9th Circuit Revives Kazakh City’s Fraud Case Against Ex-Mayor

PASADENA, Calif. (CN) – The Ninth Circuit on Thursday revived a $300 million civil racketeering lawsuit against a former Kazakh mayor whose family invested millions in a New York luxury tower project that uses President Donald Trump’s name.

The city of Almaty filed a federal lawsuit against Viktor Khrapunov and his family in 2014, claiming the politician stole hundreds of millions of dollars in assets from the city during his seven years as mayor, from 1997 to 2004. Almaty is the largest city in the Republic of Kazakhstan.

After receiving $300 million from more than 80 real estate properties through fraud, Khrapunov and his relatives transferred millions of dollars from the Switzerland to the United States and into shell companies and properties, the city says.

A Financial Times investigation linked the alleged money-laundering scheme to the $450 million, 46-story luxury hotel Trump SoHo, and said that the Kazakh family had bought apartments at the tower through three limited liability companies.

In 2015, U.S. District Judge Fernando Olguin dismissed the lawsuit, ruling that Switzerland was a better venue for the city to litigate the case because of the private and public interests at stake.

But in an unpublished memorandum filed on Thursday, a three-judge panel reversed the Los Angeles judge. The panel found that even if a Swiss court was an adequate forum, Olguin had “inverted defendants’ burden regarding the public and private interest factors.”

“Contrary to the district court’s conclusion, the proper standard is not whether Almaty’s convenience outweighs the public and private interest factors favoring Switzerland, but rather, whether defendants have established that the public and private interest factors strongly outweigh the plaintiff’s convenience,” the per curiam memorandum said. “In this case, the private and public interest factors do not sufficiently favor Switzerland to permit dismissal.”

The Khrapunov family’s attorney Jan Handzlik did not immediately respond to requests for comment by email and phone.

Latham & Watkins attorney David Schindler represents the city. He said he was pleased the city would get the opportunity to show the Khrapunov family had looted the assets.

“What’s important about this case is that the United States not become a safe haven for oligarchs who steal money from foreign jurisdictions, and this case, along with others, hopefully will thwart that effort. And we’re prepared to demonstrate what the Khrapunovs did was wrong,” Schindler said in a phone interview.

The attorney would not be drawn into discussing specific evidence related to the Trump SoHo hotel.

“I can’t comment today about any nexus to President Trump. I can simply say we have evidence and are prepared to demonstrate that they took assets looted from Almaty, and invested in a number of assets in the United States including homes and luxury cars here in California,” Schindler said.

In its 6-page ruling, the Ninth Circuit panel found that several named defendants reside in California and that while some witnesses and evidence are outside the United States, the family failed to demonstrate how a Swiss court would be any more efficient than a federal court in California.

“Moreover, the district court failed to consider whether a judgment against defendants could be enforced in Switzerland, and erroneously deemed the issue undisputed,” the panel said.

The panel said California has an interest in the legal battle because of the Kazakh family’s investments in the state.

Khrapunov and his family used laundered money to buy four California homes and four luxury vehicles and to fund companies, including multimillion investments in a medical-device company, real estate and transfers to U.S. bank accounts, according to court records.

The former official fled to Switzerland in a private jet after Kazakh authorities opened an investigation in 2007, court records show. Khrapunov also served as a minister in the Kazakhstan cabinet. He has denied any wrongdoing.

The October 2016 Financial Times article said the Kazakh family had paid $3.1 million to buy apartments at Trump SoHo through three companies. The beneficiary of the SoHo companies was Khrapunov’s daughter Elvira Kudryashova, the article said.

Trump had an 18 percent share of profits in Trump SoHo before it changed ownership in 2014 after a foreclosure sale, according to the article. The hotel has appeared in an episode of Trump’s NBC reality show “The Apprentice.”

The Trump Organization general counsel Alan Garten told the Financial Times that the companies Bayrock and the Sapir Organisation were responsible for sales and conducting due diligence, and had complied with U.S. laws.

Regulatory filings show that Trump had licensed his name to the Manhattan tower project and was co-owner of Bayrock/Sapir Organization LLC, named after the two companies that built the tower, the article said.

Circuit Judges Harry Pregerson, Richard Paez and Marsha Berzon sat on the panel.

 

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