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Hogan Lovells Reach Successful Milestone in Enforcement Against Ablyazov and his Associates

19 March 2013

LONDON, 19 MARCH 2013 – Hogan Lovells has achieved another successful milestone on behalf of BTA Bank in one of the biggest fraud cases to have ever come before the English courts. The English High Court today granted further judgment in favour of BTA Bank, following a four-month trial where Hogan Lovells successfully battled to recoup money for the bank. Mr Justice Teare granted judgments against:

  • Zhaksylyk Zharimbetov, former deputy chairman of BTA's Management Board, for approximately US$1.5 billion plus interest;
  • Usarel Investments Limited, a Cyprus company which owns the valuable Vitino Port on the White Sea, ordering it to transfer to BTA the shares of the companies which own and operate the Vitino port and to compensate the bank if the value of the shares does not exceed US$120 million, plus interest;
  • Ildar Khazhaev, former head of BTA's office in Moscow, to compensate the bank if the value of the Vitino port shares is less than US$120 million, plus interest.
    The court also indicated that it will grant further judgments against Mr Ablyazov, former chairman of the board of BTA. Those judgments are expected to exceed US$1.5 billion, plus interest. Those judgments will be in addition to the judgments already granted against Mr Ablyazov in November 2012 for the amount of approximately US$2 billion, plus interest.

The court found that in 2008 Mr Ablyazov, with the assistance of Mr Zharimbetov, made a series of fraudulent payments, totalling more than US$400 million, from BTA to companies he secretly owned.

It was also found that a series of improper loans, totalling over US$1 billion, were also made in 2008 to companies secretly owned by Mr Ablyazov; with the assistance of Mr Zharimbetov. These were then used by Mr Ablyazov to repay various loans which had previously been fraudulently granted to other companies he also owned.

Mr Ablyazov was also found to have made another improper loan in 2008 to the value of US$120 million, which was used by him to acquire the Vitino Port Facility on the White Sea in Russia. The companies controlling and operating the port were purchased by a Cypriot company called Usarel, which was also secretly owned by Mr Ablyazov, along with two Russian citizens Maxim Pouchikov and Sergey Shekhlanov. The court held that Usarel, together with Mr Khazhaev, had knowingly assisted and facilitated Mr Ablyazov in making the fraudulent loan.

Hogan Lovells partner Cary Kochberg commented:

"Our client has invested heavily in the strength and reputation of the English legal system in its attempts to recover the huge sums that were wrongfully taken from it by Mr Ablyazov and his associates. Today's decision has reaffirmed the robust legal system we have."

Background to the case

Hogan Lovells has been acting for BTA Bank (one of the largest banks in Kazakhstan) since May 2009 in a series of major fraud cases before the English Courts.  A total of eleven claims have been issued in the Commercial Court and Chancery Divisions against Mukhtar Ablyazov and others for a total of approximately US$6 billion (including interest).

The Bank's losses, in early 2009, were thought to be in excess of US$10 billion and necessitated a major cross-border restructuring in order to save the Bank.  As part of that restructuring, creditors (mainly international financial institutions) agreed to write off significant proportions of their claims against the Bank.

In a previous High Court decision in February 2012 Mr Ablyazov was found guilty of numerous counts of contempt of court and was given 3 concurrent sentences of 22 months in prison.  However he went on the run to avoid his sentence and his whereabouts is currently unknown.  The contempt of court alleged by BTA included the disposal of assets and misleading the court on oath by denying ownership of a number of valuable properties in the UK - including a nine-bedroom mansion on The Bishop's Avenue in Hampstead worth around £15 million and a 100-acre estate near Windsor with a value of approximately £20 million.

The litigation has involved a number of developments in English law which are of significant importance in the context of cross-border fraud litigation.  In a series of Court of Appeal judgments the English Courts have provided significant guidance in a number of crucial areas such as Receivership Orders, Freezing Orders, and Norwich Pharmacal disclosure orders and access to email accounts.

Hogan Lovells has been at the centre of the significant asset recovery exercise involved in the BTA case using a team primarily based in London but has also relying heavily on support from its Moscow office.  The firm has also managed very extensive litigation in jurisdictions such as Cyprus and the BVI which has been central to the gathering of evidence and the freezing of assets. 

The partner team working on this case comprises Chris Hardman, Cary Kochberg, Jeremy Cole, Michael Roberts and Alex Sciannaca.

ENDS

About Hogan Lovells

Hogan Lovells is a leading global law firm providing business-oriented legal advice and high-quality service across its exceptional breadth of practices to clients around the world. “Hogan Lovells” or the “firm” is an international legal practice that includes Hogan Lovells US LLP and Hogan Lovells International LLP. For more information, see www.hoganlovells.com.

 
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