Calvey case to end with a whimper

The Bell

Hello! This week our top story is the approaching end of a controversial criminal case against U.S. private equity investor Michael Calvey. We also look at the upheaval facing leading newspaper Vedomosti, the huge prison sentences given to a group of men accused of plotting armed rebellion, why the FSB is demanding access to the the data of millions of internet users, rising pressure on emigre banking brothers Dmitry and Alexei Ananiev, and the U.S. allegation that billionaire Oleg Deripaska was involved in laundering money for President Vladimir Putin.

Criminal case against investor Calvey to be wrapped up

One of Russia’s most controversial criminal cases of last year, which targeted U.S. private equity firm Baring Vostok, looks set to be resolved in the next few months, according to The Bell’s sources. It is likely that Baring Vostok founder Michael Calvey and his partners will be freed in May after being found guilty by a court and given short prison sentences.

  • A Moscow court transferred Tuesday the three Baring Vostok managers who remained behind bars — Ivan Zyuzin, Maksim Vladimirov, and Vagan Abgaryan — to house arrest. The two other defendants, Calvey and his partner Philippe Delpal, were moved to house arrest last year.
  • The Bell spoke with two members of a group who have requested the Baring Vostok case be reviewed at the highest levels. Both said that Tuesday’s decision is a signal the whole affair will be sorted out in the coming months. One source even provided a timeline. In his opinion, a court will find the defendants guilty in May, but only impose short sentences that they will have already served, meaning they can walk free. An acquaintance of the defendants agreed with this prediction, but said a verdict is unlikely before the end of the year. Neither source thought that the court will backtrack and deem the men not guilty.
  • One banker said that, for the case to be closed, there must be an upswell in support (like last spring, when Calvey was transferred to house arrest). A critical mass is already nearing. A source close to the political discussions about the case told The Bell that, in addition to Kirill Dmitriev, head of the Russian Direct Investment Fund, who came out in support of Calvey immediately after his arrest, several others have also now spoken out. These include Sberbank head German Gref; Audit Chamber head Alexey Kudrin; and Valentin Yumashev, advisor to President Vladimir Putin and a former head of the presidential administration.
  • February 15 will mark exactly one year since the Baring Vostok case began. The charges followed from a shareholder conflict within Vostochny Bank, 50.01 percent of which was owned by Baring Vostok. It is believed the case was ordered by the fund’s partner in the bank, Artyom Avetisyan, a top manager at the state-owned Agency for Strategic Initiatives known for his close ties to the security services. Avetisyan is also friendly with Putin’s former advisor, Andrei Belousov, who was appointed deputy prime minister last month. Belousov has denied any involvement in the case. Since Calvey’s arrest, Baring Vostok lost its case against Avetisyan and his partners in the Russian courts, and was forced to transfer its shares in Vostochny Bank to Avetisyan.
  • The criminal case against the founder of the largest U.S. fund investing in Russia was a major blow to Russia’s investment climate. Prime Minister Mikhail Mishustin’s new government, tasked with boosting economic growth and increasing investment, would welcome an end to the case. But the case cannot simply be closed and the defendants freed as this would mean the security officers involved would be humiliated, a source close to Calvey’s legal team told The Bell.

Why the world should care

If Calvey and his Baring Vostok managers finally walk free there will be rejoicing. But it will not be a victory for the rule of law. More importantly, even a happy outcome will not ensure that foreign investors are never targeted by criminal cases linked to business disputes.

Major business newspaper faces upheaval

Russia’s leading business daily, Vedomosti, is on the verge of big changes. Amid rumors of new ownership, it emerged (Rus) Thursday that Vedomosti may get a new chief editor. The leading contender, Dmitry Solopov, is not just known as a journalist, but also a PR specialist. And there are fears the new owners have ties to state-owned oil giant Rosneft.

