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Hogan Lovells Wins Court Battle with Maximum Prison Sentence for Pugachev

12 February 2016

London – 12 February 2016 - Hogan Lovells has had two significant victories in the High Court in the ongoing case against Sergei Pugachev.

Committal
Mr Pugachev has today been sentenced to two years in prison after being found guilty earlier this week on 12 counts of contempt of court. This is the maximum sentence available for contempt of court, reflecting the seriousness and scale of Mr Pugachev's wrongdoing. In fact, when the separate sentences for each of the individual contempts are taken together, the total amounts to more than eight years and nine months (excluding concurrent sentences), but is capped by law at two years. 

Hogan Lovells' client, the Deposit Insurance Agency (DIA), brought the committal application against Mr Pugachev after he fled to France following orders to disclose his assets, and despite an injunction prohibiting him from leaving the UK and a warrant for his arrest.

Partner Michael Roberts, who led the team representing the DIA, says:
"The sentence imposed on Mr Pugachev today – the maximum available for contempt of court – reinforces the seriousness of Mr Pugachev's wrongdoing.  The Judge found him guilty of a staggering and quite possibly unprecedented number and range of allegations of contempt of court, confirming that has repeatedly lied to the Court, breached the Court's orders and cannot be trusted.  It is an important step forward in the DIA's on-going efforts to recover assets for the Bank's creditors."

Mrs Justice Rose, who delivered the detailed judgment finding Mr Pugachev to be guilty in the High Court earlier this week, described Mr Pugachev's breaches of numerous orders made by the English Court, including the worldwide freezing injunction granted in July 2014, as "egregious", "serious" and "deliberate".  Her judgment also conclusively establishes that Mr Pugachev has repeatedly lied and cannot be trusted.  The Judge concluded that she could not "safely rely on any evidence he gave", variously describing it as "impossible to believe" and "wholly unsatisfactory".

In connection with the DIA's concerns that Mr Pugachev has failed properly to disclose the whereabouts of the hundreds of millions of dollars extracted from Mezhprombank prior to its collapse in 2010, the Judge accepted that "the trail provided by Mr Pugachev goes cold".  The Judge also found that Mr Pugachev's eldest son, Victor, had been used as a nominee in a dishonest attempt to conceal Mr Pugachev's beneficial ownership of assets worth at least $150 million.  Mr Pugachev has the opportunity to reduce the sentence imposed on him if he purges his contempt by complying with the Court's orders.  

If he refuses to purge his contempt or serve his prison sentence, and instead chooses to remain a fugitive from justice, the English Court will be able to debar Mr Pugachev from participating in proceedings in this jurisdiction and he will be imprisoned as and when he comes back to England.   He has previously said that he intends to return once his legal difficulties are resolved, and had been living in London for several years with his family until he fled to France last summer in breach of a court imposed travel restriction.  Mr Pugachev claimed that the reason he fled was because he feared for his safety in England, but the Judge said that she was "fully satisfied that there was no link between his fears for his safety and his decision to leave England" and that "his explanation as to why he felt safer in France than in England does not bear any scrutiny". 

Frozen trust assets
In a separate judgment, also delivered today, the High Court of Justice dismissed the New Zealand trustees' attempts to set aside the ground-breaking judgment made by the English Court of Appeal last year, which froze assets in discretionary trusts disclosed by Mr Pugachev, including valuable London real estate.  The Court found that there is "a very good case" for saying that the assets within the trust structures are in fact under Mr Pugachev's control. 

The Judge comprehensively rejected the trustees' application, stressing that a number of the allegations made were "misconceived" and/or "should not have been made".  He also found that, unless the injunction is maintained, there is "a very serious risk" that the trustees will allow Mr Pugachev to dissipate the trust assets.

Today's decisions are both significant steps forward in the DIA's on-going efforts to trace and recover assets for the benefit of the creditors of Mezhprombank, who are the victims of Mr Pugachev's fraud.  The DIA's judgment against Mr Pugachev, finding him liable in the amount of RUR 75.6 billion, has now been upheld by three appellate courts in Russia.  The DIA is moving forward with its steps to enforce the judgment against Mr Pugachev's assets in Europe. 

ENDS


Background
The DIA commenced proceedings against Mr Pugachev in Russia in December 2013 after he was accused of helping himself to over US$2 billion from Mezhprombank, while allegedly controlling and beneficially owning it. 

Civil proceedings were subsequently initiated against Mr Pugachev in England in July 2014. At the same time, an injunction freezing Mr Pugachev's worldwide assets up to the value of £1.17 billion, and requiring him to disclose all his assets worth £10,000 or more, was granted by the High Court of Justice on 11 July 2014 in support of the proceedings in Russia.

The DIA obtained judgment against Mr Pugachev in Russia in April 2015 in the amount of over US$ 1 billion.  Following the dismissal of two separate appeals by Mr Pugachev, Hogan Lovells has now issued further proceedings to have the judgment enforced in this jurisdiction. 

The Hogan Lovells team includes partners Michael Roberts and Rebecca Wales (London) and Alexei Dudko (Moscow).

 
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