The Ablyazovs, The Khrapunovs And Their Fifth Column In Kazakhstan: A Brotherhood Of Thieves

Ablyazov files: battle over cash resumes in London court, enter Trump and the Clintons

It is almost official now, Ilyas Khrapunov (“Mummyanddaddytoldmeso”) can be justly considered to be a crook to the manner born. That is the main content, to to some extent implicit, of the latest court ruling in London which holds him co-responsible for the damage caused to Kazakhstan’s banking system inflicted by the international fraud ring conducted by former BTA head and leading shareholder Mukhtar Ablyazov. The court did not go as far as indict Khrapunov with contempt through willingly and wittingly sabotaging a freezing order dating from 2010 but still valid, of Ablyazov’s ill-gotten gains. It is but a little step forward on a long road for BTA’s current owner Kazkommertsbank to regain major chunks of the multi-billion bounty held by the gang of culprits.

by Charles van der Leeuw, writer, news analyst

The Ablyazovs, The Khrapunovs And Their Fifth Column In Kazakhstan: A Brotherhood Of Thieves

“Few people have much time for banks right now but spare a thought for BTA Bank of Kazakhstan. Like many other banks it has lost billions of dollars over the last decade. Unlike many of its peers, however, it is making progress in trying to get them back. The vehicle for that is the biggest fraud case currently going on in Europe,” a recent article published by Forbes Magazine’s international edition reads. “The latest step is a February 2 judgment in the Court of Appeal in London, which ruled in favour of BTA, building on previous findings in a series of global legal proceedings against Ilyas Khrapunov and the bank’s former chairman Mukhtar Ablyazov.”

The article has many merits, and it is a relief to see how the author manages to avoid the trap laid by the likes of George Soros’ brainchild Eurasianet and Amnesty International, which continue to depict Ablyazov and cronies as “political dissidents” and “opposition leaders”, lamenting over alleged “persecution” by the state. This is not to say that there are no politics in the entire whilom affair- but not as Ablyazov, Krapunov, relatives and other servants keep proclaiming. The truth is that they are not modern-day Red Pimpernels à-la-kazakhstanaise, but rather look like Jabez Balfour turned into Guy Fawkes. Shortly after his scandalous release by the French government, following its refusal to follow court instructions from the highest possible level to extradite the culprit to Russia or in second instance to Ukraine, Ablyazov, then still in France (his current whereabouts are unknown), openly declared that he intended the money he stole to topple the Kazakh head of state and government by means of violence.

Turning Guy Fawkes into Lady Godiva

The search for the lost billions continues to take place not just outside Kazakhstan but also closer to home. “The National Anti-Corruption Bureau continues the investigation of the criminal case launched against the former Chairman of BTA Bank Mukhtar Ablyazov, Zhaksylyk Zharimbetov and other individuals accused of embezzling multiple billions of dollars, the Bureau said in a statement on February 10,” the Bishkek-based regional news agency AKIpress reported. In the course of the investigation, a new accomplice of Ablyazov in Kazakhstan, Mamai Zhanbolat Mamaiuly, was revealed, the statement said. “According to the Bureau, Mamai Zhanbolat Mamaiuly laundered embezzled money belonging to the BTA bank through the Sayasi Kalam:Tribuna newspaper under the guise of legal financial transactions of the outlet, the statement said.

Unlike Forbes, other global media supporting Ablyazov’s display of injured innocence have jumped on the event sing a rather different tune. “Anti-corruption officials on February 10 detained the editor of one of Kazakhstan’s few surviving independent news publications on charges of corruption, once more arousing anxieties about the fast-vanishing space for free media in the country. Authorities are accusing Zhanbolat Mamay, editor of Tribuna newspaper, of involvement in fraudulent schemes with fugitive banker and government foe Mukhtar Ablyazov,” a report by Soros’ offspring Eurasianet reads in contrast. The entire report is a clear attempt to turn perpetrators of unlawful acts into victims of violations of civil liberties by authorities, or, to maintain the comparison: to turn Guy Fawkes into a Lady Godiva. “Unlike most media in Kazakhstan, Tribuna is not a beneficiary of the ‘state order’ system, whereby the government either finances outlets outright or pays for the publication of material publicizing state policies and initiatives. It focuses primarily on social issues and has a line that tends toward robust criticism of the government and provides a platform for the few opposition politicians remaining on the scene,” the report reads further down. In other words: media kicking against the state order are good guys while all other media are bad guys. This fits in smoothly with the false image build-up of Ablyazov, Khrapunov and other mega-thieves posing as persecution victims.

