Ablyazov and family: all on board to cross the Atlantic/I

Ablyazov and family: all on board to cross the Atlantic/I

After having abused his two brothers-in-law, the Shalabayev brothers, it appears now that the Khrapunov family from their Swiss hideouts has played a much more pivotal role in Mukhtar Ablyazov’s fund diversion schemes than so far assumed. On both sides of the Atlantic, courts are now taking a closer look at details where it comes to exposing their common network.

Can an accomplice who helps a defendant breach a worldwide freezing order (and thereby places himself personally in contempt of court) be sued for conspiracy to injure by unlawful means? If so, will the English court have jurisdiction over the claim on the basis that England was the place where the conspiracy was implemented? These are the academic questions to b addressed to in the English Court of Appeal on 19 or 20 December. But behind what looks much like judicial hair-cleaving there are other more news-breaking issues at stake. It appears now that there is a much heavier intertwinement between the voluminous files concerning the multi-billion embezzlement scheme carried out by Kazakh ex-banker and master swindler Mukhtar Ablyazov and his relative by marriage Viktor Khrapunov, the ex-mayor of Almaty who during his time in office defrauded the community for hundreds of millions (in euro) through property value falsification schemes.

Recovery of stolen funds

The case concerns an original verdict ruled in February this year by the English “Ablyazov veteran judge” Nigel Teare, in which for the first time in the seven years of court proceedings the name Ablyazov is mentioned in a single breath with that of the Khrapunov family, in particular the main culprit’s son Ilyas. “There has been considerable litigation in this court since 2009 between the Kazakhstan bank, JSC BTA Bank, and its former chairman, Mr. Mukhtar Ablyazov,” the opening paragraph of the verdict reads. “Much of the litigation has concerned attempts by the Bank to enforce the worldwide freezing order (WFO) granted by the court against Mr. Ablyazov in 2009 which attempts culminated in contempt proceedings against Mr. Ablyazov. The Bank established that Mr. Ablyazov breached the terms of the WFO and that certain individuals assisted him in doing so. The Bank now considers that Mr. Ablyazov’s son-in-law, Mr. Ilyas Khrapunov also assisted Mr. Ablyazov in breaching the WFO. In 2009, when the Bank says that Mr. Khrapunov conspired with Mr. Ablyazov to breach the WFO, Mr. Khrapunov was 25 years old. He had married Mr. Ablyazov’s daughter in 2007.”

The motive behind the latest move by BTA, which originally belonged to Ablyazov, was nationalised in 2209 through a bail-out intervention by the National Bank of Kazakhstan, and re-sold to former rival Kazkommertsbank in 2014, seems to be a deadlock in the recovery of stolen funds, believed to top 10 billion in US dollar, just over $6 billion falls under the WFO by English courts. Part of the money has been laundered through property operations, especially in the Russian Federation, which were first bought (when still under construction) and later sold. Ablyazov is now waiting or his extradition to Russia where he has to be brought to justice for his operations, but the income generated by them is stashed away in hundreds of bank accounts all over the world, belonging to nominee firms all of which, though managed by proxies, are under the end-control of Mukhtar Ablyazov.

“Conspiracy to injure by unlawful means”

The latter’s lawyers have sought to buy time from the very beginning to allow Ablyazov, though under surveillance, to close and open such offshore firms on a regular basis with the aim to wipe out traces. In late 2010, Hogan Lovells staff discovered a container full of documents identifying the firms, more than 800 in number, which were hiding the diverted and in part laundered funds. But most of the list should now be considered outdated, since the lengthy legal proceedings allowed Ablyazov to replace names, locations and figureheads of his offshore network more than once – operations which now even with the culprit behind bars are believed to continue. By targeting the Khrapunov family, BTA and its lawyers hope to get a better picture of the current state of affairs – if it is not too late again, that is, since very time so far a new team of cronies was exposed, they had already been replaced by newer ones.

