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Wednesday, August 04, 2021

The power of money: How autocrats use London to strike foes worldwide

The politics of authoritarian countries like Russia and Kazakhstan has spilled into England’s legal system, with lawyers and private investigators in London raking in huge fees and engaging in questionable tactics in the service of autocratic foreign governments.

By: New York Times | London |
Updated: June 19, 2021 11:49:29 am
The building housing the offices of Hogan Lovells, one of the biggest law firms in the world, in London on Feb. 13, 2019. (The New York Times/File)

Written by Andrew Higgins, Jane Bradley, Isobel Koshiw and Franz Wild

Olena Tyshchenko, a lawyer based in Britain, was facing years in a crowded Russian prison cell when a chance at freedom came via an unexpected source.

An English lawyer named Chris Hardman, a partner at Hogan Lovells, one of the biggest law firms in the world, flew into Moscow while his firm helped draft a tantalizing offer: Tyshchenko could be freed if she provided information that could be used to help his client in a sprawling web of litigation in London.

The twist is that Tyshchenko was one of the lawyers on the other side. To win her freedom, she would have to turn on her client. It was a ruthless exchange. But the Moscow prison had been ruthless, too, and she reluctantly agreed. In a later interview, she said what seemed “most abnormal” was that lawyers opposing her in a trial in London could play a role in her fate in Russia.

“They are extremely aggressive,” she added.

A Moscow prison. A London courtroom. One is part of a Russian legal system widely considered corrupt and subordinate to the Kremlin. The other is a symbol of an English legal system respected around the world. Yet after Hardman returned to London, an English judge would accept into the case the evidence obtained from the Moscow prison.

The episode is a vivid illustration of how the brutal politics of authoritarian countries like Russia and Kazakhstan have spilled into England’s legal system, with lawyers and private investigators in London raking in huge fees and engaging in questionable tactics in the service of autocratic foreign governments.

An investigation by The New York Times and the Bureau of Investigative Journalism — involving a review of hundreds of pages of case documents, leaked records and more than 80 interviews with insiders, experts and witnesses — reveals how London’s courts are being used by autocrats to wage legal warfare against people who have fled their countries after falling out of favor over politics or money.

Four out of the past six years, litigants from Russia and Kazakhstan have been involved in more civil cases in England than have any other foreigners. Authoritarian governments or related state entities are often pitted against wealthy tycoons who have fallen from favor and fled. Neither side elicits much pity — but both pay generous legal fees.

Filing litigation in London can bring legitimacy for claims by autocratic governments, whose own legal systems are so tainted that their decisions carry little weight outside their borders. England also offers advantages: Judges have broad latitude to examine evidence, even if it is produced by corrupt security services or compromised foreign legal systems. London’s own private intelligence firms are unregulated, largely unrestrained and sometimes willing to use borderline methods for deep-pocketed clients.

In one example, our investigation found that private detectives working on a case with Hardman’s firm, Hogan Lovells, traveled to France to try to pay a potential witness to testify against an enemy of President Vladimir Putin of Russia.

But perhaps the biggest advantage is how lawyers like Hardman enabled their clients to pursue their foes by winning what one judge called a legal “nuclear weapon”: court orders freezing a defendant’s assets worldwide. These orders are similar to the ones the U.S. government uses against terrorists or arms dealers, except they emerge from civil proceedings.

Much of this is initially secret, with orders in many cases issued before the target is aware or has been found liable in a trial. Even lawyers specializing in the freezing orders are uncertain how many are issued. But the fact that London lawyers, judges and private investigators are now deeply immersed in the savage political battles of the post-Soviet world is eliciting concern.

“We’re being asked in the U.K. to adjudicate on political dynamics that English courts don’t fully understand,” said Tom Mayne, a researcher at Exeter University, who focuses on how English courts handle corruption cases related to the former Soviet Union. “It seems like an abuse of English law courts, because we’re basically reinforcing the status quo of the regimes in these kleptocratic countries.”

Hardman and his protégés at Hogan Lovells have been industry leaders in representing powerful clients from the former Soviet Union, routinely working with Diligence, a London private intelligence firm with a reputation for aggressive surveillance. The firms are teamed up on behalf of Russia’s Deposit Insurance Agency in pursuit of Sergei Pugachev, a onetime confidant of Putin now accused by the state of stealing more than $1 billion from a Russian bank, which he denies.

Another example is a bitter and sensational legal battle that originated in the brutal, autocratic politics of Kazakhstan and involves a state-owned bank, a fugitive tycoon and allegations of stolen billions. The much-publicized dispute began 12 years ago in London, involves numerous lawyers on both sides and is focused on Mukhtar Ablyazov, a former insider among Kazakhstan’s kleptocratic elites who said he was singled out for prosecution after he fell out of favor for political reasons.

