British High Court of Justice acknowledges ERNC was right
The company never stopped trying to save its reputation in court. Last week the High Court of Justice in England and Wales acknowledged actions the SFO took against the company as illegal and said that the behavior of the legal firm Dechert, which was hired by ENRC to conduct an internal investigation, was inappropriate. Amid the trial that took years, ENRC reported serious reputational damage, delisting of its stocks and turning from a public company to a closed holding.
Investigation – delisting – investigation
On August 9, 2011, The Times, a British outlet published an article by David Robertson with the heading «Copper giant calls in outsiders to examine corruption claims.» The entire article was devoted to ENRC, a Kazakhstani holding that had been listed on the LSE since 2006 and said that the company’s executives hired a third-party legal firm to examine corruption cases in Kazakhstan as they allegedly didn’t trust their managers.
The article was noticed by Keith McCarthy, who at the time served as a chief investigator in SFO. He sent a written notification to the company insisting that ENRC must report SFO about any internal anti-corruption investigations. He wanted the head of SFO Richard Olderman to meet ENRC executives. The company that had turned to the transnational holding with assets in Kazakhstan, Russia, Zambia, Congo and Brazil just a couple of years before that immediately confirmed the meeting.
Dechert, a transnational legal firm with 22 representative offices all over the world and headquartered in Philadelphia, U.S. (the company reported $1.3 billion of turnover in business last year) was consulting ENRC in that internal investigation. Until recently the legal firm was considered well-respected: about 40 companies from Fortune 100 used to use its services. According to Bloomberglaw.com, the partner of Dechert in London Niel Gerrard was the one who kept in touch with ENRC.
In 2013 SFO opened a legal case against ENRC blaming the company for fraud and corruption. At the same time, some details of the internal investigation by Dechert somehow went public: The Sunday Times wrote about ENRC connections with corrupt presidents in Africa, embezzlement of $35 million and elimination of crucial documents. In turn, ENRC said that all these accusations are groundless and prohibited Dechert from continuing the internal investigation due to irrelevant contacts with SFO.
Despite loads of publications with tough accusations, the British authorities have never brought charges against ENRC or its representatives. However, the company’s reputation was damaged severely. In November 2013, ENRC delisted its stock from LSE and KASE. At that moment, the capitalization of the company was about £3 billion. Among the majority shareholders of the company were Alexander Mashkevitsh, Alijan Ibragimov, Patokh Chodiev and the government of Kazakhstan (54% in total).
When ENRC lost its status as a public company, it initiated a massive legal fight to take its reputation back. The company accused Mr. Gerrard from Dechard of sharing unfounded suspicions with SFO to get more fees for his legal services. For example, many British outlets then depicted ENRC as a cash cow.
In September 2018, the company received the consent of the court to not provide SFO with its internal documents including those which were prepared by Dechert. In March 2019 ENRC filed a case against SFO for £70 million over the corruption probe. This money should cover legal costs by the company (the reputational damage is excluded). Mr. Gerrard quit Dechert in 2020 when the trial against the legal firm entered its final phase.
A lawyer who didn’t make it
The last hearing started in May 2021. According to Reuters, Gerrard who was invited to the court as a witness called his accusers «screwy.»
On May 16, 2022, David Waksman, a judge of the High Court of Justice in England and Wales drew a line under the case. Basically, he confirmed all the main claims ENRC had tried to prove for nine years.
Neil Gerrard started to work with ENRC in 2010. He was the one who recommended the holding to share the details of the internal investigation with the SFO. Moreover, he recommended doing so on both Kazakhstan’s and African operations.
ENRC, SFO and Dechart representatives met eight times while the firm and SFO had more than 30 meetings; all these meetings were acknowledged by the court as «controversial.» The court also found that Olderman and Gerrard always kept in touch. The very first documents concerning ENRC were sent by the lawyer to SFO in June 2013, before the scandal article in The Times.
Moreover, Gerrard was the one who stayed behind all three information leaks to the media. The Dechart partner also knew about the very first letter to ENRC from SFO. The way the lawyer had negotiated with SFO contributed to tensions between SFO and the company and increased the risk the holding might be fined. Gerrard also helped SFO to expand its investigation against the company which affected the business interests of ENRC. For its legal services provided to ENRC until March 2013 Dechert received £13 million, an amount ENRC deemed to be inflated by ‘unnecessary fees’ of £11 million.
Compensations are looming
Mr. Justice Waksman’s decision was great news for the holding. On May 17, ENRC told The Times that the company is deeply concerned about the consequences that decision may have for other clients of Dechert and those who are subject to investigations by SFO. The holding is going to sue SFO for £70 million and Dechert and Niel Gerrard for £100 million.
Representatives of the defendant were speechless. Dechert said that it fully recognizes the seriousness of the judge’s findings in relation to Mr. Gerrard’s conduct. “We are considering the judgment to see what we should learn from it,” the firm stated.
«The court has now found Mr. Gerrard to have committed conduct that is completely at odds not only with our values, ethos, and culture as a firm, but also with the high ethical and professional standards adhered to on a daily basis by our lawyers the world over,» the company said.
In turn, Niel Gerrard said in a statement that he and his family are devastated by the judgment. «After over 30 untainted years as a solicitor I remain sure of the appropriateness of my actions, of my advice in relation to my former client and of my personal and professional integrity. I gave evidence to the best of my ability and believed I was telling the truth at all times,» he said.
SFO said that the service is considering the implications of the judgment for the SFO and other law enforcement authorities. This is not the first time when SFO ends in a fiasco. As a result, the High Court of Justice has initiated an investigation into the agency’s activity over the few past years.