“A good arguable case”

Despite their ambiguity on some points, the English Royal Court, which on previous occasions has explicitly dismissed all Ablyazov’s claims of “political persecution” has preserved a cool attitude towardsthe issue. Instead, hairs keep being cleft on whether or not Ablyazov’ key partners in crime, namely the Geneva-based Khrapunov family, has done so deliberately and wittingly from the beginning (affirmative) and whether he can be held responsible for it under English jurisdiction (affirmative to some extent, evasive to the ultimate extent). “The present proceedings relate to a claim by the Bank against Mr Ablyazov’s son-in-law, Mr Ilyas Khrapunov, for the tort of conspiracy to injure the Bank by unlawful means. It is alleged that Mr Khrapunov conspired with Mr Ablyazov to hide Mr Ablyazov’s assets from the Bank or dissipate them, in breach of a worldwide freezing order against Mr Ablyazov and a receivership order made against him. The unlawful means relied on are breaches of that freezing order and that receivership order,” the court document reads.

“The Bank issued the claim form in the present proceedings against Mr Ablyazov and Mr Khrapunov on 17 July 2015. The judge had to decide whether at that date there was a proper basis for this under the terms of the Convention on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters, known as the Lugano Convention. The judge held that the Bank has a good arguable case in conspiracy against Mr Khrapunov to the requisite standard on the basis of his and Mr Ablyazov’s alleged breaches of the freezing order and the receivership order, which the judge held qualify as relevant unlawful means for the purposes of the tort. The judge rejected the Bank’s submission that as at 17 July 2015 Mr Ablyazov was domiciled in the United Kingdom, so as to provide a foundation for jurisdiction against Mr Khrapunov under Article 6 of the Convention.”

“Mr Khrapunov and the Bank each appeal, to contest different parts of the judge’s ruling. Mr Khrapunov contends that (i) the judge erred in holding that there was a good arguable case against him as a matter of law, in that breaches of a court order cannot qualify as relevant unlawful means for the purposes of the law of conspiracy, and (ii) the judge was wrong to hold that there was a basis for any assertion of jurisdiction under limb (b) of Article 5(3). In other respects, Mr Khrapunov seeks to support the judge’s ruling to the extent it was in his favour.

Mr Khrapunov has not filed any evidence to deny that he has indeed assisted Mr Ablyazov in seeking to avoid the effect of the worldwide freezing order against him and the receivership order in the ways alleged by the Bank. The judge therefore proceeded on the basis that the Bank has a good arguable case that he has done the acts or assisted Mr Ablyazov in the ways alleged, and there is no challenge to this on appeal.”

“In addition, the Bank sought on the appeal to raise a new argument, to the effect that even if it could not establish a good arguable case against Mr Khrapunov for conspiracy to injure by unlawful means of the requisite kind, it could establish a good arguable case against him for the tort of conspiracy to injure the Bank by lawful (or, perhaps more accurately, non-unlawful) means,” the document reads further below.

Green Life International SA

“In May 2005 Mr Ablyazov became Chairman of the Bank, which was registered in Kazakhstan. In February 2009 he was removed from office on the basis of charges of misconduct of the Bank’s affairs and diversion of its assets and he promptly fled from Kazakhstan and moved to live in London. He cut off all ties with Kazakhstan,” the document relates further down. “In August 2009, the Bank instituted proceedings against Mr Ablyazov in England and obtained a worldwide freezing order against him and others. The freezing order is in standard personal form, i.e. what used to be known as a Mareva injunction, without any proprietary element based on assertions by the Bank that it is the true owner in equity of the assets covered by the order. The order included an obligation on Mr Ablyazov to give disclosure of his assets. As originally made, the freezing order was limited in amount to assets up to a value of £175 million, but we were told by Mr Smith [BTA’s chief lawyer – ChvdL] that by December 2009 the Bank was able to show that it had a good arguable case against Mr Ablyazov for very large sums indeed and at the end of that month the limit on the value of Mr Ablyazov’s assets frozen by the order was removed.”

