Crime without punishment in 2014: I/the Ablyazov files
The year 2014 has been one of high expectations regarding the chances that Kazakhstan’s two most notorious former high-placed officials turned criminal could finally be brought to justice in a foreseeable future. But the cases of former banker Mukhtar Ablyazov, who entered the year already behind bars in France, and his counterpart, also former thieving banker but kidnapper and murderer as well, Rakhat Aliyev have proven to be more laborious than initially assumed. Defence lawyers in both cases, meaning in France and in Austria where Aliyev is due to be tried and eventually convicted, have tried to manipulate the course of justice into “political” domains by throwing mud to judges, prosecutors and victims’ attorneys alike. The outcome of the struggles is yet to get profile, since obstacles to conclude proceedings on both locations keep appearing time and again. In the case of Ablyazov, in addition to the question over his extradition, efforts by his former bank BTA, now under control of its former rival Kazkommertsbank, to regain at least part of the multi-billion funds stolen by the culprit either in cash or in assets remain complex in spite of a successful attempt to obtain access to all documents indicating the funds’ and assets’ locations from the culprit’s former defence lawyers.
BY CHARLES VAN DER LEEUW, WRITER, NEWS ANALYST
The scene in France was first set towards the end of 2013, half a year after Ablyazov’s surprise arrest in the south of France, shortly after which both the Russian Federation and Ukraine (not before, remarkably) requested his extradition. “The Prosecutor General’s Office of Aix-en-Provence asked to grant a request for extradition of former BTA Bank CEO Mukhtar Ablyazov to Russia because more serious crimes have been committed there,” Russia’s legal newsreel RAPSI [http://rapsinews.com/judicial_news/20131213/270087435.html] reported on December 13, referring to Agence France Presse. “Earlier, the prosecutors asked to extradite Ablyazov to Ukraine. A court in Aix-en-Provence on Thursday began the hearing of Ablyazov’s extradition to Ukraine. The hearing was set to begin in September, but was rescheduled to December 3, as Ablyazov was not proficient in Ukrainian and French languages in which the documents were submitted to the court. The hearing was then again postponed for a week. During his detainment in France, Ablyazov twice filed for bail, but the court refused on the grounds that the banker’s safety could not be properly looked after if he is not kept in a penitentiary facility. Ablyazov was detained on July 31 near Cannes, France. Kazakhstan, Russia, and Ukraine are all seeking the extradition of the fugitive banker. Kazakhstan and France do not have an extradition treaty and extradition to Russia may be hindered for procedural reasons, so Ukraine remains the choice destination. Kazakhstan is seeking the extradition of Ablyazov, who fled to the UK after the Kazakh government acquired a stake in BTA in 2009 and the bank came under the control of its sovereign wealth fund Samruk-Kazyna. Ablyazov was granted political asylum in Britain in 2011.”
The initial result looked hopeful indeed – but was followed by a setback which caused a year’s delay in proceedings due to a mere formality on the side of the court. “A court in France’s Aix-en-Provence on Thursday ruled to extradite fugitive BTA Bank ex-CEO Mukhtar Ablyazov to Russia or Ukrauine, with the priority given to the Russian side,” the agency reported on January 9 [http://rapsinews.com/judicial_news/20140109/270391898.html]. The agency quoted Antonin Levy, a legal consultant for BTA Bank, as commenting: “Today’s decision of the court confirms the validity of the Russian and Ukrainian extradition requests as well as that of the claims brought by BTA bank against Mr Ablyazov. The French judge considers the facts against Mr Ablyazov as sufficiently grave to justify his extradition. Whether Mr Ablyazov appeals this decision is irrelevant when considering the facts since such an appeal would only address procedural issues and would not impact in any way the merits of the extradition or that of the case against him for stealing billions from the bank.”
