Break the ice: ‘Fish king’ Orlov may lose one-third of his fortune and go to jail
The dispute for Karat Fishery Holding between Aleksander Tugushev, ex-Deputy Head of the Federal Fishery Agency, and fishery magnate Vitaly Orlov has recently taken on a new twist – and not for the benefit of Orlov. In the worst case scenario, the billionaire may not only lose a portion of his fortune, but also be criminally charged.
In late July 2018, the London High Court of Justice has frozen a portion of assets of Vitaly Orlov, owner of Norebo Holding, worth $350 million – while the total cost of Norebo is estimated at $1.5 billion.
In pursuit of justice, Aleksander Tugushev, former partner and current opponent of Orlov, has addressed the British court so favored by Russian oligarchs. Tugushev claims that not only was he defrauded but also framed up by the ex-partner.
London High Court of Justice
The story of their relations resembles many others unfolding during the infancy period of big business in Russia. In the 1990s, Tugushev and Orlov, graduates of the Murmansk State Technical University (former Higher Nautical School), made their first steps in the perspective fishery business. Tugushev has founded his own enterprise, while Orlov found a job in a Swedish company – Scansea International – purchasing fish from Russian fishermen, including the Tugushev’s company, in Murmansk and selling it in Norway. In 1997, Orlov has established, jointly with Magnus Roth, co-owner of Scansea International, a new company in Norway – Ocean Trawlers – to supply Norwegian trawlers to Russia in exchange for the fish.
Later Orlov has stated in the course of his legal battle with Tugushev that they could not run a fishery business in Russia due to its non-transparent catch quota distribution system. On the other hand, Tugushev could secure the required quotas. At that time, foreigners had everything – money, modern fleets, and market channels – so the Russians just had to give them assess to the resource. Therefore, the parties decided to combine their efforts.
They also decided to formalize their business relations in accordance with the British legislation (Partnership Act 1890, Trustee Act 1925, Trustee Act 2000) and signed a general partnership agreements. Sometimes such agreements are made verbally – but according to Tugushev, they had produced a document in English in one copy to be kept by Orlov.
According to their arrangements, Magnus Roth was responsible for provision of funds for the business development; Orlov – for general management, coordination of structural subdivisions of the holding, and trading and procurement operations; while Tugushev – for strategic development, acquisition of new fishing enterprises, and procurement of catch quotas for the company’s own fleet and its partners.
According to RBC Group, in 1998, the business partners have established Karat Holding in Russia. Tugushev claims that Orlov and Roth had owned 33% of its shares each, while he owned 34% of the shares. However, in his interview to RBK in 2017, Orlov said that he hadn’t established Karat jointly with Tugushev. He considers 2001 the beginning of their official partnership – at that time, Orlov and Tugushev have created, jointly with some other persons, Almor Atlantika Closed Joint Stock Company. Cofounder Norebo Invest Closed Joint Stock Company has made its contribution in monetary funds, while the other cofounders provided shares of their companies. For instance, Tugushev has invested his shares of RK SOGRA Closed Joint Stock Company, Karat Closed Joint Stock Company, and Gavan’ (Harbor) Closed Joint Stock Company – which translates into 20,318 shares in the charter capital of Almor Atlantika with a nominal value of 1 ruble (¢1.5) each.
It is necessary to note that officially Orlov is not listed among the founders of Karat or Almor Atlantika. Up until 2014, he had a Norwegian citizenship and gave it up due to the new stance of Russia with regards to the people with dual citizenship – such persons have been declared foreign investors, which was disadvantageous for the Russian business of Orlov.
In the meantime, the joint business of the partners was doing well – by the early 2000s, their enterprises became major suppliers of Alaska pollock, cod, and haddock on the Russian market. But their ambitious plans required further development. To do so, they had to gain control over the catch quotas distribution – the key factor of the fishing business in Russia.
Fishing in the Barents Sea
The continuously changing quota system was very non-transparent and corrupt. Initially, the officials had determined the permissible catch volumes. Since 2000, an auction-based quota distribution system was introduced: local authorities had distributed 60% of sea bioresource catch quotas, while the remaining 40% were distributed through federal auctions. In 2003, a new system was proposed: distribute quotes for five years at once based on the “historical record” – i.e. companies’ catches in the three previous years.
In 2003, Tugushev became a Deputy Head of the State Fishery Committee (later reorganized into the Federal Fishery Agency) responsible for the distribution of catch quotas.
In the end of 2003, the media wrote that Tugushev was involved into illegal schemes – fish caught by Russian companies in the framework of their quotas was transported abroad for the benefit of Norway-based Ocean Trawlers.
