City of Almaty v. Ablyazov

226 F. Supp. 3d 272, 2016 U.S. Dist. LEXIS 183338, 2016 WL 7756629
CourtDistrict Court, S.D. New York
DecidedDecember 23, 2016
Docket15-CV-5345 (AJN)
StatusPublished
Cited by19 cases

This text of 226 F. Supp. 3d 272 (City of Almaty v. Ablyazov) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
City of Almaty v. Ablyazov, 226 F. Supp. 3d 272, 2016 U.S. Dist. LEXIS 183338, 2016 WL 7756629 (S.D.N.Y. 2016).

Opinion

MEMORANDUM & ORDER

ALISON J. NATHAN, District Judge:

On June 21, 2016, the Court granted in part and denied in part the motion of Triadou SPV S.A. (“Triadou”) to dismiss various crossclaims that are asserted against it by the City of Almaty, Kazakhstan (“Almaty”) and BTA Bank JSC (“BTA”) (together, the “Kazakh Entities”). Dkt. No. 174. In light of the Supreme Court’s decision issued the previous day in RJR Nabisco, Inc. v. European Cmty., — U.S. —, 136 S.Ct. 2090, 195 L.Ed.2d 476 (2016), however, the Court declined to address Triadou’s argument that the Kazakh Entities’ claims under the Racketeer Influenced and Corrupt Organizations Act, (“RICO”), 18 U.S.C. § 1961 et seq., are impermissibly extraterritorial. Instead, the Court invited additional briefing as to whether and how RJR Nabisco affects this action. Dkt. No. 174 at 32. Having considered the parties’ briefing on that question along with several supplemental authority letters, Dkt. Nos. 188, 195-97, 202, 240, 244, 248-50, the Court concludes, for the reasons set forth below, that the Kazakh Entities’ RICO crossclaims must now be dismissed.

[275]*275I. Background

Both the procedural history of this matter and the factual allegations giving rise to the RICO crossclaims currently at issue are complex, and an exhaustive recitation is unnecessary here. The reader is referred to the Court’s Memoranda and Orders dated June 21, 2016 and June 24, 2016, Dkt, Nos. 174 and 175, for more comprehensive background. For present purposes, however, the following will suffice.

A. Factual Allegations

Greatly simplified, what remains of this sprawling litigation concerns an alleged conspiracy by which prominent Kazakh citizens looted billions of dollars from the Kazakh Entities and then laundered the stolen funds around the world, including ultimately by investing—through Tria-dou—in New York City real estate projects.

Almaty, the largest city in Kazakhstan, claims that its former mayor Viktor Khra-punov, along with certain associates and family members including his son Ilyas Khrapunov, embezzled approximately $300 million from Almaty between approximately 1997 and 2004, principally by appropriating various public assets for their personal use. Dkt. No. 219 ¶¶ 45-551 Often, Almaty claims, this was achieved in one of two ways: fraudulent auctions in which Khrapunov confederates acquired valuable assets at nominal prices; or Viktor Khra-punov’s exercise of eminent domain power to seize private property and transfer it to entities owned or controlled by the Khra-punovs. Id. ¶¶ 49-55. For its part, BTA, a formerly state-owned banking institution based in Kazakhstan, claims that its former chairman Mukhtar Ablyazov siphoned more than $6 billion out of BTA between approximately 2005 and 2009, primarily through a series fraudulent loans to valueless entities owned or controlled by Ablya-zov himself. Id. ¶¶ 28-33,

The Kazakh Entities further allege that, in order to evade law enforcement, the Khrapunovs and Ablyazov—who were related by marriage—joined together to move the stolen funds out of Kazakhstan and to launder them through a series of shell companies, sham transactions, and outwardly-legitimate investments. See, e.g., id. ¶¶ 56-59, 68-72, 77-97. To help accomplish this, the Khrapunovs and Ablyazov allegedly created, among other things, a Switzerland-based real estate investment vehicle called SDG Capital, S.A. (“SDG”) into which they funneled hundreds' of millions of dollars of illicit proceeds before engaging in a sham sale of the company to conceal their continued control. Id. ¶¶ 58, 78-84. The Khrapunovs and Ablyazov then purportedly facilitated the creation of several entities under Luxembourg law for the purpose of investing stolen funds in United States-based real estate projects. Id. ¶¶ 86-87. Among these entities was Triadou, a special purpose vehicle wholly owned and controlled by SDG—and thus purportedly by the Khrapunovs and Ablyazov. Id.

