Defendant Found Liable in Litigation Brought by SCF Group Companies

On Friday, in the High Court (Commercial Court) of London, Mr. Justice Andrew Smith gave judgement in the case brought by the claimants Fiona Trust & Holding Corporation & Others, together with Intrigue Shipping Inc & Others - both now part of SCF Group (Sovcomflot), against, amongst others: Yuri Nikitin (The Principal of Standard Maritime Limited); Dimitry Skarga (Former Director General of Sovcomflot); Tagir Izmaylov (Former President of JSC Novorossiysk Shipping Company).

In summary, Mr. Justice Andrew Smith found Mr. Yuri Nikitin liable for bribery and conspiring to injure the SCF Group. As a consequence, it is expected that he will be ordered to pay approximately USD 65 million including anticipated interest in compensation. Messrs Dmitry Skarga and Tagir Izmaylov were found not liable for breach of duty to the SCF Group.

Mr. Nikitin was found to have been involved in fraudulent conduct between 2001-2004, including the bribery of Mr. Privalov, ex head of SCF’s London office, and collaboration and conspiracy with Mr. Privalov and certain London brokers to divert from the SCF Group “commissions” on various sale and purchase and new building transactions and other monies for his benefit.

The litigation proceedings, which were originally started in London in 2005, were initiated by the claimants in order to recover the losses sustained by their shareholders. Furthermore the Group’s then new management team, installed from the fourth quarter of 2004, pursued this litigation as part of its wider and ongoing commitment to open and transparent business transactions and good corporate governance.

Commenting on the decision Mr. Vladimir Mednikov, Executive Vice-President of Sovcomflot and Chief Legal Officer of the SCF Group, said:

“Today’s judgment from Mr. Justice Andrew Smith has found the key defendant liable for acting against the interests of companies within the SCF Group. We are very disappointed, however, that Mr. Justice Smith did not find the other defendants liable, and are also evaluating whether to launch an appeal. SCF Group operates a policy of zero tolerance towards corruption and is fully committed to transparent management processes and good corporate governance. The decision to pursue this litigation reflects these commitments and was taken to protect the rights and interests of our shareholders. The Serious Fraud Office (SFO) has requested and been provided with copies of documents relating to the transactions involving the SCF Group and Mr Nikitin, which were the subject of these proceedings”.

Nicholas Fairfax,a member of the Executive Board of SCF Group, noted:

“When we initiated the litigation proceedings in 2005 we had no doubt that the SCF Group had been the subject of fraud. The judgment of the London High Court announced today supports our decision to bring these proceedings and we are satisfied with Mr. Justice Andrew Smith’s findings in respect of Mr. Yuri Nikitin. At the same time we understand that cases involving fraud and corruption are complex and their investigation requires perseverance and a lot of time. We remain convinced that it was right to have brought these claims and that in time our position should be more fully vindicated.”

Highlights

Judgement supports the decision of the SCF Group to investigate suspicious transactions undertaken between 2001-2004
Mr. Yuri Nikitin found liable for bribery and conspiring to injure the SCF Group.
Compensation of approximately USD 65 million including anticipated interest to be paid to the SCF Group by Mr. Yuri Nikitin
Mr. Dmitry Skarga, a former Director General of Sovcomflot, whilst found to have acted dishonestly and to have received what, under English law, amounted to bribes was found not liable for dishonest breach of duty to the SCF Group
Mr Tagir Izmaylov, a former President of Novoship, who was joined to the Claims against Mr Niktin and the brokers, was also found not liable for dishonest breach of duty or of being a party to any conspiracy with Mr. Nikitin and others

Mr. Justice Andrew Smith’s overall findings include:

That Mr Nikitin paid bribes to Mr Privalov the ex-head of SCF’s London office
Mr. Nikitin collaborated and conspired with Mr Privalov and certain London brokers to divert “commissions” for his benefit
Mr. Nikitin conspired with Mr. Privalov to divert other SCF monies to one of his companies
Several claims against other parties, including Mr. Yuri Privalov, amounting to approximately USD 84 million, were settled by amicable agreement at the pre-hearing stage of the case.