Sergei Polonsky's pleas fall on deaf ears in a London court

My Week: From an oligarch’s troubles, to a gathering of the City’s most powerful bankers at Chelsea Flower Show

Jim Armitage
City Editor
Saturday 28 May 2016 11:45
Sergei Polonwky is currently languishing in a Moscow jail, having been extradited from Cambodia
Sergei Polonwky is currently languishing in a Moscow jail, having been extradited from Cambodia

My colleagues here often accuse me, perhaps rightly, of having an unhealthy “obsession” about the legal battles of eastern European oligarchs.

Well, maybe I have, but there’s method in my madness.

My “interest” – as I prefer to call it – is fuelled by the fact that most of these individuals own big chunks of my home town – London. And if they don’t, there’s a fair bet they’ll be the owners of swathes of Surrey or Henley on Thames. So, although they may be foreign by birth, their stories are very much local ones.

Today, I spent a happy hour poring over a ruling from Justice Gabriel Moss, handed down in the High Court that morning. It involves the curious case of one Sergei Polonsky, a former billionaire property magnate. His interests once included a skyscraper project by London’s Blackfriars Bridge and a stuccoed slice of Cornwall Terrace, the elegant Nash-designed residences commissioned by King George IV in Regent’s Park.

Mr Polonsky is also, perhaps most famously, known to readers of The Independent for having been punched by our own Alexander Lebedev on live TV a few years back.

Currently, he is languishing in a Moscow jail, having been extradited from Cambodia. He’s facing criminal charges of embezzlement in Russia.

While he was living in that jungle kingdom, he filed a legal action in London against his Mayfair-based lawyer, claiming he conspired against him to purloin his property empire. And that is what this ruling was about.

To understand his situation fully, I have to first introduce yet another bizarre detail into his most peculiar story. At the time of the alleged deceit, Mr Polonsky was in jail in Cambodia (wrongly, he claims), on suspicion of assaulting and illegally detaining the crew of his own yacht. Allegations at the time, disputed by Mr Polonsky, were that he had forced the crew to jump overboard at knifepoint while sailing with friends on New Year’s Eve, 2012.

Due to his incarceration, he claims, he had limited access to phones and email, so entrusted his lawyer, Alexander Dobrovinsky, to sell his property empire. But the lawyer, Mr Polonsky claims, duped him into selling the business to a man he specifically asked him not to because he didn’t trust him. The deal, he alleges, left him hundreds of millions of dollars out of pocket. Mr Dobrovinsky denies all the claims.

At the time of issuing the legal proceedings against the lawyer, Mr Polonsky presumably had no idea what would happen next. Despite Cambodia having no extradition treaty with Russia, and a court ruling in the country specifically refusing an official extradition request, he was arrested and stuck on a plane back to Moscow.

Since then, he has been in jail and, he claims, his confidential communications with his lawyers have been routinely intercepted and handed over to the other side in his civil case. In the light of that alleged interference, he asked the judge that the London case by stayed until after his criminal trial is over, to prevent the alleged leaks affecting his chance of success.

All his claims of such interference are vigorously denied and, as it happened, Justice Moss ruled that the case should continue.

But he did accept some pretty shoddy practices were routine in Russian jails. His judgement gave credence to the testimony of an experienced Russian lawyer called as a witness by Mr Polonsky who said pre-trial prisoners’ confidential conversations with their lawyers were routinely recorded, against the law. There was, she said, an “internal secret order” in remand prisons allowing such recordings to be made.

Similarly, she said, it was established practice that, when lawyers visit their clients to discuss their cases, they are ordered to hand over all documentation to be read by the prison authorities. This is particularly in high profile cases where, she claimed, it is hoped confidential details will be leaked.

She named another Moscow lawyer who, during a confidential meeting with his client, discovered a recording device stuck with adhesive tape under his chair seat. The bugging device was hardly covert; “a small black square box with a dark blue flashcard inserted in it”.

While the judge ruled there was “no concrete evidence” such tampering had happened and dismissed the application, he accepted Mr Polonsky faced “serious risk” of his privileged communications being intercepted, which could have a “chilling effect” on the civil case.

So, with the trial set to go ahead, more interesting tales await. In the meantime, remind me not to get myself banged up in a Russian jail.

