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Abramovich, CIC, HSBC, Kaupthing, BTA, Galleon in Court News

November 02, 2011

Nov. 1 (Bloomberg) -- Roman Abramovich, the owner of Chelsea Football Club, told a London court that he never had a deal to carve up Russian oil company OAO Sibneft with his former business partner Boris Berezovsky.

Abramovich, 45, said he didn’t agree with Berezovsky’s allegations that they had a deal to create and later divide the company. While Berezovsky had been “very useful” in helping establish Sibneft through his political connections, Abramovich denied that Berezovsky had any actual stake in the company.

“We did not discuss any ownership interest,” Abramovich said through an interpreter.

Berezovsky, who built Russia’s largest car dealership LogoVaz in the 1990s, claims he was intimidated by Abramovich into selling his stakes in state-owned companies for less than they were worth a decade ago. Berezovsky, who is now an exile living in London, is seeking around $6.8 billion in the case.

Laurence Rabinowitz, a lawyer for Berezovsky, read out records of a Moscow meeting attended by Abramovich in 1995 where the price of military tanks was discussed.

“I was never involved in arms trading,” Abramovich said. “In the Russian Federation, arms trading was the prerogative of the state and the state alone.”

Berezovsky’s lawyers also presented documents that said Abramovich was investigated for fraud by Russian officials over an oil deal in 1992. Abramovich said there was no wrongdoing and the case was dropped.

“I have never falsified any documents,” he said about the deal. “By the time the money arrived the problem disappeared all by itself.”

The two men present contrasting versions of the events which turned them from friends and allies into enemies. Berezovsky, who spent seven days being cross-examined at the trial, claims Abramovich told him the Russian state would seize his shares in OAO Sibneft and another company unless he sold them in 2001 and 2003.

In a witness statement filed at court yesterday, Abramovich said Berezovsky’s role had been to provide “krysha,” or protection, in the “dangerous and risky” environment in Russia after the fall of communism.

He said he gave Berezovsky and Badri Patarkatsishvili hundreds of millions of dollars for physical and political protection before paying them $1.3 billion to break off the arrangement in 2001 and 2002.

The case is Berezovsky v. Abramovich, High Court of Justice, Queen’s Bench Division, Commercial Court Case No. 09-1080.

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Credit Industriel Accumulators Retrial Begins, Banker Missing

Credit Industriel et Commercial, a French bank, claimed a former client made a wrong bet in a 2007 transaction that he now insists wasn’t authorized, even as it said the banker involved can’t be found to testify at a re-trial.

“This is a classic case of a punter who makes a series of successful bets in a buoyant stock market and then cries foul when the market turns against him,” Manoj Sandrasegara of WongPartnership LLP, who represents CIC, as the unit of France’s Groupe Credit Mutuel is known, said yesterday at the start of the re-trial at the Singapore High Court.

Chief Justice Chan Sek Keong of Singapore’s Court of Appeal had ruled in April that CIC’s dispute with its former client, Teo Wai Cheong over a S$6.4 million ($5.1 million) debt must be resolved in a new trial after additional evidence came to light.

The judge ordered CIC to disclose internal communications and transcripts of phone conversations that its banker had with Teo and other clients who may have disputed giving instructions to buy accumulators, which are products that commit investors to buy stocks at preset prices for a specified period of time

Ng Su Ming, the private banker who dealt with Teo, has left the country for the Middle East and repeated attempts by the bank to contact her to be present during the retrial have proved futile, Sandrasegara said. He said Ng’s last-known address was in Dubai and she was either genuinely not reachable or didn’t want to cooperate any more in the case.

Teo’s lawyer, Chelva Rajah of Tan Rajah & Cheah, said in his opening statement yesterday that his client will show the former banker’s trial testimony was “peppered with inconsistencies and contradictions” and was “totally unreliable.”

The case is Credit Industriel et Commercial vs Teo Wai Cheong, S626/2008 in the Singapore High Court.

