Get out of Gref’s way: Former owners of Pavlovskgranit seek justice in New York court
The confusing story of ownership of Pavlovskgranit is about to become the most high-profile litigation of 2017 in the Southern District Court of New York: one of the defendants is a former Minister of Economic Development of the Russian Federation.
Each his own way, I go to Cyprus
Pavlovskgranit is bankrupt and does not exist officially anymore – but it is still frequently mentioned in media headlines. The enterprise used to be the European leader in crushed stone production, but it would go down in history as the subject of a fierce corporate war. The roots of this war are in the Russian corruption, while its outcome depends on the American justice system.
In the end of January 2017, the world media have reported that Sergei Poymanov, former owner of Pavlovskgranit Open Joint Stock Company and former Deputy of the Voronezh Regional Duma, in the person of PPF Management controlled by him, had filed a lawsuit with the Southern District Court of New York to recover a compensation in the amount of $750 million for the loss of control over Pavlovskgranit. The list of defendants includes Sberbank (the largest state bank of Russia); its subsidiary structures; Herman Gref, the CEO and Chairman of the Executive Board of Sberbank; and his son Oleg Gref. The statement of claim describes the story of the raiding takeover of the company covered in Russian media more than once. The very fact that the court has accepted the lawsuit for hearing indicates that Poymanov has strong evidence to support his position.
The collapse of Pavlovskgranit has started from the calls for deoffshorization – which the Government of Dmitry Medvedev used to put high hopes on. At that time, more than half of Pavlovskgranit shares had remained under the jurisdiction of Cyprus-based Zinica Limited offshore company. Zinica Limited had directly owned 29.46% of shares in Pavlovskgranit Open Joint Stock Company. 36.37% of shares in the mining and processing complex belonged to Vitera company controlled directly by Sergey Poymanov (50%) and the above-mentioned Zinica Limited (50%). The offshore company was controlled by Poymanov through Pavlovskgranit–Invest Closed Joint Stock Company completely belonging to him. Pavlovskgranit–Invest had been managing 100% of shares in Zinica Limited, thus, completing the circle of structures affiliated with Poymanov.
Pavlovskgranit Open Joint Stock Company ownership structure prior to taking out the loan
Trapped in his own pitfall
Amid the deoffshorization rhetoric, in 2008, Pavlovskgranit Open Joint Stock Company has taken out a special-purpose loan from Sberbank in the amount of 5.1 billion rubles. The purpose of the loan was to pull out the mining and processing complex from the offshore territory; it was secured by Pavlovskgranit–Invest Closed Joint Stock Company and shares of Poymanov and Zinica Limited in Vitera. It was clear from the very beginning that the bank had been pursuing its own purposes not mentioned in the loan agreement. A company whose assets are to be bought out under the loan agreement can not be used as the loan security. The decision to grant the loan to Pavlovskgranit had been made by the senior management of Sberbank. It must be said though that the goals of Poymanov had nothing to do with the return of the assets back to Russia.
Pavlovskgranit Open Joint Stock Company ownership structure shortly after taking out the loan
To deoffshorize any Poymanov’s company operating under the Russian jurisdiction, it was sufficient to buy out assets of Zinica Limited. And the Cypriot company started losing assets indeed. Its share in Vitera Limited Liability Company dropped from 50% to 10%. The share of Poymanov in Vitera has also unexpectedly decreases to 10%. At the same time, Yuri Podgorny, father-in-law of Sergei Poymanov, has become the third co-owner of Vitera. By increasing the charter capital by 4 million rubles, Podgorny has acquired 80% of Vitera shares.
Concurrently, Pavlovskgranit–Invest had been growing poor – it retained only 1% of shares in Zinica Limited. The remaining 99% have been siphoned to Belim Enterprises Ltd. incorporated in the British Virgin Islands. The owner of the newly-established company was none other than Sergei Poymanov.