  • Vedomosti’s current chief editor, Ilya Bulavinov, has a one-year contract that ends in April. But popular Telegram channel Merciless PR Guy reported (Rus) Thursday that Bulavinov and web editor Maksim Tovkailo are quitting. An acquaintance of Bulavinov and Tovkailo confirmed their departure to The Bell, but there has been no official confirmation. A spokesperson for Vedomosti shareholder Demyan Kudryavtsev said a new contract has not yet been discussed with Bulavinov.
  • Merciless PR Guy named Dmitry Solopov as Vedomosti’s likely new chief editor. A former journalist, Solopov was editor-in-chief of radio station Business FM and Kommersant FM before co-founding a major PR agency. Solopov said (Rus) he was offered Vedomosti’s top job, but Kudryavtsev denied this, writing on Facebook that Solopov may have been the victim of a practical joke.
  • Vedomosti is Russia’s most authoritative business daily, and one of the few remaining independent media outlets in Russia. It has a monthly online audience of 12 million. Until 2015, the newspaper was owned through a three-way arrangement that included the Financial Times Group, Dow Jones (publisher of the Wall Street Journal) and Finland-based Sanoma. But a ban on foreigners owning media outlets in Russia saw the shareholders sell to media manager Demyan Kudryavtsev, former director of newspaper Kommersant and ex-advisor to 1990s oligarch Boris Berezovsky. Formally, Vedomosti is owned by Kudryavtsev’s wife — because he hasn’t had Russian citizenship since 2017.
  • For years there have been rumors that Kudryavtsev is the public face for a secret shareholder, or group of shareholders, but there has never been any official confirmation of this theory. One possible ‘co-owner’ is Kudryavtsev’s friend, metals tycoon Dmitry Bosov, who has business ties to Rosneft. In a 2018 interview with The Bell founder Elizaveta Osetinskaya, Kudryavtsev admitted (Rus) that he did borrow money for Vedomosti’s development from Bosov, but said it happened after the purchase of the newspaper, and that the debt was quickly repaid.
  • Last year, Kommersant reported (Rus) that Kudryavtsev was looking for a buyer for Vedomosti, and earlier this month Kudryavtsev announced (Rus) the newspaper would be sold to Vladimir Voronov, former manager of News Corp’s Russian assets (Rupert Murdoch helped Kudryavtsev finance the purchase of the paper in 2015). But the market has no doubt this is only an interim transaction — everyone expects the newspaper will get another owner very soon.

Why the world should care

We do not know for certain whether current (or future) Vedomosti shareholders have ties to Rosneft, or to Russian officials. But a well informed media manager told The Bell that the buyer will be a figure approved by the Kremlin. This means that the change of ownership at Vedomosti will almost inevitably compromise its independence.

Left-wing activists handed huge jail sentences

Seven young men accused of taking part in an armed, left-wing conspiracy to topple the Russian government were given prison sentences of up to 18 years Monday in a case that has been ridiculed as a fantasy of Russia’s Federal Security Service (FSB). All the men deny the charges, and four have given harrowing accounts of torture.

  • The accused, aged between 23 and 31, were sentenced by a military court in the city of Penza, 400 miles southeast of Moscow, where their trial took place. All were convicted of belonging to a terrorist group, or on weapons or drugs charges — or a combination of all three. Dmitry Pchelintsev was given 18 years; llya Shakursky got 16 years; Andrei Chernov was given 14 years; Maksim Ivakin received 13 years; Mikhail Kulkov got 10 years; Vasily Kuksov got 9 years; and Arman Syganbaev received 6 years.
  • The men were arrested in late 2017 and early 2018, and have been in pre-trial detention while the FSB investigated their case (one has contracted tuberculosis in this time). In court, prosecutors alleged the defendants were part of a secret group called Network that had cells in several cities and planned attacks to provoke unrest during the presidential elections and the soccer World Cup in 2018. The FSB has presented no real evidence for the allegations, and much of the case is based on confessions from two other suspects who cooperated with investigators and received lighter sentences.
  • All the men maintain the charges are a fabrication, the weapons found by police were planted, and no organisation called Network ever even existed. Four said they were tortured in police custody, via electrocution and physical assault, and retracted initial confessions. Pchelintsev, the alleged leader of the group, said (Rus) in court that FSB officers wearing balaclavas and surgical gloves made him strip after his arrest, tied him to a chair and hooked him up to a device that gave out electric shocks. He agreed to give them the answers they wanted only when they began to attach the wires to his genitals, and threatened to harm his 25-year-old wife.
  • The Network Case is eerily similar to another investigation initiated by the FSB, the so-called New Greatness Case, in which 8 people from Moscow and the surrounding region are currently on trial, accused of being members of an extremist group. The defendants deny the charges, maintaining they were set-up by an FSB agent.