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HSBC, Other Defendants Seek to Dismiss Madoff Investor Suit

HSBC Holdings Plc and other defendants in a lawsuit by investors in foreign feeder funds that lost money in Bernard Madoff’s Ponzi scheme asked a U.S. judge to dismiss the case, saying it belongs in Ireland and Luxembourg.

The individual investors in 2009 sued Thema International Fund Plc and 27 other defendants, including Thema’s custodian bank, London-based HSBC, alleging the bank should have known of Madoff’s fraud. The investors asked to amend their suit after U.S. District Judge Richard Berman in Manhattan rejected HSBC’s proposed $62.5 million settlement, saying it is “not fair, reasonable or adequate.”

“These cases do not belong in a United States court,” the defendants said in an Oct. 28 court filing. Referring to two other feeder funds in the suit, they said, “The Thema action belongs in Ireland, and the Primeo and Herald actions in Luxembourg.”

In addition, the plaintiffs are barred by the laws of New York, Ireland and Luxembourg from bringing such claims, the defendants said.

JPMorgan Chase & Co., also a defendant, said separately that the investors shouldn’t be allowed to amend their suit and the case should be dismissed.

Madoff, 73, pleaded guilty in 2009 to orchestrating what prosecutors called the biggest Ponzi scheme in history. He is serving a 150-year sentence in a federal prison in North Carolina.

The case is In re Herald, Primeo and Thema Securities Litigation, 09-cv-00289, U.S. District Court, Southern District of New York (Manhattan).

Phone-Hacking Probe Judge Urged Not to Hurt Criminal Trials

The judge overseeing Britain’s government inquiry into News Corp.’s phone-hacking scandal pushed back at attempts by police and prosecutors to set limits on the evidence he can review.

U.K. police and prosecutors have said the government inquiry could threaten future criminal trials if evidence is introduced too soon. The probe is being conducted at “enormous expense” to the public and should be “worthwhile,” Judge Brian Leveson, who is overseeing it, said at a hearing yesterday in London.

“I have my own statutory responsibility and my own statutory powers,” Leveson said at the hearing. “It would be an abrogation of those responsibilities if I were to defer” to the police. Leveson hasn’t ruled on the police request.

The inquiry was announced in July by U.K. Prime Minister David Cameron nine days after the revelation that journalists at News Corp.’s News of the World tabloid hacked into the phone of a murdered school girl Millie Dowler in 2002. The probe’s scope extends beyond the now-shuttered tabloid, covering press ethics and its relationship with politicians and police.

Lawyers for the Metropolitan Police and the U.K.’s Crown Prosecution Service asked Leveson to write procedures for the probe to prevent the publicizing of police documents from hurting their criminal cases against former employees of the News of the World tabloid.

Leveson yesterday granted so-called core participant status in the probe to the Telegraph Media Group Ltd. and Trinity Mirror Plc, publisher of the U.K.’s Daily Mirror tabloid, meaning the companies can have legal representation in the inquiry and view evidence.

Police in Surrey, England, also asked Leveson to grant the force core participant status after newspapers revealed officers there didn’t investigate News of the World after it learned the tabloid hacked Dowler’s phone in 2002. The police force’s lawyer said some of its officers may have had their phones hacked.

Leveson didn’t make a ruling on the Surrey force’s request.

Dahdaleh Must Post $16 Million Bail, Get Executive Pledges

British investor Victor Dahdaleh must post 10 million pounds ($16 million) bail in order to be released pending a trial on bribery charges. Several of his friends promised to pay almost one-and-a-half-million pounds if he doesn’t return to court.

Dahdaleh, 68, is accused of paying bribes to a Bahraini royal and the former chief executive officer of Aluminium Bahrain BSC to win contracts for Alcoa Inc. Judge Quentin Purdy set the bail terms and transferred his case yesterday from a magistrates court to a higher criminal court in London, where he will enter a plea in January.

