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Fraud allegations ruined reputation, oil executive’s lawyer tells court

Russian-Canadian businessman Michael Shtaif.

Fernando Morales/The Globe and Mail

A lawyer for former Russian oil executive Michael Shtaif told a court on Wednesday that Toronto billionaire Alex Shnaider's "false and malicious" fraud allegations against him have ruined his reputation and keep him from returning to Russia, where he fears that the police could throw him in prison.

Lawyer Colin Stevenson was making his closing arguments on the final day of the civil trial that pits the former business associates against each other, with steel mogul Mr. Shnaider alleging that Mr. Shtaif and others tried to defraud him of a $50-million investment in a joint venture set up to shop for undervalued Russian oil fields with Mr. Shtaif at the helm.

The defendants in the case allege that Mr. Shnaider wrongly forced them out of the joint venture, bribed Russia police and prompted them to launch a bogus investigation of Mr. Shtaif that forced him to flee the country. None of the allegations have been proved.

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At one point in 2007, Mr. Stevenson told the court, Russian police put Mr. Shtaif on their most wanted list, despite there being not "a grain of truth" to the criminal allegations that were filed against him by a lawyer for Mr. Shnaider's Midland Group with police in Russia. Courts there have since sided with Mr. Shtaif, Mr. Stevenson alleged, and tossed out the allegations despite a "relentless" probe by the police. But his client, who now lives in Calgary, still fears that he could be jailed if he were to return, he said.

Mr. Stevenson said Midland's allegations purported to link Mr. Shtaif not only to the alleged theft of a portion of $6-million (U.S.) worth of promissory notes involved in a failed transaction at a Moscow bank, but to the "Chechen diaspora," which the trial has heard was tantamount to linking Mr. Shtaif to terrorists in Russia.

The lawyer argued that the actual crux of the case was what he alleged was a breach of contract by Mr. Shnaider, and his Midland co-founder, Eduard Shyfrin, when they demanded "unilateral" changes to the terms of the joint venture on March 1, 2007.

Toronto-area businessman and lawyer Greg Roberts, a co-defendant along with Mr. Shtaif, is acting for himself in the trial and made his closing arguments on Wednesday.

Mr. Roberts sat on the board of the joint venture as a representative of what lawyers for Mr. Shnaider have called a "sham" shell company. The company was controlled by a man who called himself John Howard, but was allegedly convicted Toronto fraudster Irwin Boock. Mr. Shnaider's lawyers have said he would have pulled out of the deal if he knew someone with a criminal record was involved.

Mr. Roberts, who has acknowledged acting as a lawyer for Mr. Boock in the past and knowing that he was using a new name, told the court that he was aware of only one fraud conviction from many years ago and that he did not believe that it was a "material" matter he needed to disclose to fellow board members.

He also said he believed that Mr. Howard's company was legitimate at the time, and that Mr. Howard had the ability to raise millions of dollars and had financial connections in New York.

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About the Author
Toronto City Hall Reporter

Jeff Gray is The Globe and Mail’s Toronto City Hall reporter. He has worked at The Globe since 1998. From 2010 to 2016, he was the law reporter in Report on Business, covering Bay Street law firms and white-collar crime. He won an honourable mention at the National Magazine Awards for investigative journalism in 2010. More

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