Typically, the territory’s timely compliance with international law enforcement requests is seen as a lynchpin in the global efforts to prevent corruption, money laundering and other criminal activity.
However, a High Court lawsuit recently filed against government suggests that corruption is exactly what government could be enabling if it carries out a request from the Investigative Committee of the Russian Federation — the country’s main federal investigative authority.
The lawsuit — which was filed in May on the behalf of Virgin Islands business companies Magnum Investment Trading Corporation and Niteroi Limited — seeks a High Court order to block records containing confidential information from being delivered to the ICRF, and to have those records returned to the companies.
Though the lawsuit doesn’t specifically claim that the records could be used by Russian authorities for nefarious purposes, it does outline a long history of “corporate raiding” against a Russia-based firm connected to Magnum and Niteroi, suggesting that the documents sought by the ICRF could also be used for such purposes.
Search warrant
The case stems from a search warrant Magistrate Ayanna Baptiste-DaBreo granted in January for the VI Financial Investigation Agency to obtain all records for Magnum and Niteroi from the companies’ registered agent, Corporate Agents (BVI) Limited, and to transfer them to the ICRF.
The search warrant was granted because Russian authorities claimed that the records could contain information about the activities of three individuals under investigation for allegedly stealing $3 billion from the Russian chemical company TogliattiAzot between January 2008 and December 2011, court documents state.
The three individuals under investigation allegedly transferred TogliattiAzot shares to Magnum and Niteroi in December 2012, which makes the records of those companies “very important to the case,” Russian authorities claim.
However, the lawsuit filed on behalf of Magnum and Niteroi strongly denies any connection to criminal activity, making its own allegations that corrupt Russian officials have targeted TogliattiAzot with bogus legal proceedings in other courts around the world for years, all in an attempted hostile takeover of the company.
As such, the lawsuit seeks a court order prohibiting the VI government from transferring the companies’ records to Russia, as well as an order to have the records — which the FIA obtained when it executed the search warrant in January — returned.
According to Magnum Investment and Niteroi’s claim, TogliattiAzot has since 2005 been the target of “corporate raids,” which entail a raider obtaining a minority shareholding in the victim company and using abusive legal proceedings to devalue the company and put pressure on its shareholders and officers in order to obtain their shares.
Most recently, TogliattiAzot has been targeted by minority shareholder Dmitry Mazepin, who has ties to the Kremlin and owns a rival company, the United Chemical Company Uralchem, the claim states (see sidebar for details on corporate raiding).
“Mr. Mazepin (through Uralchem) has orchestrated another attempted raid (widely reported in the press) employing substantially the same tactics, instigating a further series of unjustified criminal and regulatory proceedings against TogliatrtiAzot and its officers and directors,” the claim form states. “That has resulted in a number of unjustified sanctions imposed against TogliattiAzot and its shareholders.”
Search warrant
The lawsuit doesn’t specifically allege that Russian authorities are seeking records on Magnum and Niteroi for nefarious purposes. Nevertheless, it does argue that the search warrant granted against the companies was not issued in accordance with VI law.
Attorney General Baba Aziz, who received the records request from the Investigative Committee of the Russian Federation and ordered the FIA to obtain a warrant, was obligated to investigate whether Russia’s allegations against the VI companies had merit, but he did not do so, according to the companies’ lawsuit.
“The AG was clearly required, as a matter of fairness and in the proper exercise of his discretionary powers, to undertake his own investigations prior to directing that a warrant be sought, and erred in law for failing to do so,” the claim states. “That is all the more important in a case where the request originates from a country such as Russia, which has a known track record of disregard for the rule of law.”
Likewise, the claim argues that Ms. Baptiste-DaBreo was obligated to establish reasonable grounds that the two companies were connected to criminal activity before issuing the warrant, but she did not do so.
The attorney further said that Magnum and Niteroi complied last November with an FIA request for the same records that were the subject of the search warrant, which he said further calls into question Mr. Aziz’s decision to order the FIA to request a warrant, as well as Ms. Baptiste-DaBreo’s decision to grant the warrant.
The claim form does not specify whether the FIA transferred those records to Russia when it received them from the companies last November, but the companies’ VI attorney, Paul Dennis QC, told the Beacon that there is an injunction in place preventing those documents from being delivered pending the outcome of the case.
$3b theft claim
The lawsuit adds that the Russian investigators allegations that Magnum and Niteroi are connected to the theft of $3 billion are “bare assertions.”
“There were no reasonable grounds for suspecting that the registered offices of [Magnum and Niteroi] in the BVI would have contained evidence relevant to the alleged theft of ammonia and cabamide from a TogliattiAzot site located in Russia some five years prior to the time when the warrant was sought,” states the claim.
Mr. Dennis declined to comment further on the matter. Ms. Baptiste-DaBreo also declined to comment, and Mr. Aziz did not respond to requests for comment.
The case docket at the High Court registry states that the next hearing will take place on Dec. 6. A date for trial has not been scheduled yet.
{fcomment}