Friends of Dahdaleh, including Philip Martin Cutts, the chief executive officer of Credit Suisse Group AG’s U.K. private bank, and BP Plc executive Thomas Prescott agreed to pay a total of 1.4 million pounds if Dahdaleh doesn’t return to court, according to the Serious Fraud Office, which is prosecuting the case.

Dahdaleh must surrender his British and Canadian passports, wear an electronic tag and spend nights at his home in London’s Belgravia neighborhood. He faces six charges of making corrupt payments, two counts of money laundering, and one charge of conspiracy to corrupt, according to court papers.

A lawyer for Dahdaleh, Ken MacDonald, said he would fight the charges.

The investor, who was a donor to former U.S. President Bill Clinton’s charitable foundation, allegedly bribed officials of the smelting company Aluminium Bahrain, known as Alba, to win contracts for Alcoa to supply alumina, according to the prosecutors.

Dahdaleh paid bribes of $6 million to Sheikh Isa Bin Ali al-Khalifa, the former oil minister of Bahrain and former chairman of Alba’s board of directors, in 2003 and 2004, according to the indictment. He is also accused of paying bribes to Bruce Hall, the former chief executive officer of Alba, totaling around $1.75 million.

“These allegations are denied and will be vigorously contested,” MacDonald said in court yesterday. “He is not guilty of these offenses.”

A Bahraini government official, who declined to be identified citing agency policy, didn’t immediately comment when asked about the indictment.

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Iceland Passes Last Hurdle in $11.4 Billion Depositor Payout

Iceland will start paying out as much as $11.4 billion in foreign depositor claims after the country’s top court upheld an emergency law that leaves bank bondholders in the lurch and protects ordinary account holders.

The decision by Iceland’s Supreme Court to rule in favor of a crisis bill enacted three years ago “marks the endpoint” to a dispute with the U.K. and the Netherlands triggered by the island’s 2008 financial collapse, Economy Minister Arni Pall Arnason said. The ruling will help repair relations with the two countries, whose depositors risked losing their savings when Iceland’s second-biggest bank collapsed, he said.

“It’s clear from these rulings that all depositors, regardless of nationality, residency, nature or amount of their deposit, will get their money back in full,” Arnason said in an interview in Reykjavik. Repayment may start within weeks, he said.

Iceland’s banks defaulted on $85 billion at the end of 2008, as the government ring-fenced lenders’ domestic operations in an effort to protect the $12 billion economy from total collapse. The local assets of Landsbanki Islands hf, Kaupthing Bank hf and Glitnir Bank hf were taken over by the state, which has since created new banks from the lenders. Bondholders, including Royal Bank of Scotland Plc, BNP Paribas SA and Deutsche Bank AG, are still trying to recoup their funds.

The British Financial Services Compensation Scheme, which compensated U.K. Icesave depositors in full, will probably get its first payments “in a matter of weeks,” Arnason said. Dutch depositors, who had up to 100,000 euros in savings covered by their central bank, will be repaid in full once final “technicalities” are solved, he said. “This isn’t a question of months but rather weeks, as I understand it.”

While the court’s decision frees up funds to end the three- year depositor dispute, it may revive bondholder efforts to push their claims.

“Should any of the creditors of Landsbanki, Kaupthing or Glitnir decide to take the emergency legislation up with the European Court of Human Rights, that’s simply something we’ll deal with when the time comes,” Arnason said. “It will be very difficult for the creditors to bring credible claims before the European Court of Human Rights.”

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BTA Bank Wins Jail Term for British Man in Ablyazov Fraud Case

A British man in Cyprus who’s accused of helping former BTA Bank Chairman Mukhtar Ablyazov steal $290 million from the Kazakh lender was sentenced to 21 months in a U.K. prison for contempt of court.

Paul Kythreotis, 44, lied in testimony and failed to turn over documents related his role in the alleged fraud, the Court of Appeal in London ruled Oct. 28. Kythreotis, who wasn’t in court and hasn’t been arrested, said he had to lie because of threats from other defendants, according to the ruling.

