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DwB_1745

By John Helmer, Moscow

Andrei Melnichenko’s Eurochem group, one of Russia’s largest producers of fertilizers, has responded to a New York lawsuit this month from Alexander Mashkevich’s International Mineral Resources (IMR). Mashkevich is accusing Melnichenko of paying American agents to hack into his company computers, steal sensitive information, and promote litigation and propaganda damaging to Mashkevich and his companies’ reputations. Melnichenko says he has been vindicated.

In a press release issued in Moscow yesterday, Eurochem announced it has won “favourable decisions” from a US federal district court in Washington, DC, whose rulings followed a week after the IMR filed its accusations in the New York Supreme Court. Eurochem, its release says, “has obtained favorable judicial decisions in its legal dispute with a contractor retained for the construction of the cage shaft at the Group’s potash mining project in Russia’s Gremyachinskoe deposit. On November 17-18, 2015, the U.S. District Court for the District of Columbia issued a series of decisions rejecting all allegations that the consulting expert hired by EuroChem-VolgaKaliy had engaged in unlawful information-gathering activity.” The contractor referred to in the judgement is Shaft Sinkers, an associated company of IMR under Mashkevich’s control.

The opening of the Washington court files, which had remained sealed or unreported for more than a year, also exposes a world of Washington lobbying and propaganda targeted at the Kazakhstan Government and President Nursultan Nazarbayev.

Melnichenko produces fertilizers in Russia from hard-rock mining and the refining of gas; further fertilizer processing is carried out in plants in Lithuania, Belgium and China. In Kazakhstan Eurochem is close to starting a new phosphate mine. In global terms – in millions of tonnes of annual nutrient capacity — Eurochem is already ranking 12th in the world. When the Kazakh and Lithuanian plants are up and running, it will rank 3rd in the world, behind Potash Corporation of Canada and Mosaic of the US.

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Source: http://www.eurochemgroup.com/wp-content/uploads/2015/04/EuroChem-Group-AG-2014-Annual-Report.pdf -- page 21

In 2014 Eurochem reported revenues of $5.1 billion, earnings (Ebitda) of $1.5 billion; and borrowings of $2.1 billion. The group is owned by Melnichenko, and its shares are unlisted.

Mashkevich’s best-known corporate property was the London-listed Eurasian Natural Resources Corporation (ENRC), a Kazakhstan-based producer of ferro-alloys, iron ore, alumina and other minerals. Its revenues in 2013 came to $6.4 billion; Ebita to $1.9 billion. Since 2014 it has become a private company called Eurasian Resources Group (ERG). IMR is an Amsterdam-based subsidiary of ENRC.

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The conflict between Melnichenko, 43 (above, left) and Mashkevich, 61 (right), started because the mining technology introduced by Shaft Sinkers for Eurochem’s new potash mine in Volgograd failed. The initial Shaft Sinkers contract was worth $270 million; the delays in meeting mine targets and the cost of drilling an alternative mine shaft added substantially to this bill. Melnichenko subsequently concluded he had been defrauded and began court proceedings in The Netherlands. He and Mashkevich tried to settle but couldn’t agree. To conserve the financial capacity of IMR and Shaft Sinkers to pay the bill, if he wins in court, Melnichenko obtained a Dutch court freeze order over $1.2 billion in Mashkevich’s cash. The case is continuing; the cash remains frozen; Shaft Sinkers is loss-making. For details, read this.

In April 2014, to help with its defence in court in Holland, IMR applied to the federal US district court in Washington for an order compelling Rinat Akhmetshin, a US citizen and Washington resident, to answer a subpoena, give testimony under oath, and hand over documents, computer files, and tapes he had compiled on IMR, Shaft Sinkers, and the Gremyachinskoye project. The legal proceeding in Washington is known by its US Code section 1782; this allows litigants in foreign courts to apply to a US federal court to order the production of evidence in their jurisdictions. Among the Russian oligarchs, Sect. 1782 has been a favourite tactic of Oleg Deripaska and his lawyers.

Gladys KesslerIMR has identified Akhmetshin as one of the agents employed in Eurochem’s investigation of the alleged fraud at Gremyachinskoye. He was working on the instruction of Patrick Salisbury, Eurochem’s New York lawyer. In February 2015, the presiding judge in Washington, Justice Gladys Kessler (right), ordered Akhmetshin to testify himself and hand over his records. She had concluded that “Mr. Akhmetshin performed both strategic communications and expert consultant duties while working on behalf of ECVK [EuroChem Volga-Kaliy, the Volgograd mine subsidiary]”.