“The Bank has adduced evidence which suggests that since 2008 Mr Khrapunov has been a trusted associate of Mr Ablyazov, charged with helping him administer his assets around the world and in keeping them away from the Bank’s attempts to enforce against them. It is not necessary to go through this material in detail, because Mr Khrapunov has not sought to put in evidence to explain or to deny these charges against him. The judge proceeded on the footing that there was a good arguable case on the facts against him of involvement in these alleged activities and there is no appeal in relation to this part of the case,” in the court document’s words. “The assets alleged to have been the subject of concealment or removal by Mr Ablyazov in breach of the freezing order and the receivership order, as part of the conspiracy with Mr Khrapunov, comprise certain assets located in Switzerland, a company called Green Life International SA incorporated in Belize and various companies and other assets located in Russia.”

The Bank’s case is that Mr Khrapunov has at all times been aware of the freezing order and the receivership order and the obligations imposed on Mr Ablyazov thereunder. The Bank pleads that in about 2009 Mr Ablyazov and Mr Khrapunov entered into a combination or understanding with each other with an intention to injure or cause financial loss to the Bank by the use of unlawful means comprising actions to deal with, dissipate, reduce in value and conceal assets of Mr Ablyazov in breach of the freezing order against him and in breach of the receivership order. The Bank says that Mr Khrapunov has acted on instructions from Mr Ablyazov and also on his own initiative to do these things, with his role increasing and becoming more important once Mr Ablyazov went on the run in February 2012 and it became more difficult for him to conduct his own affairs. The elements of the cause of action: conspiracy to injure by unlawful means.”

Tort of conspiracy to injure”

“The judge rejected the opposing extreme positions adopted by each party. He rejected the Bank’s submission that damages are available for breach of a court order such as the freezing order and receivership order in this case. He also rejected Mr Khrapunov’s submission that there is a positive rule of law which says that damages can never be awarded for breach of a court order, including where breaches of an order are deliberately employed as the means to inflict harm on a claimant pursuant to a conspiracy to injure him. Instead, the judge held that breaches of a court order do qualify as unlawful means for the purposes of the tort of conspiracy to injure by unlawful means. In that regard, the position is the same in relation to them as it is in relation to simple crimes (i.e. criminal conduct which does not constitute a separately actionable tort in private law) and private law wrongs (in particular, torts and breaches of contract), which so qualify. In my judgment, the judge was correct on all these points, essentially for the reasons he gave.”

What follows turns out to be elementary in the case’s slow but steady proceedings. “Turning to the position of a co-conspirator who is not himself subject to the court’s order, again I do not think that there is any floodgates objection to imposition of liability. The co-conspirator will only become liable if, with knowledge of the obligations imposed by the order on the addressee of the order, he deliberately counsels, procures or assists in the violation of those obligations by the addressee,” in the document’s words.

Further below, the court considers that “… the co-conspirator should be exempt from personal penal sanction for contempt of court, but it does not follow that he should be immune from civil action for compensation for his participation in what has been done, which is so obviously unlawful vis-à-vis the claimant. In the case of a freezing order, if a co-conspirator has indeed deliberately helped the addressee of the order to hide his assets covered by that order or in some way render them immune from execution, thereby inflicting loss on the claimant, I consider that it is strongly arguable that justice is in favour of the imposition of civil liability on the co-conspirator to be liable to pay compensation to the claimant.”

“Conspiracy to injure by unlawful means”

Though generally considered a scored point, the ruling remains disappointing for BTA since it does not seem to give the bank a new tool to apprehend its stolen funds. “For the reasons given above, (1) I would dismiss Mr Khrapunov’s appeal on the question whether the Bank has established that it has a good arguable cause of action against him for the tort of conspiracy to injure by unlawful means; (2) I would dismiss the Bank’s appeal based on Article 6 of the Convention; (3) I would dismiss the Bank’s appeal in respect of limb (a) of Article 5(3) (place where the damage occurred); however, (4) I would allow the Bank’s appeal in respect of limb (b) of Article 5(3) (place of the event giving rise to the damage),” the verdict reads in conclusion.

