English courtrooms have become a battleground — and a source of powerful weapons — in fierce disputes between the tycoons and the politicians of the post-Soviet world.
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 tantalising 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 US 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 specialising 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."
Lawmakers in Britain are increasingly expressing alarm over Russian influence, warning in a parliamentary report last year that a growing industry of London professionals, including lawyers and private investigators, has emerged "to service the needs" of the Russian elite.
"As the Russia Report laid bare, an industry of enablers has grown up in our capital city to protect and sustain the interests of corrupt elites," said Lisa Nandy, who leads on foreign affairs for the opposition Labour Party. "The court system has now become the latest battleground as they seek to use the institutions of an open society to defend ill-gotten gains."
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 US$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-publicised 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 that 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.
"I always want to get gold," Williams said. He said Dozortseva's knowledge could help end what he described as a legal "stalemate" and promised her "financial independence" and, through his contacts in Moscow, the possibility of travelling freely to and from Russia.
"For that," Williams said, "we want something; we want some sort of cooperation."
In the competitive world of private intelligence, Diligence has built a reputation for deceptive tactics and intrusive surveillance that gets results, while often working on cases, such as this one, for Hogan Lovells.
Unlike many European countries — and US states — Britain has no statutory regulation of private investigators, even after the 2011 tabloid phone-hacking affair, arguably the most infamous private investigation scandal in modern history. Investigators are bound by privacy and other laws and legal procedures in local jurisdictions, but even those are sometimes looser in civil cases brought by private parties.
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 that 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.
Lawyers have been able to benefit from these gaps in the law to obtain evidence and tactical advantages while distancing themselves from the techniques of firms like Diligence. It would, for example, be against industry regulations for a lawyer to pay any witness except for "specific and reasonable" expenses, such as travel or accommodation.
Hogan Lovells refused to answer questions about its relationship with Diligence or its knowledge of the firm's tactics, including the offer to Dozortseva. The law firm noted that its use of "enquiry agents" had not been criticized by the English courts and said it would always "expect such firms to ensure that they operate within the law."
Established in 2000, Diligence took its corporate DNA from Nick Day, its founding chief executive, who, according to former colleagues, revelled in the thrill of undercover operations. A big breakthrough came in 2005, while the firm was assisting a Russian conglomerate in a multimillion-dollar commercial dispute in the British Virgin Islands.
Day was accused of bamboozling an accountant with KPMG into handing over some confidential documents. He impersonated a British intelligence officer while an American working for the company pretended to be from the CIA, claiming to be "Liz from Langley."
When KPMG was tipped off about the deception, Diligence paid US$1.7 million to the accounting firm to settle a fraud claim, Bloomberg reported.
Hardman worked on the case alongside Diligence at the time and has since continued to put work the firm's way. Hogan Lovells paid Diligence nearly US$2.3 million for work carried out in 2012 alone, documents show, around half of the London headquarters' total income for the year.
In a statement, Day said that both he and Diligence's Swiss spinoff, which he now runs, denied "all allegations of wrongdoing." Day — who did not deny impersonating an intelligence officer to obtain documents — stated that the company had stringent protocols to "ensure that its techniques are lawful, necessary and proportionate." It uses "creative and cutting edge investigative techniques" to obtain information that is "admissible in court and meets all applicable rules of evidence," he added.
For the Pugachev case, Diligence's approach to Dozortseva was arranged by Pugachev's butler and driver, a keen amateur pianist and an admirer of Russia and its culture.
In return for spying on Pugachev and copying some documents, the butler, Jim Perrichon, said in an interview that Diligence had promised him a monthly retainer. Perrichon said he delivered on the bargain by setting up the hotel meeting with Dozortseva. "I realized that if we could recruit Natalia, we could crush Pugachev," Perrichon recalled.
But Perrichon, while still a believer in Russia, said he now no longer trusted Diligence, which he said failed to fully pay him. In a March 2020 email, the firm also offered him a one-off "36k" settlement and promised to increase its payments if he prepared a report on what he knew about Pugachev and stated his willingness to testify in court. He rejected the deal.
Diligence admitted to paying Perrichon for information on Pugachev but said it did not recruit him as an informant. The company said it was Williams who sought to end the relationship, after Perrichon did not deliver the promised intelligence. It denied owing him money.
