High Court Cracks $5 Billion Bank Fraud

Posted: 5th December 2013

Following an extraordinary forensic exercise of Byzantine complexity, the English courts have finally got to the bottom of a $5 billion web of fraud spun by a foreign bank’s former chairman who became a fugitive from justice and had to be tracked down to the South of France.

A nationalised bank based in Kazakhstan had launched no less than 11 sets of proceedings – all but one of them in the Commercial Court – against its former chairman, who was accused of fraudulently misappropriating vast sums in concert with other members of the bank’s senior management.  

The proceeds of the fraud were said to have been spirited away into a string of offshore companies controlled and managed on the former chairman’s behalf or through a network of his nominees and trusted associates. The matter had given rise to litigation of ‘ever-increasing, at times bewildering, complexity’.

Following his repeated defiance of a world-wide asset freezing order in failing to make full and frank disclosure of his assets, the former chairman was committed to prison for 22 months for contempt of court. However, he had by then fled Britain and had remained a fugitive from justice until his hide-out in France was discovered. He had since remained in the custody of the French authorities with extradition proceedings pending against him by at least three countries.

He had nevertheless continued to instruct English lawyers to represent him, but his challenge to the committal order was dismissed by the Court of Appeal. By reason of his failure to comply with orders of the Court, default judgments were entered against him in respect of various of the Commercial Court proceedings in sums totalling at least $3.6 billion.

In separate proceedings brought in the High Court Chancery Division, the bank claimed that he had fraudulently transferred certain AAA-rated investment bonds, with a market value of approximately $300 million, for his own benefit. He had announced through his solicitors that, whilst reserving all his rights, he would not be defending those proceedings.

The Court noted that his insistence that the case needed to go to trial sounded ‘rather hollow’ in the light of his decision not to defend the action. Finding that the bank’s case in respect of the AAA-rated bonds was sound on the evidence, the Court entered summary judgment against the former chairman for more than $294 million, plus interest.