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Kazenercom TOO v. Turan Petroleum

December 19, 2008


The opinion of the court was delivered by: Ellen Segal Huvelle United States District Judge


Plaintiffs are individuals and organizations that reside or are based in Kazakhstan and have brought suit for fraud, breach of contract, and a host of other federal and common law claims arising from the sale of an oil concession in Kazakhstan. All but one of the defendants are residents of the Los Angeles area or Kazakhstan,*fn1 and the relevant events occurred either in California or Kazakhstan. Nonetheless, plaintiffs have chosen to file suit in the District of Columbia even though no party resides here, and the District of Columbia has no meaningful ties to this action. The Court will therefore transfer this case to the Central District of California pursuant to 28 U.S.C. § 1404(a).



This case began on August 4, 2008, with the filing of a forty-nine page complaint, including exhibits, that alleges twelve causes of action, two of which are based on federal statutes -- RICO, 18 U.S.C. § 1961 et seq., and the securities laws, 15 U.S.C. § 77a et seq. This rambling complaint has been aptly characterized in Defendant Vanetik's motion as "so bewildering and incoherent as to render a reasonable interpretation all but futile." (Vanetik's Mot. at 4.) In response, two separate motions to dismiss have been filed. First, seven defendants (hereinafter "the Seven Defendants")*fn2 have moved to dismiss based on Fed. R. Civ. P. 12(b)(1),(2),(3),(5) and (6), or in the alternative, they move to transfer pursuant to 28 U.S.C. § 1404(a), § 1406(a), or § 1631, and to strike certain allegations under Rule 12(f)(2). Defendant Vanetik has also moved to dismiss under Fed. R. Civ. P. 12(b)(2) and (3), or in the alternative, for transfer under 28 U.S.C. § 1404(a) or § 1406(a).*fn3 In response to these motions, plaintiffs have inundated the Court with a series of filings seeking to have it take judicial notice of proceedings in other courts (Dkt. # 28), information on Turan's website (Dkt. # 30) and the circumstances of the attempted murder of Plaintiff Yerkin Bektayev in Almaty, Kazakhstan on October 31, 2008 (Dkt. #38). Plaintiffs have also asked the Court to order the taking of the deposition of Defendant Askar Karabayev (Dkt. #40), because Bektayev "suspect[s] Karabayev as an organizer of that murder [attempt]." (Plaintiffs' Amended Motion to File a Report, Inform the Court, to Submit Unredacted Exhibit, under Seal, and for Order of Expedited Deposition of Defendant Askar Karabayev at 3, filed Nov. 10, 2008.) Given plaintiffs' persistent filing of extraneous pleadings and irrelevant arguments, the Court had to take the unusual step of issuing an order denying plaintiffs' motions for the Court to take judicial notice and admonishing counsel for both sides to be civil and to comply with the governing rules of procedure. (See Order issued on Sept. 18, 2008.)

Ultimately the motion filed by the Seven Defendants became ripe on October 20, 2008 (Dkt. #37), and Defendant Vanetik's motion became ripe on December 9, 2008 (Dkt. #48). Thereafter, after having had a full opportunity to review all of defendants' pleadings and arguments, plaintiffs filed their Verified First Amended Complaint on December 10, 2008 (Dkt. # 50). This amended complaint, including exhibits, spans a hundred pages but does little, if anything, to clarify the confusing nature of plaintiffs' claims. Instead, it adds two new common law counts for breach of fiduciary duty and accounting,*fn4 and includes information regarding Turan's website, defendants' representations about their relationships with officials in Washington, D.C. and their alleged failures to make filings at the SEC. (See, e.g., Am. Compl. ¶¶ 26-31.) Plaintiffs have also added a reference to two criminal statutes apparently in an effort to bolster their jurisdictional arguments (id. ¶ 30), and they reference ongoing litigation in Las Vegas, Nevada and the Central District of California (see, e.g., id. ¶¶ 32-38) as part of their discussion of defendants' alleged use of offshore entities and coconspirators as part of their scheme to defraud the plaintiffs. However, not one of the new entities or individuals who is named in the amended complaint as having anything to do with this scheme is located in this jurisdiction.

Despite the obvious tactical advantage that plaintiffs should have gained by waiting to file a dramatically expanded set of allegations until all of defendants' arguments for dismissal had been set forth, plaintiffs are still unable to provide a comprehensible statement of facts to support their blunderbuss approach to the law, nor have they succeeded in curing the many obvious problems identified in defendants' motions. However, because the Court has concluded that this matter should be transferred on the basis of forum non conveniens, its consideration of the facts is far more limited than would be the case under Rule 12(b)(6), and the relevant facts can be explained briefly without attempting to provide a full exposition of plaintiffs' 350-paragraph amended complaint.*fn5 In setting forth these facts, the Court relies exclusively on the amended complaint filed this past week, and as required by law, it has "accept[ed] the plaintiff[s'] well-pled factual allegations regarding venue as true, draws all reasonable inferences from those allegations in the plaintiff[s'] favor, and resolves any factual conflicts in the plaintiff[s'] favor." Hunter v. Johanns, 517 F. Supp. 2d 340, 343 (D.D.C. 2007) (quoting Darby v. U.S. Dep't of Energy, 231 F. Supp. 2d 274, 276 (D.D.C. 2002)). In applying this test, the Court is mindful that plaintiffs "bear[] the burden of establishing that venue is proper," Hunter, 517 F. Supp. 2d at 343 (quoting Varma v. Gutierrez, 421 F. Supp. 2d 110, 113 (D.D.C. 2006)), but it is the defendants who "must present facts sufficient to defeat [plaintiffs'] assertion of venue" in order to prevail on their motions to dismiss. Hunter, 517 F. Supp. 2d at 343.


