A former Russian oil executive locked in a court battle with Alex Shnaider told a courtroom on Thursday that he did not induce the Toronto billionaire into investing $50-million in a joint venture by falsely claiming that tens of millions had already been committed from other investors.
Michael Shtaif, a Canadian citizen who lives in Calgary and has worked for major Russian oil firms, is battling Mr. Shnaider over a joint venture the pair set up in 2006 to buy underdeveloped Russian oil fields. In court documents, Mr. Shnaider alleges Mr. Shtaif and a group of co-defendants were part of a scheme to defraud him.
Mr. Shtaif denies the allegations, and has accused Mr. Shnaider in court documents of forcing him out of the joint venture, bribing Russian police and having "spurious" criminal complaints filed against him that forced Mr. Shtaif to flee Russia. Mr. Shnaider denies the allegations. The civil trial has been under way since February.
Mr. Shtaif was cross-examined on Thursday by a lawyer for Mr. Shnaider, Kenneth Prehogan, who accused Mr. Shtaif of sending documents to Mr. Shnaider's lawyer falsely claiming that a list of investors from Europe and elsewhere were committed to the joint venture.
Mr. Prehogan said Mr. Shtaif has not produced documents to prove any of those named ever committed to invest. Mr. Shtaif denied the allegation and said Thursday he would look for more documents to support his claims. He has already produced thousands of e-mails and other documents for the trial.
Mr. Shnaider alleges that Mr. Shtaif also induced Mr. Shnaider to invest by pledging that another potential investor had committed $70-million. That investor, according to court documents, turned out to be a shell company allegedly controlled by a convicted Toronto fraudster using multiple aliases, and the money did not materialize.
Mr. Prehogan said Mr. Shtaif made a "false statement" in a December, 2005, e-mail that stated an $8-million instalment of the pledged $70-million had already been transferred to the joint venture. "That's what I was told," Mr. Shtaif told court, acknowledging the statement was "inaccurate."
Mr. Prehogan also alleged Mr. Shtaif knew "from the outset" that this purported investor, a man calling himself John Howard, was using another alias – an allegation Mr. Shtaif denied.
Mr. Howard's e-mails to Mr. Shtaif arrived under the heading "David Watson," but Mr. Shtaif testified that this did not raise suspicions. According to court documents, the man using those names was allegedly a convicted Toronto fraudster named Irwin Boock.
Mr. Shtaif denied that he failed to properly look into Mr. Howard's credentials: "I tried to Google Mr. Howard's name. There are too many Mr. Howards in the world."
Mr. Prehogan also accused Mr. Shtaif of misrepresenting himself as a member of the Registered Public Accountants Association of Alberta when he met Mr. Shnaider in 2005, although he had not been a member in good standing since the mid-1990s when he moved to Russia and stopped paying dues.
Mr. Shtaif at first testified that he remained a "certified member," but then acknowledged he was not a member in good standing. He produced a letter from the association sent last month offering reinstatement if he paid about $6,800, took courses and disclosed any legal action in which he was involved.