LONDON (Reuters) – A London judge has cleared a vice-chairman at UBS investment bank of claims he knowingly took part in a rigged auction in 2007 during the Russian state’s breakup of Mikhail Khodorkovsky’s Yukos oil major.
Bob Foresman faced a civil fraud lawsuit filed by Yukos’ former managers that alleged the American banker, then vice president of Moscow investment bank Renaissance Capital, conspired with Russian state officials to pre-agree the sale of Yukos Finance BV to a consortium of foreign investors at a fixed price range.
A judge this week dismissed the lawsuit saying there was “no smoking gun” that showed Foresman, acting with four other foreign executives named in the lawsuit, entered into any “unlawful agreement” with Russian state oil company, Rosneft, to pre-arrange the auction in the consortium’s favour.
Lawyers for the former Yukos management had based their case on a cache of emails from Renaissance Capital. Foresman had written a memo to three other senior executives at Renaissance Capital pointing to the Kremlin-run Yukos asset auctions as “the trade of our lives.”
The lawsuit followed the Russian government’s levying of “enormous retrospective tax assessments requiring immediate payment” which led to Yukos’ break-up and sale in a series of state-run auctions, Judge Michael Burton said.
Russian state oil champion Rosneft acquired most of Yukos’ assets. But senior executives at Renaissance Capital formed a consortium of foreign investors to acquire Yukos Finance BV, which held Yukos’ Dutch assets, through a bidding vehicle previously owned by Rosneft, at an August 15, 2007 auction.
The sale was soon overturned by a Dutch court which ruled the transaction invalid. The Dutch unit held up to $1.5bn in cash reserves, of which $650m was net of debt, while it also held a 49 per cent stake in a strategically important Slovakian pipeline operator, Transpetrol.
The foreign consortium had signed an internal investment agreement between themselves that said the group would not be willing to bid more than $310m for the asset, should there be more than one participant in the auction, the court ruling said.
The judge found that the agreement setting an “express limit on the consortium’s bid” to be “inconsistent” with the suggestion that the price had been rigged.
“This very powerful judgement is a complete vindication for Mr Foresman who has been living with these very serious charges hanging over him for many years,” Mark Dawkins, the lead lawyer for Foresman said in a statement.
Foresman was not able to respond immediately to a request for comment.