“Kythreotis admitted that his earlier evidence had been false” and “that he had an ‘enormous’ e-mail archive, which he had not previously disclosed,” a panel of three judges wrote. The lies related to Kythreotis’s role as nominee for British Virgin Islands-based companies used in the alleged fraud.

BTA, which defaulted on $12 billion of debt before restructuring last year, filed a series of U.K. cases against Ablyazov and ex-Chief Executive Officer Roman Solodchenko over claims they siphoned money using fake loans. The lender says litigation against the men, seeking about $5 billion so far, will benefit Royal Bank of Scotland Group Plc, Barclays Plc, Commerzbank AG and other creditors that financed its rapid growth before the global credit crisis.

An e-mail to Kythreotis wasn’t returned and a call to his phone in Cyprus wasn’t answered. Kythreotis has denied the allegations and said he wasn’t aware of the alleged fraud.

A London court last year froze $68.3 million of Kythreotis’s assets, while BTA said new evidence was uncovered through raids of an office and home in Cyprus and a storage facility in London.

The case is JSC BTA Bank v. Solodchenko, A3/2010/2730, Court of Appeal (London).

Rajaratnam Prison Surrender Date Extended a Week to Dec. 5

Raj Rajaratnam, the hedge fund manager sentenced to 11 years for insider trading, will report to prison on Dec. 5, a week later than the previous date.

Rajaratnam, 54, will report to the federal medical center in Butner, North Carolina. The surrender date was extended from Nov. 28, U.S. District Judge Richard Holwell said in a filing yesterday in federal court in Manhattan.

Holwell said last month that he sentenced Rajaratnam to the medical prison because of conditions that include diabetes. No reason for the extension was given in yesterday’s filing.

The case is U.S. v. Rajaratnam, 09-01184, U.S. District Court, Southern District of New York (Manhattan).

Former Bank of Italy Governor Sentenced for Failed Takeover

Former Bank of Italy Governor Antonio Fazio and ex-Unipol Gruppo Finanziario SpA Chairman Giovanni Consorte were sentenced to more than three years in jail for their involvement in a failed takeover of lender Banca Nazionale del Lavoro SpA.

Fazio was sentenced to three years and six months by a Milan court yesterday, while Consorte was sentenced to three years and 10 months, lawyers for the two said in telephone interviews.

“We are disappointed about the verdict, which we consider unfair,” said Franco Coppi, a member of Fazio’s defense team. Consorte’s lawyer, Filippo Sgubbi, said he was “bitterly surprised” and would appeal.

Prosecutors said Fazio acted improperly in helping Bologna- based Unipol, Italy’s third-biggest insurer, gather stock in its $6.1 billion bid for BNL. The Bank of Italy in 2006 blocked the bid amid a probe of the acquisition. That same year BNL was taken over by French lender BNP Paribas SA.

Banco Bilbao Vizcaya Argentaria SA, a Spanish lender and a rival bidder, was awarded 15 million euros ($21 million) in damages, newswire Ansa reported, citing the court. Unipol was given a 720,000-euro fine, Ansa said. Unipol didn’t respond to three phone calls from Bloomberg News seeking comment.

Deutsche Bank AG managers, who had also been investigated, were cleared by the court. “No market manipulation was found,” the German bank said yesterday in an e-mailed statement.

For the latest verdict and settlement news, click here.

--With assistance from Linda Sandler, Don Jeffrey and Bob Van Voris in New York; Kit Chellel, Lindsay Fortado and Erik Larson in London; Sanat Vallikappen and Andrea Tan in Singapore; Alessandra Migliaccio in Rome; Chiara Vasarri in Milan; and Omar R. Valdimarsson in Reykjavik. Editor: Glenn Holdcraft

To contact the reporter on this story: Elizabeth Amon in Brooklyn, New York, at

To contact the editor responsible for this story: Michael Hytha at

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