Tuesday 20 August 2019

State in the spotlight after funds of Russian oligarch released

Gardai renewed freezing order against funds owned by Russia's former richest man every 28 days for more than five years

Mikhail Khodorkovsky, the former ceo of Yukos Oil Company and one of the foremost critics of Vladimir Putin
Mikhail Khodorkovsky, the former ceo of Yukos Oil Company and one of the foremost critics of Vladimir Putin
Dearbhail McDonald

Dearbhail McDonald

The State is facing a potential compensation claim after a court order freezing almost €100m in Irish-based assets belonging to former Russian oligarch Mikhail Khodorkovsky was revoked.

The assets had been frozen for the past five-and-a-half years while gardai investigated alleged money laundering offences. But efforts by gardai to maintain the monthly renewable freezing order were thrown out last week when Judge Timothy Lucey ruled that he did not believe there was reasonable grounds to maintain it.

Khodorkovsky (53), the former ceo of Yukos Oil Company and one of the foremost critics of Russian President Vladimir Putin was granted asylum in Britain last year. Khodorkovsky fears he will be killed if he returns to his native Russia. Twice imprisoned following criminal law trials that have been criticised by various bodies including the European Court of Human Rights and the Parliamentary Assembly of the Council of Europe, the first freezing order was granted to gardai in March 2011 when Khodorkovsky was serving a sentence in a penal colony on the eastern border of the Russian Federation.

Lawyers for Saffery Champness, registered fiduciaries and the administrator of entities that act as trustees of the trusts controlling the Irish domiciled funds, sought a legal undertaking from the gardai for damages. However, that undertaking was not provided.

The way is now paved for the custodians of the funds to sue the State for the loss of interest that could have been generated on the funds during the time that they were frozen.

Khodorkovsky, who insisted at all times that the source of the Irish domiciled monies derived from Yukos dividends and income from the sale of Yukos shares - and strenuously denied the money were the proceeds of crime - was declared a Prisoner of Conscience by Amnesty International in May 2011. Khodorkovsky says that once the Irish held monies are released, he will use them to fund his Open Russia organisation, founded in 2014 to focus on justice and human rights as well as free and fair elections.

A spokesperson said Russia's former richest man had yet to consult with the trustees regarding future civil actions against the Irish authorities.

The freezing of the Dublin-based investment fund was one of the most high-profile applications by gardai under Section 17 (2) of the 2010 Criminal Justice (Money Laundering and Terrorist Financing) Act 2010.

The draconian section can only be applied if a court rules there are reasonable grounds to suspect that the service or transaction would, if it were to proceed, compromise or assist in money laundering.

However Judge Timothy Lucey, who accepted there was still an ongoing investigation by gardai, criticised the force for the lack of information provided about their inquiries and ruled that there were no reasonable grounds to maintain the freezing order.

"The respondents [gardai] have provided almost no evidence to the court," said Judge Lucey adding that Khodorkovsky had produced a substantial amount of evidence to demonstrate that he was a beneficial owner of the assets and that they were obtained as a result of his involvement with Yukos, which was placed into receivership 10 years ago.

Judge Lucey noted that Khodorkovsky, who is now being investigated in Russia on suspicion of ordering a contract killing, had been granted asylum last March in London where he now lives and was not going to be extradited. Khodorkovsky submitted his asylum application papers to the Garda Fraud Bureau of Investigation and claimed that he was "at a loss to understand" why there had been "no consideration by the GBFI of the underlying criminality which purportedly grounds this investigation".

The plight of Khodorkovsky and alleged violations in his trials and that of his former business partner Platon Lebedev were raised in the Dail two years ago by Minister for Foreign Affairs Charlie Flanagan.

As gardai renewed the freezing order every 28 days, Flanagan told the Dail in a written answer that the Irish government "fully shared" the position of EU High Representative Catherine Ashton who had welcomed Khodorkovsky's December 2013 release from prison.

"I would also recall that over the last 10 years, the EU had continuously expressed its concerns about alleged violations in their trials and had raised their cases with Russian interlocutors on a number of occasions, including at the regular EU-Russia Human Rights Consultations," said Flanagan. "The EU has consistently called on Russia to pursue its reforms towards establishing a transparent, independent and reliable judicial system and to uphold its commitments to human rights, the rule of law and non-discrimination, ensuring the respect for the freedom of assembly, association and expression. I support fully these calls."

A second fund, containing an estimated €20m and to be beneficially owned by six other former Yukos shareholders, which was also first frozen by court order in 2011, may also be released in light of last week's ruling.

Responding to Judge Lucey's ruling, the Russian Federation said it had not been notified of the Irish proceedings by the gardai who had travelled to Moscow for four days as part of their investigation.

A hearing to determine the fate of the €20m fund will be held later this week.

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