The most well-known Kazakh legal action in the West is the series of lawsuits filed against filmmakers over Sasha Baron Cohen's scantily clad moustache-toting depiction of life in Kazakhstan. But another case from the central Asian country, with less facial hair but no less public interest, is currently working its way through the commercial branch of the English High Court.
The case in question, which is said to be the biggest claim ever made in a UK court, pits BTA Bank, formerly the largest bank in Kazakhstan, against its former chairman, Mukhtar Ablyazov. The latter is accused by his previous employees of embezzling billions of dollars from the bank before it defaulted on $12bn of debt in 2009.
Ablyazov, who presided over BTA from 2005 to 2009, is actually suspected of embezzling at least $8bn of bank funds via a number of harebrained schemes that would make hardnosed con artists such as Frank Abagnale or even Charles Ponzi seem like petty crooks.
The allegations against him include all the staples of a Hollywood conman film, and much more, including a complex web of fraudulent loans, shell companies, high-profile real estate deals (such as a stalled skyscraper in Moscow’s business district) and make-believe oil rigs.
You couldn’t make this stuff up. Or could you? (Ablyazov has claimed there is no basis for the charges against him and that they are politically motivated.)
Earlier this week, lawyers representing both BTA and Ablyazov held a case management conference in London’s High Court to discuss how to proceed with the myriad of intermingled and complex litigation. At present there are seven separate proceedings worth a combined $4.15bn.
Lawyers representing Ablyazov have advocated a “mega trial” combining the five most advanced cases (see below, proceedings numbers 1-5) against their client, whereas litigators for the bank proposed moving ahead first with the largest of the five cases – the $1.5bn Granton proceedings.
Stephen Smith Q.C. of New Square Chambers, representing BTA, said in proceedings on Tuesday a mega trial would involve 12 specialist topics requiring expert knowledge -- including matters of Russian, Kazakh and Ukrainian law as well as equity valuations and knowledge of oil and gas equipment. In addition it would occupy many hours of court time and would require approximately 40-50 witnesses.
At the end of the two-day conference judge Mr Justice Teare recommended that the first trial against Ablyazov should concern three cases (numbers 1-3 below) worth a total of $2bn. The trial will not commence before December 2012 and could last at least 14 weeks.
Here is a brief overview of the maze of litigation facing Ablyazov:
1. The Granton Proceedings –$1.5bn
Relates to loans made by BTA, under Ablyazov’s oversight, to two companies to fund the purchase of oil and gas equipment from six other companies. Among the equipment that was supposedly purchased by the parties was an oil rig, evidence of which has yet to be substantiated.
2. The Drey Proceedings - $401m
Ablyazov, former bank CEO Roman Solodchenko and former First Deputy Chairman Zhaksylyk Zharimbetov, used three UK nationals as go-betweens to allegedly embezzle money from the bank into a UK based shell company called Drey Associates.
3. The Chrysopa Proceedings - $120m
BTA purportedly leant $120m to Dutch entity Chrysopa on “highly unfavourable” terms, which allegedly was a sham and was intended for onward transmission to a separate company to acquire various other companies (reportedly major oil and gas handling installations) who owned and/or operated the Vitino port facility on the White Sea in Russia.
4. The Tekhinvest Proceedings - $300m
This claim relates to a series of purported loan facilities granted to several construction companies including Tekhinvest to be used in connection with the construction of the Eurasia Tower building in the Moscow City development in Russia, a 309m mega structure (that’s taller than the Canary Wharf and Eiffel Towers). Building work on the tower has been stalled.
5. The AAA Proceedings - $300m
BTA CEO Roman Solodchenko allegedly moved the funds from a $300m portfolio of AAA-rated bonds to four companies in the British Virgin Islands with the help of two bankers in Cyprus. In early 2011, Ablyazov was added as a defendant to these proceedings.
6. The Paveletskaya proceedings – $322m
The bank alleges that Ablyazov misappropriated funds advanced to Paveletskaya and Samuel Finance for the purpose of investment in the construction of an underground shopping and entertainment mall in Paveletskaya Square in central Moscow (to be developed by Tekhinvest).
7. The DCM Proceedings - $1.2bn
The claim here concerns five loan transactions made between various Kazakh companies for the ultimate personal benefit of Ablyazov and his colleague Zharimbetov.
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And that’s unlikely to be the end of it. While Ablyazov is currently on the hook for $4.15bn, auditors believe between $8-12bn was embezzled from the bank and the lawyers representing BTA are expected to escalate the claims in the coming months.
One of the schemes reported to be under scrutiny, worth in the order of $1.5bn, concerns Eurasia Logistics, a company established by Ablyazov in 2003 which was engaged in the construction of trade and transportation centres in Moscow, Yekaterinburg, Kazan and Novosibirsk.
Ablyazov denies all allegations and has claimed all along that the allegations against him are politically motivated and driven by Kazakh president Nursultan Nazarbayev's drive to eradicate potential opponents. A spokesman for the former BTA chairman told FT Tilt word to that effect.
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