In 2012 and 2013, Triadou, acting at the direction of the Khrapunovs and Ablyazov, [276]*276invested funds allegedly embezzled from the Kazakh Entities in several New York City real estate projects, including the Flatotel and the Cabrini Medical Center, with prominent New York-based real estate developer Joseph Chetrit and several of his corporate affiliates (the “Chetrit Entities”). Id. ¶¶ 88-97, 111-118. Funding for these investments was allegedly wired to counsel for the Chetrit Group in the United States from accounts held by a Dubai-based private contracting entity called Tel-ford International Limited (which was allegedly controlled by the Khrapunovs and Ablyazov) in FBME Bank, a Tanzanian-headquartered institution with operations primarily in Cyprus. Id. ¶¶ 21, 78, 98-106, 111-113. The Kazakh Entities allege that, in order to consummate these transactions and ensure concealment of the stolen funds, Triadou accepted contract terms on at least one investment that were unreasonably favorable to Chetrit and the Che-trit Entities. See, e.g., id. ¶¶ 97, 148.

In 2014, facing mounting law enforcement pressure abroad and litigation initiated by Almaty in California federal court, Ablyazov and the Khrapunovs allegedly caused Triadou to liquidate its real estate assets in New York so that stolen funds could be removed from the United States and hidden once again. Id. ¶¶ 114-123. To that end, Triadou—acting at the direction of Ablyazov and the Khrapunovs—engaged in a sham transaction with the Chetrit Entities whereby Triadou assigned its interest in the Flatotel to the Chetrit Entities and released its entitlement to equity in the Cabrini Medical Center in exchange for a “fraction of the fair market value of the properties” and personal bribery payments to at least one Triadou executive. Id.

B. Procedural Posture

This litigation began its life as an inter-pleader action against Triadou and Almaty brought by the Chetrit Entities, which claimed to face multiple liability under their 2014 assignment agreement with Triadou. Dkt. No. 25 ¶¶ 11-17. In its answer to the interpleader complaint, Almaty asserted a variety of counterclaims against the Chetrit Entities, crossclaims against Triadou, and third-party claims against Ablyazov, Khrapunovs, and Joseph Che-trit. Dkt. No. 49.

All claims brought by or against the Chetrit Entities or Chetrit were ultimately resolved through dismissal or settlement. And in June 2016, the Court consolidated the litigation further by granting Almaty’s motion to join BTA, the Khrapunovs, and Ablyazov to the pending dispute between Almaty and Triadou. Dkt. No. 174 at 6.2

The subject of this decision is the Kazakh Entities’ RICO crossclaims.3 In its June 21 Order on Triadou’s motion to dismiss the crossclaims, the Court rejected the argument that the Kazakh Entities fail to state RICO claims under Federal Rules of Civil Procedure 9(b) and 12(b)(6), but, as noted, it deferred decision on whether those claims are impermissibly extraterritorial pending further consideration of the RJR Nabisco decision. Dkt. 174 at 19-27, 32. Triadou—now joined in pertinent part by Ablyazov and the Khrapunovs4

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Cite This Page — Counsel Stack

Bluebook (online)
226 F. Supp. 3d 272, 2016 U.S. Dist. LEXIS 183338, 2016 WL 7756629, Counsel Stack Legal Research, https://law.counselstack.com/opinion/city-of-almaty-v-ablyazov-nysd-2016.