Posted 2 декабря 2020, 11:13

Published 2 декабря 2020, 11:13

Modified 24 декабря 2022, 22:37

Updated 24 декабря 2022, 22:37

Dodgy Witness: Every party to the Norebo case in the British Court plays their game

2 декабря 2020, 11:13
The High Court of London is considering a high-profile dispute over shares of Norebo, one of the largest Russian fishing companies. Alexander Tugushev initiated the trial, accusing one of the company’s founders, Vitaly Orlov, of having stolen his share.

Suddenly, another ex-business partner of Orlov, a Norwegian businessman Magnus Roth, sided with the plaintiff. What considerations drove him to this step is one of the main mysteries in the Norebo case.

To understand what brought the businessmen to London court, it is necessary to dive deeper into history. After the collapse of the USSR, the fishing industry in Russia was privatized, and the recent graduates of Murmansk High Maritime School Vitaly Orlov and Alexander Tugushev came into the business. In the mid 90's Tugushev opened a small fishing company, which had only a few Soviet freezing trawlers at its disposal. At the time, Orlov worked for Swedes, who bought fish from Russian fishermen and resold it to Nordic countries. Tugushev was one of them.

In 1997 Orlov decided to start his own business and together with Magnus Roth registered Ocean Trawlers company. Four years later they founded a Russian company Almor Atlantica, this time together with Tugushev. In the united business he owned about 15% of shares.

In 2003, Tugushev joined the civil service—the then Prime Minister Mikhail Kasyanov appointed him deputy head of the State Fisheries Committee. The position opened up huge opportunities for Tugushev, this apparently reconciled him with the law that demanded that he leave all his businesses, which also meant selling his shares of Almor Atlantica. However, his career of a government official did not go well: in less than a year, Tugushev was arrested on charges of taking bribes for allocating fishing quotas. Later, the charges were changed to fraud and in 2007 he was sentenced to six years in prison.

After release, Tugushev worked for a while as a consultant for his former partner Orlov and tried to start his own business, but eventually committed another crime. According to the TASS agency, the former official stole more than 40 million rubles from a Murmansk businessman Alexander Sychev, the co-founder of Vostok LLC, whose company is also engaged in fishing. Tugushev was arrested in absentia and placed on an international wanted list, as he had managed to escape from Russia to London.

There, the fugitive applied to the High Court of England and Wales, so beloved by Russian oligarchs, with a lawsuit against his former partners, Orlov and Roth, asking the court to recognize his rights to a third in the business of Norebo (the successor of Almor Atlantica) or to pay him $350 million in compensation. Tugushev claims that his resignation from the company was formal: he transferred his shares to nominee shareholders. Orlov, on the other hand, told the investigation another version: his partner left for the civil service, having received $30 million for his shares, which was exactly what his share in the company was worth at the time.

It is quite possible that the idea of super-expensive litigation in London didn’t come to Tugushev out of the blue. Not even 40 million rubles from Sychev would cover the legal costs. A recent expose by Novye Izvestia showed that the former official had managed to make new friends, who seem to be quite willing to take over the successful fishing company. The article mentioned the names of famous St. Petersburg entrepreneurs from the 90s such as Vadim Gurinov, Roman Spiridonov and Ilya Traber. As soon as the names of the true beneficiaries appeared in the media, a massive campaign against the journalists was launched. For example, access to some publications was promptly blocked on preposterous charges, although the trial itself has not commenced yet.

All of a sudden, another former partner of Orlov also changed his mind: at the end of last year, Magnus Roth unexpectedly sided with the plaintiff and claimed that Alexander Tugushev had always been a shareholder of Norebo, that his disposal of shares had been purely nominal in order to hide the violation by a government official and had no effect on his shareholding. Moreover, Roth refers to a certain agreement between the shareholders, under the terms of which Tugushev has the right to forcibly buy Orlov's share in the business.

If the blocking of the articles is more or less self-explanatory, Roth's behavior raises a lot of questions. Of all things, he’s Orlov's codefendant in the litigation. The first thing that comes to mind is that he’s in cahoots with those very "mysterious sponsors" who provide financial and legal support to Tugushev's lawsuit through chains of offshore with the participation of British aristocrats. Roth himself, of course, denies such charges.

There is another version related to the fact that Tugushev's sponsors have the goods on Roth: the fact is, the businessman may find himself facing charges of tax evasion in the amount of more than $100 million brought by the Norwegian tax authority. Mr. Roth’s compliance with the law was questioned earlier when he sold his shares in Norebo in 2016. The transaction amount was $201 million (the sum appears in the court records, although earlier experts suggested $350 million estimate). He did not pay tax in Russia—the income from the sale of shares was not declared to the Russian tax authorities. Mr. Roth declared himself a tax resident in Switzerland, where he most likely agreed to pay a lump sum tax. This practice is widespread among rich people.

