Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 1 of 33

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
DR. VALENTIN GAPONTSEV
31 Hickory Drive
Worcester, MA 01609

IPG PHOTONICS CORPORATION
50 Old Webster Road
Oxford, MA 01540

Plaintiffs,
v.
UNITED STATES DEPARTMENT OF THE
TREASURY
1500 Pennsylvania Avenue, NW
Washington, DC 20220
THE HONORABLE STEVEN MNUCHIN,
in his official capacity
as Secretary of the United States Department
of the Treasury,
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

Defendants.

)
)
)
)
)
)
)
)
)
)
)
) Civil Action No. 1:18-cv-______
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)

COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 2 of 33

INTRODUCTION
1.

In Section 241 of the Countering America’s Adversaries Through Sanctions

Act (“CAATSA”), Pub. L. 115-44, Congress required the Secretary of the Treasury (the
“Secretary”) to designate individuals as “oligarchs in the Russian Federation, as determined
by their closeness to the Russian regime” led by President Vladimir Putin and their net
worth. The Secretary was to consider “indices of corruption,” their “relationship” with
President Putin, and their “sources of wealth,” all through consultation with the relevant
intelligence agencies. The term Russian “oligarch” was not invented by Congress. It
plainly refers to friends of high-ranking Russian government officials whose wealth is
primarily derived through corrupt grants of public assets by the Russian government.
2.

On January 29, 2018, the Secretary submitted his Section 241 Report to

Congress. Attached as Appendix B to the public report is the Secretary’s list of Russian
oligarchs (the “List of Oligarchs”). The Secretary’s report and List of Oligarchs reflects no
serious inquiry by the Secretary in fulfilling his statutory obligation under CAATSA.
Instead, the Secretary effectively republished the list of Russian billionaires from the March
28, 2017 issue of Forbes Magazine.
3.

The Secretary included on his list of Russian oligarchs the world-renowned

physicist, Dr. Valentin Gapontsev. Dr. Gapontsev is a U.S. citizen; and he is the founder,
Chairman and Chief Executive Officer of IPG Photonics Corporation (“IPG Photonics”), a
publicly-traded company, listed on NASDAQ and headquartered for nearly the last two
decades in Oxford, Massachusetts. Dr. Gapontsev’s wealth comes from his invention of
market-leading industrial laser technologies, not from any corrupt parceling out of public
assets to cronies of President Putin. Nonetheless, in composing the statutory List of
Oligarchs, the Secretary arbitrarily and capriciously lumped Dr. Gapontsev in with friends
2

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 3 of 33

of Russian President Vladimir Putin, whose wealth is built on gifts and grants from the
Russian Government. The Secretary’s designation of Dr. Gapontsev as a CAATSA Section
241 oligarch has harmed Dr. Gapontsev, and the company he leads. Plaintiffs seek an order
vacating the Secretary’s final action designating Dr. Gapontsev as an “oligarch” under
Section 241 of CAATSA as arbitrary, capricious, and contrary to law.
4.

The statutory requirement that the Secretary designate individuals as

Russian oligarchs springs from Congress’s effort to force the Administration to punish
Russian Government acts of aggression in Ukraine and Syria and its efforts to interfere with
elections in the United States, through imposing sanctions on individuals close to the ruling
Russian regime. Congress required the Secretary of the Treasury, in consultation with the
State Department and the Director of National Intelligence, to determine a list of individuals
who should be designated senior foreign political figures or oligarchs in the Russian
Federation. Congress required the Secretary to assess an individual’s ties to the Russian
Government, indicia of corruption and the source of his wealth, based on intelligence
gathered by the national security agencies. To that end, Congress gave the Secretary a
specific list of factors to consider in determining who is a Russian oligarch: (a) the
individual’s “closeness to the Russian regime and [the individual’s] net worth”; (b) the
relationship between the individual and “President Vladimir Putin or other members of the
Russian ruling elite”; (c) the “identification of any indices of corruption with respect to
th[e] individuals”; (d) the “estimated net worth and known sources of income of th[e]
individuals and their family members . . . including assets, investments, other business
interests, and relevant beneficial ownership information”; and (e) “identification of the nonRussian business affiliations of those individuals.” Section 241, CAATSA. The purpose
of these statutory factors is plain: To require the identification of those Russian nationals
3

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 4 of 33

who are close confidants of President Putin and have no other explanation for their vast
wealth other than corrupt distributions of public assets from the Putin regime.

The

Secretary’s report reflects none of the required analysis. If the public report and List of
Oligarchs had been created in accordance with the analysis required by CAATSA, the
Secretary would not have designated Dr. Gapontsev as a Russian oligarch.
5.

In designating Dr. Gapontsev as a Russian oligarch the Secretary took a final

agency action that is arbitrary, capricious, and/or contrary to law. First, the Secretary’s
public report does not reflect any consideration of the CAATSA statutory factors. The
Secretary’s public report does not include an examination of Dr. Gapontsev’s connection
to the Russian regime; if it had, it would be evident to all that Dr. Gapontsev has no such
connection. The Secretary’s public report does not include an examination of whether Dr.
Gapontsev had been granted public assets by the Russian Government; if it had, it would
be evident to all that Dr. Gapontsev’s wealth derives from his own innovations in laser
technology and the U.S.-based, U.S.-listed, U.S.-headquartered publicly-traded company
that Dr. Gapontsev runs and that employs thousands of individuals in the United States.
The Secretary’s public report does not reflect an examination of whether Dr. Gapontsev’s
wealth had derived from corrupt activity; if it had, it would be evident to all that Dr.
Gapontsev’s wealth derives from his nearly 100 worldwide and nearly 40 U.S. patents and
the market-leading technology that he invented and implemented through IPG Photonics
Corporation.

Further, there is no support in CAATSA that Congress intended the

Secretary’s public Russian oligarch designations to be based on the simple fact that an
individual had $1 billion or more in assets, which was the only requirement for being
included on the Forbes March 28, 2017 list of Russian billionaires.
6.

Second, the Secretary did not afford Dr. Gapontsev any due process of law.
4

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 5 of 33

There is literally no procedure, according to U.S. Department of the Treasury (“Treasury”)
officials, for challenging Dr. Gapontsev’s inclusion on the Secretary’s List of Oligarchs.
Nor was the lack of post-designation process compensated for by process available before
the Secretary made the designation. The designation was made with no notice to Dr.
Gapontsev, much less an opportunity to comment and/or provide contrary evidence.
7.

Third, the Secretary unconstitutionally delegated an official governmental

decision to a private party, by effectively adopting a list of Russian billionaires that had
been compiled by Forbes Magazine, now owned by Hong Kong investors.

