Otkritie International Investment Management Ltd and Others v Georgy Urumov (also Known as George Urumov) and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Eder |
| Judgment Date | 10 February 2014 |
| Neutral Citation | [2014] EWHC 191 (Comm) |
| Docket Number | Case No: 2011 Folio 1182 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 10 February 2014 |
[2014] EWHC 191 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Justice Eder
Case No: 2011 Folio 1182
Mr Steven Berry QC, Mr Nathan PillowandMr Anton Dudnikov (instructed by Hogan Lovells) for the Claimants
Mr Antony Peto QC and Mr Jonathan Mcdonagh (instructed by Farrer & Co) for the First, Second and Fourth Defendants
Mr Antony Peto QC and Mr Jonathan Mcdonagh (instructed by Farrer & Co) for the Fifth, Sixth and Seventh Defendants until 1 October 2013 (Day 30 of Trial)
Mr Antony Peto QC and Mr Jonathan Mcdonagh (instructed by Cartier & Co) for the Nineteenth Defendant from 14 October 2013
Mr Ian Smith for the Thirteenth Defendant
Mr Tom Weisselberg (instructed by Byrne & Partners) for the Fourteenth Defendant until 1 October 2013 (Day 30 of Trial)
Mr Bart Casella (instructed by S C Andrew) for the Tenth, Eleventh and Twelfth Defendants
Hearing dates: 12–13, 17–20, 24–27 June; 1–4, 8–9, 12, 15–18, 22–26, 29–31 July; 1–3, 7–10, 14–17, 21–24, 28–31 October; 4–8 November 2013
Final Written Submissions: 13 December 2013
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Part 1: Introduction
The Claims
In these proceedings the claimants seek damages and assert certain proprietary claims arising out of what they say are various acts of fraud and (in colloquial terms) "money-laundering" activities committed towards the end of 2010 and in the course of 2011 by some or all of the defendants. In total, the alleged frauds are said to involve approximately US$ 175m.
In many senses, this trial has been extraordinary. Quite apart from the number of defendants (there were originally some 19 of them), the main part of the trial occupied some 46 hearing days spread over almost 6 months (from June-November 2013) during which the court heard evidence (often with the assistance of interpreters) from over 20 witnesses including some by videolink.
At the heart of the case are two discrete allegations i.e. what the claimants refer to as the alleged "Sign-On Fraud" and the alleged "Argentinean Warrants Fraud" as described below. The relevant events cover a wide geographical spread including London, Moscow, Geneva, Spain and Latvia. The allegations (and counter-allegations) are wide-ranging and include alleged dishonesty, deceit, conspiracy, fraud, misrepresentation, bribery, forgery, blackmail, money-laundering, false impersonation, intimidation, entrapment, subterfuge, kidnap and even murder. Anyone sitting in court listening to the evidence and the parties' respective submissions might have been forgiven for supposing that they were in the Old Bailey rather than in the Commercial Court sitting in the Rolls Building.
In this Judgment, I should make plain that I do not deal with every single point which has been raised in evidence or addressed in the parties' submissions. In my view, to do so is both unnecessary and undesirable. Instead, I have sought to focus on what I consider to be the essential issues and, despite the length of this Judgment, to express my findings, reasoning and conclusions as succinctly as possible.
The Claimants
The claimants are (1) Otkritie International Investment Management Ltd ("OML"); (2) Otkritie Securities Ltd ("OSL"); (3) JSC Otkritie Financial Corporation ("OFC"); (4) Otkritie Bank (JSC) ("OB"); and (5) Otkritie Finance Ltd ("OFL"). OFC is the ultimate parent of the Otkritie group of companies (the "Otkritie Group"). It was established in March 2004 as a limited liability company under the laws of the Russian Federation. In December 2010, OFC was reorganised into an open joint-stock company. In terms of key personnel, Vadim Belyaev is (or at least was at all material times) the Chairman of OFC's Board of Directors; Roman Lokhov is the former Deputy CEO of OFC; Dmitriy Popkov is a member of the Board of OFC; Dmitry Romaev is the CFO of OFC and Anatoliy Predtechensky is the former Chief Risk Officer of OFC. The Otkritie Group has a large network of offices in the Russian Federation with around 225 branches located in 53 Russian cities and has offices in London, New York, Limassol and Hong Kong. The main shareholders of the Otkritie Group are (or at least were at all material times) Mr V Belyaev, Mr Boris Mints and VTB Bank (OJSC), a large Russian financial services group.