Belim Enterprises Ltd. Declaration of Trust in the name of Sergei Poymanov
The trick was that no real deoffshorization had been performed. 29.64% of shares in Pavlovskgranit still belonged to Zinica Limited controlled by Sergei Poymanov. Only the pledged assets – that could be seized by Sberbank in case of a failure of financial commitments – had been vanishing. Such an occasion occurred soon – but the bank had its own agenda.
Beware of banks granting loans
Not only had Poymanov forgotten about the special purpose of the loan, but about the need to make loan payments on a timely basis as well. The economic crisis of 2008 was beneficial for such ‘forgetfulness’. The owner of Pavlovskgranit Open Joint Stock Company had even tried to restructure the debt – but he was not aware that the bank had its own plans for the mining and processing complex. The creditor has decided to seize the 36.37% of Pavlovskgranit shares belonging to Vitera on an extra-judicial basis. And the situation has changed drastically.
In the framework of the extra-judicial debt collection, Sberbank has obtained an independent appraisal of the encumbered assets. NEO Center consulting company was retained for this purpose. This was a truly ‘independent’ appraiser – Oleg Gref, the son of the CEO and Chairman of the Executive Board of Sberbank, is among its co-owners. One third of shares in the largest European crushed stone producer has been estimated slightly above 1.1 billion rubles. Poymanov failed to appeal this decision in due time and lost the litigation. An appraisal performed by Finances Business Service consulting company – estimating the 36.37% of shares in Pavlovskgranit at 4.6 billion rubles – has been rejected because it was produced 6 months later than the appraisal of NEO Center. The court has ignored the fact that the value of the shares has increased by 4.5 times in such a short period of time.
The shares have been transferred to Sberbank–Capital and immediately sold to some Atlantik Limited Liability Company who divided the portfolio of shares between two Cypriot offshore companies: Nisoram Holding (25% of shares) and Aletarro Limited (19.97% of shares). It is necessary to note that shortly prior to this profitable deal, Atlantik had received a loan from Sberbank in the amount of 3.5 billion rubles and invested the funds in Pavlovskgranit without delay. Later Atlantik had transferred to offshore territories Pavlovsk–Nerud company established instead of the liquidated Pavlovskgranit. So who are the mysterious beneficiaries of the Cypriot offshore companies? Yuri Zhukov, the head of the National Pit-and-Quarry Company, is behind Aletarro Limited. According to some sources, he is also a co-owner of Nisoram Holding Limited. The media name Oleg Gref the other co-owner of Nisoram Holding. It is necessary to note that Cypriot law firm C. Argyrou & Associates LLC provides legal services to Aletarro Limited and used to provide services to Nisoram Holding until recently. Lawyer Christos Konstantinou is a co-owner of this firm. Apparently, there is a fan club of Konstantinou in the Executive Board of Sberbank – the bank has paid $1 million to Konstantinou for a single legal consultation.
Pledge and Charge over Shares Agreement in relation to shares of Aletarro Limited
Despite the continuous resistance of Sergei Poymanov and two asset retrieval lawsuits won by him (lawsuit № 1; lawsuit № 2), he failed to retain control over the enterprise. In addition to the shares belonging to Vitera Limited Liability Company, Sergey Poymanov has also lost the second portfolio of shares in Pavlovskgranit belonging to him directly. On December 30, 2011, the Territorial Branch of the Federal Agency for State Property Management has sold 24.67% of shares in Pavlovskgranit belonging to Poymanov at an auction. The buyer was little-known Treid company who has promptly sold the shares to Urasay Limited. Its beneficiaries are unknown yet. However, the District Court of New York can get access to information about all the beneficiaries of the former Pavlovskgranit holding – so the upcoming trial should be full of surprises.
Oleg Zaytsev had wide connections within the criminal world and law enforcement agencies. This is being related to an organized crime group headed by Ruslan Kilievich that had allegedly been patronized by a former Federal Security Service Directorate officer Oleg Natalchenko. The crime group had also been a core driver for almost disbanding the criminal investigation department of the police.