BTA Bank (BTAS), the Kazakh lender that defaulted on $12 billion of debt before restructuring last year, asked a U.K. judge to jail its former chairman, Mukhtar Ablyazov, for contempt of court in a fraud lawsuit.
Ablyazov, who fled Kazakhstan to escape prosecution and lives in the U.K., violated a 2009 court order freezing his assets by failing to reveal ownership in a Moscow skyscraper project and more than 600 shell companies used to conceal his wealth, BTA’s lawyer said today at the start of a two-week trial in London. Ablyazov attended the hearing with an interpreter.
“There hasn’t quite been a case like this before,” BTA’s lawyer, Stephen Smith of New Square Chambers, said at the hearing. “The bank’s primary purpose is to coerce Ablyazov into complying with the court order.”
BTA, based in Almaty, filed a series of U.K. lawsuits against Ablyazov and Roman Solodchenko, its former chief executive officer, claiming they took more than $5 billion from the bank using fake loans, back-dated documents and a web of offshore companies. The men deny the claims, while BTA has said its accountants are still unwinding the transactions behind the alleged theft.
Ablyazov claims the bank’s case is politically motivated because he was part of the democratic opposition to Kazakhstan’s president, Nursultan Nazarbayev, who has ruled the country for more than two decades and was re-elected in April with 95.5 percent of the vote.
The bank’s “true motive” for seeking to put Ablyazov in jail during the case is to win “a knockout blow in order to impact Ablyazov’s ability to operate commercially or politically or to defend himself,” his lawyer Duncan Matthews said at today’s hearing.
Ablyazov’s “fear” of Nazarbayev forced him to use offshore companies and back-dated documents to protect his assets, Matthews said. Such practices are commonly used by Kazakhs who gain wealth quickly and legitimately and seek to protect it from theft by the government, he said.
BTA said litigation against the men will benefit Royal Bank of Scotland Group Plc (RBS), Barclays Plc (BARC), Commerzbank AG (CBK) and other creditors that financed it to become the biggest Kazakh lender before its nationalization in 2009.
Ablyazov’s attempt to delay the contempt trial was denied by Judge Nigel Teare in October after the court was shown evidence that land “indirectly owned” by the defendant was pledged to the Central Bank of Russia in violation of the freeze. The bank wants Ablyazov to be sent to prison until the case runs its course, saying he can’t be trusted.
The dispute over asset disclosure has already resulted in a court order placing an estimated $5 billion of Ablyazov’s assets into receivership during the case.
Syrym Shalabayev, Ablyazov’s brother-in-law who was his money manager since 2008, was sentenced in June to 18 months in a U.K. jail for failing to reveal his own assets or cooperate in the case. He hasn’t been arrested and is scheduled to testify in the trial via a secure video link from an unknown location. Other people who helped Ablyazov have fled, the bank said.
BTA also won a 21-month jail sentence last month against Paul Kythreotis, a British man in Cyprus who’s accused of helping Ablyazov. Kythreotis, who claims he was forced to lie because of threats made against him, didn’t attend the sentencing hearing and hasn’t been arrested.
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