“The Bank has commenced eleven actions and, following Mr. Ablyazov’s flight from the jurisdiction on the eve of being committed to prison for contempt, has obtained judgments in default against Mr. Ablyazov for a total sum exceeding US$4.6 billion. But the Bank has not succeeded in recovering amounts of a magnitude remotely approaching that sum via its enforcement efforts [in the words of] the first affidavit in this action of Mr. Hardman, the Bank’s tireless solicitor at Hogan Lovells International. Notwithstanding the apparent paucity (at least in terms relative to the size of the judgment debt) of the Bank’s recoveries and the long and undoubtedly hugely expensive years of litigation, the Bank’s desire to litigate appears undiminished. It has now opened up another front by taking proceedings against Mr. Khrapunov. In an action against Mr. Khrapunov commenced in July 2015 the Bank has alleged that since 2009 he has conspired with Mr. Ablyazov to prevent the Bank from making any substantial recovery by breaching the WFO, creating and using false and misleading documents and by taking whatever steps they considered necessary to prevent the Bank from recovering the judgments debts. By so doing it is said that they abused the process of the court and interfered with the administration of justice. The cause of action relied upon is the tort of conspiracy to injure by unlawful means, the unlawful means being serial contempts of court. […] The alleged unlawful dealings concerned assets of Swiss, Belizean and Russian companies. In support of that action the Bank obtained a WFO against Mr. Khrapunov which was granted by Males J. on 17 July 2015. Mr. Khrapunov has so far failed to produce any information as to his assets as required by that WFO.”

“A false contrast”

It looks now as though BTA in its attempts to include Ablyazov’s proxies in legal action has resulted, at least for the moment, in a legal deadlock. It should be recalled that Ablyazov has been condemned to 22 months in prison for “contempt of court” – read: perjury. One of his brothers-in-law has received a similar verdict – and was rewarded by Lithuania for it with “political asylum” (for breaking the English law). Perjury is not a felony considered reason to ask for extradition in England. So in the best case, Khrapunov can feel safe as long as he stays out of the UK. “The question arose during argument whether it was unprincipled to have a situation in which Mr. Ablyazov could not be ordered to pay damages for his contempt whereas Mr. Khrapunov could be made liable in damages for conspiring to injure the Bank by unlawful means, namely, assisting Mr. Ablyazov to act in contempt of court by breaching the WFO,” Teare continues further down. “However, I consider this to be a false contrast. Both Mr. Ablyazov and Mr. Khrapunov are alleged to have been party to the conspiracy to injure the Bank by the use of unlawful means. If that conspiracy is established they are both liable in damages for the tort. It is true that Mr. Ablyazov would not be liable in damages simply as a result of acting in contempt. But […] means can be unlawful even though those means are not in themselves actionable. Where there is a conspiracy to injure the liability stems from the conspiracy.”

Ablyazov’s and Khrapunov’s delay tactics are at this stage based on the question if such a “conspiracy” has existed and even if so, under which jurisdiction. “In my judgment it is necessary to keep well in mind that the court is seeking to identify the place of the event which gave rise to the damage, not the tort,” Justice Teare opines. “The damage, for the reasons which I have given, occurred in the places where the assets, which were the subject of wrongful dealing, were located. The place of the event giving rise to that damage seems to me to be the place in which the conspiracy was implemented. It is the implementation of the conspiracy which gave rise to that damage. But where was the conspiracy implemented? Mr. Smith submitted that at least until February 2012 the conspiracy will have been implemented by instructions given by Mr. Ablyazov in London. This submission, as I understood it, was based upon the same circumstances which made it appropriate to infer that the conspiracy had been hatched in London. There is force in this submission. At any rate I consider that the Bank has much the better argument on this point. It is likely that the necessary decisions and instructions to implement the conspiracy were taken in and issued from Tower 42 in the City of London.”

“A good arguable case”

As a result of the trial, one could say that BTA has won a battle but the stalemate continues to prevail and with that Ablyazov’s main goal, namely to win time, continues to be served. “The Bank has a good arguable case against Mr. Khrapunov in damages for the tort of conspiracy to injure by unlawful means. The Bank is able to establish that this court has jurisdiction over him […] with regard to the damage caused by the wrongful dealing in assets of Mr. Ablyazov before 16 February 2012,” the verdict concludes. “Although the order sought appears to relate both to Mr. Khrapunov’s own assets and those of Mr. Ablyazov in which he has dealt since January 2013 the debate before me primarily concerned the latter. I would therefore prefer to deal with this application after it is clear in what terms the injunction and disclosure obligations are to continue.”

Today, as though to demonstrate that the fund diversion carousel keeps swirling at full speed, the USA has come to the attention of Ablyazov-watchers as the location where, at least for some time, both he and Khrapunov have been laundering embezzled funds, dislocated from Switzerland through Luxemburg. As we shall see for the first time, there is a Belgian connection in those schemes (Dutch connections have appeared at a much earlier stage) – apart from the juicy fact that the name Donald Trump appears prominently in the files as well. But for that, we have to cross the Atlantic – either on the Santa Maria or the Titanic… (to be continued)

Second part: Ablyazov and family: all on board to cross the Atlantic/II

by Charles van der Leeuw