The

Constitution requires that official government actions be taken by officers of the United
States. This requirement—articulated by the Supreme Court as the private non-delegation
doctrine—is found in the Vesting Clause, which vests the Executive Power in the President,
through the Appointments Clause, which requires all persons exercising substantial
governmental authority to be appointed in certain manners, separation of powers principles
established in the Constitution, among other constitutional provisions. No one appointed in
any manner provided for in the Constitution foreign-owned Forbes Magazine to make
official U.S. government decisions; but the Secretary ceded its authority to Forbes.
Paradoxically, Forbes Magazine afforded Dr. Gapontsev more process than his own U.S.
government, removing Dr. Gapontsev from the list of Russian billionaires after determining
that Dr. Gapontsev was a U.S. citizen, whose wealth primarily derived from his founding
of a successful U.S. company.
8.

Fourth, the agency’s continued inclusion of Dr. Gapontsev on the list of

designated Russian oligarchs violates the Privacy Act, 5 U.S.C. § 552a. Treasury’s
maintenance of a false record has caused injury to Dr. Gapontsev and to IPG Photonics
Corporation and violates the Privacy Act. 5 U.S.C. §552a.
5

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 6 of 33

9.

Accordingly, and as set forth below, the Court should vacate and set aside

the Secretary’s designation of Dr. Gapontsev as a Russian oligarch under Section 241 of
CAATSA.
JURISDICTION AND VENUE
10.

This Court has subject matter jurisdiction under 28 U.S.C. § 1331. Plaintiffs’

causes of action arise under the laws and Constitution of the United States, including the
CAATSA, the Administrative Procedure Act (“APA”), 5 U.S.C. §§ 701 et seq.; the Fifth
Amendment to the United States Constitution; the Vesting Clause of the United States
Constitution; the Appointments Clause of the United States Constitution; separation of
powers principles established in the United States Constitution; the private Non-Delegation
Doctrine derived from the United States Constitution; and the Privacy Act, 5 U.S.C. § 552a.
11.

Venue is proper in this district under 28 U.S.C. § 1391.

Defendant

Department of the Treasury resides in this district. Defendant Steven Mnuchin performs
his official duties in this district.
12.

An actual controversy exists between the parties under 28 U.S.C. § 2201,

and this Court has authority to grant declaratory and injunctive relief to set aside the
Secretary’s designation of Dr. Gapontsev as a Russian oligarch and to issue all necessary
and appropriate process to preserve Plaintiffs’ status or rights pending conclusion of the
proceedings, as requested herein. 28 U.S.C. §§ 2201, 2202; 5 U.S.C. §§ 705, 706.
PARTIES
13.

Plaintiff Dr. Valentin Gapontsev is a citizen of the United States. He resides

in Worcester, Massachusetts. Dr. Gapontsev moved to the United States in 2001 with his
family, obtained U.S. permanent resident status in 2003, and became a United States citizen
in 2008, while not renouncing his Russian citizenship. Dr. Gapontsev is the Founder,
6

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 7 of 33

Chairman, and Chief Executive Officer (“CEO”) of Plaintiff IPG Photonics Corporation.
14.

Plaintiff IPG Photonics Corporation (“IPG Photonics”) is a publicly-traded

company, incorporated in Delaware, with its principal place of business in Oxford,
Massachusetts. IPG Photonics is an S&P 500 company that develops, manufactures, and
sells fiber lasers for use in various manufacturing and other processes. IPG Photonics
directly employs more than 2,100 Americans across 10 states. It is one of the largest
employers in the area surrounding Worcester, Massachusetts, bringing nearly 2,000 wellcompensated, high-tech jobs to the region.
15.

Dr. Gapontsev’s active participation is critical to the financial well-being of

IPG Photonics. As a result, the Secretary’s final action in designating Dr. Gapontsev as a
Russian oligarch has caused direct injury both to Dr. Gapontsev and to IPG Photonics, for
which there is no administrative remedy. Plaintiffs have standing to bring this suit because
Defendants’ actions have caused direct injury to Dr. Gapontsev and to IPG Photonics,
which injuries will be remedied by a favorable ruling from this Court.
16.

Defendant Department of the Treasury is an executive department of the

United States Government. Treasury is headquartered in Washington, D.C.
17.

Defendant Steven Mnuchin is Secretary of Treasury (the “Secretary”) and is

sued in his official capacity. The Secretary oversees Treasury’s activities with respect to
the Russian oligarch designation under Section 241 of CAATSA.
BACKGROUND
A.

Dr. Gapontsev Invents Groundbreaking Fiber Laser Technology and Founds
IPG Photonics
18.

Dr. Valentin Gapontsev was born in the Soviet Union in 1939.

Dr.

Gapontsev spent his childhood in the Ukraine. He obtained a master’s degree in electronics
7

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 8 of 33

from Lvov Polytechnic Institute and then spent three years working at a high-tech company
in Lvov, Ukraine. Dr. Gapontsev then obtained his Ph.D. in Laser Materials Science from
the Moscow Institute of Physics and Technology.
19.

Until shortly after the fall of the Soviet Union, Dr. Gapontsev worked at the

Soviet Academy of Sciences (“SAS”). The SAS was the country’s elite institution for its
most talented scientists. As the Soviet Union fell apart, Dr. Gapontsev decided to start his
own company focused on researching fiber-based lasers and amplifiers. To that point,
industrial lasers were then dominated by Carbon Dioxide and crystal lasers; fiber lasers had
very low output power and were expensive, which limited their effectiveness in
manufacturing and other applications. Dr. Gapontsev had a different idea: In 1990, Dr.
Gapontsev and I.E. Samartsev published a scientific paper discussing the feasibility of
development of “simple, compact, reliable and low cost devices with an output power on
the order of tens or with hundreds of watts.” V.P. Gapontsev and I.E. Samartsev, HighPower Fiber Laser, in Advanced Solid-State Lasers; Proceedings of the Topical Meeting,
Salt Lake City, UT, Mar. 5-7, 1990, Washington, DC, Optical Society of America, 1991.
Based upon experimental data from their tests, the paper was the first to suggest that fiber
lasers, with a very high output power density, could be a viable alternative technology to
other lasers in many applications.
20.

Dr. Gapontsev continued researching this idea in the rented basement of a

small laboratory at the SAS, using his small savings of a few thousand dollars and working
with a handful of students. That company was called STC IRE-Polus Partnership.
21.

Dr. Gapontsev’s first business breakthrough came in 1993. It was not from

a Russian government grant or give away. It came from a Western European corporation
convinced that Dr. Gapontsev’s innovations could transform its business. Italtel, a large
8

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 9 of 33

Italian telecommunications company, contracted with Dr. Gapontsev’s company for a highpowered erbium doped fiber amplifier. In 1994, Dr. Gapontsev convinced DaimlerBenz
Aerospace (Dornier) to develop the world’s first eye-safe laser transmitter for a helicopter
obstacle warning system. Both companies wanted the products manufactured in Western
Europe, so Dr. Gapontsev opened a manufacturing facility in Germany. It was at this
German facility that Dr. Gapontsev developed and introduced the first generation of various
high volume fiber lasers and amplifiers.
22.

