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By John Helmer, Moscow

The second day of Yury Privalov’s trial in Moscow for embezzling funds from Sovcomflot ended Monday evening without a ruling from Judge Natalia Morozova. The state shipping group, represented by lawyers from Sovcomflot, one of its offshore subsidiaries, and Novorossiysk Shipping Company (Novoship), have requested leniency and Privalov’s discharge. The state prosecution has asked for a sentence of six years in prison, less the two years Privalov has already served, and a fine of Rb1 million ($30,000). The judge reserved her decision, and promised to issue her judgement in a week’s time on September 17.

According to prosecutor Elena Zinovenkova, the case evidence comprises 300 volumes, while the indictment against Privalov on the two counts of embezzlement charged runs to six volumes. Zinovenkova ended her presentation Friday and Monday after reading through the first volume and half of the second volume.

The case is an unusual one because the evidence has already been presented over five years and tried in several months of witness testimony and cross-examination in the UK High Court. In London Justice Andrew Smith has already ruled to dismiss the charges against former Sovcomflot chief executive, Dmitry Skarga. But in the Moscow court proceeding, the prosecutor, Sovcomflot’s lawyers, and Privalov himself have attempted to resurrect the charges against Skarga, as well as against former chief executive of Novoship, Tagir Izmailov, and former chartering partner Yury Nikitin. Justice Smith dismissed all charges against Izmailov, and ordered Sovcomflot to pay an extra indemnity to compensate him and sanction Sovcomflot. The UK court has also ordered Skarga’s and Izmailov’s costs to be reimbursed by Sovcomflot. For a full account of the case and findings against Nikitin, and his counter-claims against Sovcomflot, read on here.

Yesterday in Moscow Prosecutor Zinovenkova told the judge that during her investigation two “new episodes” had been uncovered. But she did not provide details, claiming the statute of limitations had expired for prosecuting them. The UK High Court has ruled that Privalov began his embezzlement of Sovcomflot funds through false commission accounting and kickbacks in 1998, or earlier. According to the UK ruling, “before Mr. Skarga joined Sovcomflot and before Mr. Nikitin had any dealings with [Privalov], he had been engaged in skilfully defrauding the Sovcomflot group for his own benefit. He did not need any assistance from anyone at Sovcomflot’s Moscow office to do so.”

According to the prosecution’s presentation yesterday in Moscow, Privalov began his crimes in 2001.

Sergei Polevoy, who represented the Sovcomflot group in the two-day Moscow trial, was asked before the court hearing began yesterday why the indictment refers to no episodes before the year 2000. Polevoy replied “because there were no such episodes. Where did you get them?” When told the evidence was confirmed in the UK High Court, Polevoy responded: “at least I don’t know about these facts.” Privalov testified in the London court that he began skimming illegal payments from Sovcomflot transactions in 1999.

Polevoy told the judge that Sovcomflot has no remaining claims on Privalov because he has pleaded guilty, assisted in the London prosecution of others, and agreed to repay money to Sovcomflot. According to Polevoy, Privalov has repaid $4 million, including the sale of a Moscow apartment belonging to his wife, and the sale of his London home which was estimated to have been worth about $2 million. In a separate statement, prosecutor Zinovenkova confirmed that Privalov had made a “partial reparation” of $4 million. In the UK High Court, it was estimated that Privalov had gained about $12 million from his operations. According to the London evidence, Privalov’s bank account balances were identified as totaling $14.5 million at the end of 2004, when the Sovcomflot investigation commenced.

Privalov himself told the Moscow court yesterday; “I fully admit my guilt. I realized that what I was involved in was not right.” He went on to blame “the people around him [who] said that it was acceptable to act this way.” “I was in prison, and I know what it is.” As soon as he realized what he had done was wrong, Privalov told the judge he “did all the best he could.” He added: “I could [continue to] bring benefit to Sovcomflot.”

Lawyers for Sovcomflot and for Privalov said there are mitigating circumstances which recommend a non-custodial sentence — he has thyroid cancer; his aged parents, wife and young daughter depend on him; and his maritime business expertise is still needed by Sovcomflot. Prosecutor Zinovenkova told the judge that she was recommending a jail sentence because “a man with such a high intellectual level couldn’t fail to understand what would be the result of such criminal activity.”

Legal experts on Russian and British case law say they cannot recall an earlier case or precedent in which evidence and witnesses rejected as non-credible in a British court have been accepted for a criminal conviction in a Russian court.

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