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Michael Shtaif is locked in a litigation battle over an ill-fated joint venture.Fernando Morales/The Globe and Mail

A former Russian oil executive told a Toronto courtroom on Wednesday that he was falsely accused during a Moscow police investigation of conspiring with the "Chechen diaspora" after his falling out with Russian-born Toronto billionaire Alex Shnaider over a joint venture.

Michael Shtaif, a Canadian citizen who has worked for Russian oil firms TNK-BP and OAO Yukos, is locked in a litigation battle with Mr. Shnaider over an ill-fated joint venture the pair set up in 2006 to buy underdeveloped Russian oil fields. In court documents, Mr. Shnaider accuses Mr. Shtaif and a group of co-defendants of fraud.

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 him to flee Russia. Mr. Shnaider denies the allegations. None of the allegations have been proven, and a trial has been under way since February.

Mr. Shtaif told court on Wednesday that he was falsely linked to a terrorist group in a July, 2007, statement to Russian police by a Russian lawyer for Mr. Shnaider's Midland Resources Holding Ltd.

The complaint to Moscow police also alleged Mr. Shtaif was an accomplice in the theft of millions of dollars in promissory notes involved in an aborted deal to buy a Russian oil field – an allegation Mr. Shtaif denies. Mr. Shtaif said he was interrogated 20 or 30 times and that his name was put on an international most-wanted list.

Mr. Shtaif said the accusation of links to the Chechen diaspora was akin to being accused of involvement with "the al-Qaeda of Russia," as well as an unfair smear against Chechens.

"I was accused of organizing a [Islamist] terrorist group, and I am a Jew," he testified, calling the allegation "preposterous."

The court heard that Russian judges, and reviews by senior prosecutors there, later determined the case against Mr. Shtaif was "unfounded," revoking orders to have him jailed and demanding that police disclose to him the information they had gathered. However, as recently as last year, Mr. Shnaider's lawyer filed another complaint, court heard.

Mr. Shnaider's lawyers have repeatedly objected to portions of Mr. Shtaif's testimony as hearsay. Letters sent by a Canadian embassy official in Moscow about Mr. Shtaif's plight were excluded as evidence on Wednesday. Mr. Shtaif told court that Canada's embassy in Moscow advised him to leave Russia, which he did in November, 2007.

When Mr. Shtaif tried to tell the court about information he says he learned from his Midland-provided Russian security guard, Mr. Shnaider's lawyers objected. In court filings, Mr. Shtaif had alleged that he believed there was a plot to kidnap him, and that he feared for the safety of his family. Mr. Shtaif told the court that he now could not find the former security guard to have him to testify.

After objections by Mr. Shnaider's lawyers, Madam Justice Mary Anne Sanderson of the Ontario Superior Court also stopped Mr. Shtaif from recounting what he said he was told about the alleged seizing of the offices of a Russian oil firm by armed Midland personnel.

Instead, the judge had Kenneth Prehogan, a lawyer for Mr. Shnaider, read out an agreed statement of facts signed by a Midland executive that stated the Russian company was transferred to Midland's control with "no threats or violence."

Mr. Shtaif said he could not find a geologist he said witnessed the event and would contradict this account. His lawyer said they would inquire about other witnesses.