A legal weapon
Like a military drone, a global freezing order can strike its target without warning.
Pugachev, for example, learned that 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 that 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 that the government only pursued him because he posed a political threat.
An English judge has declared Ablyazov untrustworthy, but France's highest administrative court in 2016 overturned a government decision to extradite him on the grounds that the case against him had a "political motive."
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.
Since then, English freezing orders, backed by international respect for England's courts and London's centrality as a financial hub, have become unparalleled in power and reach, experts say. The orders can be applied to an individual target with even a loose link to Britain, and courts have ruled they can also apply to connected companies, trusts and associates anywhere in the world.
"A worldwide freezing order is an incredibly draconian measure," said Lloydette Bai-Marrow, a former senior prosecutor for Britain's Serious Fraud Office who now runs a white-collar investigations consultancy. "There is a trend toward them being used potentially in a very harmful way and weaponised against individuals, and that should be a cause for concern for all of us.
"We can't allow ourselves to be used as a pawn in a bigger game."
Hogan Lovells said English law places a "very heavy burden" on any party applying for a freezing order to do so fairly. The law firm added that the defendant had the right to apply immediately on being served to have an order lifted if the injunction has been obtained using "improper or false" evidence and noted that the litigant must put forward any arguments to the judge that the defendant might make if they were present.
Many English lawyers and judges maintain that freezing orders are essential to restrict fraudsters, and defend the openness of their courts to lawsuits and evidence originating in countries with compromised legal systems. Assessing all the evidence, they contend, regardless of where it came from or how it got there, better serves justice.
"Admissibility of evidence makes UK courts more attractive for this kind of litigation than countries like the US," said Pavel Tokarev, a former Diligence investigator who left in 2019 to start his own agency. "The rules of accepting evidence, it's very flexible in the UK."
The jailhouse evidence from Tyshchenko is a case in point.
To acquire it, Hardman worked with Andrei Pavlov, a Russian lawyer hired by BTA Bank. The US and Britain would later place sanctions on Pavlov for his alleged role in a criminal conspiracy that led to the 2009 death in a Moscow prison of whistleblower Sergei Magnitsky. Pavlov, in an interview in Moscow, said he had been unfairly smeared and had done nothing wrong. He said he was proud to have worked with Hardman because of his London partner's reputation as an outstanding lawyer.
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 that 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 that London's High Court had already rejected complaints of the firm "behaving improperly" in Tyshchenko's case and stated that 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.
A case that never ends
If some of London's law firms have reaped rich rewards by defending oligarchs and former Soviet countries, they have sometimes been less successful at recovering funds for those clients. As of November 2020, BTA Bank had recovered just US$45 million of the more than US$6 billion it claims Ablyazov stole, its chair said in a recent affidavit.
An internal report prepared by the bank in 2014 said that 89 per cent of the US$470 million it had spent worldwide on lawyers and other "consultants" was disbursed in London.
Legal battles rooted in former Soviet states are often "pretty lucrative, just considering the rates of UK lawyers or investigative firms," said Tokarev, the former Diligence investigator. "The UK is a pragmatic country and government, and they don't have any interest in chasing any money out of the country."
Indeed. The BTA case, for one, shows no sign of slowing down.
In November, for example, a London judge reviewed a request by the state-owned bank to freeze the assets of a Kazakh billionaire, Bulat Utemuratov, whom a British lawyer working for BTA Bank alleged in court was Ablyazov's "money-launderer in chief." The judge, presented with evidence partly generated by Kazakhstan's security apparatus, issued the freezing order.
The following month, however, another London judge abruptly lifted the order after the bank reached a confidential settlement and dropped its case against Utemuratov, who denied the allegations. The law firm that introduced the evidence to an English court, Greenberg Traurig, declined to comment.
It was another reminder that the political fights of Kazakhstan and other autocratic states often end up in London.
This article originally appeared in The New York Times.
Written by: Andrew Higgins, Jane Bradley, Isobel Koshiw and Franz Wild
Photographs by: Jane Stockdale and Adam Ferguson
© 2021 THE NEW YORK TIMES