Dr. Gapontsev’s next business breakthrough came in 1997, when the

company’s products were qualified for use in BellSouth, a large regional
telecommunications company, for the first large fiber-optic network in the United States.
Reflecting the importance of these U.S. contracts, Dr. Gapontsev established IPG Photonics
Corporation in Massachusetts, with Delaware as the company’s state of incorporation.
23.

The main assets of Dr. Gapontsev and his company were the knowledge,

creativity, and work ethic of Dr. Gapontsev himself.
24.

Dr. Gapontsev’s capital raises for the company’s expansion were hardly

gifts from Russian government leaders and their cronies. In 2000, Dr. Gapontsev raised
$100 million of private-equity investments from U.S.-based TA Associates and Merrill
Lynch, which took a minority ownership in IPG Photonics.
25.

Months later, IPG Photonics opened its headquarters and U.S.

manufacturing facility in Oxford, Massachusetts. Today, that facility employs nearly 1,600
individuals in well-compensated, high-tech jobs.
26.

In connection with opening IPG Photonics’ headquarters in Oxford,

Massachusetts, Dr. Gapontsev relocated himself and his family to the United States, settling
in Worcester, Massachusetts. He received his green card in 2003 after going through the
9

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 10 of 33

application process and became a naturalized United States citizen in 2008.
27.

During the tech crash in 2001, the telecom industry was hit hard. Dr.

Gapontsev retooled his company to advance fiber laser technology and apply it to
manufacturing.

During this difficult period, Dr. Gapontsev retained as many U.S.

employees as possible, investing millions of his own dollars to keep the company afloat.
The result, through Dr. Gapontsev’s own expertise and that of his employees, was the
development and production of high-power fiber lasers for manufacturing applications,
pump diode technology (to reduce the company’s component costs and increase power),
and other critical optical components and modern production lines.
28.

In December 2006, IPG Photonics launched its initial public offering and

listed on the NASDAQ Stock Exchange. In its prospectus, IPG Photonics stated: “Our
future success is substantially dependent on the continued service of our executive officers,
particularly our founder and chief executive officer, Dr. Valentin P. Gapontsev . . . .” IPG
Photonics Corporation, Form 424B4, at 11 (Dec. 13, 2006). The company used the
proceeds from its initial public offering to invest in a new plant and equipment at its Oxford,
Massachusetts headquarters.
29.

In 2010, IPG Photonics introduced its first quasi-continuous wave fiber

lasers into the market. IPG Photonics has continued to work to increase the power of its
products.

For example, in 2013, IPG Photonics sold the world’s first 100 kilowatt

commercial fiber laser, which is used to weld together metal parts 300 millimeters thick.
In 2016, IPG Photonics introduced its Laser Luminaire RGB light source for digital
projection replacing conventional xenon bulb cinema projection.
30.

At the time of IPG’s IPO, net sales had been $96.4 million for 2005 and

$101.1 million for the nine months ending September 30, 2006, but by 2016 IPG Photonics’
10

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 11 of 33

net annual sales were in excess of $1 billion.
31.

IPG Photonics’ growth and successes have been driven by Dr. Gapontsev’s

ingenuity and investment in the company’s technologies, products, and processes.
32.

In 2017, IPG Photonics had revenues of $1.4 billion and employed more

than 2,000 people across the United States. IPG employs a highly skilled workforce with
long-term, loyal employees who bring consistent and robust income to local communities.
33.

Dr. Gapontsev and trusts he created currently control, directly or indirectly,

approximately 31 percent of IPG Photonics shares. The remaining shares are owned
primarily by institutional investors. Based upon information and belief, no IPG Photonics
shares are owned by the Russian government.
34.

Dr. Gapontsev and IPG Photonics, in addition to growing a successful

business, have been key contributors to the broader scientific community in the United
States and abroad. For example, Dr. Gapontsev and IPG Photonics established the IPG
Photonics Laboratory at Worcester Polytechnic Institute (“WPI”); co-founded the Siegman
International School of Lasers; and funded a biophotonics fellowship, created by the
Optical Society of America. Dr. Gapontsev has won numerous awards, including the Ernst
& Young Entrepreneur of the Year for New England (2006); the Laser Institute of
America’s Arthur L. Schawlow Award (2009); and the Russian Federation National Award
in Science and Technology honoring individuals for their contributions to laser applications
in science, industry, education or medicine (2011). Additionally, Dr. Gapontsev was named
a Fellow of the Optical Society of America in 2011 for his “technical leadership in
developing [] high power fiber lasers and vision and business leadership in commercializing
high power fiber lasers.” Letter from The Optical Society of America to Dr. Valentin P.
Gapontsev (Nov. 4, 2011).
11

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 12 of 33

B.

Scientific Innovation and Hard Work, and Resulting Contracts With
Western Companies, Drove Dr. Gapontsev’s and IPG Photonics’ Success
35.

The successes of Dr. Gapontsev and IPG Photonics have been entirely

market-driven: The result of arms-length contracts with many U.S., European, and Chinese
private companies. Only a small portion of IPG’s total revenue is generated from Russian
sales. The successes have not been the result of corrupt or otherwise inappropriate Russian
government assistance or involvement.
36.

The commercial acceptance of high power fiber lasers in large scale

manufacturing operations in the last five years, nearly two decades after Dr. Gapontsev
moved to the United States and IPG Photonics established its headquarters in
Massachusetts, is responsible for substantially all of Dr. Gapontsev’s wealth. Between
2013 and 2017, IPG Photonics’ net income rose from $155,780,000 to $347,588,000, and
the shareholders’ equity in the company rose from $927,969,000 to $2,022,322,000. IPG
Photonics 2017 Annual Rpt. at 34-35. Nearly all of Dr. Gapontsev’s wealth is derived from
his stake in IPG Photonics.
37.

Dr. Gapontsev’s fiber lasers are disruptive technology that changed how

scientists and engineers think of and use lasers. The fiber lasers are more efficiently able
to produce light at a much shorter wavelength than traditional CO2 lasers, making Dr.
Gapontsev’s lasers effective for a broader range of applications including metal processing.
IPG’s fiber lasers have the highest output powers, electrical efficiency, beam quality and
reliability compared to other types of lasers.
38.

Recognized as the “father of the fiber laser industry” by the Laser Institute

of America, Dr. Gapontsev personally holds nearly 100 patents worldwide, including nearly
40 in the United States. He has written more than 250 scientific publications.
12

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 13 of 33

39.

Just as he was in 1990, Dr. Gapontsev remains critical to the financial health

and continued innovations and success of IPG Photonics. As a result, IPG Photonics
Corporation has a direct interest in Dr. Gapontsev’s reputation and ability to do business
unimpeded by arbitrary government actions. In its 2017 Annual Report, IPG Photonics
stated:
We rely on the significant experience and specialized expertise of our
senior management and scientific staff and if we are unable to retain these
key employees and attract other highly skilled personnel necessary to grow
our business successfully, our business and results of operations could
suffer.
Our future success is substantially dependent on the continued service of our
executive officers, particularly our founder and chief executive officer, Dr.
Valentin P. Gapontsev, age 79, and the chief operating officer, Dr. Eugene
Scherbakov, age 70, our highly trained team of scientists, many of whom
have numerous years of experience and specialized expertise in optical
fibers, semiconductors and optical component technology, and other key
engineering, sales, marketing, manufacturing and support personnel, any of
whom may leave, which could harm our business.
IPG Photonics 2017 Annual Rpt. at 23.
40.