In June 2004, Tugushev was arrested following a criminal complaint filed by Far-Eastern fishery company named Polluks – allegedly, Tugushev had promised it to allocate quotas for 50 tons of Alaska pollock in exchange for a bribe of $3.7 million, but provided only a catch quote for 7 thousand tons. In February 2007, Tugushev and his accomplices were found guilty of extortion and swindling. The former Deputy Head of the Federal Fishery Agency was sentenced to six years behind bars. A land lot on Nikolina Gora, Audi vehicle, and $400 thousand were confiscated from him; in addition, he was ordered to pay $3.63 million to Polluks.
Prior to joining the governmental service, Tugushev, in strict accordance with the Russian legislation, has completely withdrawn from the business. The terms of this ‘withdrawal’ are currently the main matter of dispute between the former partners. Tugushev claims that he has transferred his share in Norebo Invest Closed Joint Stock Company – the key company in their joint venture – to nominal shareholders. Orlov insists that his partner has received $30 million for his portfolio. On paper, Tugushev has sold his portion of the business at the above-mentioned nominal price of 20,318 rubles ($302).
After his release in 2009, Tugushev became an advisor to Orlov (officially, he was employed with one of the holding’s companies). He was a member of the Boards of Directors of MTF (Murmansk Trawler Fleet) Public Joint Stock Company and Akros Closed Joint Stock Company. Orlov had owned 67% of shares in their joint business, while 33% of the shares belonged to Roth. Tugushev, who was not bound by the legal restrictions anymore, wanted to be reinstated as a company co-owner and requested back his portfolio – allegedly transferred to Orlov for trust management
In February 2013, Orlov has barred Tugushev from the holding management. The conflict has entered the hot phase.
In October 2015, Orlov has offered Tugushev a compromise – in his opinion – solution: abandon the claim for a portion of the business and admit that he had sold his shares in Almor Atlantika in 2003 for $30 million. According to Tugushev, he was offered a settlement of $60 million in exchange – while he insisted on getting one-third of the total assets worth $350 million.
In November 2015, Tugushev engaged lawyers from Egorov Puginsky Afanasiev & Partners (EPAM) law firm into the negotiations with Orlov. During a personal conversation, they threatened to address for help Adam Delimkhanov, Deputy of the State Duma and friend of the Head of the Chechen Republic. According to Orlov, the lawyers had claimed that Delimkhanov was “highly efficient in corporate issues because his methods are questionable from the legitimacy point of view and nobody prohibits him from doing anything outside of the law”.
Nobody knows how far could this corporate dispute take the former partners – but as of a sudden, on December 18, 2015, the Koptevsky District Court of Moscow has dismissed a claim filed by Tugushev. To be specific, the court hasn’t recognized the fact of universal partnership between Orlov, Tugushev, and Magnus Roth existing since 1998; hasn’t recognized the existence of a trust management agreement made between Orlov and Tugushev in 2003 with regards to the portfolio of Tugushev in their universal partnership; and declined to recognize the right of Tugushev to 33.3% of shares in Karat Holding and collect Tugushev’s dividends from Orlov as a partner in a universal partnership.
Representatives of Tugushev filed an appeal with the Moscow City Court – and it annulled the verdict of the Koptevsky District Court because disputes between shareholders are outside its jurisdiction and must be examined by arbitration courts.
Interestingly, but according to The CrimeRussia source, Tugushev had nothing to do with the initial lawsuit and subsequent appeal filed with the Moscow City Court – he accidentally became aware of this story a year later.
An expert assessment performed as per Tugushev’s request has established that the power of attorney allegedly issued by him to lawyer Aleksei Dryndin and documents presented by Sergei Golubev, an attorney for Orlov, were fake. Furthermore, at the time of the power of attorney issuance – which, according to Dryndin, has happened in Cyprus – Tugushev was outside the island state.
Valery Parfenov, the real attorney for the ex-official, believes that Golubev and Dryndin were likely familiar prior to the litigation.
The CrimeRussia became aware that Tugushev has strong reasons to believe that Orlov had staged the above litigation to obtain an official court verdict denying the right of Tugushev to 33% of the holding shares – such a decision would be useful for Orlov in their further disputes. Orlov has purposively rented a one-room apartment in the Koptevsky district to make sure that the lawsuit against him is examined in the local court.
Then Orlov apparently decided that a verdict of a district court is not sufficient and decided to forge an appeal and file it with the Moscow City Court on behalf of Tugushev. He had likely expected the court not to go into details and dismiss the appeal, thus, providing him with a verdict of a higher judicial instance. However, his expectations failed because a scandal was escalating in Russia at that time in relation to the siphoning of dirty money off the country through fake court verdicts – and the Moscow courts started thoroughly reviewing all the materials.
