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Michael Shtaif leaves court during a break in the case involving former partner Alex Shnaider in this file photo.Fernando Morales/The Globe and Mail

A former business partner of Alex Shnaider falsely reassured the Toronto billionaire that others were also investing in a new Russian oil venture, despite allegedly knowing a promised $70-million investment from a "dead shell company" would never materialize, according to allegations made in a Toronto courtroom on Monday.

Kenneth Prehogan, a lawyer for Mr. Shnaider, launched into closing arguments on Monday in a civil trial of allegations that former Russian oil executive Michael Shtaif and his associates tried to defraud Mr. Shnaider and his business partner, Eduard Shyfrin, of their $50-million investment in 2006.

Mr. Shtaif and his co-defendants deny the allegations, and allege the Russian-born Mr. Shnaider tried to force him out of the venture, bribed Russian police and prompted Russian authorities to launch a "spurious" investigation of Mr. Shtaif. Mr. Shnaider denies the allegations. None of the allegations have been proven.

Mr. Prehogan told the courtroom that Mr. Shtaif was not a credible witness, pointing to inconsistencies in his testimony.

"He was not trying to tell the truth in this court," Mr. Prehogan alleged.

Mr. Prehogan said Mr. Shnaider and Mr. Shyfrin had said they would only invest in the venture if Mr. Shtaif found another $70-million from other investors. An investment of that amount was pledged by a shell company controlled by a man calling himself John Howard, but who is alleged to actually be convicted Toronto fraudster Irwin Boock.

But the money never came. In a Dec. 20, 2005, letter sent to Mr. Shnaider, Mr. Shtaif made a "false" statement and left the impression that a first instalment was in the bank, Mr. Prehogan alleged.

Mr. Prehogan said Mr. Shtaif failed to tell Mr. Shnaider that the money had not been deposited until months later, on May 17, 2007 – after the billionaire had invested his own $50-million.

"Mr. Shtaif says, however, he was duped … But the evidence doesn't bear that out," Mr. Prehogan told the court, arguing that Mr. Shtaif was "in league" with Mr. Howard.

Mr. Prehogan pointed to alleged contradictions in Mr. Shtaif's testimony during the trial, including over an incident that Mr. Shtaif alleges took place at a Moscow police station, where Mr. Shtaif said he was taken to report an alleged fraud involving a botched oil deal that resulted in $6-million in promissory notes going missing.

Mr. Shtaif told court that he felt forced to sign an agreement to restructure his joint venture with Mr. Shnaider after a Russian police officer pulled out his gun and rested it on a table.

When asked how he apparently sent an e-mail while at the police station, Mr. Shtaif first told Mr. Shnaider's lawyers, before trial, he had borrowed the Russian officer's computer. At trial, he said the e-mail was sent from his hotel later that night.

"You would think that Mr. Shtaif would remember every detail of the traumatic day," said Mr. Prehogan, who also said none of Mr. Shtaif's e-mails sent at the time make any reference to the alleged events at the police station.

Symon Zucker, another lawyer for Mr. Shnaider, told the court that Mr. Shtaif's associate, former lawyer Greg Roberts, also a co-defendant in the lawsuit, should have told Mr. Shnaider that he knew that Mr. Howard was actually Mr. Boock, whom Mr. Roberts says was a former legal client. Mr. Roberts has testified that he did not know the full extent of Mr. Boock's fraudulent record.

"It raised no red flags for him," Mr. Zucker told the court. "… Why would a successful (stock) promoter want to change his name?"

At times on Monday, Mr. Roberts, who is acting for himself, rose to object to Mr. Zucker's arguments, accusing him of spouting "unmitigated lies."

Mr. Shtaif's lawyer is scheduled to begin his closing arguments Tuesday.

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