Both sides go for the jugular in High Court case summing-up

Bank St Petersburg (BSP) and Oslo Marine Group (OMG) owner Vitaly Arkhangelsky both claimed the other to have been fraudulent during oral summing-up at the London High Court trial.

BSP is claiming $90m for alleged defaults on loan guarantees by OMG, but Russian businessman Arkhangelsky is counterclaiming for damages of $500m over allegations, denied by the bank, that it illegally appropriated OMG assets in 2009.

“This is a case where both parties allege fraud against each other, and it is indeed impossible to see how both might have acted honestly; one or the other must have been fraudulent,” said Arkhangelsky’s legal representative, Pavel Stroilov.

Brick Court Chambers barrister Simon Birt, acting for BSP, claimed: “Our general submission is that he [Arkhangelsky] is a dishonest man and was a dishonest witness. That is not a submission that counsel makes lightly, my Lord, but here we say it is obvious and clear.

“We had the quite astonishing evidence that Mr Arkhangelsky said that he had paid $160m to a Russian official or officials in connection with Western Terminal.

“He volunteered it, and when he was asked to explain those payments, he characterised them as bribes.”

Arkhangelsky was a “very frank witness”, Stroilov responded. “If it was a question of explaining away a discrepancy in the figures, and if he was prepared to make things up, as the claimants would have you believe, there would be a hundred ways to explain it away, which would be far less damaging than admitting to paying these massive bribes,” he added.

“He also told you about various associations with people whom he himself described as notorious criminals, and he explained that he was buying assets from very controversial people, and that’s why he was able to buy them cheap,” Stroilov said.

The admission about bribes had come in questioning during the trial as to why OMG had purchased Western Terminal for about $40m but said it paid $220m when it was seeking loans from various banks for about $300m in early 2008.

The terminal was being used to import timber but OMG planned to build a container terminal on the land.

OMG also included the Onega Terminal, which was used to import cars, and Vyborg Shipping — a firm that bareboat chartered three general cargoships to move timber, and had plans to fix seven more vessels and order a fleet of 10 newbuildings.

However, BSP took over OMG’s port assets under repossession (repo) and loan-guarantee contracts secured in December 2008 after extended loans to develop various businesses within the group came to term unpaid during the continuing financial crisis.

BSP then sold the terminals at relatively low prices in auctions over the second half of 2009.

Arkhangelsky claims the terminals were sold to companies linked to the bank’s senior managers after the bank defaulted on a six-month moratorium on loans. He also alleges he did not agree to several of the repo deals, or that they were forged.

Birt said of allegations that loan guarantees were forged or a moratorium agreed: “It is inconceivable, we say, that if he really thinks that he didn’t sign these documents, if Mr Arkhangelsky really thinks that, that he hasn’t drafted anything at all for his written submission after two months of having the time to do so. The fact that there’s nothing there speaks volumes.”


Bank claims Oslo Marine was pyramid scheme

Bank St Petersburg (BSP) claimed Oslo Marine Group (OMG) was a failing pyramid scheme designed to siphon off funds to Vitaly Arkhangelsky, while the OMG owner countered that the bank conspired to take over its assets on the cheap, in oral summing-up of the London trial.

Acting for the bank, Brick Court Chambers barrister Simon Birt claimed Arkhangelsky “is the ultimate chancer”, for whom “kicking the can down the road is a favourite tactic”.

Birt said: “Buying himself a bit more time here or there is all that he wanted. He must have known that his businesses were sunk.

“He knew that his Vyborg Shipping business was a bit of a pyramid scheme and he’d been siphoning off the money through Land Breeze for vessels which had just disappeared.”

Arkhangelsky’s legal representative, Pavel Stroilov, replied the idea that OMG was a financial pyramid based on revaluing assets, borrowing more and embezzling money “only makes sense if there are no personal guarantees, and then the companies get bankrupt, and Mr Arkhangelsky is laughing because he has taken the money away”.

But Birt claimed that RUB 2bn, out of total loans of RUB 4bn (more than $100m at the time), were transferred from OMG firms LPK Scan, Scan and PetroLes during 2008—2009. Much of the money went to a mysterious company called City Centre that Arkhangelsky has claimed was a stockbroking firm he did not know.

It recently emerged that Cyprus-based Land Breeze, which handled time charters for Vyborg, was beneficially owned by the Arkhangelskys, and has been wound up, Birt added.

Stroilov argued that OMG firms were sold by the bank in a series of auction sales that were limited to inter-related subsidiaries of Renord Invest — a company he alleges was linked to senior BSP executives.

There was “uncontradicted evidence from the claimant themselves” of “bid rigging”, Stroilov says. “In each case, you had two bidders controlled by Renord, only one of them bidding at one step above the market price.”

Stroilov added that BSP witnesses unanimously agreed Renord acted on the bank’s instructions. “Either they were all acting honestly, or they were all in it together, they were all in the fraud,” he said.

Birt had earlier argued that not everything ended up with Renord but admitted it was the main original and subsequent purchaser. Assets later ended up with other firms that Stroilov alleges were controlled by BSP executives.

The court also heard there was little evidence of widespread marketing or advertising of the auctions but Birt denied claims of a conspiracy. He said: “There has not really been any effort through the trial to put the case or bring forward actual evidence, rather than innuendo or speculation.”