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By John Helmer in Moscow

Archangel Diamond Corporation (ADC) has re-emerged from a bankruptcy proceeding initiated earlier this year by De Beers, to launch new charges in the Colorado state court against Russian oil company LUKoil, and well-known Russian oligarchs, Vagit Alekperov (lead bearer) and Alisher Usmanov (2nd bearer).

ADC is now being directed by a group of minority stakeholders, led by US attorney Bruce Marks; former board director, Clive Hartz; and the Firebird Global Master Fund of New York, with a stake of about 18%. De Beers owns 56% of ADC’s shares.

The new filing was lodged in the Denver city and county court for Colorado on November 24. It charges LUKoil, one of Russia’s largest oil companies, with racketeering, fraud, unjust enrichment, and civil conspiracy. Set out in detail is an alleged scheme by which LUKoil used Colorado, local companies, and at least a dozen Colorado employees to smuggle large sums of cash into Russia. The scheme has been revealed in order to buttress ADC’s claims that the Colorado court has jurisdiction over LUKoil to try the 11-year diamond mine case.

The new court papers charge that from March 1999 until now LUKoil has used a Colorado front company, DS Engineering, as “the fulcrum of illegal cash smuggling schemes in which the Lukoil Colorado Employees carried cash from Colorado to Russia, in amounts averaging $40,000 per month, totaling over $6 million. The cash smuggled each month was purposefully broken up into bundles of less than $10,000 and divided among separate Lukoil Colorado Employees traveling to Russia to knowingly avoid U.S. currency reporting laws. Lukoil then on a monthly basis directed wires into Colorado to reimburse DS Engineering for the cash smuggled to Russia. The Lukoil Colorado Employees smuggled cash related to at least three different projects: Kogalym project in the Khanty-Mansi Autonomous Region, NMNG joint venture with Conoco in the Timan-Pechora province; and Western Siberia project. Lukoil companies, including Lukoil AIK, even provided a safe for DS Engineering to store the cash.”

The fresh evidence of LUKoil’s operation of DS Engineering includes the claim that “the cash was used in part to pay Russian geologists and engineers who provided services to Lukoil companies, including Lukoil AIK in Russia. Such payments were made in dollars and represented a violation of numerous Russian laws, including, but not limited to, (a) currency importation regulations and controls laws, (b) labor laws regarding payment of employees, (c) law which limit the use of currency other than rubles for payment, and (d) tax laws.”

“Although DS Engineering appeared to be a separate company from Lukoil, this was a sham. DS Engineering, at the direction of Lukoil related companies Oldberry, Gilwood, and Lukoil Israel, made numerous payments by wire for expenses unrelated to the services which DS Engineering personnel provided in Russia, including (a) over $350,000 for “OBIL services”; (b) over $100,000 to Express Travel to benefit the person who nominally represented Oldberry, Gilwood, and Lukoil Israel; (c) over $100,000 for travel and other expenses of employees of Lukoil AIK, including its general director, Mr. Usmanov (who appears unrelated to Alisher Usmanov); and (d) from 2001 through the current date over $3 million to Lukoil Israel. In other words, DS Engineering paid millions of dollars to Lukoil Israel which it then billed Lukoil Israel for reimbursement. Upon information and belief, this “circle” of monies paid to Lukoil Israel for “services” was wired to a different bank account from which DS Engineering received payment from Lukoil Israel and may constitute some type of fraud. Upon information and belief, Lukoil Israel never provided DS Engineering any invoices or billings which provided any substantive description of the services purportedly provided for the more than $3 million which DS Engineering wired out to Lukoil Israel from its bank account in Colorado.”

The ADC filing charges that the cash smuggling scheme “involved over 75 separate fraudulent mails and wires, organized by numerous persons associated with AGD and Lukoil, and caused hundreds of millions of dollars of injury. The Cash Smuggling Schemes involved over 25 Lukoil Colorado Employees making over 1,000 separate trips over a ten year period smuggling over $6 million. The potential scheme involving payments to Lukoil Israel involved dozens of payments made over seven years involving millions of dollars.”

The new court filing also explicitly accuses Alisher Usmanov, a business partner of LUKoil chief executive Alekperov, with wrongdoing as part of the alleged scheme to take the mining licence for the Grib diamond pipe in Arkhangelsk away from ADC, and vest it in Arkhangelskgeoldobycha (AGD), a local company controlled by Alekperov and Usmanov. “After the discovery of the Grib Pipe,” the court filing says, “Usmanov decided to use his interest in AGD in order to direct AGD to breach the Agreement so that the owners of AGD could obtain the benefits of the diamond discovery (the “Illegal Scheme”).” Usmanov’s actions, along with those of Alekperov, are alleged to amount to an agreement to “defraud Archangel and …to commit two or more related predicate acts of racketeering in a ten year period in the course of operating the AGD Enterprise, including the numerous predicate acts set forth…”

New evidence in the case that threatens to bring LUKoil to trial is being interpreted in the Toronto stock market as potentially valuable in the eventual strategy of obtaining billion-dollar compensation for the lost diamond mining rights from the Russians. Lack of funds from De Beers and other sources has meant that a parallel legal proceeding in Stockholm, before the Stockholm international arbitration tribunal, was wound up in October last.

Usmanov has repeatedly said he is not culpable in the affair. The court filing claims that LUKoil bought out Usmanov’s interest in the Grib diamond project in 2000 or 2001. LUKoil has also denied wrongdoing, and continues to challenge the jurisdiction of the Colorado to try ADC’s claims.

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