Tyshchenko was a lawyer for a company related to Ablyazov. She had gone to Moscow in August 2013 but was grabbed from her luxury hotel near the Kremlin, tossed in prison and accused of helping Ablyazov hide assets. Russian authorities blessed the deal with Hardman’s client that set her free. She denied any wrongdoing, but the affidavit she later provided to Hardman became evidence in a case that saw an English judge issue a freezing order against Ablyazov’s son-in-law.

In a statement, Hogan Lovells denied all allegations of acting inappropriately, adding that Ablyazov and Pugachev had “committed some of the largest frauds that the world has ever seen” and that “given its well justified reputation for fair and open justice, it should be no surprise that such claims are tested in London where the result can be trusted around the world.”

An Unusual Menu

To understand the lengths to which Diligence, the private intelligence firm, has gone to produce evidence in these cases, consider the example of Natalia Dozortseva, a Russian lawyer.

Sitting in a hotel in Nice, France, in 2017, Dozortseva was joined at the bar by Trefor Williams, head of Diligence in London. Speaking over the tinkling of a piano, Williams mixed flattery with offers of money if she would turn on her client, Pugachev, the former Putin confidant who was residing in France to avoid a prison sentence for breaching a 2014 freezing order issued in London.

Williams described a menu of options: gold, silver or bronze. Each band, he said, represented a level of cooperation and compensation.

Telling him everything she knew about her client would earn bronze. Silver would require a sworn statement. Gold would entail her testifying in court against her client.

The Times and the Bureau of Investigative Journalism learned about Diligence’s approach to Dozortseva after listening to a secret recording of her conversation with Williams. In the end, she never betrayed Pugachev but instead told him in advance of the meeting and recorded it.

Lawyers for Diligence admitted Williams had attended an “exploratory” meeting with Dozortseva but noted that “it is not illegal to offer payments to witnesses” and said no agreement on payment was reached.

The offer to Dozortseva would run afoul of England’s strict rules governing public prosecutions, but nothing would explicitly ban it in private-party civil proceedings. In France, offering to pay witnesses is illegal only if the intent is to induce false testimony. Some legal experts believe, however, that a substantial payment could be evidence of such intent, a point Diligence strongly rejected.

A Legal Weapon

Like a military drone, a global freezing order can strike its target without warning.

Pugachev, for example, learned his assets had been frozen only when a Diligence agent and a Hogan Lovells lawyer tried to hand him the order on a London street. After Pugachev refused to take the papers, the lawyer dropped them at his house.

England introduced the freezing orders in 1981, and by 1998 a judge had ruled they had global reach. The timing was propitious. Money and businessmen from Russia and other post-Soviet states had poured into London, supposedly a safe haven.

Ablyazov fled Kazakhstan in 2009 after the Central Asian state accused him of embezzling billions from BTA Bank, of which he was chair. Ablyazov denies wrongdoing and maintains the government only pursued him because he posed a political threat.

Hardman’s legal team won the freezing order against Ablyazov in 2009 and has since filed scores of court applications, winning judgments that have gradually widened the order’s scope and expanded the list of defendants to associates and members of his family.

The civil rulings ultimately turned into a 22-month prison sentence in 2012 for contempt of court for Ablyazov, after he was found to have breached an order to disclose assets. He fled to France, which eventually granted him refugee status.

Faced with complaints that Hogan Lovells had not fully informed the court that Tyshchenko provided her evidence under duress, an English judge ruled they had followed disclosure rules by stating she was incarcerated when she first provided the information. But the judge was not asked to rule on whether the circumstances of her incarceration — the fact that she was in a Russian prison — should also be considered, as well as the involvement of Pavlov and questions about whether Tyshchenko had been mistreated.

Moreover, while Tyshchenko remained in prison, another Hogan Lovells attorney convinced an English judge to grant an order that required her husband in Britain to hand over records and other information. Among the supporting evidence the law firm submitted were “press reports” from compromat.ru, a Russian website notorious as a clearing house for unverified and sometimes fabricated information.

Hogan Lovells said London’s High Court had already rejected complaints of the firm “behaving improperly” in Tyshchenko’s case and stated it “complies fully” with the rules of evidence. The information from compromat.ru was “one small part of a much larger collection of evidence that the court accepted justified the granting of the order” in the case against Tyshchenko, the firm said.

Tyshchenko was less sanguine. “There are no good guys in this affair,” she said.

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