Other reports on the affair, though, were less objective and mixed factuality with interpretations. “Mukhtar Ablyazov, a fugitive former Kazakh banker and political activist, has won his appeal against a decision by a French court to extradite him to Russia,” the Financial Times [http://www.ft.com/intl/cms/s/0/8dab907c-bff1-11e3-b6e8-00144feabdc0.html#axzz3Mi6dkA51] reported on April 9. “France’s Court of Cassation on Wednesday upheld Mr Ablyazov’s appeal against the ruling reached by a court in Aix-en-Provence in January and ordered the case to be heard again, assigning it to a court in Lyon. A defence lawyer said it was a ‘significant victory’ for Mr Ablyazov. […] The Court of Cassation in Paris has not yet issued the motivations for its ruling, which is not based on the merits of the case but whether due legal processes have been followed. Mr Ablyazov’s French lawyers, led by Jean-Pierre Mignard, said they had submitted a complaint to Christiane Taubira, justice minister, calling for an investigation into what they called ‘apparent multiple, grave and repeated breaches’ of due process allegedly committed by the judges and prosecutor in Aix-en-Provence, as reported by Le Canard Enchaîné, a French newspaper, on Wednesday.” For all it matters, Le Canard Enchaîné is not a French newspaper but a renowned satirical weekly.
The report’s author, though, did allow BTA to clarify its position. “BTA Bank said in a statement that it was disappointed by the delays caused by what it called an ‘administrative error’ made by the court in Aix-en-Provence, the FT’s report read further down. “We understand that according to the decision of the French Supreme Court, such annulment resulted solely and exclusively from an administrative error by the court in the extradition process in failing to have Mr Ablyazov sign an official record before the court objecting again to the extradition requests following a minor change in the composition of the court,” the bank was quoted as declaring. “French justice has joined British justice in acknowledging the massive frauds committed by Mr Ablyazov to the prejudice of the bank.” “BTA said it understood that Mr Ablyazov would remain in custody until the Lyon court makes its decision on whether to hold a retrial and that BTA was confident the ruling would confirm his extradition,” in the FT’s words. “BTA said that so far it had secured numerous judgments in the English High Court in its favour for nearly $4bn and was in the process of seeking to enforce those judgments against assets currently held in receivership.”
Shortly after Ablyazov’s momentary “great victory” in France, his last straw in England through which he could uphold his false appearance of a “political activist” had been removed by the authorities. “The UK has decided to revoke the asylum status it granted in 2011 to Mukhtar Ablyazov, a former banker accused of fraud and one of Kazakh president Nursultan Nazarbayev’s main political opponents,” a separate report in the Financial Times published in its edition of April 16 [http://www.ft.com/intl/cms/s/0/c22e50d0-c53e-11e3-89a9-00144feabdc0.html#axzz3Mi6dkA51] was to read. “Mr Ablyazov, former chairman and main shareholder of Kazakhstan’s BTA Bank, which was nationalised in 2009, was informed in January of the UK Home Office’s intention to cancel his refugee status. Lawyers for Mr Ablyazov, who is in prison in France where he is fighting a protracted legal battle against extradition, accuse the UK of violating international laws protecting refugees by engaging in communications over his refugee status with his country of origin, and refusing to release information to him about those contacts. The lawyers say documents they have obtained suggest that David Cameron, UK prime minister, saw the issue as an obstacle to better relations with Kazakhstan. […] Documents obtained by Mr Sahlas and provided to the Financial Times show that two London-based law firms, Reed Smith and Ronald Fletcher Baker, are acting on behalf of the Kazakhstan government in lobbying the UK government as well as the Serious Fraud Office, which was pressed to open a criminal investigation into Mr Ablyazov.”
