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by John Helmer, Moscow
  @bears_with

Slaughtering sheep, goats and chickens with the idea of checking their innards to tell the fortunes of human beings started with the ancient Babylonians, peaked in ancient Rome, and despite the best efforts of the Catholic popes, it was still going strong in medieval England. The killing was called casting the haruspices.  

Foie gras and chopped liver are still fashionable in London and New York where Mikhail Khodorkovsky, the guilty Russian oil robber, spends his money trying to improve his reputation and fortune, and run as the Anglo-American candidate for the succession to President Vladimir Putin.  Journalists believe Khodorkovsky’s haruspices; the Royal Courts of Justice don’t.  Positively liverish is what becomes of the Khodorkovsky narrative when exposed to cross-examination, the truth test, and the penalty for perjury.  

In the new case of Yukos Finance and Yukos International versus Stephen Lynch, Stephen Jennings, Robert Reid, Richard Deitz and Robert Foresman, the verdict is “the Claimants’ claim against all five Defendants fails”.

Above, left to right: the victorious defendants Stephen Lynch; Robert Foresman; Richard Deitz. Below, the defeated Yukos claimants David Godfrey, Steven Theede; and  Bruce Misamore; for Misamore’s continuing war against Russia, click to read.

After preliminaries lasting four years, and courtroom hearings in June and July of this year, the 49-page judgement by Sir Michael Burton was issued on October 8. “All of the Defendants were impressive witnesses,” Burton ruled, “and gave a very good account of themselves in very difficult circumstances, and, despite vigorous cross-examination, did not accept or indicate any dishonesty.”

Much worse for two journalists employed by Reuters and Bloomberg; they attempted to portray Foresman and his co-defendants as guilty of fraud on the basis of stolen emails the reporters  were shown before the London trial began; that evidence Justice Burton dismissed as worthless. “Very sketchily explained” was the euphemism the judge used to describe this evidence.

Left to right: Sir Michael Burton; Catherine Belton whose Twitter account publishes a 25-year old photograph of herself;  Stephanie Baker. For the record of daily Russia-hating diatribes which Belton issues but is unable to publish in mainstream media, click to open

The reporters were Catherine Belton and Stephanie Baker; click to read their parallel reports on June 10 here  and here;  and this analysis.  

 Belton and Baker didn’t  appear in court, neither to report from the press bench, nor to testify in the box.   The judge decided they had jumped to a false conclusion: “The fact that the RenCap cache [the stolen emails] included internal communications between the Defendants, and legally privileged documents: and I have not found in any of them any admission or confession of wrongdoing, as might otherwise have been expected.”

Source: https://s3-eu-west-2.amazonaws.com/

Baker refuses to report the outcome of her lying.

Belton has reported “there was ‘no smoking gun’”. She creates the innuendo that she has been telling the truth while the defendants have escaped on a technicality. In fact, the term ‘smoking gun’ had come, Burton said, from the defendants. Burton himself ruled more comprehensively. “Having weighed up all the above, I do not conclude that there was a breach of Article 1064 [Russian Civil Code provision for damages for tortious  injury ] by the Defendants: I am not persuaded that there was an unlawful agreement to rig the Lot 19 auction between Rosneft and the Consortium [the defendants]. Accordingly, the claim against the Defendants is dismissed. Even if I had so concluded in relation to the other Defendants, I find it very difficult to find any justification for having included as a Defendant Mr Jennings, who was out of the country for most of the material time, and in particular no justification whatsoever for the pursuit of the solicitor Mr Reid, who was involved in 36 hours of drafting, at his employers’ instance.”

The judge’s innuendo is that Khodorkovsky’s men had fabricated a vindictive case; in the case of David Godfrey, that he had faked claims at the start of proceedings which, later,  he and his lawyers didn’t dare to test in the witness box, on oath and under cross-examination. This is British legal procedure for dishonesty.

The big lie was that the American defendants had been accomplices of the Kremlin, particularly Igor Sechin, in the final (allegedly criminal) liquidation of Khodorkovsky’s Yukos empire in 2007:  after Sechin had moved the oil assets into Rosneft,  the five conspired in secret with Sechin, Rosneft, and the Kremlin to steal cash and oil pipeline shares from Khodorkovsky’s Dutch hideout, and make several hundred million dollars for themselves.

