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.”