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By John Helmer

On July 31, the UK Court of Appeal upheld the ruling of High Court Justice Christopher Clarke that the administration of law in Russia is liable to be manipulated by powerful Russian businessmen and politically influential individuals pursuing vendettas for their financial gain. “Improper interference by State actors” was the phrase accepted by the three appeal court judges to refer to the behaviour of the Russian prosecutor-general, ministries of Interior and Justice, police, and courts.

The case on which the appeal court ruled to endorse Justice Clarke is a multi-billion dollar lawsuit by Michael Cherney (Mikhail Chernoy) against Oleg Deripaska, the aluminium oligarch, for defrauding him of his rightful shareholding in the company they founded, now known as United Company Rusal.

Not that Clarke intended to accuse the Russian legal system of pervasive corruption, nor that he and the expert witnesses, who testified in the case, thought there was something that has newly appeared in Russia. According to the Clarke ruling of July 3, 2008 – now upheld on appeal – “the use of criminal prosecutions (or the threat of them) as tools in a power struggle with rivals was a feature of Soviet Russia. The pattern has continued and has a new name: “zakaznye dela ” (‘prosecutions to order’).” Considering the testimony before him, Clarke decided “that a State capable of such conduct on one occasion is perfectly capable of doing so again.”

Clarke will resume the trial of Cherney v Deripaska shortly.

Meantime, in another courtroom, down the corridor of the Royal Courts of Justice, Justice Andrew Smith heard testimony this week of a scheme in which the Russian state authorities were passed materials stolen in England, on the instructions of the state-owned shipping company Sovcomflot. A document trail was then presented in court to show that the purloined materials were attached to a request by the Russian Prosecutor-General to the counterpart authority of Switzerland, transmitted through the foreign ministries of the two states, as ground for the request to open Swiss bank and corporate transaction records. The Swiss state reply to the Russian state request , comprising hundreds of pages, was then passed to Sovcomflot, for use in a civil lawsuit it was pursuing in the High Court in London.

The chain of evidence was proof of “improper interference by State actors”. Or was it? “It is rather difficult for me to speculate intelligently about that”, responded Sovcomflot’s chief executive, Sergey Frank, who was testifying for a second full day in the case he and Sovcomflot have brought against his predecessor at the shipping company, Dmitry Skarga, and the company’s former chartering partner, Yury Nikitin. According to Frank, he had no direct knowledge of what his subordinates were doing; did not hear reports of illegal operations at meetings he attended; never prompted Russian prosecutors on names they should be after; and has no idea how the document chain, which his subordinates started in London, found its way to Switzerland, back to Moscow, and then to London again.

The Anglo-American media, which are normally at hair-trigger readiness to report Russian corruption and human rights violations, have so far failed to notice the Sovcomflot proceedings at all. With two minor exceptions, the Russian press has also failed to report a single word of the case, which commenced last week. It is unknown what has deterred editors and reporters on both sides of the Iron Curtain and ensured their silence, as the string of powerful Russian business and government figures named in court as implicated in illegal operations in London grows longer, and more revealing.

Frank has told the court he was duty bound to investigate the massive fraud he has alleged. “We are talking about hundreds of millions; we are talking about uncommercial transactions which attracted the interests of the independent media; so we decided to set up a professional legal team to do a proper investigation inside the company.And then it was the business of that team, and the team basically can — did consist of many prominent professional legal names of the flourishing legal community of London. So I was secure that they had to conduct properly, and I did not make any specific instructions to teach them what they should and what they shouldn’t do.”

In defence, Skarga and Nikitin say the loss figures and the fraud charges have been trumped up by Frank, whom they accuse of pursuing a personal vendetta against Skarga, after trying, and failing, to block his appointment to Sovcomflot in 2000. When the lawful means of investigation were exhausted and failed to find evidence of wrongdoing – so say Skarga and Nikitin in court through Queen’s Counsel Graham Dunning and Steven Berry – Frank involved Russian state agencies for intelligence, foreign affairs, criminal investigation, and prosecution; as well as at least three detective agencies in London, burglars, computer hackers, and false-flag agents operating in the UK, Switzerland, Panama, and elsewhere.

The scope charged in the testimony on October 5 included satellite monitoring of all computers operated by Sovcomflot personnel; a break-in and burglary at a London house; penetration of English bank records; profiling of American Express, other non-Russian credit cards, and mobile telephone records; and in Russia, police raids on homes and offices. According to invoices paid by Sovcomflot and entered into the court records, at least £340,000 was paid to two London detective agencies, Hart and Modus International.