Dr. Gapontsev’s initial investment of a few thousand dollars in his fiber laser

company has grown, through scientific invention, hard work, and risk taking.
C.

Dr. Gapontsev’s Assets Are Located in the United States
41.

Dr. Gapontsev holds more than 98 percent of his assets in the United States.

Virtually the entirety of Dr. Gapontsev’s wealth has come from his innovations and the
success of IPG Photonics.
42.

In March 2017, Dr. Gapontsev was included on the Forbes Magazine

listing of Russian billionaires. Forbes 2017 Billionaires List: Meet the Richest People on
the Planet, FORBES (March 28, 2017). Forbes subsequently corrected its listing and now
lists Dr. Gapontsev on the list of American billionaires, noting that Dr. Gapontsev holds
13

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 14 of 33

both U.S. and Russian citizenship, but that his residence, company, and wealth are based
in the United States. The World’s Billionaires, FORBES (Dec. 3, 2018 3:26 PM),
https://www.forbes.com/billionaires/list/#version:static_header:country_countery:United
%20States; FORBES, https://www.forbes.com/profile/valentingapontsev/?list=biollionaires
#2b56e4401a0c, (last visited Dec. 3, 2018).
43.

When ranked by dollar volume of sales, not even one of IPG Photonics’ top

forty customers for fiscal year 2017 is headquartered in Russia. By region, 44% of the
company’s sales are to companies in China, 12% of the company’s sales are to companies
in the United States, 8% of the company’s sales are to companies in Germany, 21% of the
company’s sales are to “Other Europe,” and 15% of the company’s sales are to “Other
Asia.” Of this 15%, approximately 2% of total sales were in Russia. IPG Photonics
Investor Guidebook, Nov. 2018, at 29. IPG Photonics’ U.S. customers include the United
States Government and government contractors such as Lockheed Martin, Boeing, and
many others.
D.

Neither Dr. Gapontsev, Nor His Wealth, Nor the Success of IPG Photonics Is
Tied to President Putin’s Government
44.

Neither Dr. Gapontsev nor IPG Photonics owes its success to President Putin

or to other senior Russian government officials, past or present.
45.

Dr. Gapontsev, through his intellect and scientific innovation, established

and built IPG Photonics. To succeed, Dr. Gapontsev had to relocate his business outside
of Russia and operate under the legal frameworks of the United States and other countries
in which IPG Photonics operated.
46.

Dr. Gapontsev has met Mr. Putin only once, when receiving the country’s

highest award for scientific accomplishment by persons of Russian descent in 2011. That
14

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 15 of 33

award, which was only honorary, came after Dr. Gapontsev’s inventions and after his
commercial success in the West.
47.

Dr. Gapontsev was not a beneficiary of Mr. Putin and other Russian leaders

dispensing publicly-owned businesses and resources to their friends after the fall of the
Soviet Union. As that was happening, Dr. Gapontsev was inventing new laser technologies
and obtaining contracts from European companies on the basis of those innovations.
48.

“Russian oligarch” is a widely understood term. It refers to the few friends

of prominent Russian leaders who were corruptly allocated public assets and became rich
from it. Dr. Gapontsev is the polar opposite of a Russian oligarch. He had no friends in
high places in the Russian Government. His wealth came exclusively from his individual
scientific innovation and global market demand for his unique products. He is not a
“Russian oligarch.”
Countering America’s Adversaries Through Sanctions Act (“CAATSA”)

E.

49.

On August 2, 2017, the Countering America’s Adversaries Through

Sanctions Act (“CAATSA”) became law. Congress passed this law for the purpose of
prompting further sanctions against Russian individuals closely associated with the Putin
regime.

The purpose of such sanctions was to punish the conduct of the Russian

government, including interference in U.S. elections, cyber-attacks, and military aggression
in the Ukraine and Syria.
50.

Congress established a framework to facilitate and to require the imposition

of sanctions against Russian individuals closely associated with the Putin regime.
51.

To identify those who should be sanctioned, Congress required the Secretary

of the Treasury to designate individuals who qualify as Russian oligarchs.
52.

Most relevant here, in Section 241, CAATSA provides:
15

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 16 of 33

(a) IN GENERAL.--Not later than 180 days after the date of the enactment of this
Act, the Secretary of the Treasury, in consultation with the Director of National
Intelligence and the Secretary of State, shall submit to the appropriate
congressional committees a detailed report on the following;
(1) Senior foreign political figures and oligarchs in the Russian Federation,
including the following:
(A) An identification of the most significant senior foreign political
figures and oligarchs in the Russian Federation, as determined by
their closeness to the Russian regime and their net worth.
(B) An assessment of the relationship between individuals identified
under subparagraph (A) and President Vladimir Putin or other
members of the Russian ruling elite.
(C) An identification of any indices of corruption with respect to
those individuals.
(D) The estimated net worth and known sources of the income of
those individuals and their family members (including spouses,
children, parents, and siblings), including assets, investments, other
business interests, and relevant beneficial ownership information.
(E) An identification of the non-Russian business affiliations of
those individuals.
53.

Section 241 reinforces the common understanding of the meaning of the

term “Russian oligarch,” requiring that oligarchs be determined “by their closeness to the
Russian regime” and requiring an assessment of their “known sources of income,” “indices
of corruption,” and “non-Russian business affiliations” that might otherwise explain their
wealth.
54.

Section 241(b) of CAATSA provided that the Section 241 report “shall be

submitted in unclassified form, but may contain a classified annex.”
F.

The Secretary of the Treasury Arbitrarily and Capriciously Designates Dr.
Gapontsev as a Russian Oligarch under CAATSA Section 241
55.

On January 29, 2018, the Secretary of the Treasury published in the Federal

Register a “Report to Congress Pursuant to Section 241 of the Countering America’s
16

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 17 of 33

Adversaries Through Sanctions Act of 2017 Regarding Senior Foreign Political Figures
and Oligarchs in the Russian Federation and Russian Parastatal Entities” (“Treasury’s
Section 241 Report”).
56.

In his Section 241 Report, the Secretary stated that he was “providing in this

unclassified report a list of senior foreign political figures and oligarchs in the Russian
Federation, as determined by their closeness to the Russian regime and their net worth,”
suggesting the Secretary actually performed an analysis, but then further stated that “[t]o
determine the list of oligarchs, the Department of the Treasury enumerated those
individuals who, according to reliable public sources, have an estimated net worth of $1
billion or more.” Treasury’s Section 241 Report, at 1 (emphasis added).
57.

