By John Helmer, Moscow
When a powerful Kremlin official recently confided that he values the usefulness of UK High Court proceedings involving some of Russia’s wealthiest businessmen, he probably wasn’t thinking of the case which concluded on Friday with a judgement issued by Justice Sir Geoffrey Vos. The Russian official was intimating that the British court is providing an internationally credible platform for forensic analysis of crimes which have been the foundations of many recent Russian fortunes. He probably wasn’t thinking of the diamond and real estate fortune of Lev Leviev (image left); the Soviet debt, gun and diamond fortune of Arkady Gaydamak (centre); or the celestial credits of Chief Rabbi of Russia, Berl Lazar (right). All three were condemned by this ruling [1].
The Vos judgement is the worst condemnation Leviev has received in public from an international court of law. It could only have been worse if, in addition to being branded an arrogant liar, Leviev was ordered to pay Gaydamak a hundred million dollars in past-due obligations. According to the judge, however, the 2001 agreement that would have obligated him had been lost or destroyed in improbable circumstances by Lazar, and then nullified by another agreement Gaydamak subsequently signed in August 2011. For Lazar to be judged a liar and turncoat is bad enough. But for Gaydamak, who is a fugitive from a prior French conviction and prison sentence for money-laundering, tax fraud and other offences, the judgement that he too is a liar can’t do more damage than he has already suffered, at least reputationally.
The business on which the London court was asked to rule was the trading of diamonds produced in the southwestern African republic of Angola. Oil and diamonds generate almost all of Angola’s export income, and both are the focus of corrupt skimming by state officials and by smugglers. The criminality makes Angola’s official diamond export statistics an under-statement. In 2000, the export value was reported to be $739 million, a decade later, in 2010, $976 million. About 8% of all the diamonds mined in the world come from Angola.
Exactly how much diamond revenue Gaydamak and Leviev have earned from Angola isn’t specified in the court ruling or the judge’s summary of the evidence. What is clear is that Gaydamak introduced Leviev to the Angolan authorities – president, army command, security chiefs — and thereby helped set him up to make money trading Angolan diamonds. Their agreement appears to have lasted as long as Leviev needed Gaydamak as a go-between with Angolan government officials. Gaydamak’s claim is that he and Leviev signed an agreement in December 2001 for a 50/50 share in the diamond export proceeds. The latter number is variously reported as 2% of gross turnover, 4% of the turnover of the Catoca mine, and other fractions of other aggregates.
The incomplete and conflicting evidence suggests that when they were on good terms, Gaydamak and Leviev thought they were entitled to help themselves in equal shares to the profit on about one-half of about one-half of all the Angolan diamonds for export. Over the past decade, Gaydamak’s share might have come to about $2 million per month, or between $20 million and $30 million per annum. When he commenced his claim in the High Court against Leviev last year, Gaydamak probably calculated his claim against Leviev over the past decade to be worth about $250 million. Of that sum, Gaydamak also testified, though groggily, that he had received about half.
The court accepted evidence that for a few months Leviev was paying Gaydamak sums of between $2 million and $3 million, mostly taken away in suitcases, documented on pseudo-invoices for polished diamond trades. Gaydamak was sure the suitcases stopped in February 2005. He wasn’t sure how much in total had been transferred, but guessed it was between $100 million and $150 million.
Russian involvement with both Gaydamak and Leviev in Angola is also documented, when Alrosa, the state-owned Russian diamond miner, bought stakes in the Catoca diamond mine, in northeast Angola, and then in a diamond export company called Sunland. In January 2005, Alrosa owned 40% of Sunland; Gaydamak 60%. At the time, they agreed to purchase and export $35 million worth of Angolan diamonds each month. This was modified in June of 2005 so that stakes in Sunland were also taken by Leviev and Angolan companies. Six months later, Gaydamak sold out of Sunland, and took $50 million for his interest from the Israeli diamanatire, Dan Gertler.
Alrosa’s involvement in Angola (as well as other African diamond-producing countries) with all three – Leviev, Gaydamak, Gertler – was murky, and in time they went their separate ways [2].
That too is what happened to the partnership between Gaydamak and Leviev. As the court records document, they also fell out over claims over who was the biggest donor to Jewish charities in Russia and in Israel, and who deserved the largest kudos in the Jewish press. One of the obvious motives on both sides for fighting such an open court case appears to have been the need to preserve the public reputations they have cultivated that they are business geniuses, philanthropic greathearts, and religious moralists without blemish.
To these ends, Justice Vos has provided a comprehensive set of conclusions:
“Mr Gaydamak ‘s recollection of what occurred, and even of what was in his own witness statements, was more impressionistic than accurate. Moreover, he persisted in saying that he had sold the shares back to Mr Leviev at a significant undervalue (of dozens of millions of dollars), because a 15% stake was worth much more than face value, even though the documents showed that the sale had been at current market value and on the basis that Mr Leviev had taken over the loans that had been made to Mr Gaydamak to buy the shares.”
“Mr Gaydamak ‘s answers in relation to monies paid before the 2001 Agreement were particularly illuminating as they demonstrated, extraordinarily candidly, the lawless and unstructured nature of the enterprise upon which he was engaged.”
“Nor did Mr Gaydamak see the irony in the fact that he was making a written agreement with a man [Leviev] he regarded as a fraudster, but he nonetheless gave him the only signed copy to lodge secretly with Rabbi Lazar for reasons of Jewish tradition.”
