Russian billionaires sue each other in USA by gangsta rules
American media continue discussing the affairs of Viktor Vekselberg and accusing the oligarch of interference into the American elections in 2016. But now the billionaire is about to become a personality of court chronicles as well. The Supreme Court of the State of New York has recently accepted the second lawsuit against Vekselberg and his old friend Leonard Blavatnik. This litigation may surpass the notorious legal battle between Roman Abramovich and Boris Berezovsky.
As it is known, not only do Russian oligarchs prefer to live abroad but sue each other there as well. Roman Abramovich and late Boris Berezovsky were the first to start this tradition. The entire world was watching with bated breath their litigation in the London High Court of Justice. Equally interesting was the legal battle between businessman Mikhail Chernoy affiliated with Izmailovskie organized criminal group and billionaire Oleg Deripaska. But the judicial adventures of Viktor Vekselberg in New York are going to surpass the ‘Russian seasons' in London.
Boris Berezovsky and Roman Abramovich
Claims against Vekselberg
The lukewarm dispute between oligarch Viktor Vekselberg slapped with US sanctions and Leonard Blavatnik, the wealthiest resident of the UK with an American passport, on the one part and Leonid Lebedev, ex-Senator from the Chuvash Republic, bitterly disappointed with these two persons, on the other part has recently escalated with renewed frenzy. This week, attorneys for Blavatnik and Vekselberg have filed with the Supreme Court of the State of New York a Memorandum of Law claiming that Lebedev had lied to American Themis for four years. This document vividly illustrates specific features of big business in modern Russia.
Back in 2014, Robert Mueller, Special Counsel for the US Department of Justice, had no questions to Vekselberg yet – but the Supreme Court of the State of New York has already got some. At that time, Leonid Lebedev, then-Senator from the Chuvash Republic and currently a Cypriot citizen, has filed a complaint demanding $2 billion from American citizen Leonard Blavatnik and Swiss resident Viktor Vekselberg and claiming that they had defrauded him of the above amount.
Ex-Senator Leonid Lebedev
In his complaint, Lebedev claims that Viktor Vekselberg and Leonard Blavatnik failed to pay the ex-Senator his 15% share of proceeds after the sale of TNK-BP to Rosneft for some $14 billion. Lebedev calls himself a ‘secret shareholder’ of OGIP company that used to own TNK-BP. The ex-Senator believes that, according to the ‘code’, his ‘secret ownership’ had also applied to the Russian share in TNK-BP established in 2003. The elegant term ‘secret shareholder’ implies the very same concept that Boris Berezovsky and Mikhail Chernoy had tried to explain to the British justice in order to validate their claims. The main proof of his rightness presented by Lebedev were ‘dividends’ in the amount of $600 million transferred by Blavatnik and Vekselberg to Ireland-based Coral Petroleum Limited for a certain period time – up until their decision to disregard the ‘code’.
Prior to its merger with British Petroleum, Tyumen Oil Company (TNK) used to belong to OGIP – whose ‘secret shareholder’ allegedly was Lebedev. The ex-Senator claims that he had invested into the OGIP charter capital 10.5% of Nizhnevartovskneftegaz, 1.8% of Tyumen Oil Company (TNK), and $25 million in cash. Lebedev explains his ownership of 15% in all TNK structures by an informal agreement with Viktor Vekselberg and Leonard Blavatnik; according to that agreement, Lebedev has withdrawn his bid from the privatization auction offering 40% of TNK shares for sale in the late 1990s.
Later, the united TNK-BP belonged to British Petroleum (50%) and Russian consortium Alfa Group–Access Industries–Renova (50%). Leonard Blavatnik and Viktor Vekselberg are beneficiaries of Access Industries and Renova respectively. OGIP was liquidated after the merger of TNK and British Petroleum.