Left, Mikhail Khodorkovsky with President Boris Yeltsin; right, interviewing President Putin, with Mikhail Fridman and Sergei Pugachev in the background. Fridman and Pugachev have also been promoted by Catherine Belton.  

Godfrey demanded a judgement of fraud against the five defendants, plus their payment in compensation of £23 million for the costs of Yukos litigation across Europe and the US, plus $12 million for losses from the freeze of the Transpetrol shares and the Dutch bank cash until they were released by the Dutch courts in 2017. 

The Khodorkovsky group had been hoping they would be as credible in the British courts as they have been in the Dutch, which have ruled in Khodorkovsky’s favour on Rosneft’s takeover of Yukos. The Dutch government and its courts – not to mention the Dutch police, prosecutors,  aviation safety board, chemical warfare agency,  and press  — have demonstrated their commitment to the Russia war lies in the MH17 and Skripal cases. This one, however, has failed in London.

For the original report of the Yukos Finance auction affair, published in 2008, click to open.   

The new Yukos Finance case doesn’t rehash the Dutch court claims by Khodorkovsky and his men for the core oilfield assets of Yukos which, following
tax evasion, fraud and other convictions,  was declared bankrupt in August 2006. Instead, Godfrey and his associates, Steven Theede and Bruce Misamore, claimed the Russian Government’s auctioning of non-core assets of Yukos in August 2007 was rigged. Justice Burton assessed the evidence for each of 17 lots  auctioned by the Russian liquidator, Eduard Rebgun (right). In thirteen of the auctions, the judgement was no rigging. In four cases, Burton ruled rigging was “possible” but “there was no evidence of it”.  For the 45-page judgement, read this.

Lot 19 was the focus of the London lawsuit. Through Dutch entities and bank accounts, Khodorkovsky had owned assets worth almost $2 billion. These assets comprised “a pool of money, approximately $1.5 billion, largely being the proceeds of sale of a Lithuanian refinery [Mazeikiu], some other small assets totalling $50 million, and the 49% of Transpetrol.” Transpetrol is a Slovak oil pipeline company which carried Russian crude from the Soviet-era Druzhba pipeline to refineries in the Slovak and Czech republics. Evidence considered in court valued it between $100 million and $200 million; the balance of the shareholding was held by the Slovak Government.

Burton concluded these assets weren’t free of liabilities and controversies. He added up the liabilities to a total of $1.15 billion, with court freezes and other contingencies covering $1.25 billion. These claims, ruled Burton, added up to “a hornets’ nest, even for those experienced in distressed assets because of (inter alia) the following:

“(i) There were very substantial monies owed to Rosneft, protected by attachments, which on the face of them would wipe out the whole of the cash, which was the main justification for any acquisition. There was also approximately $840 million owed to the company owned by the former shareholders of Yukos Oil, GML [Group Menatep Limited], represented by a Mr Tim Osborne [right].”

The judge also noted the “shadow over the value of the Dutch assets [because there was] the challenge to the validity of the bankruptcy administration of Yukos brought by the former management of Yukos Finance, Messrs Godfrey, Misamore and Theede, representing the Stichtingen [Dutch trust created by Khodorkovsky to shield his assets]… of which Mr Osborne was also a director. Very substantial PR had been arranged by Mr Godfrey and the others in order to discourage participation in the auctions, and in the event (then considered unlikely) of success by them in the Dutch proceedings the validity of the administration, and thus the acquisition of the shares, could be rendered at risk… Transpetrol was subject, as set out above, to joint ownership with the Slovakian government, which had until April 2007 – and it seems to have been still believed to be the case in August (see paragraph 62(i) below) – a veto, or at any rate a right of approval, in relation to the transfer/sale of Yukos Finance’s shareholding.”

“It was therefore essential for anyone, particularly anyone specialised as were RenCap [Foresman and Jennings] and VR Capital [Dietz] in the acquisition of distressed assets, to take every possible step prior to bidding to: (i) neutralise the position of Rosneft, which was in any event receiving the proceeds of all the auctions, thereby reducing the debts the subject of the Rosneft charges/attachments, and the Russian authorities: (ii) resolve the position of GML [Group Menatep Limited], whose debt was on any basis well within the cash available to Yukos Finance, and, given that GML was on the face of it the representative of the interests of the ex-Yukos management, hopefully carrying them along too: and (iii) decide what to do with the 49% of Transpetrol, in whose retention the purchasers would have no interest.”