But will it help? Financial critics at the time suggested that the businessman simply decided to obfuscate the issue and not pay at all.

A tax resident everywhere and nowhere

Before moving to Switzerland, the businessman officially lived in Hong Kong for 10 years. However, after Norway signed a tax information agreement with Kong, he preferred to change his place of residence. But in late 2016 - early 2017 he officially returned to Hong Kong again. And this coincides with the sale of shares of Norebo.

Roth claims to have lived in a service apartment in Hong Kong, but according to other reports, he was living at his villa in Lugano all this time. However, the Norwegian tax authorities also have doubts about this. According to sources, from 1984 to 2015 Magnus Roth, together with his wife and children lived in Norway, in Drobak (29 km south of Oslo). In this country, he owns a number of houses, yachts and cars. Business colleagues claim that until November 2018, when the Norwegian tax authorities became interested in him, Mr. Roth regularly attended board meetings of the companies he is associated with. It is noteworthy that, while his Norwegian neighbors remember him well, his Hong Kong acquaintances do not. So, for example, in spite of 10 years allegedly spent in this country and declared membership in the Royal Hong Kong Yacht Club, none of the other club members could remember him.

This being said, in 2012 Magnus Roth already had to provide official explanations concerning his residency. He claimed to be in Hong Kong undergoing a year-long herbal therapy, which has no analogues in Western medicine. Seven years later, in 2019, Magnus Roth stated under oath in a Hong Kong court that he had not recorded the time spent in Hong Kong, and when the judge asked a clarifying question, he evasively answered that he had no parallel resident status anywhere in Europe.

At the same time, in recent years Roth has been buying Norwegian shipping and offshore companies. Since 2016, he has invested over 700 million Norwegian kroner in the Norwegian economy. If it is proved that the businessman was a tax resident in Norway at the time when he sold his shares of Norebo, he could face additional tax claims and fines, as well as imprisonment.

There’s another little detail about Magnus Roth: in order to avoid taxes, he even faked separation from his wife, with whom he has been living for 35 years. Fake marriages are quite common, but faker divorces for tax purposes are relatively rare. Since 2003, the couple have not officially lived together, but this does not prevent Roth from presenting Catherine Nordstrom to everyone (except tax authorities) as his wife and live in the same household. It is not surprising that the couple never managed to finalize the divorce in 17 years: for tax authorities the formal status of separation is enough.

Cunning fox

It is quite possible that the sponsors of the London trial have documents and evidence that can stimulate the amenability of Vitaly Orlov’s former partner. But at the same time Magnus Roth himself has claims to the Russian businessman. As Orlov’s representative said, "The claims and statements put forward by the defense of Mr. Roth, should not be taken for granted, but as statements made in his own interests.”

As noted in court documents, a joint business founded by partners can be divided into two parts. The first one is, in fact, Norebo. Here the division has already happened—Orlov bought Roth out.

The second is a Hong Kong company Three Towns Capital Ltd. (TTC), founded in 2006 by Vitaly Orlov and Magnus Roth. In September 2019, the High Court of Hong Kong ordered the Norwegian businessman to buy Orlov's 50% share of Hong Kong holding fishing and transport company Three Towns Capital. Orlov's representatives said they were satisfied with the court's decision. The decision was made after the court weighed mutual claims of former partners accusing each other of unfair business practices. Orlov claimed that Roth, without his consent, fired the company's employees and appointed himself the CEO in order to get the company under his sole governance.

Roth accused Orlov of acquiring assets without his consent. And now that, according to the decision of the Hong Kong court, Roth has to buy Orlov's shares, he may be trying to use his testimony in London court to lower his financial participation in settlement with Tugushev.

A phrase of the Hong Kong judge, included in the text of the decision, is quite telling: “From around mid-to-late 2016 Orlov and Roth were increasingly 'at war',” the Judge Russell Coleman wrote. “What was once a successful and harmonious business relationship has fractured to such an extent that it has given rise to a raft of allegations and counter-allegations, where each of the protagonists sees the history and continuing circumstances through his own particular and very different lens,” he added.

It is obvious that all participants in the Norebo case are playing their game in this trial, secretly or explicitly. And while the part of the plaintiff Alexander Tugushev is pretty much obvious and the strings of his puppeteers are becoming more and more evident, the role of the Swede is just beginning to take shape. It may well turn out that he, too, is not a completely independent figure and only follows the instructions of those who staged this performance in London court.