Why the world should care

The chances of these men actually being part of a nation-wide left-wing conspiracy that posed a threat to the regime are vanishingly small. A much more likely explanation is that Russia’s sprawling security services need to occupy themselves with something: uncovering sinister plots helps to keep budgets intact, and earns promotions for the officers involved.


FSB demands access to internet companies’ user data

A group of Russian internet companies were approached by the FSB last summer in a bid to gain access to the data of millions of internet users, multiple industry sources told The Bell. The FSB sent letters to companies including internet giants Yandex and Mail.Ru; messenger app Telegram; the online banking arm of state-owned Sberbank; and internet sales platform Avito requesting they permit the installation of special monitoring equipment. There was nothing illegal about the FSB’s wishes, which are in line with a controversial package of so-called anti-terrorism laws that came into force in 2018. Companies are obliged to cooperate with the FSB if they are included on a special list (Rus) maintained by communications regulator Roskomnadzor, known as the “organizers of spreading information on the internet” (ORI). The internet companies are in the process of installing the equipment and some have already completed the process, according to a source.

Pressure rises on emigre banker brothers

The former co-owners of bankrupt Promsvyazbank, Dmitry and Alexei Ananiev, who fled Russia amid criminal allegations, find themselves increasingly caught between a rock and a hard place. In Russia, the brothers are accused of embezzling more than $1 billion. And now, lawyers from the Law Offices of Bud Cummins, founded by a former U.S. prosecutor, have demanded the U.S. sanction the two men. Cummins represents former clients of Promsvyazbank who accuse the Ananievs of embezzling credit-linked notes worth a total of $235 million. The brothers are also facing legal action in London and the Netherlands. Younger brother Alexei is currently living in London, while Dmitry has moved to Cyprus where he has acquired citizenship (Cyprus is currently reviewing its golden passport program so he may even be stripped of his Cypriot passport). In an interview published Friday in the Guardian newspaper, Dmitry described Russian politics as a “muppet show”, and said he was targeted by the “repressive machine of the state.”

U.S. accuses Deripaska of money laundering for Putin

Accusations by the U.S. Treasury that billionaire Oleg Deripaska took part in money laundering for Putin emerged Friday in a letter from the agency to Deripaska’s lawyers, which was published by the Financial Times. Deripaska has claimed he lost $7.5 billion as a result of U.S. sanctions, and is currently suing the U.S. government. But the tycoon spent much of Friday refuting the allegations, both in comments to the Financial Times, and in his personal Telegram channel. “What money? He didn’t even trust me with a pen for 10 minutes,” Deripaska wrote on Telegram, referencing an incident in 2009 when Putin publicly dressed-down Deripaska over a business conflict that threatened to lead to big lay-offs.

It’s awkward to have to come to Deripaska’s defense, but the six points that the U.S. Treasury listed in its letter are either banal (Deripaska spent $800 million on Olympic construction projects in Sochi — so did all of Russia’s wealthy elite); based on anonymous sources (“Deripaska’s business activity was reportedly used… as a cover to facilitate the transfer of funds for the personal use of Vladimir Putin”); or simply bizarre. The oddest of the allegations was that Deripaska once cancelled the IPO of automobile company Gaz so as not to expose money linked to Putin — but the problem is that, to cancel an IPO, you need to plan it in the first place, and Gaz has never had any serious IPO plans.

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