Ukrainian Gas Tycoon Wins Venue Fight

MANHATTAN (CN) - Untangling a case involving titans of Ukrainian commerce, a federal judge discussed voiding a contract he said "appears to contemplate illegal activity by one or both parties."

The question appeared in a Tuesday ruling that could spell trouble for brothers Ilya and Vadim Segal, the New York-based owners of Dancroft Holdings.

Through that company, the Segals created Kokhova Prom Agro, an agricultural company said to supply half of the Ukraine's soybean products.

The Segals went to New York County Supreme Court last year with claims that Ukrainian gas tycoon Dmitry Firtash used ties to the country's president Viktor Yanukovych to seize Kakhovka's $50 million soybean plant.

Firtash, a controversial figure in the Ukraine, has been keeping his lawyers busy recently.

Austrian authorities arrested the 48-year-old billionaire in March this year, pending his extradition to the United States to face unrelated bribery charges.

Firtash was also named as a defendant in a recently dismissed New York lawsuit alleging that he conspired to imprison "Orange Revolution" leader Yulia Tymoshenko, and his attorneys sued the Guardian for reporting on U.S. diplomatic cables leaked by WikiLeaks that purported to tie him to a Russian mob boss.

While Firtash reportedly called his criminal charges political, U.S. authorities remarked in a March 14 press release that his arrest was "not related to recent events in Ukraine."

The Segals crossed paths with Firtash through Nadra, the Ukraine's eighth-largest bank, which loaned Kakhova at least $19 million in 2007.

When the global financial crisis hit the next year, a Firtash-owned company acquired 50 percent of Nadra, the Segals say.

According to their lawsuit, Firtash offered to forgive a portion of that debt if they entered into a "sham agreement" on July 1, 2009.

The terms of that deal raised the eyebrows of U.S. District Judge Richard Sullivan.

"Firtash and one of his associates stated to Vadim Segal and [his attorney that, in order for the agreement to receive judicial approval, Nadra would first need to sue Kakhovka and some of the Segals' other companies, and that Firtash could 'influence' the speed with which the Ukrainian court would act," Sullivan wrote, summarizing the brothers' allegations.

"The complaint does not explain why the parties believed the agreement needed judicial approval, why judicial approval depended on the institution of a lawsuit, and whether the 'influence' alluded to by Firtash referred to bribery or some other form of corruption," he added.

Firtash ultimately used the "sham lawsuit" in Kiev to strip the brothers of their assets, they claim.

The case landed on Sullivan's docket because Firtash succeeded in transferring it there from state court.

While the reasons for this preference are unclear, it might be worth noting that Firtash succeeded in dismissing the earlier federal lawsuit against him from Tymoshenko on procedural grounds in the same court.

Sullivan refused Tuesday to punt the case back to state court.

His 15-page ruling asks the parties to explain whether the case belongs in his court, and whether he has jurisdiction over Firtash and Nadra.

The parties must answer those questions, and seven others, in written arguments by Oct. 2, and they will meet in court eight days later.

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