The facts, as set forth in the amended complaint, which are relevant to venue and transfer, are as follows. In 2001, the government of Kazakhstan granted Aral Petroleum Co. ("Aral") a concession to develop oil on five million acres in the Shymkent region of the country. (Am. Compl. ¶ 73.) Three years later, Aral entered into an agreement with Plaintiff Kazenercom TOO ("KEC") to form Turan Enerpetroleum TOO ("TEP"), a joint venture between Aral and KEC. (Id. ¶ 76.) Under the joint venture agreement, Aral vested TEP with all of its rights under the oil concession and provided KEC with a 49% interest in TEP. (Id.) Aral, KEC and TEP were all organized under the laws of Kazakhstan. (Id. ¶¶ 3, 73, 76.)

The other plaintiffs in the case comprise two groups. Kinozhuz, Public Foundation Our House Kazakhstan, and the Association of Kazakh Investors and Entrepreneurs were all investors in KEC's projects and consequently affected by KEC's alleged injuries. (Id. ¶¶ 4-6.) The remaining plaintiffs were employees of KEC. Yerkin Bektayev was the Director of KEC, as well as President of TEP. Berik Bektay was a senior advisor at KEC and Kanet Meirmanov performed seismic tests for the company. (Id. ¶¶ 7-9.) The plaintiffs are all either citizens of Kazakhstan or entities organized under the laws of Kazakhstan. (Id. ¶¶ 3-9.)

In March 2005, KEC purchased Aral's 51% share of TEP and sold it to Defendant Turan Petroleum, Inc. ("Turan"), a Nevada corporation headquartered in Costa Mesa, California, a suburb southeast of Los Angeles.*fn6 (Id. ¶¶ 10, 98-99.) Plaintiffs' allegations stem from the manner in which Turan paid KEC for this acquisition. Defendant Anatoly Vanetik, a Los Angeles area resident who was President of Turan at the time, agreed to pay for the acquisition using a combination of cash and Turan stock. (Id. ¶¶ 15, 103-04, 108.) Turan was to pay $450,000 to KEC and issue Turan shares to Bektayev, the Director of KEC. (Id. ¶¶ 7, 103-04, 108.) Some of the Turan stock was to be issued to Bektayev directly, while the rest was to be held by Trek Resources, Inc. ("Trek"), a company that shared Turan's California office. (Id. ¶¶ 11, 104.) Vanetik told Bektayev that he would have complete control over Trek. (Id. ¶ 113.)

According to plaintiffs, defendants failed to abide by their payment agreement with KEC. Defendants never made the promised $450,000 cash payment. (Id. ¶ 122.) More importantly, they claim that the stock that Bektayev received was virtually worthless because Turan was never intended to be a viable business; it was merely part of a Ponzi scheme to attract investors. (Id. ¶ 102.) Defendants employed a wide range of tactics to make Turan appear to be a legitimate business. Vanetik and his son fabricated investments in the company. (Id. ¶¶ 83-89.) Turan misled plaintiffs about its relationships with various governmental entities, including the U.S. Department of Energy, the White House and the Embassy of Kazakhstan.*fn7 (Id. ¶¶ 90-95.) Turan also used trades between insiders to artificially inflate the value of its stock. (Id. ¶¶ 96-102.) According to plaintiffs, these insider transactions were not publicly disclosed as required by the SEC. (Id. ¶ 136.) Plaintiffs also claim that the Turan stock was restricted, which meant that it could not be sold for two years. (Id. ¶ 105.) Turan failed to file a registration statement upon the expiration of this restriction. (Id.) It also neglected its obligations under the oil concession by failing to drill the requisite number of wells, thereby jeopardizing the license from the Kazakhstan government. (Id. ¶¶ 102, 137-38.)

Plaintiffs also claim fraud with respect to Trek, the entity that was to hold Turan stock for the sole benefit of Bektayev. Bektayev was not the sole shareholder of Trek as promised, and his 100,000 shares of Trek were dwarfed by the 75 million shares of authorized capital. (Id. ¶¶ 114-17.) And even if Turan had not diluted Bektayev's interest, he was legally prohibited from owning shares in Trek because he was a nonresident. (Id. ¶ 116.) Moreover, defendants issued two sets of the same Turan stock certificates to Trek, presumably in an attempt to defraud Bektayev of his shares. (Id. ¶¶ 123-26, 264-65.)

Defendants not only failed to adequately pay for the 51% interest in TEP, but they also defrauded plaintiffs out of the remaining 49% interest. According to plaintiffs, Yedil Kassymov, TEP's Director General, was secretly working on Turan's behalf. (Id. ΒΆ 110.) Kassymov lied by saying that he had permission from the Kazakhstan government to transfer KEC's remaining 49% interest to Turan. (Id.) In return, Turan paid Kassymov $102,000 without disclosing it to KEC. (Id.) However, before Turan could obtain 100% ...

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