“The $6bn legal battle between Kazakhstan’s JSC BTA Bank and its former chairman Mukhtar Ablyazov is heading to the Supreme Court, where for the first time the justices will examine the standard form freezing injunction,” The Lawyer [http://www.thelawyer.com/analysis/behind-the-law/ablyazov-reaches-supreme-court-the-latest-step-in-extraordinary-litigation/3018570.article] reported on April 2. The legal pursuit of Addleshaw Goddard client Mukhtar Ablyazov, the former chairman of Kazakhstan’s JSC BTA Bank, has been ferocious from the get go. The former bank manager, who is challenging an extradition ruling in France that could see him sent to Russia, stands accused of siphoning off in excess of $8bn during his time as BTA’s chairman. It was the biggest case to hit the High Court in 2012. A $6bn claim was issued against Ablyazov issued by BTA’s London-based legal team, featuring Hogan Lovells partner Chris Hardman and New Square’s Stephen Smith QC (Smith has since moved to Erskine Chambers). The firm is believed to have obtained judgments worth in excess of $3.5bn for its client through more than 200 court clashes resulting in more than 50 reported decisions so far, along with a whole body of new law regarding freezing injunctions. Whether any money has actually been repaid is unclear, with sources suggesting that no money has been handed over to BTA by the Ablyazov camp.”
“Now the litigation is about to take a new turn. The Supreme Court last month accepted a request from BTA to examine how exactly Ablyazov funded his defence. [… ] The case centres on the freezing order granted against Ablyazov back in August 2009 by Mr Justice Teare. The case specifically relates to the funding of the defence legal team and Ablyazov’s living expenses and whether he had breached the 2009 freezing order. The order allowed the Kazakh billionaire up to £10,000 a week towards his individual ordinary living expenses as well as a “reasonable amount” toward his legal fees. The injunction stated: ‘This order does not prohibit [Mr Ablyazov] from dealing with or disposing of any of [his] assets in the ordinary and proper course of any business conducted by [him] personally.’ The £40m loans in question, BTA contended, were in breach of the freezing order because they diminished Ablyazov’s net asset position, contrary to the primary purpose of the injunction.”
“At the High Court Mr Justice Christopher Clarke dismissed the application,” the article continued. “The Court of Appeal (CoA) threw out the subsequent appeal on the basis that the word “assets” within the freezing order should not be read to include borrowings of this nature, as a loan cannot be readily understood to be an “asset” against which the bank could ultimately enforce its judgments. Addleshaws said the CoA ruling was an important victory for their client, one that would ensure he could continue to defend himself against politically motivated claims. Indeed, the court has described the bitter dispute as “extraordinary litigation on a large scale”, which had been pursued with a vigour akin to “trench warfare”. Should the Supreme Court quash the ruling of the lower courts it will have an impact on all freezing orders granted by the court in recent years, although whether it will have any impact on money already paid to his legal team remains unlikely. The firm has signalled intent to defend the claims rigorously. In a statement the firm said: ‘If [BTA] successful in this appeal – which we do not expect to be the case – Mr Ablyazov’s current method of funding might no longer be appropriate, it will have no impact on the past funding of the litigation, given the clear and contemporaneous authority given to Mr Ablyazov’s arrangements by the Commercial Court and the Court of Appeal’. When it gets an outing in the Michaelmas term it will be the be the first time the court has ever been required to interpret the wording of the standard form freezing injunction.”
But in the dead of summer, this is exactly what was to happen. “The High Court has ordered the disclosure of documents held by Addleshaw Goddard, Clyde & Co and Stephenson Harwood in the ongoing battle between Kazakhstan’s JSC BTA Bank and its former chair Mukhtar Ablyazov,” the periodical reported on August 8 [http://www.thelawyer.com/news/practice-areas/litigation-news/high-court-orders-disclosure-of-documents-covered-by-privilege-in-long-running-ablyazov-case/3024323.article]. “Handing down judgment this morning (8 August) Mr Justice Popplewell approved the application by the bank’s solicitors Hogan Lovells, instructing Erskine Chambers’ Stephen Smith QC, to disclose documents relating to the assets of Ablyazov and his brother-in-law Syrym Shalabayev. These documents were previously withheld on the grounds of legal professional privilege. Popplewell J said disclosure should be allowed because the three firms are ‘likely to hold documents casting light on Mr Ablyazov’s and Mr Shalabayev’s beneficially owned assets which may assist the Bank in executing its judgments and enforcing the Court’s orders against them’. The successful application is an attempt to enforce judgments entered by BTA before the High Court against Ablyazov (11 December 2012). The bank alleged that its former chair embezzled funds, but it is understood that it is yet to recover any of its lost assets. Popplewell found that Ablyazov had set out to deceive his solicitors and had engaged them in order to pursue a ‘strategy of concealment, forgery and deceit’ in relation to his assets.”
