foreign countries and from foreign central banks, and $836 million was balances due from foreign branches of other American banks. Some of the countries where the bank has a presence include Thailand, Lebanon, Egypt, Indonesia, and Russia.

The Bank of New York’s Foreign Assets

As of December 31, 2007

$27.3 billion in cash and balances due from other depository institutions. Of that amount, $25.1 billion was cash and balances due from other banks in foreign countries and from foreign central banks, and $836 million was balances due from foreign branches of other US banks.

$402 million in available-for-sale foreign debt securities

$574 million of trading assets in foreign offices and a total of $611 million of derivatives with a positive fair value in foreign offices

As of September 30, 2007

$3.1 billion of total international banking facilities assets, primarily consisting of foreign branch and representative offices that are either owned or leased by the bank and other international operations

About $2 billion generated in interest income from loans made in the bank’s foreign offices. Of that figure, total consolidated net income (profit) attributed to foreign offices was $153 million