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. Last Updated: 07/27/2016

New York Lawsuit Against RusAl Cut to $40M

VedomostiMikhail Zhivilo
Two key plaintiffs against metals tycoon Oleg Deripaska have backed out of a multibillion-dollar racketeering and corruption suit filed in a New York court.

The suit, filed by nine companies linked to fugitive businessman Mikhail Zhivilo, was thrown out by the U.S. District Court this spring.

The decision by plaintiffs Base Metal Trading and Alucoal Holdings to drop the appeal against the court's ruling is a sign that Zhivilo may be focussing on larger, parallel suits filed in Stockholm.

With the withdrawal of Base Metal and Alucoal, the damages sought by the plaintiffs in New York from Deripaska's Russian Aluminum have shrunk to $40 million from more than $2 billion.

Deripaska touted the news Wednesday as "the ultimate vindication."

"Not only has the case been dismissed by the federal court in New York, but now even the plaintiffs themselves are afraid to go through with the appeal process," Deripaska said in a statement. "It proves that the plaintiffs had no case to begin with."

The plaintiffs claimed Deripaska orchestrated the 1999 bankruptcy of the Novokuznetsk aluminum smelter to wrest the plant's management from Zhivilo. Zhivilo himself is wanted by Russian authorities in connection with a murder plot, which he says Deripaska has fabricated.

Zhivilo, in turn, accuses Deripaska of using bribery and death threats in the smelter acquisition.

He evidently hoped to benefit from the U.S. Racketeering-Influenced and Corrupt Organizations Act. In March, however, a U.S. judge ruled the case not to be within his jurisdiction.

RusAl's lead counsel Michael Burrows called the case "a transparent attempt to grab headlines."

"Plaintiffs' lurid descriptions of corruption, money laundering and mafia involvement are false and were made without a shred of evidence to support them," he said.

Sergei Sokolov, managing partner with the Philadelphia-based Marks and Sokolov law firm, which represents the claimants, said it was difficult to say why his clients had pulled out in New York.

Sokolov added that they were hoping for a "quicker outcome" in other European courts. Alucoal Holdings and Base Metal Trading are also seeking to retrieve about $400 million each in damages before an international arbitration court in Stockholm.

As in the New York case, the companies claim that long-term agreements with the Novokuznetsk aluminum smelter, signed while Zhivilo was a director, were broken after the plant's takeover by Deripaska.

Sokolov said the Alucoal suit is due to be heard in December or January. A date for the Base Metal has yet to be set.

Marina Kaldina, head of RusAl's legal department, said that Zhivilo had sacrificed the New York suit so as not to harm the parallel cases in Europe.

RusAl had planned to argue in Stockholm that the same claims could not be considered simultaneously by two different courts, Kaldina said.

The dispute has its roots in the fight for Russia's aluminum industry at the end of the 1990s, which put Deripaska and Roman Abramovich at the helm of RusAl, a holding that now oversees some 70 percent of Russia's aluminum market, the world's second largest.

Yury Korgonyuk, of the Indem think tank, said that Zhivilo's priority is to keep his name in the headlines: "God help him if people forget about him and he is handed over to our law enforcement agencies. Then he won't live."