Russian Vneshprombank — story of going down the drain
In early December 2015, the public learned for the first time that Vneshprombank faced certain difficulties. However, at first nobody dared to assume that by December 18 the Central Bank of Russia would detect a huge hole in the balance sheet and introduce external management. Three days later, chairman and founder of Vneshprombank Larisa Marcus was arrested on suspicion of fraud. One month later, the Central Bank revoked the license of the credit institution without attempting to employ bank resolution and recovery mechanism. The investigators claimed that Marcus had squandered a total of 750 million rubles of the depositors’ money.
The events that led to the collapse of the bank occurred rapidly. Back in February, the distinguished magazine Profil summed up the year 2014 and called Vneshprombank the second most reliable Russian bank in the top 100 list. The volume of the bank's assets amounted to more than 245 billion rubles. In November 2014, the Central Bank initiated a scheduled inspection. The regulator began to suspect that the loans worth more than 10 billion rubles had been provided to small-timers, and demanded to supplement the reserves with additional 6 billion rubles. This was the first sign of the upcoming problems. It transpired that in the past month the equity had decreased from 27 billion rubles to 19.5 billion. The bank decided to supplement the reserves with 6.2 billion rubles. The owner of the O1 Group Boris Mintz was directly involved in this situation. Shortly before the bank faced those problems, he issued a subordinated loan of 3 billion rubles. Moreover, his O1 group had invested 7 billion rubles in the bank's bonds, the RBC media reported. In general, the bank had three bond issues in circulation, their total amount being 19.2 billion rubles, with the maturity dates in 2016, 2018 and 2020 respectively. On December 19, the bank failed to perform the obligations of one of the issues amounting to 1.5 billion rubles. Soon afterwards the Central Bank experts found that the bank's liabilities exceeded its assets to the value of about 210.14 billion rubles.
Vneshprombank, which is the acronym for the Foreign Economic Industrial Bank, was founded by Larisa Marcus in 1995. Even at the initial stage, the bank managed to attract genuine customers, such as Sovtransavto group of logistic companies, the SASCO Sakhalin Shipping Company, the JSC Novorossiysk Commercial Sea Port, the Obschemasheksport foreign trade association, the Moscow radio manufacturing plant Temp, the state-controlled oil company Zarubezhneft (at the time headed by the current president of Transneft Company Nikolay Tokarev), and the Plateau insurance company (owned by a friend of Tokarev, Vladimir Kushnarev and his wife). At a certain period, even the government had a share in this bank, but after 2006 Vneshprombank became fully private. However, in those years Vneshprombank did not have assets large enough to be included at least in the top Russian 100 banks. The main growth of the portfolio occurred in 2008. Furthermore, even during that recession year the reports on problem loans and liquid assets were too good.
In 2009, Vneshprombank won a tender and started to provide services to the Transneft Company and its affiliated structures, the Russian newspaper Vedomosti reported. And in 2013, the bank was considered reliable enough to enter the top-50 of the Russian banking institutions.
Moreover, in recent years, the bank started to serve more and more VIP-clients. The level of confidence in the Vneshprombank was extremely high. According to the latest data by Forbes, the former governor of the Tula Region, Vladimir Gruzdev kept $ 44 - 50 million in this bank. Among other clients were such notable personalities like the family of Defense Minister Sergey Shoigu, the relatives of Artur Chilingarov, the son of the head of Presidential Administration Sergey Ivanov, State Duma deputy Vladislav Reznik and his wife (about $ 10 million), the son-in-law of Nikolay Tokarev (Transneft) Andrey Bolotov, the wife of deputy prime minister Dmitry Kozak, Natalia Kvacheva, the former head of Credit Suisse in Russia Diana Gendin, the former head of the State Duma Finance Committee Natalia Burykina, and the family members of the Russian Olympic Committee head Alexander Zhukov (his son Peter worked in Vneshprombank).