The oligarchs from the Forbes list cannot reach an agreement with regards to the ‘code’. The Memorandum of Law filed on behalf of Vekselberg and Blavatnik refers to an Acquisition Agreement allegedly pertaining to the sale of the 15% of shares belonging to Lebedev. But Lebedev claims that it pertains to the dividends – the repeated payments supposedly confirm this. But the lawyers for Blavatnik and Vekselberg found an inconsistence in the ex-Senator’s testimony: Lebedev insists on allegedly unreasonable payments made to Coral Petroleum Limited but fails to clearly identify his own role in this company. In interviews to Russian newspapers, he had claimed that Coral was under his control – but in the New York Court, Lebedev states that the Irish company was just an intermediary used to pay dividends to the ‘secret shareholder’. The ex-Senator explains this inconsistence by translation problems.
Viktor Vekselberg and Leonard Blavatnik, former shareholders of TNK-BP
According to documents requested by the court from Swiss BNP Paribas following a motion brought by lawyers for Vekselberg and Blavatnik, Lebedev was more honest with Russian journalists than with the American judge. Based on the papers provided by BNP Paribas, the ex-Senator had indeed controlled Coral Petroleum Limited and managed company’s everyday operations since its foundation in 1999. The defendants’ attorneys complain that they had to spend years to locate the required documents because of the Lebedev’s lies and that his allegations became a heavy burden for British, Cypriot, Swiss, and Irish courts. Surprisingly, the Russian courts were not mentioned – although the lawyers for Vekselberg became aware of many interesting details pertaining to Coral Petroleum Limited from operatives of the Administration for the Tver Region of the Ministry of Internal Affairs (MIA) of the Russian Federation.
Sue not, and you shall not be sued
Leonid Lebedev has addressed the American justice for help while being a member of the Council of the Federation – at that time, he could afford the luxury not to be very skilled in the Russian legislation. Somehow, Lebedev has overlooked the prohibition to have foreign citizenship imposed on Russian officials – or maybe, he just forgot about his Cypriot citizenship. Nor was the Senator really concerned about criminal cases involving Territorial Generating Company № 2 (TGK-2) controlled by him – the enterprise has disrupted the heating season in the Tver region. The rolling heat outages hadn’t affected the investigation progress in any way. But after the relocation of Lebedev to New York, the Russian operatives have got a second wind.
The investigators failed to prosecute Lebedev in the framework of the existing criminal case because the Senator hadn't exercised the operative management of TGK-2. So, in 2016, they have launched a new criminal case against him following a complaint filed by Lonicera Participation Corp., a minority shareholder of TGK-2. According to some information, Lonicera Participation Corp. is controlled by top managers of Renova. The company representatives informed the investigators that Leonid Lebedev has personally siphoned off some $220 million from TGK-2.
Attorneys for Lebedev had explained this by the need to purchase a power plant in Skopje, Macedonia. It is necessary to note that the Limassol Court has recognized this deal illegal and the further fate of the money remains unknown. The Tver investigators have also expressed interest to Ireland-based Coral Petroleum Limited controlled by Lebedev – although it was not involved in the shady deals with TGK-2. Lebedev had used Coral Petroleum to receive fake dividends for the ‘secret ownership’ of TNK shares.
The Irish company has attracted keen interest of the Tver operatives. Nikita Matveev, Senior Investigator for Special Cases of the MIA Administration for the Tver Region, was so eager to protect the interests of Lonicera Participation Corp. that mastered English. Matveev submitted to the Irish police a multi-page inquiry with numerous questions about Coral Petroleum claiming that this information is essential for the inquest into the embezzlements of funds from TGK-2 – even though Coral Petroleum had nothing to do with this.
This request and responses provided by the Irish police turned out to be very useful for Vekselberg’s attorneys in New York. They defend his case demonstrating surprising awareness of financial operations of Coral Petroleum. The lawyers have already found an explanation for the $600 million transferred to the company: according to them, the money had nothing to do with alleged ‘dividends’ for the ‘secret ownership’ – instead, it was the payment for the company’s share purchased from Lebedev prior to its merger with British Petroleum.
Why would Lebedev decide to sell his share in such a moment? Why had one of the richest Russian oligarchs paid for this purchase in installments for several years prior to the deal closure? The attorneys have no answers to these questions yet... And the time is running out: in late July, the Supreme Court of the State of New York started examining a lawsuit where Leonid Lebedev is on the same side of the fence with his offenders. Magomed Magomedov has addressed the American justice claiming that these three people owe him $1.3 billion.