Skarga and Nikitin have told the court that none of the evidence uncovered incriminates them or substantiates the fraud and bribery charges laid by Frank.

In desperation, according to their evidence, Frank passed the materials the London investigators had stolen to the Russian prosecutor, covering up the source, as part of an attempt to get the Swiss authorities to find something incriminating. Believing the Russians were prosecuting a criminal fraud, the Swiss prosecutors then issued warrants to open individual bank records, and sent the materials to Moscow. There, the documents were handed to Sovcomflot, which passed them to lawyers in London, for use in the High Court claim.

This is how the chain was spelled out in court on Tuesday:

“Dunning for Skarga: what I am getting at is this, Mr Frank: some of the documents that your private investigators created in the course of reporting to you, on their investigationsin England, were then attached to the request which the Russian prosecutor sent to the Swiss legal authorities?

Frank: What is the point?

Dunning: Well, I am wondering if you can explain how that came about?

Frank: It is difficult for me to speculate, but most likely the Russian general prosecutors’ office simply requested these documents and we have to submit them, and they decided to attach them. But that is their business. How I can influence?

Dunning: Well, I think you already said that the Project Sturgeon reports were very sensitive documents which were not widely circulated within Sovcomflot.

Frank: That’s true.

Dunning: Because you were worried about leaks.

Frank: That’s true.

Dunning: And probably only you and Mr Mednikov [Sovcomflot company lawyer] had them within Sovcomflot, did you not?

Frank: I don’t think so. This is your suggestion, it’s quite artificial. Limit it, but it is not possible to make it like this.

Dunning: If you look at page 3 there, this is a document which was gathered in Switzerland by the Swiss authorities, pursuant to the request which had been made to them by the Russian authorities. It was one of, I think, hundreds — possibly even thousands – of documents sent by the Swiss authorities back to Russia. The documents have on them — I don’t know whetheryou can confirm this, Mr Frank — they have on them a stamp which is the stamp that’s put on by the Swiss authorities, in a box with “BA/MPC, 001054”, and the one on the following page, which is a Wegelin [Bank] internal document relating to Milmont [alleged beneficiary company], has a number 648 on it.

Frank: Sorry, can you repeat your question?

Dunning: Yes. These are examples, Mr Frank, of documents that were then obtained in Switzerland and sent back to the Russian prosecuting authorities, and then handed over by the Russian prosecuting authorities to Sovcomflot or to Ince [London law firm representing Sovcomflot], for use in this court proceeding.

Frank: Are you sure that they’ve been obtained and sent to the —

Dunning: Yes, because they have a stamp on them. That’s the Swiss —

Frank: I have three higher educations, but it was not my course to learn whose stamp on this letter, clearly…

Dunning: This is a letter which Ince & Co wrote in June of this year, and they said in the first sentence there: “Our clients recently received from the office of the Russian prosecutor copies of documents which we understand were seized from the offices of Henriot Finance (Global Marine Logistics) [Nikitin company] in St Petersburg in 2005.”

Frank: Sorry; so what?

Dunning: Well, I suggest you knew very well about that sharing of documents, that passing over of documents, didn’t you?

Frank: Not really. This is the first time I see this letter.

Dunning: Well, if you didn’t know about it, who did know about it? Mr Mednikov?

Frank: Maybe, but I’m not speaking on behalf of him….

Dunning: All right. Do you have any explanation as to how the product of the bank profiling got from your investigators to the Russian prosecuting authorities?

Frank: Can be many speculations about that. It can be Russian authorities have their general — it can be they requested some of the papers, which be in the limited quantity located in the Moscow office, and then to deal with them. But it is rather difficult for me to speculate intelligently about that.”

Asked to explain his presence at the London office of the lawyers, when the illegal operations were discussed, Frank testified that it was “maybe quite coincidental that I have been in the Ince’s offices on the same day.” As for the allegation that he had been in control of the entire Project Sturgeon campaign, Frank said: “I don’t — I don’t know anything about the campaign. What do you mean by ‘campaign’? And then once again, this can be purely coincidental.”

Frank also told the judge he was indignant at the innuendo that the Russian state authorities should be accused of involvement in illegal operations at the behest of a private interest. “It sounds a bit insulting to the sovereign countries that you are speaking in the way that somebody can be superior than the authorities in the sovereign state to decide who they want to question.”

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