Treasury’s Section 241 List of Oligarchs was set out in Appendix B to

Treasury’s January 29, 2018 Section 241 Report. The Secretary’s List of Oligarchs
mirrored the Forbes March 28, 2017 list of Russian billionaires; it appears to have merely
put the list in alphabetical order. The Secretary’s apparent republishing of the Forbes
March 28, 2017 list of Russian billionaires does not reflect any consideration of the listed
individuals’ ties (or lack thereof) to President Putin and the Putin Government, the sources
of the individuals’ wealth, whether there existed any indices of corruption, or the nonRussian business affiliations and sources of wealth of the listed individuals.
58.

The Secretary’s public List of Oligarchs does not reflect consideration of the

factors set out by Congress; nor does it reflect any independent analysis by the Secretary of
the nationality or net worth of the listed individuals.
59.

Upon information and belief, Dr. Gapontsev is the only person included on

the List of Oligarchs who is a United States citizen.
60.

Upon information and belief, the Secretary also submitted a classified annex
17

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 18 of 33

to the oligarchs designation report to Congress. According to the unclassified report to
Congress, the classified annex may include other individuals for designation as oligarchs
that are not identified in the unclassified report.
61.

Upon information and belief, the classified annex may include analysis of

the designated oligarchs’ sources of wealth, indicia of corruption, and relationship with
President Putin. Any serious analysis of Dr. Gapontsev would show that he has no
relationship with the Russian regime and that his wealth arises from purely legitimate
sources, not from closeness to the Russian regime.

The Secretary arbitrarily and

capriciously chose to make any such analyses classified, leaving the reputational stain of
the U.S. Government’s official public oligarch designation without any of the analysis that
would make plain to IPG Photonics’ customers and counterparties that Dr. Gapontsev is
not associated with the Russian regime, is not corrupt, and is unlikely to suffer the same
legal fate as President Putin’s true cronies.
62.

The decision to submerge the analysis of the required statutory factors into

a classified annex, and indeed to include other oligarch designees in the classified annex, is
contrary to the plain statutory text of CAATSA. Section 241(a) required “the report” to
include analysis of the statutory factors, including each individual’s “closeness to the
Russian regime,” his relationship with President Putin, his “indices of corruption,” his
“sources of wealth,” and his “non-Russian business affiliations.” (emphasis added).
Section 241(c) then mandated that “the report required under subsection (a) shall be
submitted in an unclassified form.” (emphasis added). That means the required content of
the report had to be submitted in unclassified form, including analysis of each of the
statutory factors required in subsection (a). Although the Act contemplates that the
Secretary also may submit “a classified annex to the report,” which presumably could
18

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 19 of 33

include the classified bases or sources and methods used to derive the analysis in the report,
the Secretary’s unclassified report contains none of the statutorily required analysis. The
requirement that the report, including its analysis of the statutorily required factors, be
submitted unclassified is not some irrelevant government paperwork mandate.

The

requirement is for the protection of those who are designated as oligarchs so the public can
assess why they were designated and the likelihood of further adverse government actions.
The Secretary’s arbitrary and capricious decision to submit only a list of oligarchs, with
none of the statutorily required analysis, in the unclassified report deprived Dr. Gapontsev
and IPG Photonics of this crucial protection.
63.

By the time of the release of its March 2018 edition, Forbes Magazine had

realized its mistake in including Dr. Gapontsev on the list of Russian billionaires and
instead included him on the magazine’s list of American billionaires.
64.

Requests of Congressmen and Dr. Gapontsev’s representatives for removal

of Dr. Gapontsev from the List of Oligarchs have been met with no substantive response
from Treasury. Supporters included the Optical Society of America, the President of the
U.S. Russia Business Council, a former Secretary of the U.S. Navy, the Town of Oxford,
and suppliers and employees of IPG Photonics.
65.

Dr. Gapontsev’s representatives have met with the Treasury Department and

provided a list of his assets and asset locations. Despite these efforts, the Secretary has
refused to remove Dr. Gapontsev from the Section 241 List of Oligarchs and has informed
Dr. Gapontsev and IPG Photonics that there is no mechanism in place by which an
individual can seek to be removed from Treasury’s List of Oligarchs.

19

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 20 of 33

G.

Dr. Gapontsev and IPG Photonics Have Been Harmed by the Secretary’s
Designation of Dr. Gapontsev as a Russian Oligarch
66.

Dr. Gapontsev and IPG Photonics fear the Secretary’s designation of Dr.

Gapontsev as a Russian oligarch has affected, or will affect, their business, including their
interactions with customers and financial institutions. Given the significant ownership
stake that Dr. Gapontsev and the Gapontsev family trusts have in the company, the
Secretary’s designation of Dr. Gapontsev as a Russian oligarch necessarily affects IPG
Photonics. Counterparties of IPG Photonics have made statements to company personnel
to the effect that IPG Photonics is on Treasury watch lists and has been red-flagged as a
sanctions list company. At least one counterparty stated they assumed that IPG Photonics,
due to its founder, CEO, and substantial owner’s designation as a Russian oligarch by the
Secretary, is effectively disqualified from doing business with U.S. persons and
corporations.
67.

Particularly affected is Dr. Gapontsev and IPG Photonics’ business with

U.S. Government contractors. Dr. Gapontsev and IPG Photonics have worked to grow this
small part of Plaintiffs’ business. IPG Photonics’ Director of Advanced Applications has
a U.S. Government security clearance, which permits him to discuss the Government’s
technology needs with U.S. Government agencies and to propose IPG Photonics laser
solutions for those needs. U.S. Government officials and contractors have told IPG
Photonics personnel that they believed they could no longer work with IPG Photonics due
to the Secretary’s designation of Dr. Gapontsev as a Russian oligarch. One contractor even
expressed surprise that IPG personnel were bothering to attend a classified symposium
regarding U.S. Government laser needs given Dr. Gapontsev’s designation.
68.

IPG Photonics has had to devote time and resources to addressing the
20

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 21 of 33

Secretary’s List of Oligarchs. The company has been required to field questions relating to
the Secretary’s designation of Dr. Gapontsev and to convince customers that they still may
legally do business with IPG Photonics. IPG Photonics is concerned that it has lost or may
lose business opportunities and that the Secretary’s designation of Dr. Gapontsev may
affect the willingness of certain potential customers to work with IPG Photonics due to
concern that the designation will in some way disqualify IPG Photonics from completing
any contract.
69.

At least one third-party trade compliance system, Visual Compliance,

flagged Dr. Gapontsev in its system as posing a problem after the Secretary submitted his
List of Oligarchs to Congress. Being flagged on a database like Visual Compliance may
result in third parties being unwilling to do business with the flagged individual or any
businesses associated with that individual. That effect is made plain by advice appearing
on the website of the International Compliance Professionals Association regarding the
oligarch designation; those entries suggest that the designated individuals “are suspected of
working for a Russian defense or intelligence agency” and that companies should “[u]se
caution when dealing with anyone on th[e] list.” The Secretary’s designation of Dr.
Gapontsev as a Russian oligarch has required the company to divert time and other assets
to clarifying the significance of the designation. Following the Secretary’s submission of
the CAATSA Section 241 List of Oligarchs to Congress, IPG Photonics has reason to
believe that it has not received product orders that it expected were going to be placed.
70.

