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‘Putin’s banker’ loses $2bn UK court fight
From the Financial Times of Fri, 19 Dec 2014 12:59:47 GMT
one of the main concerns of Russia's business elite, who are also known as the "Oligarchs". WAW/AA - RTR6RG2©Reuters

Sergei Pugachev, the man once known as Putin’s banker, has lost his legal challenge to overturn a UK court order freezing his assets of up to $2bn.

The former Russian senator had gone to London’s High Court to try to overturn the order issued in July after an application brought by Russia’s Deposit Insurance Agency, which is acting as liquidator of Mezhprombank.

The bank co-founded by Mr Pugachev had collapsed with a deficit of more than $1.7bn in 2010 and now the DIA is pursuing him in England and Russia for $2bn.

It alleges that he carried out a number of schemes to extract money from Mezhprombank after it had received substantial loans from the Central Bank of Russia in December 2008.

Mr Pugachev denies wrongdoing.

His barrister argued last month that the freezing order was out of proportion as his global assets were worth no more than $70m and there was no prospect that Mr Pugachev would be able to pay even a significant fraction of the $2.1bn lawsuit that the DIA might obtain against him.

Mr Justice Mann in his ruling said this argument was no reason to lift the freezing order.

“It may be that if Mr Pugachev has disclosed all his assets correctly [a fact that the claimants do not accept] then his assets would discharge only a small part of the enormous claim if the claim is good. However, $70m is still a significant sum,” the judge said.

The judge also found there had been some non-disclosure of relevant matters by the DIA to the hearing that originally granted the freezing order. However, he held: “I do not find any of the non-disclosure to be deliberate in the sense that a conscious decision was taken to exclude it.”

He added that in his view the freezing injunction would have been granted even if these matters had also been disclosed at the July hearing.

Mr Pugachev’s barristers had alleged in written submissions to the court last month that the DIA “does not have clean hands” and was “quite prepared to resort to illegal and dishonest methods” to pursue its case against him. The Russian government had sold off Mr Pugachev’s stakes in two large shipyards for an “extraordinary low price” after they were pledged as collateral for outstanding loans, Mr Pugachev’s lawyers had alleged at the hearing last month.

Francis Tregear QC, his barrister, told the court that his 88 per cent stake had been “auctioned” off and sold for the “price of a smart Moscow flat”.

The judge found that, although the shipyard valuations by valuers BDO and VFC should have been disclosed to the July hearing, the significance of the non-disclosure was “appreciable but limited”.

Mr Pugachev said in a statement that the freezing order was only a small part of the legal proceedings and the judge had been required only to rule on narrow technicalities.

“I have strong faith in the English justice system and I will continue to vigorously pursue all the options open to me,” he said.

Both sides agree the legal case in Russia should go ahead but the DIA has argued the High Court freezing order should remain to avoid “risk of dissipation” of assets.

Mr Pugachev was not originally named as a suspect in Mezhprombank’s collapse, but a Moscow court issued an order last year for his arrest, blaming him for the bank’s demise.

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