The documentary evidence and testimony of witnesses suggested, according to Burton’s ruling, that there was an arbitrage profit for the Lot 19 bidders for asset value minus liabilities and contingencies; that’s to say, a net of between $480 million and $650 million.  How much then to invest in the bidding with the aim of a 50% to 100% rate of return?

JUSTICE BURTON’S SUMMARY CALCULATION OF THE DIETZ-FORESMAN BID

Source:  Judgement, Para 67, Page 29. The evidence accepted by the court “anticipated an auction price of US$310 million, and looked at a potential profit (before fees) from that outlay of between US$170 and US$340 million, after the sale of Transpetrol for US$105 million.” In summary,  at worst a return of 55% on outlay, or at best 110%. Burton reports an even higher best-case resale value of $854 million. At that level, the profit might have been 176%.

This 55%-176% profit was the “booty” of the deal, Burton quoted Foresman as telling one of his colleagues in one of the stolen emails.

But that was not a crime, Burton decided – neither a fraud, nor a conspiracy to rig the auction. “The allegations against the five Defendants,” summarized the judge, “are of dishonesty, albeit dishonesty by reference to Russian law, namely the dishonest rigging of an auction by fixing a price and ensuring that they were bound to win at that price.”  The calculations, according to Burton, were “infected [not] by dishonesty but by optimism”.

Godfrey testified in the London court; Theede and Misamore did not. The judge ruled that he didn’t believe Godfrey, noting that the lawyer for the Yukos group, Dominic Kendrick QC, had attempted to “disown” Godfrey’s initial claims, and then “attempt[ed] to downgrade Mr Godfrey’s declaration so as not to rely upon it for the purpose of liability, and to seek to avoid the obvious difficulties to his case on limitation.” Disown and downgrade are judicial euphemisms for faking.  Burton also accused Godfrey of reviving a claim in the London court which had been tossed out of the Dutch court years earlier. “This does not redound to the credibility of the claim which is now put differently, and claimed in these proceedings” – that’s High Court jargon for dishonesty on Godfrey’s part.

“Having weighed up all the above,” Burton concluded, “I am not persuaded that there was an unlawful agreement to rig the Lot 19 auction between Rosneft and the Consortium. Accordingly, the claim against the Defendants is dismissed.” He then added that the time for the claim had run out long past the statute of limitations under Russian or British law. “If I had not found that the Claimants’ claim failed, I would have been satisfied that it was statute barred against all Defendants.”

Burton also judged the Khodorkovsky group guilty of falsely portraying the actions of the defendants as personal fraud, not corporate business. “It seems to me that the acts of the RenCap [Foresman, Jennings] and VR Capital [Dietz] Defendants in this case were plainly in the course of their employment, whether acting on instructions or at any rate acting within the scope of the performance of their duties, and, insofar as it is relevant, by reference to some of the cases I have seen, they were not stealing money or diverting an opportunity from their employers, but involved in making money for their employers, even if, by way of bonus or otherwise, also likely indirectly to benefit.”

This was a hands-down victory for Dietz, Foresman and their associates on all counts, and a vindication of their reputations. It was a thumbs-down defeat for Godfrey and the Khodorkovsky group.

This was not, however, the way Belton and Baker for Reuters and Bloomberg have reported the outcome.  Belton has spent a career in Moscow for the Financial Times promoting the tale-telling of Khodorkovsky and other oligarchs, including Oleg Deripaska, Suleiman Kerimov and Sergei Pugachev. For more of Belton’s record, read this.   Her disappearance from the Financial Times, and reappearance for this single story on Khodorkovsky’s behalf at Reuters, have yet to be explained. Reuters repeats the now discredited allegations, and ends by reporting Foresman’s refusal to speak to Belton as if he were covering up. 

Baker avoided reporting on the outcome. Foresman was quoted as telling her substitute at Bloomberg: “I have always regarded this claim as frivolous and thought that it was a huge waste of money and time for all the defendants.” According to Bloomberg, lawyers for the Khodorkovsky group “didn’t return calls and emails seeking comment.”

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