In the meantime, Tugushev, being unaware that he was already involved in litigation, has submitted in 2016 a criminal complaint to the Murmansk law enforcement authorities claiming that his shares in Almor Atlantika were stolen. Orlov attempted to overcome him again by filing a counterclaim accusing the ex-partner of extortion and compulsion to complete a transaction (Articles 163 and 179 of the Criminal Code of the Russian Federation). He has provided records of telephone conversations where some Mualadi Dzhamaldaev, a native of the Chechen Republic, threatens to “break the legs of Orlov and his family” if he doesn’t return the Tugushev’s share.
Sergei Golubev, the fake ‘attorney’ for Orlov, has somehow became a witness in this case – while detained Dzhamaldaev gladly told the investigators about his meetings with Tugushev and instructions received from him. He was unaware though that Tugushev was abroad at that time – entries in his travel passport confirm this.
In April 2016, the law enforcement authorities issued a refusal to institute a criminal case against Tugushev – but in the end of the year, he was put under home arrest. Only in March 2017, the court has released him under a written pledge not to leave the city.
Meanwhile, Orlov has purchased the remaining assets of Norebo Holding and became its sole proprietor in 2016.
Norebo Holding is the largest fishery corporation. According to the corporate information, its total catch in 2017 was some 600 thousand tons of fish. The holding controls a dozen of fishing companies operating in the Russian North and Far East. A year ago, it had a quota to catch 15% of Alaska pollock, cod, and herring. According to the Bloomberg Billionaires Index, the fortune of Orlov has exceeded $1 billion in early 2017.
In March 2018, lawyer (or fake lawyer) Sergei Golubev representing Orlov was arrested in relation to another Murmansk fishery magnate – Yuri Tuzov. Tuzov was charged with abduction of financier Pavel Surin with the purpose to convince him to waive a bill debt in the amount of 400 million rubles ($5.9 million) earlier granted to the company belonging to Tuzov. Golubev had represented Tuzov in court and was involved into the assault on a lawyer retained by Surin’s company and theft of court materials and the corporate seal from him.
Yuri Tuzov (circled)
Using the seal stolen by the assailants, in late 2014, Tuzov managed to obtain in the same Koptevsky District Court of Moscow (!) a verdict recognizing the promissory note for 400 million rubles ($5.9 million) invalid. Later Surin had to spend an entire year to annul that verdict. In addition, Golubev was directly involved into the abduction of Surin.
After the exposure of that story, the trustworthiness of the smear campaign waged by Orlov against Tugushev has drastically declined. Furthermore, The CrimeRussia became aware that during the arrest of Golubev, operatives have seized fake documents, including those allegedly signed by Tugushev and presented earlier in the Koptevsky District Court.
It can’t be ruled out that Golubev is a member of a criminal group specializing in forging documents, abductions, and other crimes committed to secure favorable court verdicts for its clients. Apparently, the group had connections in the Koptevsky District Court, and Orlov and Tuzov had used its ‘services’. The criminal complaint filed by Tugushev in relation to the weird litigation in the Koptevsky District Court may be added to the charges already laid against the group of Golubev. This, in turn, casts a shadow on Orlov – who could not be unaware of that episode.
The newly discovered circumstances encouraged Tugushev to seek justice in London. According to his lawyer Richard Slade, the businessman became “a victim of a multifaceted and sophisticated conspiracy” allegedly plotted by Orlov and another partner with the purpose to deprive Tugushev of his share in their joint business.
Vitaly Orlov (Photo: Andrei Rudakov / Bloomberg)
Apparently, Orlov has something to conceal – his defense team in the London High Court of Justice has brought a motion to provide the information about their client’s assets requested by the court only to British representatives of Tugushev – but not to the plaintiff – due to “reasonable concerns” that it might be used “for other purposes”. At the same time, according to Bloomberg, Orlov does not intend to appeal the court decision to seize his assets worth $350 million.
The situation for Orlov is now pretty serious – it is not just about the Tugushev’s claim to return his portion of the business. In the worst case scenario, Orlov may not only sustain severe reputational and financial losses – but be criminally charged as well. The partners had built their business by the ‘code’ – but now they have to divide it by the law. The criminal group of lawyers that used to work for Orlov has already attracted the attention of the Russian law enforcement authorities – and it also might be of interest for the British court examining the corporate conflict between Tugushev and Orlov. Overall, the Murmansk ‘fish king’ has plenty of reasons to be seriously worried.