Documents have emerged that are alleged to show that Michael Zolotas, former chief executive of Greece's NewLead Holdings, received kickbacks from the sale of shares, laundered money and hid assets.
The documents have been revealed in court papers filed in New York by TransAsia Commodities Investment, led by its principal Serge Turko, which seeks to collect $22.3m owed in damages by NewLead and Zolotas from litigation that concluded this year.
In the first round of legal action, London-based TransAsia sued for compensation for a failed agreement to buy 110,000 tonnes of coal, which was never delivered.
Real estate
To recoup the court award, TransAsia has litigation underway in New York and Monaco to seize the former shipowner’s apartments.
Zolotas has claimed he never owned the New York apartment, which he said belonged to his now ex-wife Chrysanthi Giara, his co-defendant in the case.
Giara has filed documents in New York and Monaco showing she owned both properties, but TransAsia claimed the documents are fake and that Zolotas is the true owner.
The London-based trader claims its exhibits show the couple have a track record of falsifying documentation.
The exhibits included facsimiles of emails and official documents retrieved from Zolotas’ computers during the discovery process of the previous litigation.
TransAsia has claimed Zolotas and his associates — but not Giara — laundered money via the bank account of Aurora Properties, the entity that owned the New York apartment.
Co-defendants Giara, Aurora Properties (USA) and Marshall Islands-registered Aurora Properties Inc have not yet submitted an exhaustive defence of the claims.
Lawyers for Zolotas filed a reply, stating that Turko is making his claims out of time due to the statute of limitations and that his "conclusory allegations" are "insufficient to state a claim".
US complaint
Turko's 28-page affidavit sheds new light on allegations that Zolotas and his associates created fake promissory notes for non-existent or inflated debts, for which NewLead issued new shares as compensation.
The US Securities and Exchange Commission (SEC) filed a complaint in February that alleged NewLead took part in this activity.
“Most of Zolotas’ transactions have undisclosed kickbacks and side agreements, and virtually all transactions have an intermediary siphoning funds, that is later determined to be another undisclosed entity related to Zolotas or Giara,” Turko stated in his affidavit, filed on 26 November.
One exhibit filed in support of Turko's affidavit is a report on NewLead's business activities, written by expert witness Dr E Emre Carr, a former SEC manager.
The report determined that about 47% of the debts settled in a June 2013 transaction with Hanover Holdings were fake.
Trading allegations
Giara opened a share trading and brokerage account in 2013 with S Goldman Capital in order to sell NewLead shares, Turko stated in his affidavit.
S Goldman Capital is headed by Sheldon Goldman and has co-managed share offerings for shipping companies since 2010.
Its affiliate, Goldman Advisors, acted as sole financial advisor for the reverse merger that created NewLead in 2009.
Giara’s account was set up in the name of Marshall Islands-registered Tsofli Enterprises.
“Zolotas caused third parties to assign NewLead shares to Tsofli Enterprises [Giara] with the proceeds from the sale of NewLead shares diverted to Giara and Zolotas,” according to Turko’s affidavit.
The shares were assigned by certain companies that were allocated NewLead stock in settlement of debts that Dr Carr later determined were fake, exhibits show.
In opening the account, Giara indicated she was not a NewLead insider, despite being married to its chief executive, according to an exhibit obtained under subpoena.
Dr Carr's report states that Giara instructed S Goldman to sell Tsofli's shares around the time NewLead announced it was entering the coal business.
Giara also had a share-trading account with S Goldman in the name of Aurora Properties, Turko states.
Carr's report describes Sheldon Goldman as Zolotas' "long-time advisor", who had an "insiders' view of the financial condition of NewLead".
Document questions
Turko has filed examples of what he alleges are fake share certificates, board resolutions, power-of-attorney documents and share transfer documentation for Marshall Islands entities, some of which were signed off by Greek lawyer Fay Catsiba.
TransAsia alleged that Catsiba also facilitated the payment of kickbacks to Zolotas and assigned NewLead shares to Tsofli.
Catsiba, who could not be located for comment on this story, worked as business development manager for the Liberian International Ship & Corporate Registry in Dubai in 2014 as an external consultant and previously worked as general counsel at Greek shipping companies.
The allegedly fake documents relate to three Marshall Islands-based entities that were operated by Michail Fole, who is Zolotas’ co-defendant in an ongoing criminal case in Cyprus.
TransAsia claimed the documents were created in February 2015 but were backdated to dates in January 2014, as shown in screenshots of their metadata.
TransAsia alleged that Fole was just a proxy through whom Zolotas controlled companies, including a Marshall Islands-registered entity named F&S Capital Partners.
The backdated documents include a service agreement in which F&S commits to pay 4% commission to a Giara-held firm, which Turko claimed was a kickback for Zolotas.
TradeWinds has contacted all of the parties mentioned in this article, but none responded for comment before publication.
This article has been edited to remove references to Mr Tsouvelekakis, Oppenheim & Co (Custody) Limited and the Paralos Fund who were not parties in the litigation described in the article. TradeWinds is pleased to make it clear that it was not and is not suggesting that there has been any wrongdoing on the part of Mr Tsouvelekakis, Oppenheim or Paralos and apologises to each of them for any harm which may have been caused to them by their inclusion in the article and by any misunderstanding which may have arisen in consequence.
Legal action taken by TransAsia Commodities Investment and its principal Serge Turko against Michael Zolotas and NewLead Holdings dates back to 2013, when the trader filed a civil case for breach of contract against the defendants for a failed coal deal.
The commodity trader is foreclosing on Zolotas-owned assets around the world in an effort to recoup his court award.
Setting precedents
TransAsia has litigation underway in New York to seize the Greek former shipowner’s Manhattan apartment.
The case set a legal precedent in New York when the court granted TransAsia's motion to admit Zolotas' wife, Chrysanthi Giara, as a defendant in the case.
Enforcement action is also underway in Greece and Monaco, where Zolotas owns property.
On 18 February this year, the Courts Of First Instance in Piraeus upheld the New York court judgment and granted Turko permission to enforce collection of the full $22.3m in punitive damages in Greece.
A Monaco court has allowed Turko to seize Zolotas’ apartment and assets in the Mediterranean principality.
Inventory of assets
An inventory compiled by court-appointed auditors recorded just $15,000 of possessions inside the Monaco property, which Turko has said shows the apartment was never Zolotas’ main residence, contrary to what the shipowner represented to Greek tax authorities.
The US Securities and Exchange Commission suspended trading of NewLead’s shares in September 2018 for failing to file documents on time.
Piraeus Bank is pursuing Zolotas and NewLead in the UK and Bermuda for failing to repay outstanding debts.
The Greek bank took over the assets and liabilities of Marfin Egnatia Bank, from which Zolotas borrowed money for his own account and for NewLead.
Delisting
NewLead was also delisted from the Bermudan business register in late 2018.
Meanwhile, Zolotas is currently on trial alongside Michail Fole in Cyprus on an unrelated money-laundering charge.
Both are accused of facilitating a €1m payment to bribe the then governor of the Central Bank of Cyprus.
Zolotas' assets have been frozen during the litigation and several of his privately owned properties have already been foreclosed upon and sold at auction in Greece.
