High Court in First-Ever Ruling on the Pants of Oleg Deripaska
by John Helmer - Dances with Bears
February 12, 2019
“By force or threat of force,” Justice Sir Nigel Teare declared in a judgement published last week, Deripaska had seized a valuable site in central Moscow, evicting its lawful owner, Vladimir Chernukhin, in 2010.
About his business dealings over the property Deripaska “gave false evidence” himself in court as well as inducing his employees and business associates to do the same in their testimony.
“Mr. Deripaska has given dishonest evidence to the court as he did to the arbitrators,” the judge ruled.
“What his motive was for doing so is known only to himself.”
“I formed the view that it would be wholly unsafe to rely upon his evidence.”
The result of the judgement is that Deripaska must pay about $100 million to Chernukhin, a former deputy finance minister and runaway state banker, who has lived in London since 2004.
In a statement issued in Moscow last week by one of Deripaska’s companies, Russian Aluminium (Rusal), he called the judgement “biased and unfair”.
The Trekhgorny Manufaktura site when Vladimir Chernukhin, his lover
Lolita Danilina and Oleg Deripaska bought it in a partnership concealing
Chernukhin’s interest. A textile factory has been on the site since 1799.
The textile workers took an active part in the 1905 uprising and in the 1917 revolution.
The Chernukhin stake in the real estate has now jumped in assessed value to more than $95 million. The reason is that the original textile business of the plant was loss-making, while the redevelopment of the site for office, retail and residential purposes has been very profitable.
Chernukhin, through his lawyers, refuses to explain how he came by the money to buy the real estate in the first place, but he denies his money came from corruption. For details, click to read.
Chernukhin told the court that,
“his need for a partner [Deripaska and Danilina] was not financial but because he wanted a prominent private businessman to be the public face of the project. That is consistent with what he himself described as a need for someone in his position with VEB [Vnesheconombank] and the government to be discreet (and with the agreed evidence of Russian law to which I have referred.) He therefore approached Mr. Deripaska who was agreeable.”
Justice Teare reached no conclusion about Chernukhin’s honesty. He said instead,
“[Chernukhin] gave evidence that he invested in projects, often as a 50% shareholder, with other prominent members of the Russian economic establishment. Mrs. Danilina said that as a state official he was not permitted to use his position for his own benefit.
“Mr. Chernukhin did not think that was true but he accepted that discretion was required. (There was agreement between the Russian law experts that an employee of VEB [Vnesheconombank] was not prohibited from engaging in entrepreneurial activities. There was also agreement that a civil servant was prohibited from engaging in such activities but that they were permitted to purchase their own shares in legal entities so long as they were transferred to fiduciary management for the period of their public service. It would therefore appear that Mr. Chernukhin was right to say that discretion was required.)”
Left – Justice Sir Nigel Teare; right – Lolita Danilina at the High Court.
The judge also decided that Chernukhin had been dismissed from Vnesheconombank, and then fled to London in fear of arrest and prosecution for corruption.
“In May 2004 Mr. Chernukhin was dismissed as chairman of VEB. The very next month draft term sheets were produced concerning the relationship between the parties to the joint venture regarding TGM. The fact that they were produced shortly after Mr. Chernukhin ceased to be chairman of VEB is consistent with his explanation of the reason why there was no formal agreement in place before then. I consider it more likely than not that his explanation was correct and that Mr. Deripaska understood why there could be no formal agreement whilst Mr. Chernukhin was a deputy minister and chairman of VEB. The absence of a formal agreement created risks for both Mr. Chernukhin and Mr. Deripaska. But at the time they were each aged 32 or 33, they had both succeeded in the turbulent world of Russia after the collapse of the USSR and it appears that they were young men prepared to take risks.”
“In November 2004 Mr. Chernukhin left Russia, never to return, and settled in London. The catalyst for his sudden departure was the arrest of Mr. Mikhailov, who worked for Mr. Chernukhin, on suspicion of corruption. When cross-examined Mr. Chernukhin accepted that it was ‘more or less correct’ to say that he left Russia because he was concerned that he might be arrested also. It is also likely that, in circumstances where his mentor, the former Prime Minister, had been dismissed from office, Mr. Chernukhin feared further action against him.”
Left – Vladimir Chernukhin in Moscow in 2003; right – Chernukhin
in London during the court hearing in November 2018.
Teare also ruled that Chernukhin had been untruthful in some of his testimony. “He is not the first litigant to lie when it is unnecessary to do so,” the judge commented.