Comments on the latest ruling are sometimes even more academic than the court document itself. One argument put forward that could shake up all BTA’s legal gains so far is Brexit, and in particular the question what it means to England’s commitment to the Lugano Convention. “The Court of Appeal has held that agreeing to frustrate a freezing order can amount to the tort of conspiracy. Under the Lugano Convention, the court in whose territory the agreement is reached will have jurisdiction to hear a claim for damages by the beneficiary of the order,” Lexology argued in a recently posted comment. “The freezing order at issue in Khrapunov v JSC BTA Bank [2017] was made in earlier proceedings in which the bank obtained several judgments against Mr Ablyazov, its former chairman. Mr Ablyazov breached the order by moving assets out of reach of enforcement, allegedly with administrative assistance from his son-in-law, Mr Khrapunov. When the bank sought a committal order against Mr Ablyazov for contempt of court, he left the UK for France, where he allegedly continued to deal in his assets with Mr Khrapunov’s help. The bank sued Mr Khrapunov for conspiracy by unlawful means. He did not deny helping his father-in-law to circumvent the freezing order, but argued that a contempt of court was not sufficient to supply the required unlawful element in such a claim. He also claimed that since he lived in Switzerland, the English courts did not have jurisdiction. The bank argued that the English courts had jurisdiction under the Lugano Convention on two grounds: 1/ the damage took place in England because the English order and judgments constituted a chose in action that was damaged in value by the breach; 2/ tt was in England that Mr Ablyazov and Mr Khrapunov first agreed to move the assets out of reach, so England was the place of the event giving rise to the damage to the bank. The judge at first instance accepted that a contempt of court could constitute unlawful means. He rejected both the bank’s arguments on jurisdiction, however, holding that: (i) the damage to the bank had to be treated as arising in the foreign jurisdictions where it would have enforced its judgments had the freezing order not been frustrated; and (ii) the events giving rise to the damage were the transactions carried out in pursuit of the agreement to avoid the order rather than the agreement itself.”

“A deliberate flouting of court orders”

“On this basis, the bank’s claim would be limited to damages in respect of dealings which were arranged between Mr Khrapunov and Mr Ablyazov before the latter left the UK,” the analysts continue. “Both parties appealed. The Court of Appeal upheld the judge’s decision that contempt of court could qualify as unlawful means. A deliberate flouting of court orders was more reprehensible than simple torts and breaches of contract, which were already recognised as unlawful means. As regards jurisdiction, the Court of Appeal agreed with the judge that the damage took place in the jurisdictions where the freezing order should have been enforced. The court accepted, however, that the event giving rise to the damage was the agreement to avoid the effects of the order. The English courts therefore had jurisdiction to hear the claim for damages in its entirety and not just in relation to the transactions that were arranged from the UK, because on the facts Mr Ablyazov had initiated the unlawful agreement while in the UK.”

“This case potentially opens up a new avenue for judgment creditors to obtain compensation when a judgment debtor has moved its assets between jurisdictions in an effort to avoid enforcement,” the article reads in conclusion. “However, it requires the judgment creditor to show a good arguable case that a third party has unlawfully agreed to assist the judgment debtor in that effort. If such a case can be established, then the relevant event for determining jurisdiction is the making of the unlawful agreement. Although reached under the Lugano Convention, the same principles are likely to apply under the Brussels Convention and Brussels Regulation regimes, since the wording of those instruments is substantially the same in this respect. That said, the UK’s future as a member of those regimes remains in doubt pending the outcome of the Government’s Brexit negotiations.”

This should give both the Ablyazov and the Khrapunov family more than enough time to hide all possible traces and remove all evidence that sustains the latest claim and its court ruling. For the victims of their fund thefts, the entire affair must have become extremely frustrating by now. It is clear that in England, the case pends in the wrong court: instead of a “commercial” court in charge of civil claims, a penal court should have handled the case from a very early stage, i.e. from the moment it became clear, and confirmed in court, that Ablyazov had laundered major amounts of stolen money within English jurisdiction, even though the role of Khrapunov has only come out in ore (though not all) detail, which is a blunt violation of English criminal law. Scotland Year’s Serious Fraud Office has been taking muscled action in cases of a lot less significance. In Ablyazov’s case, the fraud is serious enough, while the office is not. One could almost hear the detectives think: oh, well, after all they are only Kazakhs…

The opening of a criminal case against Ablyaov, and subsequently against a number of his

Former and current associates including the Khrapunov faily, would moreover shift courts’ considerations from mere jurisprudence to the law. All judgments made so far have been based on jurisprudence which carries a broad margin of error risk and virtually ignore the country’s legislation. One could even call it unconstitutional, but for the fact that neither England nor the United Kingdom has a constitution to begin with. This enables criminals like Ablyazov to get away with their felonies, while it could put any woman who sleeps with somebody other than her husband at risk to get her head blown off after the precedent of Queen Catherine in the XVI Century… In both cases, justice as a tool to set things right remains just as evasive for it.

by Charles van der Leeuw, writer, news analyst