Additionally, since the Secretary’s designation of Dr. Gapontsev as a

Russian oligarch, IPG Photonics has been subjected to additional inquiries from the
company’s banking facilities. IPG Photonics did not receive these types of inquiries before
the Secretary’s designation of Dr. Gapontsev. These new inquiries are consistent with the
21

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 22 of 33

April 18, 2018 letter that Senators Jeanne Shaheen and Sheldon Whitehouse sent to major
U.S. financial institutions, encouraging those institutions to red-flag and conduct extended
due diligence on any person included on the oligarchs list. The letter goes further to demand
that the financial institutions report to Congress their financial dealings with the oligarchs,
presumably under pain of further compulsory demands or subpoenas. Banking institutions
generally are reluctant to ignore demands from senators on committees with financial
industry oversight. The Senators’ letter states:
Given their wealth and relationship to the Russian state, many
oligarchs in Russia either wield or are susceptible to considerable political
influence. These individuals often have global financial dealings, including
in the U.S., through luxury real estate, personal property, or other interests,
and may utilize the U.S. financial system to conduct some of their activities.
Unfortunately, the net worth of many of these individuals is frequently
generated by business conduct that can blur the line between private wealth
and state resources. In some examples, the private fortunes of Russian
oligarchs were acquired through the privatization of state-owned assets
conducted in a manner which unjustly enriched them and in an environment
subject to corruption and abuse. In fact, many oligarchs have been known
to use their assets to shield the state from the impact of sanctions….
As mentioned, the Treasury Department released this unclassified
report on January 29, 2018. The report identified 96 Russian oligarchs with
a net worth of $1 billion or more. While the names were compiled from
public sources such as the Forbes list of billionaires, Secretary Mnuchin
warned during testimony before the Senate Banking Committee on January
30: “There will be sanctions that come out of this report.”…The law
explicitly requires that the January 2018 report, and not just the sanctions
designations alone, should guide banks and help to detect and deter the
exploitation of our financial system by Russian oligarchs and senior political
figures, some of whom may have engaged in acts of corruption and the
privatization of state-owned assets in a way which unjustly benefited state
officials or their family members, or other sanctionable conduct.
Given the importance of this issue to national security, and to gain a
better understanding of the extent of this problem and what financial
institutions may be doing about it, please provide the answers to the
following questions:
1. During the past 5 years, as part of its normal due diligence
program or triggered by internal concerns about suspicious activity,
22

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 23 of 33

has [your bank] identified, or conducted any review to determine if
it has any account (including but not limited to personal, commercial
or correspondent accounts) that is controlled by or contains any
assets that belong to or are controlled by any individual on the
January 29, 2018 list of oligarchs or senior Russian political figures,
or if [your bank] has any financial arrangement (including but not
limited to any loan, line of credit or margin account) or has provided
any service to any individual, or any entity controlled by any
individual, on the list [“applicable account, financial arrangement or
service”]? If so, please provide the following information:
...
c. Whether any applicable accounts, financial arrangements
or services were identified as being held by or provided to
any individual or individuals on the list. If so, for each
applicable account, financial arrangement or service -grouped by common control or beneficial owner -- please
provide the following information:
i. The type, amount or value (as appropriate) of any
account, financial arrangement or service provided;
ii. Whether the accountholder, party to the
arrangement or recipient of the service was treated as
a Politically Exposed Person or subject to any
enhanced due diligence and if so, what was it;
iii. Whether any suspicious activity was identified
with any applicable account, financial arrangement or
service, and a description of any such suspicious
activity; and,
iv. Whether any applicable account, financial
arrangement or service has been discontinued during
this period, and if so the reason for the
discontinuation.
2. If [your bank] has not conducted such a review in the past 5 years,
what efforts has [your bank] initiated to identify any activity between
those individuals named on the U.S. Government’s January 29, 2018
list of senior political figures or the “Oligarchs List” and any
applicable account, financial arrangement or service associated with
your institution, and what actions does [your bank] plan to undertake
if such an individual and any applicable account, financial
arrangement or service is identified?
Letter from Senators Jeanne Shaheen and Sheldon Whitehouse to Brian Moynihan, Chief
23

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 24 of 33

Executive Officer, Bank of America (Apr. 18, 2018) (footnotes omitted).1
71.

Upon information and belief, the Secretary’s designation of Dr. Gapontsev

as a Russian oligarch has caused customers and potential customers to believe they cannot
deal with Dr. Gapontsev or IPG Photonics. Such beliefs may be enhanced by pending
legislation, such as the proposed Defending Elections from Threats by Establishing
Redlines Act (“DETER”), H.R. 4884, 115th Congress, 2d Session, and the proposed
Defending American Security from Kremlin Aggression Act (“DASKA”), S. 3336, 115th
Congress, 2d Session. Each includes provisions regarding the imposition of sanctions on
Russian oligarchs.
CLAIMS FOR RELIEF
COUNT I
(Violation of the Countering America’s Adversaries Through Sanctions Act: The
Secretary of Treasury’s Actions in Designating Dr. Gapontsev as a Russian Oligarch
Violated CAATSA)
72.

Plaintiffs incorporate the preceding paragraphs as if fully set forth herein.

73.

The Secretary’s designation of Dr. Gapontsev as a Russian oligarch is not in

accordance with a congressional statute, the CAATSA, which required the Secretary to
determine Russian oligarchs by “their closeness to the Russian regime.” Any analysis of
Dr. Gapontsev’s closeness to the Russian regime would have disqualified him as a Russian
oligarch.
74.

Moreover, Dr. Gapontsev’s inclusion as an “oligarch in the Russian

Federation” is contrary to the plain meaning of that term, which clearly refers to friends of

1

Although this citation is to the Bank of America letter specifically, letters were drafted to
several other major banking institutions, e.g., JP Morgan Chase, Citibank, Barclays,
Deutsche Bank, UBS, HSBC, and Credit Suisse.
24

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 25 of 33

powerful Russian officials who have been granted public assets by the Russian regime.
Any analysis of the source of Dr. Gapontsev’s wealth would have demonstrated that it arose
from his groundbreaking inventions in the field of fiber lasers and contracts with Western
firms, not favors from the Russian government or any of its officials.
75.