The Otkritie Group operates predominantly in commercial and investment banking sectors and provides brokerage and asset management services. As a result of a reorganisation in September 2010 through the merger of Petrovsky Bank OJSC, Otkritie Investment Bank (JSC) and Otkritie Commercial Bank, the Otkritie Group's commercial and investment banking operations are now performed through one legal entity, OB, a subsidiary of OFC. OB holds a banking licence from the Central Bank of the Russian Federation, as well as licences issued by the FSFR for securities trading and trading in derivative financial instruments. Mikhail Belyaev is the former chairman of OB's Board of Directors; Tatiana Chepeleva is a former COO of OB and Anatoliy Predtechensky is a member of the management board of OB.
Commercial banking operations performed by the Otkritie Group include lending, raising rouble-denominated deposits and deposits in freely convertible currencies, settlement and currency exchange operations. Investment banking operations include securities trading and trading in derivative financial instruments, operations on the equity share and debt capital markets, services related to mergers and acquisitions and operations on the money market, including interbank loan and foreign exchange markets. The Otkritie Group also provides brokerage services and performs securities trading and trading in derivative financial instruments, primarily through Otkritie Brokerage House OJSC in Moscow and OSL in London, both wholly owned subsidiaries of OFC.
OSL is licensed in England and regulated by the Financial Conduct Authority. In terms of key personnel of OSL, Mr Lokhov is the former CEO of OSL in Moscow and in London; Tatiana Chepeleva is the former COO of OSL; Howard Snell is the current chairman of OSL; Anton Shamarin was the head of risk in Moscow and Malika Sharipova was the former risk manager in Moscow. Otkritie's employees during the relevant period include Messrs Urumov, Sergey Kondratyuk, Pinaev, Gherzi, Ramaiya, Mufti, Mujagic and Katorzhnov.
OML is a BVI Company that is wholly owned by OFC, and it provides management services to other Otkritie Group companies. The directors of OML are nominees. At all relevant times, the day to day management of OML was conducted by OFC.
As stated above, the group is generally referred to as the "Otkritie Group" or "Otkritie" and unless the context otherwise specifically requires, I shall refer to one or more of the claimants as "Otkritie".
The claimants have throughout been represented by Hogan Lovells and Counsel led by Mr Steven Berry QC with Mr Nathan Pillow and Mr Anton Dudnikov.
Mr Sergey Kondratyuk
One of the alleged fraudsters was the named 8 th defendant, Mr Sergey Kondratyuk. He was born in 1981 and after working at Web-Invest Bank and then KIT Finance joined Otkritie in 2009 as a director of OB and Head of Fixed Income Trading ("FIT"). He worked at Otkritie's offices in Moscow until his resignation in September 2011. After the balloon went up in August 2011, Mr Kondratyuk was arrested and charged with certain criminal offences in Switzerland. In the event, he eventually admitted his involvement in the Sign-On Fraud as well as the Argentinean Warrants Fraud; and the claimants settled their claims against him on terms set out in a Settlement Agreement dated 25 January 2013. As part of the settlement, Mr Kondratyuk has returned some of the fraud proceeds totalling approximately US$ 25m. Mr Kondratyuk served a prison sentence in Switzerland for these frauds and was eventually released in April 2013. He has also met with the City of London Police and freely provided them with a full account of what he says was his involvement in the frauds with others.
As part of the settlement, Mr Kondratyuk also agreed to assist the claimants in pursuit of their claims against other parties. Thus it came about that he provided three witness statements and gave evidence in this trial on behalf of the claimants. Such evidence was given by videolink from Paris (pursuant to an earlier order of HH Judge Mackie QC and, after further submissions at the beginning of the trial, reconfirmed by me) in particular because he said that he might be arrested by the authorities here and also feared for his personal safety if he came to England. He was cross-examined over a number of days. In essence, it is his evidence that he participated in the Sign-On Fraud together with Georgy Urumov...
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