Akhmetshin delayed, arguing the evidence sought was commercially as well as politically sensitive. Disclosure, he told the court, “would be an economic (and political) disadvantage to [him] , if people associated with [his] economic competitors, or people associated with the regime of
Mr. [Nursultan] Nazarbayev [the President of Kazakhstan], were to obtain [his] confidential information and materials.”

The judge didn’t agree, and ordered him to comply with the subpoena. But she accepted that some confidentiality was required. “A limited Protective Order is reasonably necessary to protect the interests asserted by Akhmetshin and to prevent misuse of the testimony and documents IMR has requested. However, the Proposed Order submitted by Mr. Akhmetshin is, as IMR contends, overbroad.” This judgement was signed last week, on November 17.

In an earlier stage of the proceeding, the judge had rejected the case made by the lawyers for Akhmetshin that part of his evidence should not be handed over to IMR because it was privileged communication between lawyer and client, Salisbury and Eurochem. According to Kessler, “after having reviewed the 261 documents and privilege log submitted by Mr. Akhmetshin to the Court, the Court concluded that the overwhelming majority of the documents were not privileged and that a great many of the assertions of privilege were frivolous. Consequently, the Court ordered Mr. Akhmetshin to immediately produce to counsel for IMR all non-privileged documents.”

In its New York state court filing on November 12, IMR quotes from emails between Salisbury and Akhmetshin, as well as from a tape-recording of Akhmetshin discussing what he had learned from IMR files he had obtained clandestinely. Salisbury and the IMR lawyers were asked to explain the source of these details. They have refused to explain.

It now appears the email and tape quotes in the New York court papers come from the disclosures the Washington court required Akhmetshin to make to lawyers for IMR. In all, according to the judge’s count, more than a thousand pages and more than 265 emails were handed over.

At the same time, Judge Kessler has endorsed Akhmetshin’s and Salisbury’s fees and charges for the work required to answer IMR. Akhmetshin requested $111,580.33, to recover his costs for complying with IMR’s subpoena and discovery requests, for his own time, and for the work of the Salisbury law firm. IMR argued he was not entitled to anything because what he had done was criminal hacking.

The judge ruled “that position is simply wrong.” On November 18, she ordered IMR to pay Akhmetshin “$12,285 or 50 percent of what he would have earned at his usual professional rate of $450 per hour”; plus “the full amount charged for the legal services provided by Salisbury & Ryan of $85,930.33, less $12,390.00 for time spent on the production and negotiation of a Protective Order, for a total of $73,540.33.”

What of Akhmetshin’s links to the Kazakh political opposition? Last week’s rulings by Kessler keep sealed most of those details in the records Akhmetshin has been required to hand over to IMR. But Kessler does reveal Akhmetov’s admission that in the period for which IMR was seeking his records, 2012 and 2013, disclosure of information “would be an economic (and political) disadvantage to [him] , if people associated with [his] economic competitors, or people associated with the regime of Mr. [Nursultan] Nazarbayev [the President of Kazakhstan], were to obtain [his] confidential information and materials.”

Akhmetshin and his wife, Lyudmila Verashchagina, list themselves with telephone numbers at an address on Vermont Avenue, in northwest Washington. The numbers do not answer. Akhmetshin told the court he is “Director of the Washington office of International Eurasian Institute for Economic and Political Research (“IEI”). IEI works to expand democracy and the rule of law in Eurasia.” He also claimed to be “an expert on the legal, political, social, cultural, and economic characteristics of many of the countries that formerly comprised the Soviet Union.”

In June 2011, when Akhmetshin was contacted by Radio Free Europe (RFE) for comment on the political opposition to Nazarbayev he implied that his institute had moved location, and that he himself had moved on to other issues. Akhmetshin, according to the RFE report, “has been linked in the past with [Akezhan] Kazhegeldin, the Kazakh opposition leader who once employed [Petr] Afanasenko as a bodyguard. Akhmetshin, who sponsored Afanasenko’s visit [to Washington], declined to comment on the case when contacted by e-mail, saying only that Afanasenko ‘is an old friend — he is a Belgian citizen and has nothing to do with [Kazakhstan].’”

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In 2011, according to an unrelated case in federal US court in New York, Akhmetshin and Salisbury were reported to have been engaged on a campaign to attack the reputation of a Moscow businessman, Ashot Egiazaryan, and to persuade the US Government to deny him political asylum. The client for that was reported to be a business rival of Egiazaryan’s in Moscow, Suleiman Kerimov. The 2011 court case can be read here; Egiazaryan’s success on appeal can be read here. In Moscow this week Kerimov declined to comment on the relationship with Akhmetshin.

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