“One of the points made on behalf of Mr Ablyazov and Stephenson Harwood was that the solicitors were unlikely to hold material casting light on assets which Mr Ablyazov had not disclosed because the solicitors would have been under a professional duty to ensure such assets were disclosed or to come off the record,” Popplewell was quoted in the article as declaring – adding: “The submission itself serves to reinforce the analysis that what was occurring was an abuse of the ordinary relationship of client and solicitor. The solicitors were being deceived to a very substantial extent about aspects of Mr Ablyazov’s holdings in, and dealings with, assets, whilst being retained to conduct the litigation under the pretence that what they said on their client’s behalf in relation to the assets was complete and true.” Addleshaw Goddard, Clyde & Co and Stephenson Harwood have all acted for Ablyazov at various points in the long litigation. Clydes was originally instructed in 2009 by Ablyazov, Shalabayev and two other former BTA officers. Stephenson Harwood was brought on board in December 2009, alongside Clydes, to act for Ablyazov, before being replaced by Addleshaws in 2011 (19 September 2011).”
“Popplewell J agreed with the three respondent firms that the scale and cost of disclosing millions of documents – over 500,000 emails and 40GB of electronic data – would be both complex, expensive and lengthy,” The Lawyer’s report continued. “However, he found there was a “real prospect of material being disclosed in response to the order which makes the complex and expensive exercise involved proportionate”. He also suggested that disclosure could reveal the details of the ownership of Green Life International, which is currently funding Addleshaws’ representation in the ongoing litigation. Mr Justice Christopher Clarke has already found that the company could be beneficially owned by Ablyazov, and Popplewell J said disclosure of any investigation carried out by Addleshaws into the source of the funding “may well be of assistance to the Bank”. The firms suggested that the overall cost of disclosure would amount to about £2.5m. While BTA said it was unwilling to fund the disclosure exercise, and recognised that the trio of law firms should not bear the cost themselves,”
“Popplewell J said this did not mean a disclosure order should not be made. ‘Any order the Court makes will depend for its implementation on funding by Mr Ablyazov,’ he noted. ‘It has been made clear on his behalf that he has no intention of funding it, and he continues to maintain that he has no undisclosed assets with which he has the ability to do so. This led to a submission that no order should be made because the Court will not act in vain. I reject this as a ground for declining to make an order required by the interests of justice. The Court makes orders on the basis that they are to be obeyed, and it would require exceptional circumstances for a respondent to be able to resist an order by saying that because he will not obey the order, it should not be made in the first place’. Today’s ruling comes ahead of a Supreme Court hearing which will look at standard form freezing orders and examine how Ablyazov conducted his defence of the High Court litigation (2 April 2014). It is not yet clear whether the firms will appeal today’s decision. In a statement Addleshaws said: ‘We are studying the judgment and will be considering it with our client. We do not propose to comment further’.”
