A $900 million Jersey trust, $24 million in allegedly improper payments, $1.8 million in Bitcoin and lawyers expected to burn through as much as £170,000 each month are at the centre of an extraordinary international court battle being played out in Jersey.
The sprawling dispute has seen assets frozen in the Island and five other jurisdictions amid allegations of secret commissions, concealed management fees and payments for “non-existent consultancy services”, with Jersey’s Royal Court now being asked to help untangle where the vast fortune sits and who should ultimately control it.
Details of the case have emerged in a recently published judgment concerning the ‘New Fairmont Settlement’, a discretionary trust governed by Jersey law which is said to hold assets totalling around $900 million.
At the heart of the proceedings are allegations against Stanislav Berger, a dual Russian and Cypriot national whose profession is described by the court as “the formation and administration of offshore trusts and companies”.
Mr Berger was involved in establishing the trust and had for many years been both a friend and business associate of its economic settlor.
The allegations at the heart of the case are yet to be determined, and Commissioner Sir Michael Birt stressed that “no pleadings have yet been filed by the defendants”, but surfaced during a hearing over the extraordinary web of freezing orders imposed as part of the international dispute – including a bid by the defendants to unlock hundreds of thousands of pounds to fund their mounting legal bills.
Secret commissions and ‘non-existent’ services alleged
The plaintiffs in the case allege that Mr Berger controlled the trust’s trustees, protectors and administration service providers and used that position to procure breaches of trust and enrich himself and various companies.
Setting out their case, Sir Michael said Mr Berger was alleged to have obtained “secret commissions for himself and his associates” for purported introductions of companies held by the trust to banks.
He is also accused of extracting management and performance fees through an investment management entity which he allegedly controlled but “presented to the beneficiaries as an independent third party”.
And further fees are alleged to have been extracted through another entity for “non-existent consultancy services”.
The plaintiffs say their investigations have so far identified approximately $24 million paid or received in alleged breach of trust – and that “investigations continue”.
Mr Berger is accused of dishonest assistance in relation to the alleged breaches, while claims against other defendants include allegations of dishonest assistance, knowing receipt and proprietary claims.
From Cyprus… to Nevis
The case took another turn when the beneficiaries began investigating.
Sir Michael recorded in the latest judgment that, after this point, Mr Berger allegedly set about placing the trust assets and other entities liable to have claims made on them “beyond the beneficiaries’ reach”.
The plaintiffs allege that, in June last year, Mr Berger caused the trusteeship of the $900 million trust to be moved from Cyprus to Nevis.
They say this happened without the knowledge of the beneficiaries or protector, and that the trust assets were not subsequently transferred as requested to a replacement trustee.
Mr Berger has, however, stated in separate proceedings that he has no claim to the assets of the trust.
The Nevis trustee has since agreed to step aside, but the Royal Court was told that there were still difficulties establishing exactly what assets make up the $900m trust – and where they are – so that they can be handed over.
The plaintiffs allege the information needed is in Mr Berger’s hands. He says the records are largely held by a Cyprus company he used to control, but which is now in the hands of his son.
Sir Michael said: “I made it clear to the parties during the hearing that I regarded it as essential that both sides should work towards an early transfer of the assets of the F Trust from CTL Nevis into the hands of the replacement trustee.”
He added that this would “greatly simplify” the litigation, leaving it essentially focused on claims concerning alleged wrongful payments currently totalling around $24.6 million.
Freezes across the globe
The Jersey proceedings are only one front in the dispute.
Related proceedings have been launched in Cyprus, the Bahamas, the British Virgin Islands and Nevis, while proceedings have also begun in Switzerland.
“Freezing orders have also been obtained in most of these jurisdictions,” Sir Michael said.
In Jersey, the Deputy Bailiff imposed wide-ranging interim freezes when the case was launched.
Mr Berger’s assets were frozen up to $900 million – the stated value of the entire New Fairmont Settlement.
One company caught up in the proceedings, Alsten Worldwide, was said to have assets worth more than $15 million, comprising cash and around $1.8 million in Bitcoin.
The defendants asked for permission for Alsten to transfer £575,000 to Jersey law firm Collas Crill to meet existing legal costs across Jersey and the other jurisdictions.
That figure represented demands from lawyers in Jersey, the Bahamas, Switzerland, Cyprus and the BVI, including an estimated £25,000 for London counsel.
They also sought permission to spend a further £170,000 every month.
Advocate James Sheedy, representing the defendants, accepted that the monthly figure was “simply his best estimate” of the continuing cost of fighting the litigation across the various jurisdictions.
Sir Michael decided that it was “reasonable” to approve the £575,000 and £170,000 payments for August and September, but declined to approve the monthly sum indefinitely.
He said that while the litigation was proceeding in several jurisdictions and raised “complex issues”, its “shape” should change if the trust’s assets were transferred to the proposed replacement trustee.
“If this occurs, it is not clear to me that a continuing monthly sum as large as £170,000 will be required,” he said.
£60,000 spent without warning
The hearing also revealed a potential further legal headache for Mr Berger.
Under the Jersey freezing order, defendants are permitted to spend reasonable sums on ordinary living expenses, but must tell the plaintiffs’ advocate beforehand how much they intend to spend and where the money will come from.
Mr Berger disclosed that, since the order was served, he had made 31 payments towards living expenses worth around £60,000 in total without providing the required advance notification.
The plaintiffs argued that Mr Berger was “clearly in contempt of court” and said they would consider bringing an application seeking punishment.
Mr Berger apologised for the breach.
Giving brief evidence, he said the worldwide injunction and litigation in several countries had placed an “enormous strain” on him and affected his health.
He said the money had all been spent on living expenses or bills, and that he had had in mind the terms of the Cyprus order, which permitted living expenses of up to €15,000 a month.
He assured the court there would be no repetition and that he was now notifying all payments in advance.
Sir Michael deliberately made no finding on that explanation because of the possibility that contempt proceedings could follow, but issued a warning.
“I emphasise the importance of complying with orders of the court,” he said, adding that “any repeat breaches by SB may not be similarly regarded”.
Assets moved into new trust
Meanwhile, disclosure following the original freezing orders revealed another twist.
The court heard that in January this year Mr Berger had arranged for assets within another structure, the Westbourne Settlement, to be appointed to him.
He then “immediately settled them” into a new trust called the True Purpose Westbourne Trust, according to the judgment.
The plaintiffs therefore asked for the Jersey freezing order to be extended specifically to assets in the new trust.
Sir Michael agreed, saying that he therefore had “no hesitation in granting the application”, extending the order to cover the new structure.
The plaintiffs are also seeking dramatically increased freezing limits against several other defendants.
They want one freeze increased from around $6.9 million to $48.1 million, another from $14.7 million to $22.8 million. They also seek for the cap against Alsten to be increased from $5.9 million to $900 million.
However, Sir Michael ruled that it would be “premature” to increase the frozen sums at this stage.
He adjourned the application, ruling that if the plaintiffs wished to pursue it they would first have to amend their case to spell out the factual basis for the additional relief they were seeking.