Goldman Sachs drops a small bomb in Sir Philip Green's lap

You can watch select committee hearings in parliament on a live TV feed. But there’s no substitute for going down there yourself.

Smell the sweat from the tycoon being harangued by the grandstanding MPs. See the victim’s hands tremble as they sense their careers going up in a puff of smoke. Watch as their consiglieri, usually sitting behind them, tap their shoulders for a quiet word, or slip them a subtle scribbled note.

It’s fun to watch the MPs, too. Particularly when they score a hit on the miscreant in the dock, or secure a new nugget of information as they did on Monday from Goldman Sachs’ Anthony Gutman. Mr Gutman, who had been unofficially asked by Arcadia to check out Dominic Chappell before it sold him BHS, dropped a little bomb in Sir Philip Green’s lap.

He declared, in as many words: We told Arcadia months before they sold him BHS, that this Chappell fellow was a risk … We said he was a bankrupt with no retail experience.


So far, the impression we’ve had from the Green camp has been that Chappell’s failure as an owner of the business came as a bolt from the blue. That can’t now be the case.

You can see why the pols were pleased.

Not only that, but they later managed to ascertain that Sir Philip’s chairman, Lord Grabiner QC, was not even at the key meeting where the sale to Mr Chappell was discussed.

In Sir Philip’s defence, the committee also heard how Arcadia had demanded Mr Chappell prove he was serious by slapping millions of pounds in his lawyer’s account. The money appeared the next day.

But clearly, as the committee is exposing, Sir Philip called the shots in the BHS show. As the hearings go on, I’ve no doubt the impression will grow that he ran it on a toxic fuel of instinct and ego without the checks and balances a business of that scale required.

The problem with all these revelations is this: outside the select committee, they will surprise no one. Sir Philip has always been an aggressive, shoot-from-the-hip entrepreneur who dominates anyone who comes into contact with him. But that’s not against the rules, and it doesn’t make him unlike many other abrasive billionaires.

Surely what’s more worrying aspect of this miserable saga is that, five weeks in, the administrators still haven’t found a buyer. Worrying times for BHS’s 11,000 employees.

The smart executive plants seeds at the Chelsea Flower Show

I had a quick chat with Mr Gutman in the corridor before his appearance at the committee. He was, as ever, calm, unflappable and nonchalent. Think Jeremy Irons with a trimmed Romanov beard.

See you at the Flower Show tonight? I asked. He grimaced and nodded towards the select committee timetable. Booked until 8pm, it said.

Chelsea’s Gala preview soiree is, without doubt, the biggest event in the City corporate calendar. Everybody in the Square Mile attends.

I headed up there long before Mr Gutman’s grilling had finished. Funnily enough, among the first people I met were Mr Gutman’s fellow Goldman partners, Richard Gnodde and Michael Sherwood, hobnobbing on the show’s main thoroughfare. When I told Mr Sherwood – a friend of Sir Philip’s – I’d just seen his colleague getting put through the parliamentary wringer, he didn’t seem overly keen to talk about it. Funny that.

Mr Gutman, ever the professional, client man, did make it later that evening. I have to admit, I didn’t see him, but that’s no surprise given the sheer volume of triple-A business talent on display among the blooms. Lakshmi Mittal, Sir Martin Sorrell, Sir Peter Wood, Dame Helen Alexander, Mike Coupe, Xavier Rolet, Sir Win Bischoff, Nick Leslau, Lloyd Dorfman, Richard Desmond. Everywhere you looked was a tycoon, a FTSE-100 chief executive or a chairman. And his wife, of course. I was hosted by the ever-clubbable Aberdeen Asset Management boss Martin Gilbert, perhaps the best-connected man in the City.

As one banker said to me before darting off in search of more potential clients: “You can spend six months trying to meet with one of these guys, and suddenly they’re all here in one place.”

It’s not just about winning your next client, though. Chelsea is also where you get your next job. Little surprise, then, that the most popular stand around which to gather was that of a City headhunter.

Deals aren’t actually done among the roses, as is often portrayed. Nor are jobs won. But connections are made.

Make no mistake, on Monday night, as at every Chelsea Flower Show Gala night, seeds were sown which will bear much financial fruit in the months and years to come.

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