Even large Russian enterprises trust this bank with their money. Vneshprombank had a number of accounts that belonged to the companies such as Rosneftegas (6 billion rubles), Rosneft (about 10 billion rubles), Transneft (more than 20 billion rubles), and also the affiliates of the Novorossiysk Sea Port (about 14-17 billion rubles). One of the most distinguishable clients of the bank was the Modniy Continent Joint Stock Company (the owner of the INCITY fashion brand), with 50.1% of its shares owned by the mother of Vladimir Gruzdev - Nelly. The company mortgaged to the bank their leftovers - clothes, shoes, and accessories worth 400 million rubles in total.
Larissa Marcus was close to the Russian Orthodox Church, some part of the eparchy’s money could also be stored in Vneshprombank. The Sistema Conglomerate Company also had a deposit worth 909 million rubles in this bank, as did Severneftegazprom (joint venture of Gazprom, E.ON and BASF), the Novorossiysk Bread-Baking Complex, the Novorossiysk Commercial Sea Port, and the World Trade Center.
Russian Olympic Committee also entrusted Vneshprombank with its financial gains. In April 2014, the field-specific Deputy Prime Minister Dmitry Kozak reported that Russia had earned more than € 32 million at the Olympic Games in Sochi, which were distributed for the development of mass sports. The exact areas were not specified. It is possible that the means the Olympic Committee had obtained at the end of the games were deposited into Vneshprombank. Gazprom reported that the company had twice allocated funds to assist the Russian Olympic Committee — during the training period of the Russian athletes before the Olympic Games in Sochi and London, and then before the games in Rio de Janeiro and Pyeongchang. The total amount equaled approximately $ 30 million. The bank itself reported that the Russian Olympic Committee was one of the largest payroll customers. The committee also dealt with Sberbank, but Vneshprombank had higher interest on savings.
Photo: Aleksandr Zurabov
Speaking about the attempts to hide the real owners of the bank, experts believe that Vneshprombank pursued this policy for the sake of its high-ranking clients. Still, the ownership structure of Vneshprombank was somewhat unclear. According to official statements, the bank had no dominant shareholder. The largest owner was the Enterprise Emerging Markets Fund B.V. with 12.52% of the shares. Cistenique Investment Fund B.V. had a share of 9.86%. Larisa Markus herself officially held only 7.44%. Her old friend and partner Alexander Zurabov (previously headed the Aeroflot airline company and the Menatep bank, the brother of Russia's ambassador to Ukraine, Mikhail Zurabov) held 7.36%. Among the beneficiaries was Nikolay Chilingarov - son of Artur Chilingarov (a prominent Russian scientist, oceanographer, State Duma deputy, first deputy head of the United Russia party, and a member of the Rosneft board of directors) – who owned 2.23% of the shares. Larisa Markus’ brother, Georgy Bedzhamov, president of the Bobsleigh and Skeleton Federation of Russia, owned 22.91% of the Promstroyproekt Company, which in turn owned 3.2% of the Vneshprombank shares. Another 23.53% of the Promstroyproekt shares belonged to Marcus. The rest of the owners were off-radar holders of the minimum amount of Vneshprombank shares, who had Cyprus and UK companies. Evidence suggested that Marcus and her brother Bedzhamov were behind them all.
Based on the review, the Central Bank concluded that Vneshprombank management engaged in siphoning off assets. The Bank of Russia received inaccurate statements about the quality and volume of the Vneshprombank’s assets and liabilities. The banking institution also falsified statements in the database of primary accounting documents, including those regarding abstracts of correspondent accounts of non-resident banks, customers’ banking histories, and also account operations of their clients.
"The siphoned assets of the bank could be invested in real estate, expensive vehicles, participation interest in commercial enterprises, financial instruments, and other property that can be legally controlled by individuals, who have no official relation to the Vneshprombank Limited Liability Company. Preliminary information suggests that this kind of property may emerge both in Russia and abroad, including in the US and Europe."