Further, the Secretary’s public List of Oligarchs does not reflect the

consultation the Secretary was required to have with intelligence officials and the Secretary
of State. The Secretary’s public List of Oligarchs also does not reflect any analysis of the
factors the Secretary was required to consider under Section 241 of the CAATSA: a)
“closeness to the Russian regime and [] net worth; b) the “relationship between individuals
identified [by reference to the previous factor] and President Vladimir Putin or other
members of the Russian ruling elite”; c) “any indices of corruption”; d) the “estimated net
worth and known sources of the income of those individuals and their family members
(including spouses, children, parents, and siblings), including assets, investments, other
business interests, and relevant beneficial ownership information”; and e) “the non-Russian
business affiliations of those individuals.” Instead, the Secretary’s public List of Oligarchs
appears to be a wholesale adoption of the Forbes Magazine March 28, 2017 list of Russian
billionaires.
76.

Moreover, the Secretary violated CAATSA by failing to put the required

statutory analysis in “the report,” which was required to be submitted in unclassified form.
To the extent that the Secretary conducted the statutorily required analysis in a classified
annex, the Secretary violated CAATSA by including none of that analysis in the unclassified
report. That the analysis was required to be unclassified is a crucial protection for oligarch
designees, so that the public could examine the reasons for the designation and the likelihood
of further adverse action. In his current split of information between unclassified report and
25

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 26 of 33

classified annex, the Secretary has published a disparaging designation of Dr. Gapontsev for
the world to see but made secret all the analysis that may exonerate him.
77.

This Court should set aside and declare unlawful the Secretary’s designation

of Dr. Gapontsev as a Russian oligarch.
COUNT II
(Violation of the Administrative Procedure Act:
The Secretary of the Department of Treasury’s Action Designating Dr. Valentin
Gapontsev as a Russian Oligarch Violated the Administrative Procedure Act)
78.

Plaintiffs incorporate the preceding paragraphs as if fully set forth herein.

79.

The Secretary’s designation of Dr. Gapontsev as a Russian oligarch is “final

agency action for which there is no other adequate remedy.”

5 U.S.C. § 704. The

Secretary has informed Dr. Gapontsev and IPG Photonics that there is no administrative
mechanism by which Dr. Gapontsev can be removed from Treasury’s Section 241 List of
Oligarchs.
80.

Plaintiffs have no adequate or available administrative remedy; in the

alternative, any effort to obtain an administrative remedy would be futile.
81.

The Secretary’s designation of Dr. Gapontsev as a Russian oligarch violates

the APA as it is “arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law,” 5 U.S.C. § 706(2)(A); “contrary to constitutional right, power,
privilege, or immunity,” 5 U.S.C. § 706(2)(B); “in excess of statutory jurisdiction,
authority, or limitations,” 5 U . S . C . § 706(2)(C); and “without observance of procedure
required by law,” 5 U.S.C. § 706(2)(D).
82.

The Secretary’s designation of Dr. Gapontsev as a Russian oligarch is not in

accordance with a congressional statute, the CAATSA, which required the Secretary to
determine Russian oligarchs by “their closeness to the Russian regime” and indices of
26

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 27 of 33

corruption. Any analysis of Dr. Gapontsev’s closeness to the Russian regime would have
disqualified him as a Russian oligarch—as would the absence of any indices of corruption.
83.

Moreover, Dr. Gapontsev’s inclusion as an “oligarch[] in the Russian

Federation” is contrary to the plain meaning of that term, which clearly refers to friends of
powerful Russian officials who have been granted public assets by the Russian regime.
Any analysis of the source of Dr. Gapontsev’s wealth would have demonstrated that it arose
from his groundbreaking inventions in the field of fiber lasers and contracts with Western
firms, not favors from the Russian government or any of its officials.
84.

Upon information and belief, the Secretary created his public List of

Oligarchs based solely on net worth, and thereby cast a dark shadow over the named
individuals, and then, in a classified report, conducted the real analysis of which individuals
in fact are Russian oligarchs. The public List of Oligarchs reflects no analysis of the factors
set out in Section 241 of the CAATSA: a) “closeness to the Russian regime and [] net
worth; b) the “relationship between individuals identified [by reference to the previous
factor] and President Vladimir Putin or other members of the Russian ruling elite”; c) “any
indices of corruption”; d) the “estimated net worth and known sources of the income of
those individuals and their family members (including spouses, children, parents, and
siblings), including assets, investments, other business interests, and relevant beneficial
ownership information”; and e) “the non-Russian business affiliations of those individuals.”
Instead, the Secretary made its oligarch designation by adopting the Forbes Magazine
March 2017 list of Russian billionaires. The Secretary’s public List of Oligarchs also does
not reflect any consultation with the Director of National Intelligence or the Secretary of
State, as required by CAATSA.
85.

The Secretary also arbitrarily and capriciously classified all but the names
27

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 28 of 33

of the people designated as oligarchs. By arbitrarily and capriciously pouring any analysis
of the designees’ sources of wealth, relationship with President Putin, or indicia of
corruption into a classified annex, the Secretary arbitrarily and capriciously denied the
public information about Dr. Gapontsev that would have mitigated the effect of the
designation on Dr. Gapontsev and IPG Photonics. Keeping secret the entirety of the
analysis required by Section 241 of the CAATSA as to which individuals truly are Russian
oligarchs is not in accordance with the terms of the statute, and certainly is not fair to Dr.
Gapontsev, a U.S. citizen, or to IPG Photonics. In these regards, the Secretary’s designation
was arbitrary and capricious and contrary to law.
86.

Further, in putting together the List of Oligarchs, the Secretary did not

provide notice to Dr. Gapontsev or IPG Photonics that it was considering placing Dr.
Gapontsev on the list; nor did the Secretary provide Dr. Gapontsev or IPG Photonics with
an opportunity to present evidence prior to the Secretary’s inclusion of Dr. Gapontsev on
the Secretary’s List of Oligarchs.
87.

The Secretary also has failed to provide any mechanism by which an

individual included on the Secretary’s List of Oligarchs can seek to be removed from the
list.
88.

This Court should set aside and declare unlawful the Secretary’s designation

of Dr. Gapontsev as a Russian oligarch; the Court further should require that the Secretary
provide notice and an opportunity to be heard, as well as procedures for seeking removal
of any such designation, before making any future designation of Dr. Gapontsev or IPG
Photonics.

28

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 29 of 33

COUNT III
(The Secretary of Treasury’s Actions Violated the Appointments Clause, the
Constitutional Separation of Powers, and the Private Non-Delegation Doctrine)
89.

Plaintiffs incorporate the preceding paragraphs as if fully set forth herein.

90.

The Appointments Clause of the United States Constitution, U.S. Const. Art.

II, §2., Cl. 2, empowers the President to nominate and, with the advice and consent of the
United States Senate, appoint public officials, including the Secretary of the Department of
the Treasury.
91.

The Vesting Clause of Article II vests all the Executive Power in the

President of the United States, subject to delegation by the President only to officers of the
United States appointed in a manner consistent with the Constitution. The Vesting Clauses
of Articles I, II, and III of the United States Constitution vest the Executive, Legislative,
and Judicial branches of government with separate and distinct powers. U.S. Const. Art. I,
§ 1; U.S. Const. Art. II, § 1, Cl. 1; U.S. Const. Art. III, § 1. The constitutionally distinct
powers of the three branches of government, known as the separation of powers, provides
a set of constitutional checks and balances on each branch of government.

