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By John Helmer, Moscow

Whoever Elena Egorova may be, she and Victor Rashnikov, owner of Magnitogorsk Metallurgical Combine (MMK), share exactly the same desire for personal anonymity and business secrecy as the Chelyabinsk court case against MMK’s half-billion dollar purchase of an Australian iron-ore mining project reaches its climax later this month. This is their story so far.

If anyone imagined that MMK is a public shareholding company with conventional accountability and corporate governance standards for spending $9 billion in annual revenues and $16 billion in assets, the action by a purported shareholder, with a name, a share, and nothing else, to halt the offshore acquisition has exposed a total blackout of information by Rashnikov’s company, and the refusal of Rashnikov, with 86% of the company shares, to explain his decision-making to his co-shareholders. But from the court file released this week, it now appears the plaintiff shareholder is as keen as the defendant oligarch to keep the evidence and the proceedings secret.

According to rulings issued to date by the presiding judge, Natalia Bulavintseva, Egorova has challenged the legality of the decision by the MMK board, dated last December 16, to proceed with the takeover of Flinders Mines in South Australia. The claim was filed on March 29; the judge then issued a preliminary injunction against closing the deal by MMK on March 30. On April 24, the judge dismissed MMK’s motion to lift the injunction, and deferred the hearing on the merits of the case until May 24. At the same time, the judge ordered MMK to bring to the May 24 hearing evidence substantiating that the buyout of Flinders Mines for $569 million complied with the company’s articles of association, as well as the Russian statute on joint stock companies.

At the same time, the judge closed the meeting records of the board of directors and MMK’s files to the shareholder by rejecting Egorova’s application to obtain discovery from MMK.

This week, on May 2, Egorova filed a motion to conduct the proceedings scheduled for May 24 behind closed doors on the ground that the evidence she intends to submit may amount to commercial secrets of MMK. Since she has been denied access to internal company documents, her evidence must be publicly accessible. And yet Egorova told the court she wanted it kept secret.

Judge Bulavintseva rejected the motion ruling that for company or trade secrets to be protected by closing the court’s doors, there must be a showing that the information to be protected relates to “information about how to carry out professional [trade] activities which have actual or potential commercial value because they are unknown to third parties, and to which third parties do not have free legal access.”

It is unprecedented in the practice of the Russian arbitrazh courts to enjoin an offshore asset purchase, and to hold a trial of a board of directors’ decision to carry out such a transaction. It is bizarre that both plaintiff and defendant should try to keep the challenge to corporate accountability as secret as possible. Why Egorova’s challenge to the MMK board of directors is at the same time attempting to keep from public exposure the very information she has challenged as violating public shareholder rights and benefits is unclear from the limited releases from the Chelyabinsk court. This is because only the judge’s rulings have been posted on the court website, not the texts of the claims submitted by Egorova or MMK.

Egorova has not appeared in public since the case began, nor have searches for her at her legal address on the outskirts of Chelyabinsk city found her. No statements have been issued by her lawyer, identified this week in the court papers as D.Danilchenko; he has submitted a document of appointment which was dated March 28, just one day before the proceeding commenced. It is normal in Russian legal practice for a lawyer to arrange his client’s power of attorney to be signed as soon as the claim preparation commences. But if Egorova engaged Danilchenko one day before the case against MMK was submitted to the court, the case claim is likely to have been prepared earlier – and elsewhere.

MMK has issued a sequence of statements saying little. On April 2, “MMK officially states that in the course of implementation of the transaction to acquire 100 percent of Flinders Mines Lim ited shares, OJSC MMK has been acting in full conformity with applicable laws and regards the plaintiff’s action as ungrounded.” On April 13: “as stated earlier, MMK continues to consider the plaintiff’s action as ungrounded and further states that the company has been acting in full conformity with applicable laws in the course of implementing the transaction to purchase 100 percent shares of Flinders Mines Limited.” On April 25: “the Company considers the minority shareholder’s action as illegitimate and deserving no legal satisfaction. MMK will continue to use all lawful means in its possession to protect its corporate interests and to lift the injunction relief order earlier imposed by the court.”

MMK has refused to disclose the law firm or lawyers acting for the company in the case. In her April 25 judgement, Bulavintseva revealed two names as holding powers of attorney from MMK. One, N.A.Mukayeva, was appointed on January 11, 2010; the second, S.V. Shepilov, was appointed on April 14 of this year, a fortnight after the case had commenced. Mukayeva appears in MMK records as a member of an internal audit committee and a representative in other legal proceedings. Shepilov is the head of MMK’s legal department. Born in Magnitogorsk and a 20-year veteran of the company, he is also a member of the regional parliament and a member of the United Russia party.

In this week’s disclosure of proceedings also, procedural faults were found in the appeal lodged by lawyers for Flinders Mines against the injunction. This caused the appellate judge, Galina Fedina, to rule on May 2 to freeze consideration of the appeal. A new filing by the lawyers led the next day to another ruling by the judge to resume the proceedings. That appeal is scheduled for a hearing on May 30, the week after the main trial is due to be held.

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