Magomed goes for a billion
Brothers Magomedov have been detained on suspicion of numerous of crimes resulting in damages to the state budget totaling, according to a conservative estimate, 2.5 billion rubles ($38.9 million). In jail, Ziyavudin Magomedov started taking active efforts to save his hard-earned wealth by divorcing and selling assets. In the meantime, his brother Magomed fell into nostalgia.
A few months before the arrest, he severed ties with the troublesome business of his brother. After becoming a ‘poor relative’, Magomedov has remembered an episode from the 1990s and used it as the basis for a lawsuit submitted to the Supreme Court of the State of New York on behalf of detainee Magomedov and his relative Akhmed Bilalov also criminally charged in Russia.
Back in the 1990s, brothers Magomedov and their relative Akhmed Bilalov had tried themselves as bankers. In that period, businessman Oleg Kim took up a loan in Diamant Bank and pledged his 5.37% of shares in Nizhnevartovskneftegaz as a security. Nizhnevartovskneftegaz was the primary oil mining site of Tyumen Oil Company (TNK); it became a lucky acquisition for Magomedov and Bilalov after Kim’s default on the loan in 1996.
Shortly after that, a conflict has escalated within Nizhnevartovskneftegaz for control over the company. Viktor Paliy, then-General Director of Nizhnevartovskneftegaz, had controlled 40% of its shares; old friends Viktor Vekselberg and then-Leonid Blavatnik together had the same portfolio of shares. Everything depended on the remaining 20%, including 5.37% belonging to Magomedov and Bilalov and 5.13% of shares belonging to future Senator Leonid Lebedev, then-owner of Sintez Group.
Vekselberg offered the three other shareholders to buy out their portfolios. According to Magomed Magomedov, he and Bilalov were offered $90 million and rejected this deal because they had supported Paliy. It must be noted that the plaintiffs have misled the American justice in this matter. In 1996–1997, they were involved in a legal battle for this portfolio of shares with its former owner Oleg Kim and hadn’t participated in the internal conflict in Nizhnevartovskneftegaz. In 1998, the Supreme Arbitration Court has ruled to return the disputed portfolio to Kim; this verdict determined the further course of events.
Businessman Leonid Lebedev was already familiar with Vekselberg and Blavatnik by that time; he was also proficient in intrigues and well aware of legal problems experienced by Magomedov and Bilalov. Lebedev offered the co-owners of Renova to settle their issues in exchange for a share in their business. Vekselberg and Blavatnik agreed. Without any difficulties, Lebedev purchased from Kim his portfolio of shares in Nizhnevartovskneftegaz, thus, acquiring 10.5% of the company’s shares and joined the business of Vekselberg and Blavatnik. In other words, Lebedev, Vekselberg, and Blavatnik have treacherously betrayed the plaintiffs who would never comply with the decision of the Supreme Arbitration Court and return the portfolio to Kim if they were aware of such an agreement. However, cheated shareholders Magomedov and Bilalov haven’t informed the American court about the verdict of the Supreme Arbitration Court of Russia.
Upon becoming aware of the fierce legal battle waged by Lebedev in New York for billions of dollars allegedly belonging to him according to the ‘code’, Magomed Magomedov has instantly calculated the amount supposedly owed to him and Bilalov using some mysterious formula.
It would be difficult for the American judge to understand the weird math used in Russia in the ‘turbulent 1990s’.
On the other hand, it is quite possible that the four rivals ultimately opt to forget about old conflicts and reach a settlement. Especially taking that the stars have already punished the participants of this controversial story: Swiss banks blocked 1 billion CHF on Vekselberg’s accounts; Lebedev had to leave the Council of the Federation; Magomed Magomedov languishes in prison; while the main desire of Leonard Blavatnik, who has recently purchased the Theatre Royal Haymarket in London, is to convince the American authorities that he doesn’t have the faintest idea about these three persons.
Initially, the defendants in the case had been charged with embezzlement through swindling in the amount of 225 million rubles ($3.3 million). In the final version of the indictment, the article was changed to 1.5-billion-ruble ($22.45 million) embezzlement.