By John Helmer in Moscow
One celebration drink too many in Bar Vogue, in downtown Almaty, has turned out to leave a very bad taste for lawyers advising hard-rock mining and oil project start-ups in Kazakhstan.
In a 216-page judgement issued this month, after three years of litigation across half the globe, a group of Australian lawyers was found guilty of stealing clients from their employer, the Kazakhstan-based law firm of Michael Wilson (see left image) & Partners (MWP). The judge, Clifford Einstein, presiding in the New South Wales Supreme Court, ruled on October 6 that John Emmott, Robert Nicholls, and David Slater had conspired together to exploit their positions in MWP to breach their employment contracts and fiduciary duties to MWP by secretly creating a competing firm of their own, Temujin International, registered in the British Virgin Islands.
Among the London AIM listed companies targeted by the scheme, the court papers identify Sunkar Resources’s Chilisai phosphate project; Frontier Mining’s Benkala copper project; Roxi Petroleum; Max Petroleum; and two other Central Asian mining projects, Urals Gold and Ablai.
In his recital of findings of fact, Einstein J said the conspiracy had begun in 2005, as soon as Slater had arrived at MWP’s office in Kazakhstan from Australia, where he had been an in-house solicitor for the Westpac Banking Corporation. In a sequence of Almaty watering holes over several weeks – the Ramstore Sushi Restaurant, Ankara Hotel, and Bar Vogue – Slater and his co-conspirators created their cut-out company, calling it Temujin, which they borrowed from the history of the hero of the Mongol empire and the Kazakh steppes, Genghis Khan. Temujin was the khan’s original name, indicating that the family had probably got their start as ironworkers.
Having formalized their roles in the skimming scheme, according to the judge, “the men then retired the Bar Vogue where they celebrated the formation of Temujin.”
Slater left Wilson’s firm almost immediately afterwards, in December of 2005. Nicholls, formerly a Sydney barrister and partner at Freehills, followed in March of 2006; while Emmott, who had been with MWP since 2001, stayed on to keep the flow of Wilson’s client business moving out the backdoor to Temujin. He exited on June 30, 2006, leaving his resignation in a sealed letter on Wilson’s desk, while the latter was out of Kazakhstan on a business trip, having, he thought, deputed Emmott to run the office in his absence.
Temujin’s new business was to advise MWP’s clients on the purchase of formerly state-owned oil, gas, gold and mineral companies and their listing on the London Alternative Investment Market (AIM). In MWP’s claim, the trio illegally earned millions of dollars in fees and share-based payments.
“The financial documentation dictates two findings,” Einstein ruled. “Firstly, TIL [Temujin] was established entirely on the basis of income derived from former clients of MWP and an interest free loan made by Horizon Services of US$200,000.00. The loan has been repaid by TIL from earnings also derived from income earned from former MWP clients…”
The judge found that Emmott “was really the backbone of the plot which had been hatched and likely played the dominant role in every step of Temujin’s initial and ongoing activites.” The judge also issued thumbnail portraits of the Australians whose testimony he had heard in the Sydney court. Emmott, he said, had been “evasive” and “ingenuous”, with a “cloak and dagger approach”. In summary, according to the judge, “the position which he held with MWP was entirely antithetic to the activities which, following the departure of Mr Slater and then Mr Nicholls, he was secretly undertaking.”
Nicholls, reported Einstein J, “was a very difficult witness… preferring to not directly and fairly answer a question.” Much of the evidence he offered in his cross-examination was “rejected”.
The third conspirator Slater is described by the judge as “in numerous respects a witness whose credit cannot be accepted…” When taken through documentary exhibits in court, the judge said Slater had “what I regard as a ‘very’ selective memory loss… clearly, this memory loss was nothing more than a device to avoid telling the truth.” When Slater had been telling the truth, according to the judge, “he had little choice but to so as the banking records told a clear story even without explanation.”
At the conclusion of his judgement, Einstein ordered the defendants, including Temujin, to account to MWP for the tainted profits. They will be liable for MWP’s legal fees and costs, as well as millions of dollars in damages. Wilson will have the option of taking his compensation in the form of shares, options, warrants, commissions or other benefits the Temujin trio obtained in relation to the Sunkar, Frontier, and Roxi transactions, in which they were involved.
According to Einstein, Wilson had been the wrong man for an aspiring junior Genghis Khan to cross. “The depth of [Wilson’s] obvious anger with these persons cannot be overstated,” Einstein ruled. “The Court’s assessment of Mr Wilson is that he is a person of high intelligence but also a person whom when crossed, can be a formidable enemy.”