This tight report by the Central Bank could not possible serve as the uncut version of the lavish lifestyle the bank owners led. Larisa Marcus and her brother Georgy Bedzhamov owned Bunkovsky Experimental Plant in the Moscow Region and Sakhalin Shipping Company. As for the property abroad, they had a 5-star Hotel Badrutt's Palace in Switzerland, built in 1896, overlooking the Engadine Alps and Lake St. Moritz. They were also the owners of apartments in the capitals of France, United Kingdom, the United States, as well as in Israel and Latvia; a few houses in the south of France and in Italy, a shop in Monaco, two boats and the Gulfstream G550 aircraft. Vneshprombank’s top management also owns another small banking institution, Promselhozban
In the 2014 reports of the Russian Interior Ministry of Interior there is evidence that in August a group of unidentified persons stole a fur coat of sable, a Glashutte watches with diamonds, a Zaskar bicycle, and 170 thousand rubles from the Europe cottage settlement in the village of Gribanovo, Krasnogorsk District. The country house belonged to Vneshprombank Vice President Dmitry Lytsov. The total damage amounted to 1 million 950 thousand rubles.
On December 22, 2015, Moscow's Tverskoy court made a decision to arrest the president and co-owner of Vneshprombank Larisa Marcus on suspicions of fraud. Her brother Georgy Bedzhamov disappeared somewhere in Monaco. The bank lost a tremendous sum of money. Initially, it missed 240 billion rubles, but later estimations proved it to be 187 billion rubles. Upon conducting a detailed study, the regulators stated that the final amount was 210.14 billion rubles.
It turned out that a lot of customers simply had their money stolen from the accounts. Moreover, the bank regularly used the customer data to issue huge loans without their knowledge. For example, the State Duma deputy Reznick found out that he owned $ 5 million, though he had never taken out any loans. The bank owners siphoned off money from the cash through cash department via bogus loans. They were using the funds held for customer as if they were their own, spending up to $ 30-40 million a month, Forbes reported.
However, according to sources of the Vedomosti newspaper, the same bogus loans were also used by VIP-clients, in agreement with the bank. This way they wrapped up clandestine deals and purchased expensive housing or cars. Criminal schemes like those were used in cases when an official wanted to buy property that cost 500 million rubles, while his official income amounted to only 2 million rubles. The same source said that if Larissa Marcus had “wanted to ditch someone,” she would have left the country. Now it remains to be seen, if she is going to be “released or convicted.”
The interim administration deemed it impossible to resolute Vneshprombank. On January 21, the Central Bank has decided to revoke Vneshprombank’s license. VTB 24 and Sberbank began to pay insurance indemnity to customers of the credit institution. According to the Deposit Insurance Agency, about 67 thousand depositors may apply for the compensation in the total amount of about 45 billion rubles. It should be noted that only those who deposited no more than 1.4 million rubles can apply for compensation.
On March 11, at the request of the Bank of Russia, the Moscow Arbitration Court recognized Vneshprombank as a bankrupt.
The Central Bank itself has initiated an internal check, which must determine if the regulator took effective measures in regards to Vneshprombank, and who is responsible for the failure to recognize a possible deliberate bankruptcy of Vneshprombank.
Georgy Bedzhamov has been put on the international wanted list. He was charged in absentia with fraud on a large scale (art. 159, para. 4 of the Russian Criminal Code). According to the source of the Forbes magazine, a representative of creditors approached Bedzhamov in Monaco. "He was shown photos of the assets owned by his family, and offered to give them up. Among them were the boat (including Ester III, which is estimated at $ 70 million) and real estate. Bedzhamov refused to negotiate," - the source reported.
Meanwhile, the search for Marcus and Bedzhamov’s assets in Russia continues. The building of the Vneshprombank central office at Komsomolsky prospect, 42 is registered for Nikolay Chilingarov, and it has already been transferred to other persons connected with the creditors.
The investigators claim that Larisa Marcus has squandered a total of 750 million rubles that belonged to the bank's depositors. She was charged with embezzlement (art. 160, para. 4 of the Russian Criminal Code), arrested and put in prison.
FSB officers detained Leyla Mammedzade along with Ziyavudin and Magomed Magomedov on March 30 this year. After questioning her for two days, they released her. In April, Mammedzade stepped down from her post. At the moment, she is not a defendant in the case of Summa Group owners.