Until Deripaska initiated the lawsuit against Chernukhin, Deripaska had tried to avoid testifying on oath in an international court.
Rather than face cross-examination, exposure in lying, and possible prosecution for perjury, Deripaska usually opted to settle out of court. In 2005 he paid Mikhail Zhivilo (right) $65 million to end the latter’s US, Swedish and French litigation for the loss of his Novokuznetsk aluminium smelter. Without testifying in person, Deripaska had earlier been ordered by a Swiss court to pay Anatoly Bykov $100.5 million for the theft of his stake in the Krasnoyarsk aluminium refinery. Also in 2005, Deripaska agreed to pay Simon and David Reuben, controllers of the Trans World Metals group, about $100 million for aluminium trade proceeds which Deripaska had trousered for himself.
In 2007 he settled a London litigation with the Tajik Aluminium Plant (TadAz’s) trader, Avaz Nazarov.
In 2012 Deripaska agreed to settle share and dividend stealing claims by Mikhail Chernoy (Cherney) whose High Court lawsuit ended just before trial commenced with a secret payment of $200 million. In 2014, following a London arbitration in which Rusal shareholders Victor Vekselberg and Len Blavatnik, accused Deripaska of helping himself to a Glencore metal trading contract to the disadvantage of the company and other shareholders, Deripaska paid another secret amount.
Left to right: Anatoly Bykov; David and Simon Reuben; Mikhail Chernoy (Cherney).
In 2011 Deripaska had testified as a witness in the High Court case brought by Boris Berezovsky against Roman Abramovich, which Berezovsky lost. The judgement in that case did not comment on Deripaska’s truthfulness, though the judge and Berezovsky’s lawyer noted that in the witness box he was suffering from repetitive memory failure. The judgement in that case revealed that Abramovich had sold his stake in Rusal after concluding he didn’t trust Deripaska as a business partner and accused him of trying to “squeeze [him] out” of the company.
In last week’s High Court ruling , the judge dismissed every one of Deripaska’s claims. He has never suffered such a sweeping defeat in an asset claim in an international court before. Once again, Deripaska’s memory failure in the witness box was telling:
CLICK ON IMAGE TO ENLARGE
Source: http://www.bailii.org/
With an unusual display of irony, Teare concluded that when Deripaska testified that an important business telephone call had taken only fifteen seconds, and could therefore have not been as important as other witnesses claimed, he was lying.
“Mr. Deripaska gave evidence that the call lasted for 15 seconds. Whilst there is evidence that he left the call before it had ended it is unlikely that his participation in the call lasted only 15 seconds. Having noted the slow, measured and careful way in which he speaks I would not have expected him to have said what he wanted to say in only 15 seconds.”
According to Teare, Deripaska’s witnesses were also liars.
“Although Mr. Karabut said that he understood the concept of giving true evidence on oath, it is apparent that he did not. I formed the view that in truth he saw his role as being to support Mr. Deripaska’s case at all costs. I therefore concluded that I could not accept his evidence save where it was consistent with the probabilities, was not in dispute or was supported by the contemporaneous documents. His evidence could only be accepted with the greatest possible caution.”
The lying, concluded the judge, extended to the circumstances in which Deripaska forcibly took over the Moscow site on December 14, 2010,
“when Mr. Deripaska took control of TGM. Mr. Sarkisyan is a man who had assisted Mr. Deripaska on ‘security’ matters. Mr. Novikov said in his fourth witness statement in the arbitration that Mr. Sarkisyan was not present. He said he was familiar with Mr. Sarkisyan and that he could not recall anyone who resembled him. After making that statement on 13 March 2017 he was shown a still from CCTV footage of the night in question. In a further statement dated 23 March 2017 he accepted that Mr. Sarkisyan was present.”
“I can properly infer that Mr. Deripaska knew that Mr. Chernukhin was his true joint venture partner. Second, it seems more probable than not that Mrs. Danilina agreed to being used as Mr. Chernukhin’s nominee or agent. That seems to me to be an inference readily and reasonably to be drawn from, in particular, the probabilities, her admission that Mr. Chernukhin kept his assets with her because of the “tough situation” affecting state officials in the 1990s and 2000s and her willingness to allow her name to be used as the beneficial owner …
“Mr. Chernukhin accepted when cross-examined that he could not remember when he suggested to her that she act as his front for the purposes of the SHA [shareholder agreement]. That is not surprising for, as he said, ‘it happened 15 years ago’. But I do consider that I can properly infer that the suggestion was made to her and that she accepted it.”
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