A New York federal court ruled that the claims brought by the Republic of Kazakhstan against New York financier Dan Chapman and his Argentem Creek companies (“Chapman”) for their role in the wide-ranging fraud schemes of Moldovan oligarchs Anatolie and Gabriel Stati to proceed despite the attempts to dismiss.
By a decision dated February 11, 2022, the U.S. District Court for the Southern District of New York: (1) granted Kazakhstan’s motion to remand its claims against Chapman to the New York state court where they were filed; (2) denied Chapman’s motion to dismiss Kazakhstan’s claims without prejudice; (3) denied Chapman’s motion to dismiss Outrider’s claims; and (4) granted Chapman’s motion to compel ICC arbitration of Outrider’s claims.
This is a substantial victory for Kazakhstan. It permits its claims against Chapman to go forward on the merits, and in the court where they were originally filed. As alleged in the New York lawsuit, Chapman discovered the Statis’ fraud in or about 2012, but instead of taking legal action against them, he unlawfully conspired with them in their efforts to defraud Kazakhstan and others.
The Statis’ fraud is an established fact. It was confirmed by the November 2021 decision of the Brussels Court of Appeal, in which the court held that the Statis committed fraud before, during and after their international arbitration against Kazakhstan.
The present New York decision is the second time that a U.S. federal court has rejected Chapman’s efforts to escape liability for his complicity in the Statis’ fraud. In March 2021, the U.S. District Court for the District of Columbia rejected Chapman’s request to enjoin the New York lawsuit. In so doing, the Washington court flatly rejected Chapman’s false assertion that the court had already ruled on the merits of the Kazakhstan’s fraud allegations.
Kanat Mussin, the recently-appointed Minister of Justice of the Republic of Kazakhstan, commented on the present decision:
Today’s decision by the New York court is a welcome development in Kazakhstan’s ongoing effort to combat corruption and bring the Statis and their co-conspirators to justice. Now, Chapman’s involvement in the Statis’ fraud will be fully exposed in a U.S. court of law.
Also commenting on the decision is Marat Beketayev, the former Minister of Justice and now Advisor to the Prime Minister of Kazakhstan:
For the last two years, Chapman has desperately been attempting to stop and/or delay the U.S. courts from reaching the merits of the claims asserted by Kazakhstan (and Outrider). We are heartened that the U.S. courts have rejected these efforts – first in Washington, D.C. and now in New York – and that our claims now will proceed forward.
The Statis Fraud is An Established Fact
As reported previously, on 16 November 2021, the Brussels Court of Appeal concluded that the Statis committed fraudulent actions before, during and after the arbitration. Particularly, the Belgian court decided that the Statis’ investment in Kazakhstan was made in bad faith:
The evidence that has been gathered since the Award, demonstrating beyond any possible doubt the fraudulent behavior of the Statis, was unknown to the arbitral tribunal as it has only been gradually discovered after the Award was issued. As a result, Kazakhstan was unable to expose to the arbitral tribunal that the Statis’ investment in Kazakhstan was conducted in bad faith.
The Court also concluded that the award relating to such bad faith investment was obtained by way of fraud:
Based on the examination of the exhibits filed in the proceedings and of the submissions from the Parties, it is demonstrated that the Statis have committed acts which must be characterized as fraudulent acts and acts of deception which have caused an unquestionable impact on the Arbitral Award which, without these fraudulent acts, would not have been rendered in the way that it was, and [the Statis] have used pieces of evidence which have been recognized to be false.
The reason why the award was not annulled at the seat of arbitration, stated the court, was because the Statis deliberately misled the Swedish courts:
KPMG’s decision to “withdraw” its audit reports has not been taken into account by the arbitral tribunal and by the Svea Court as this information was unknown at the time. They have also been deprived of the opportunity to consider the deception of the Statis who have deliberately misled the Swedish courts and which – purposefully – prevented these jurisdictions from ruling on the matter on the basis of all the information and evidence available.
The Statis Are Under Criminal Investigation in Luxembourg
One collateral consequence of the Statis’ fraudulent schemes is that they are under criminal investigation in Luxembourg for fraud, forgery and money laundering in connection with their efforts to enforce their fraudulent arbitration award.
As a result, on 2 December 2021, the Court of Appeal of the Duchy of Luxembourg stayed the Statis’ enforcement efforts until this ongoing criminal investigation is concluded. The court relied on the opinions of independent experts submitted by Kazakhstan.