By John Helmer in Moscow
To all junior miners, resource project developers, and investors in the risky wilds of Kazakhstan, be of good cheer — a Supreme Court judgement issued on December 11 in Sydney, Australia, has awarded the equivalent of US$11.4 million in compensation, penalties, and costs against a group of lawyers who have been found guilty of engaging in dishonest business practices.
Justice Clifford Einstein had ruled in October that the Kazakhstan-based law firm of Michael Wilson & Partners had been defrauded by three lawyers who had been employed by Wilson; and who had secretly moonlighted to earn fees and share bonuses for stock market listings and other transactions involving several major Kazakh resource projects — Sunkar Resources’s Chilisai phosphate project; Frontier Mining’s Benkala copper project; Roxi Petroleum; Max Petroleum; two other Central Asian mining projects, Urals Gold and Ablai; and four projects tied to these and other operators in the same region — Karamandybas (oil and gas), Ravninnoye (oil), Beibars Munai (oil), Lancaster, and Kangamiut (seafoods).
In his new order, NSW Justice Einstein reiterated his finding from October — “the essence of the matter is that the defendants concealed these continuing activities from the plainitiff”. Accordingly, the new judgement orders them to pay up what they gained unfairly in profit, and also compensate Wilson & Partners for the cost of having to litigate for recovery across the globe over the past three years. After itemizing invoices and share capital gains for each project transaction, the judge applied a 10% discount; rejected a claim for compensation for losses in the Benkala copper project; and dismissed a claim for additional and exemplary damages for the alleged conspiracy of the defendant lawyers against Wilson. Total, US$3.5 million, plus €555,259, plus A$4 million.
“The plaintiff has succeeded in almost every aspect of its pleaded case against the defendants”, Einstein ruled. “The usual rule as to costs, that they should follow the event, should apply” — another A$3.5 million. Grand total, US$11.4 million.
In his 216-page judgement issued on October 6, Einstein had ruled that John Emmott, Robert Nicholls, and David Slater had conspired together to exploit their positions in the Wilson lawfirm to breach their employment contracts and fiduciary duties by secretly creating a competing firm of their own, Temujin International, registered in the British Virgin Islands. Among the London AIM listed companies targeted by the scheme, the court papers identify Sunkar, Frontier, Roxi, and Max.
In a summary of his findings of fact, Einstein J said the conspiracy had begun in 2005, as soon as Slater had arrived at Wilson’s office in Kazakhstan from Australia, where he had been an in-house solicitor for the Westpac Banking Corporation. In a sequence of Almaty watering holes over several weeks, Slater and his co-conspirators created their cut-out company, calling it Temujin, which they borrowed from the history of the hero of the Mongol empire and the Kazakh steppes, Genghis Khan. Temujin was his original name. Slater left Wilson’s firm almost immediately afterwards, in December of 2005. Nicholls, formerly a Sydney barrister and partner at Freehills, followed in March of 2006; while Emmott, who had been with Wilson since 2001, stayed on to keep the flow of Wilson’s client business moving out the backdoor to Temujin. He exited on June 30, 2006. Temujin’s new business was to advise Wilson clients on the purchase of formerly state-owned oil, gas, gold and mineral companies and their listing on AIM.
In last week’s judgement, Einstein separates the defendants, and itemizes his rulings on culpability and financial liability for Slater, Nicholls, several companies of the Temujin group, and an associated Kazakh lawfirm. They are to pay up collectively. Emmott is named by the judge in both rulings as culpable, but he was not a defendant in the Sydney court. He is currently under investigation by the authorities in Switzerland and the UK.