Ukraine’s biggest bank has accused two former owners of “fraud on an epic scale” covered up by “money laundering on a vast scale” at a High Court trial in London.
JSC Commercial Bank Privatbank says former owners Igor Kolomoisky and Gennadiy Bogolyubov misappropriated more than £1.5 billion (nearly two billion US dollars).
A judge began overseeing a trial – due to last several months – on Monday.
Mr Kolomoisky and Mr Bogolyubov are fighting the case.
The trial was due to start a year ago but lawyers representing Mr Kolomoisky and Mr Bogolyubov persuaded Mr Justice Trower that it should be delayed because of the war in Ukraine.
“This case concerns fraud on an epic scale, covered up by money laundering on a vast scale perpetrated against the bank in 2013-14 by its former owners, Igor Kolomoisky and Gennadiy Bogolyubov,” he said in a written case outline.
“The fraud contributed to the failure of the bank in 2016 and its nationalisation in December of that year, following which an investigation led the bank – now under new ownership and management – to discover what had happened.
“That fraud – referred to in these proceedings as the ‘misappropriation’ – concerned the extraction of more than 1.9 billion US dollars from the bank, using a complex network of vehicles.”
He said the bank was the largest in Ukraine.
Mr Hunter added: “There is a wealth of evidence to establish the misappropriation, and the defendants’ involvement in it.”
Neither Mr Kolomoisky nor Mr Bogolyubov were at the hearing on Monday.
Mr Hunter told the judge that the “two elephants in the case” were not “in the room”.
He suggested that, had the two men answered questions at the hearing, they would have been “exposed” as “fraudsters, money launderers and liars”.
Mr Hunter said Mr Kolomoisky is 60. He said Mr Bogolyubov is 61 and has lived in London for almost a decade.
Mr Hunter said the bank had been the “jewel” in the businessmen’s “crown”.
He said the bank’s case is that it had “suffered a loss of around 1.9 billion US dollars”.
“(Mr Kolomoisky) eschews conventional means of communication and record-keeping,” Mr Hunter told the judge, in a written case outline.
“He states that he does not use email (believing it to be unsafe and unreliable); restricts the volume of documents he creates, promptly disposing of any hard copy documents; and uses a secure telephone network to communicate with his inner circle known as ‘the Black’, in respect of which he claims to have no record.”
Mr Hunter added: “Like (Mr Kolomoisky) Mr Bogolyubov relied on his trusted agents to administer his affairs, keep records and/or hold his assets for him, usually on the basis of oral agreements.”
“The bank’s case is that Mr Bogolyubov misappropriated money from the bank through a ‘scheme’ or ‘misappropriation’ comprising the relevant loans, relevant drawdowns and unreturned prepayments,” they said in a written case outline.
“However, the bank fails to recognise the significance of the total absence of any direct evidence against Mr Bogolyubov implicating him in any involvement with the ‘scheme’.”
They added: “The absence of any material of this sort is the evidence that Mr Bogolyubov was not involved.”
Barristers representing Mr Bogolyubov went on, in their written case outline: “The bank’s case is no more than an assumption that Mr Bogolyubov must have been involved when his conduct is viewed through English eyes and the prism of English commercial principles and practices.
“This is not a legitimate way in which to judge this Ukrainian case.”
Lawyers representing Mr Kolomoisky said the dispute is “Ukrainian” – and told the judge that Mr Kolomoisky denies “any unlawful conduct”.
“Had the bank sued Mr Kolomoisky in Ukraine, the claim would undoubtedly have failed,” said barristers representing Mr Kolomoisky in a written case outline.
“Among other fatal problems, a Ukrainian court would find that the bank had failed to identify specific acts, omissions, or decisions on the part of Mr Kolomoisky that were unlawful as a matter of Ukrainian civil law, or which directly caused the bank loss.
“The bank presumably hopes that an English court will be more disposed to construe and apply Ukrainian law generously in its favour, filling in any perceived gaps by recourse to analogies with English law principles. That is not a legitimate approach…”
They added: “Mr Kolomoisky denies any unlawful conduct.”
Lawyers said Mr Kolomoisky’s defence turns on the “factual inadequacies of the bank’s case, the contemporaneous documents and the expert evidence”.