“Mr Gaydamak vehemently denied the authenticity of the faxes of 13th, 16th and 17th December 2001. It was this part of his evidence that I found particularly hard to accept. He seemed to be smiling in a somewhat shifty way as he denied these documents. His approach was quite different from the earnest demeanour he otherwise adopted during his evidence.”
“To sum up Mr Gaydamak ‘s evidence, I did not find him a reliable witness. He was garrulous and unstructured in his answers and keen to act as his own advocate rather than focussing on the questions. He could certainly not be relied upon as regards the details of his evidence. Since he saw things so much from his own perspective of the world, it was difficult also to rely upon his evidence in some particular respects. But I thought there were veins of truth that ran through what he said.”
“Mr Leviev gave an important answer in a rather less arrogant and self-assured manner than he had previously spoken.”
“Mr Leviev then strenuously denied having used the term ‘mazel u’brucha’. I found his denial unconvincing… And, having seen Mr Gaydamak give evidence, I found it wholly implausible to think that Mr Gaydamak would have smiled and concluded the meeting amicably had he been lectured by Mr Leviev and had Mr Leviev refused to sign his proposed agreement. Mr Gaydamak would rather, I think, have reacted in a volatile and aggressive manner. There would, in short, have been no smiles and no shaking of hands. It was in this aspect of Mr Leviev ‘s story that, I think, lay the key to what really happened.”
“I was unable to accept Mr Leviev ‘s evidence that any of them [the suitcase payments] related to real sales of polished diamonds. I have little doubt that Calsen’s invoices (or at least some of them) were raised by LLD Diamonds (Mr Leviev ‘s company) with his knowledge, to conceal various large payments to Mr Gaydamak ‘s order.”
“I did not find Mr Leviev an entirely reliable witness. He displayed an arrogance, even a contempt, for Mr Gaydamak , which ill-became him since he had been so closely involved with him in 1999 and 2000. Having admitted to paying Mr Gaydamak unspecified sums for unspecified reasons, I think his denial of any partnership arrangement of any kind was simply implausible and frankly unbelievable. Hard-nosed businessmen like Mr Leviev do not pay out sums in the hundreds of thousands of dollars for no reason, and Mr Leviev certainly did not pay Mr Gaydamak without any obligation to do so. All that said, I think Mr Leviev attempted to be truthful in relation to peripheral matters that did not, as he saw it, affect his case. This will be relevant when I have to decide the truth of what really happened in September 2000, December 2001 and August 2011.”
“Mr Leviev omits to mention the roles [in Angola] of Messrs Laniado and Goldberg. This demonstrated to me that he was re-writing the history, leaving some of the crucial characters out of the story. I found that approach consistent with his arrogance, upon which I have already commented.”
About the character of Lazar, who provided a witness statement but refused to appear in court for cross-examination, the judge has issued these opinions:
“ [Rabbi David Mondshine] confirmed that Rabbi Lazar was in good health (the implication being that he could, had he chosen, have given evidence).”
“First and foremost amongst Mr Leviev ‘s written evidence is the witness statement of Rabbi Lazar dated 15th April 2012. Had he attended to give evidence, a statement from such a prominent religious leader would have been formidable support for Mr Leviev ‘s case. As it is, no satisfactory explanation has been offered for his non-attendance, nor for his unwillingness to give evidence by video link as many other witnesses did. The force of his written evidence is, therefore, I regret to say, very much depreciated.”
“Rabbi Lazar’s statement compliments Mr Gaydamak on his charitable donations to the Federation, and then describes him as paranoid, prone to exaggeration, and hysterical. He goes so far as to say that Mr Gaydamak ‘has the tendency to join together half-truths into lies, which he then ends up believing’.”
“Apart from this evidence, Rabbi Lazar deals with other contacts with Mr Gaydamak over the years, none of which is intended to redound to his credit. I have not found much assistance in the details of these allegations.”
“In all the circumstances, as I have said, I think that Mr Leviev did indeed sign the 2001 Agreement and lodge it with Rabbi Lazar. It was convenient for Mr Leviev , but hardly coincidental I think, that Rabbi Lazar lost or destroyed the envelope. Had he not done so, I am sure he would have been happy to provide his oral evidence to the Court. After all, he was content to discuss the matter on Israeli television.”
In the findings, Justice Vos concludes that Gaydamak was owed money according to the agreement with Leviev of 2001, whatever Lazar had subsequently done with the paper it was written on. But that turns out to be irrelevant practically, the judge concludes, because Gaydamak had released Leviev from his residual obligations in their agreement of 2011.
Gaydamak has issued a press release [3], saying he was “bamboozled” into signing away his rights last year, and will appeal to get them back again. Leviev has issued a press release through his lawyers that he is “obviously very pleased with this outcome.”
Lazar commented through a spokesman in Moscow: “As far as I know, Rabbi Lazar did not hide anything and all of our comments on this subject have long been on the Internet – they are not hard to find. Everyone knows that the court rejected the claim of Gaydamak for two billion dollars from Leviev. You know, by the way, that he [Leviev] is one of the biggest sponsors of Jewish communal and religious life in the CIS. And the verdict of the judge ruled that in the court Gaydamak often contradicted himself, changed his version of the key issues… As a result, the court did not consider Gaydamak a reliable witness and in its view, Gaydamak gave a speech in the court rather than answering questions from the court. So for us, everything is definitive enough.”