The

Appointments Clause requires every person exercising substantial government authority to
have been appointed in one of two manners specified in that Clause. Further, the Vesting
and Appointments Clauses preclude a private entity from exercising the legislative,
executive, or judicial powers of the Federal Government; this is known as the private NonDelegation Doctrine.
92.

The Secretary’s public List of Oligarchs does not reflect any of the analysis

required of the Secretary by Section 241 of the CAATSA, including any analysis of the
factors set out in Section 241. The Secretary’s public List of Oligarchs does not reflect any
consultation with the Director of National Intelligence or the Secretary of State, as required
29

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 30 of 33

by CAATSA. The Secretary’s public List of Oligarchs also does not reflect any analysis of
the factors set out by Congress in Section 241 of CAATSA: a) “closeness to the Russian
regime and [] net worth; b) the “relationship between individuals identified [by reference to
the previous factor] and President Vladimir Putin or other members of the Russian ruling
elite”; c) “any indices of corruption”; d) the “estimated net worth and known sources of the
income of those individuals and their family members (including spouses, children, parents,
and siblings), including assets, investments, other business interests, and relevant beneficial
ownership information”; and e) “the non-Russian business affiliations of those individuals.”
Instead, the Secretary’s public List of Oligarchs simply mirrors the Forbes Magazine March
28, 2017 list of Russian billionaires.
93.

The Secretary’s conduct improperly and unconstitutionally delegated the

Secretary’s power and authority to Forbes Magazine, a private entity owned by Hong Kong
investors. The Secretary’s actions thereby violated the private Non-Delegation Doctrine.
The Secretary’s actions also violated the Appointments Clause, the Vesting Clauses, and
the separation of powers principles in that the Secretary’s actions caused Executive Branch
functions to be performed by a person who was not an officer of the United States appointed
in a manner permitted by the United States Constitution.
94.

This Court should set aside and declare unlawful the Secretary’s designation

of Dr. Gapontsev as a Russian oligarch.
COUNT IV
(Violation of the Fifth Amendment to the U.S. Constitution:
The Secretary of Treasury’s Actions in Designating Dr. Valentin Gapontsev as a
Russian Oligarch Has Violated Dr. Gapontsev’s and IPG Photonics’ Right to
Due Process)
95.

Plaintiffs incorporate the preceding paragraphs as if fully set forth herein.

96.

The Due Process Clause of the Fifth Amendment requires that no person or
30

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 31 of 33

entity be deprived of his or its property or of a liberty interest without due process of law.
97.

In putting together the List of Oligarchs, the Secretary did not provide notice

to Dr. Gapontsev or IPG Photonics that the Secretary was considering placing Dr.
Gapontsev on the list; nor did the Secretary provide Dr. Gapontsev or IPG Photonics with
an opportunity to present evidence prior to the Secretary’s inclusion of Dr. Gapontsev on
the Secretary’s List of Oligarchs.
98.

The Secretary also has failed to provide any mechanism by which an

individual included on the Secretary’s List of Oligarchs can seek to be removed from the
list.
99.

The Secretary’s designation of Dr. Gapontsev as a Russian oligarch has

resulted in harm both to Dr. Gapontsev and to IPG Photonics. Because of the Secretary’s
designation, there is a black cloud over Dr. Gapontsev and IPG Photonics. The company
has had to expend resources to counteract the black cloud. Dr. Gapontsev and IPG
Photonics fear that the Secretary’s designation has resulted and could result in a loss of
business, including U.S. Government-related business.
100.

Plaintiffs are entitled to a declaration that the Secretary’s designation of Dr.

Gapontsev as a Russian oligarch violates the Fifth Amendment to the U.S. Constitution and
should be set aside; the Court further should require that the Secretary provide notice and
an opportunity to be heard, as well as procedures for seeking removal of any such
designation, before making any future designation of Dr. Gapontsev or IPG Photonics.
COUNT V
(Violation of the Privacy Act, 5 U.S.C. § 552a:
The Secretary’s Designation of Dr. Valentin Gapontsev as a Russian Oligarch Violates
the Privacy Act)
101.

Plaintiffs incorporate the preceding paragraphs as if fully set forth herein.
31

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 32 of 33

102.

The Secretary’s Section 241 Report constitutes a “record” under the Privacy

103.

The Secretary’s inclusion of Dr. Gapontsev on the List of Oligarchs was in

Act.

error and was due to the Secretary’s knowing and intentional decision effectively to simply
cut and paste the Forbes March 28, 2017 list of Russian billionaires. The Secretary’s public
list does not reflect the Secretary’s performance of his duties in accordance with CAATSA
or by the means necessary to assure the fairness of his determination and of any
determination made in reliance thereon.
104.

Dr. Gapontsev and IPG Photonics have sought to have Dr. Gapontsev’s

name removed from the Secretary’s List of Oligarchs, but the Secretary has denied the
request and further has stated that there is no mechanism by which an individual may seek
to be removed from the List of Oligarchs.
105.

Dr. Gapontsev and IPG Photonics have been injured by the Secretary’s

erroneous inclusion of Dr. Gapontsev on the Section 241 List of Oligarchs.
106.

This Court should set aside and declare unlawful the Secretary’s designation

of Dr. Gapontsev as a Russian oligarch.
PRAYER FOR RELIEF
WHEREFORE, Plaintiffs request that the Court enter judgment in its favor and:
a. Enter an Order holding unlawful and setting aside the Secretary’s designation of Dr.
Gapontsev as a Russian oligarch, as arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law; contrary to constitutional right, power, privilege,
or immunity; in excess of statutory jurisdiction, authority, limitations or short of
statutory right; and without observance of procedure required by law.
b. Enter an Order that the Secretary remove Dr. Gapontsev’s name from the Secretary’s
List of Oligarchs appended to the Treasury’s Section 241 Report.
c. Enter an Order enjoining the Secretary to provide Dr. Gapontsev and IPG Photonics
the opportunity to be heard and to present evidence before the Secretary makes any
32

 Case 1:18-cv-02826 Document 1 Filed 12/03/18 Page 33 of 33

future Russian oligarch, or other, designation of Dr. Gapontsev or IPG Photonics.
d. Award Plaintiffs their litigation costs and reasonable attorneys’ fees.
e. Order such other relief as the Court may deem just and proper.

Dated: December 3, 2018

Respectfully submitted,
/s/ Michael J. Edney
Michael J. Edney, DC Bar No. 492024
Stephen M. McNabb, DC Bar No. 367102
NORTON ROSE FULBRIGHT US LLP
799 9th Street, NW, Suite 1000
Washington, DC 20001-4501
Telephone: (202) 662-0200
Fax: (202) 662-4643
michael.edney@nortonrosefulbright.com
stephen.mcnabb@nortonrosefulbright.com
Attorneys for Plaintiffs Dr. Valentin
Gapontsev and IPG Photonics Corporation

33