Little was to happen until over summer, when another “political activist” joining the chorus shedding crocodiles’ tears over crime and punishment by culprits and consorts was caught by police in Russia. “Moscow’s Tverskoy District Court has sent nationalist Alexander Belov (Potkin) in pre-trial detention in connection with Kazakhstan’s BTA Bank embezzlement case, RAPSI reported on October 24 [http://rapsinews.com/judicial_news/20141024/272445809.html] from the courtroom. “Belov (Potkin) was placed last week under house arrest by court order. Investigators filed a motion to detain Belov (Potkin) alleging that he could flee Russia or try to destroy evidence. Investigators claimed that he holds passport with a valid Schengen visa which allows him to flee from justice. Investigators believe that Belov (Potkin) was involved in laundering money embezzled from BTA Bank by its former chairman Mukhtar Ablyazov.” The man could become, in case he decides to cooperate, an important witness in the pending case in Russia against Ablyazov.
The very same day, the curtain fell once more for Ablyazov in France. “A French appeals court approved on Friday the extradition from France to Russia or Ukraine of jailed Kazakh tycoon Mukhtar Ablyazov, accused of embezzling up to $6 billion from his former bank BTA,” Reuters [http://www.reuters.com/article/2014/10/24/us-france-ablyazov-idUSKCN0ID20G20141024] reported. “Ablyazov was arrested last July near the Riviera resort of Cannes, where he had been in hiding since being sentenced to prison for contempt of court by an English judge in 2012. The court in Lyon, eastern France, approved Ablyazov’s extradition to either Russia or Ukraine, though it said Russia had priority. The move followed a ruling by a separate court in April to block his extradition. The Lyon court asked for guarantees that Ablyazov would be treated with a “guarantee of respect for the Human Rights convention” as well as avoiding any treatment that would hurt his “physical and psychological integrity”. It also asked that Russia should not extradite Ablyazov to a third country such as Kazakhstan or to subject him to forced labor and said that French state representatives could travel to Russia to verify the conditions of his detention. ‘The French justice system is singling itself out and expressing reservations, as if it recognised that these countries have little respect for international treaties,’ said Bruno Renstock, Ablyazov’s lawyer, adding his client would seek to appeal to France’s highest court. The Kazakh former minister’s family unfurled banners reading ‘Stop corruption in France’ and ‘Shame on French justice’ outside the courthouse. The Kazakh bank BTA welcomed the Lyon court’s decision.”
In Britain, in spite of the rather sensationalruling of the high court, the affair was to remain in limbo, though – especially with the withdrawal of Ablyazov’s law team from the case. “Addleshaw Goddard has decided to step away from the $6bn embezzlement fight against Kazakhstan’s JSC BTA Bank chair Mukhtar Ablyazov,” The Lawyer reported on November 14 [http://www.thelawyer.com/news/lawyer-news-daily/addleshaws-cuts-ties-with-controversial-ablyazov-litigation/3028429.article]. The firm is the third to disentangle itself from the long-running litigation. Clyde & Co was originally instructed in 2009, followed by Stephenson Harwood, which was brought in later that year. Addleshaws then stepped in to represent Ablyazov in 2011, months after he fled the country to avoid a 22-month jail sentence for contempt of court. The firm decided to make a strategic withdrawal during a hiatus in court proceedings while it established who is to fund the disclosure exercise ordered in a High Court judgment in August. In the meantime, BTA is trying to force disclosure of documents held by Addleshaws, Clydes and Stephensen Harwood on Ablyazov and his brother-in-law’s assets, which were previously withheld on the grounds of professional privilege.”
For the upcoming year, a number of proceedings should be initiated and hopefully completed. All of them can be expected to reveal a lot more details about Ablyazov’s fund diversion schemes, information on which still remains rather sketchy even after all these years. There is always the risk that at some stage a court could declare the case expired – which cannot be applied to cases involving murder such as the one of Rakhat Aliyev, but in theory could be applied to cases of fraud, even on such a large scale. As for the extradition of the culprit himself, if appeal is being turned down, the French government is free to follow the court’s clearance or not – using the notorious argument of raison d’état for an eventual refusal of the extradition. The appeal case can be expected to serve in early spring, but there is no time limit between the end verdict and a government decision. As for the recuperation of stolen funds across the Channel, little can be predicted regarding any timetable for the case to proceed.