Wresting Providencia away. Deputy Attorney General of Cyprus involved into raiding takeover of elite settlement
Rikkos Erotokritou, the ex-Deputy Attorney General of the Republic of Cyprus, and prominent lawyers from Andreas Neocleous & Co. LLC have become the main suspects in a criminal case related to the attempted raiding takeover of an elite cottage community located on Pyatnitskoe highway. At the first glance, this seems absurd: where is Krasnogorsk and where is Cyprus? The CrimeRussia studied the links between Rosinka (Dewdrop) settlement near Moscow and the Attorney General’s Office of the island state.
The criminal case against the former Deputy Attorney General and his accomplices from Andreas Neocleous & Co. LLC – Andreas Kyprizoglou and Panayiotis Neocleous – has become the most high-profile anti-corruption legal action in Cyprus in the recent years. The court session on February 8, 2017, where the defendants were found guilty of corruption, swindling, and exceeding of official powers, had lasted for 9 hours. It was broadcast live on the national TV.
The court has postponed the pronouncement of the verdict – initially scheduled to February 17 – to March 1, 2017. It is already known, however, that the former Deputy Attorney General of the Republic of Cyprus is facing 7 to 9 years behind bars, while Andreas Neocleous & Co. LLC lawyers, most probably, would get conditional terms.
The investigation against Rikkos Erotokritou in relation to the bribe and attempted raiding takeover of Rosinka (Dewdrop) Closed Joint Stock Company by the Cypriot lawyers has been launched in spring 2015.
Costas Clerides, the Attorney General of the Republic of Cyprus, has received the information about illegal operations of Andreas Neocleous & Co. LLC in Russia from Cypriot parliamentarians – who, in turn, had received it from their Russian colleagues and the Central Bank of Russia. Upon reviewing the materials, Clerides has initiated a service audit of his deputy Rikkos Erotokritou. Then, based on the results of this audit, the Attorney General has personally initiated a criminal case against him.
Costas Clerides, the Attorney General of the Republic of Cyprus
The former Deputy Attorney General has been charged with receiving a bribe in the amount of €515 thousand for illegal initiation of a criminal case against Aleksander Zakharov, co-owner of Russian-based Rosinka Closed Joint Stock Company, and his lawyers Igor Zhigachev, Armen Davidyan, and Tatiana Shegoleva. Zakharov and his attorneys had been accused of embezzlement of shares of Providencia Holding Ltd. incorporated in Cyprus.
According to the investigation, Andreas Neocleous, the founder of the law firm, and his son and partner Panayiotis Neocleous had bribed Rikkos Erotokritou in a pretty original way. The Deputy Attorney General had taken a personal loan of €515 thousand in Cypriot Laiki Bank, but failed to pay it off due to some unknown reasons. Then he filed a lawsuit against the bank requesting to exonerate him from all financial liabilities to it. Andreas Neocleous & Co. LLC had represented the bank in court and failed to attend the hearings three times without providing any reason. The judge has recognized this behavior a contempt of court and complied with the Deputy Attorney General’s lawsuit. After a while, following an application from Andreas Neocleous & Co. LLC, Erotokritou has initiated a criminal case against Russian beneficiaries of Providencia Holding Ltd.
Rikkos Erotokritou and his accomplices are to remain at large until the sentencing
It is necessary to note that these events had been preceded by bitter legal battles in Russia between Andreas Neocleous & Co. LLC – whose founder and representatives were the nominee Cypriot directors of the holding – and Zakharov brothers.
In 2013, the litigation in Russia between the Cypriots and Zakharov brothers has been won by the Russian shareholders, which resulted in a diplomatic note presented to the Ambassador of the Republic of Cyprus by the Ministry of Internal Affairs of the Russian Federation. In August, the Tenth Arbitration Court of Appeal has recognized the actions of the Cyprus directors of the holding a raiding takeover attempt for reasons of greed and ruled to recover 4,787,811 rubles from Andreas and Elias Neocleous to compensate the legal costs of Russian-based Rosinka company. In December 2013, George Kasoulides, the Ambassador of the Republic of Cyprus was invited to the Ministry of Internal Affairs on Smolenskaya square where he received an official document in support of interests of the Russian businessmen. Therefore, Russia has regained Rosinka from Cyprus. But in order to understand how the Cypriots had become the directors of a settlement for foreigners located in Moscow suburbs, a retrospective journey into the history is required.
Battle for Rosinka
Rosinka International Residential Complex was built in 1990. It is located on Pyatnitskoe highway, 5 km from the Moscow Ring Road. According to the official web site of the developer, Rosinka International Group, its mission it to “provide comfortable living for employees of international corporations and diplomatic missions in Russia and other countries”. This is exactly what the company does. Businessmen and top managers of major western companies are not interested in pompous housing built along the elite Rublevskoe highway – they prefer Rosinka with its proximity to work, convenient infrastructure, interior lake, branch of the European Medical Center, British International School, and other traditional for foreigners elements of comfort.
90% of people currently living in Rosinka are foreigners from various countries. Americans predominate among them – in 1994, the U.S. Department of State has purchased, for the first time since 1917, real estate in Russia. The U.S. Embassy acquired 44 residences in Rosinka for its diplomats. This ‘deal of the century’ has become possible only because of old connections of Oleg Zakharov, a former diplomat (and allegedly an officer of the First Chief Directorate (Foreign Intelligence) of the Committee for State Security (KGB) of the USSR). Zakharov has retired from the Ministry of Internal Affairs in the end of the 1980s and decided to start a real estate business. His idea – that seemed crazy at that time – was to attract foreign investments and establish an elite settlement for foreigners on the basis of a collective farm in the Moscow region. 370 families from more than 30 countries are currently living in Rosinka, while the children of Oleg Zakharov, the founder of the company, are defending their rights to the elite residential complex worth some €450 millions in courts.
The peak of the Rosinka business coincided with the end of the 1990s – the period of raiding takeovers and mass exodus of Russian businesses to offshore territories. The Zakharov family, owner of the controlling block of shares, had established Providencia Holding Ltd. in Cyprus to protect its assets from possible raiding attacks of competitors and governmental structures. 85% of Rosinka assets had been transferred under control of Providencia; Andreas Neocleous & Co. LLC – already known in the Russian business community for services rendered to oligarchs and such major companies as Yukos and Mechel – was retained to perform the legal arrangements.
School in Rosinka International Residential Complex
In order to be eligible for tax preferences, the holding had been nominally managed by Cyprus residents – but the actual management of the company remained in the hands of the Zakharov family.
“In order to minimize the risks, we had created a foreign company and nominally transferred to it a major block of Rosinka shares,” – Aleksander Zakharov, a beneficiary of Rosinka, told later. But results of this step were just the opposite.
In 2006, Oleg Zakharov died from leucosis; Vladimir and Aleksander, his sons of the first marriage, have inherited Rosinka. Shortly after this, Andreas Neocleous, founder and Chairman of the Board in Andreas Neocleous & Co. LLC, started expressing active interest to Rosinka; after a visit to the settlement, he noted a high potential of this project – subject to skilled management approach – and offered himself as a trust director. The brothers agreed – and the events started spiraling in the most unexpected way.
Aleksander Zakharov, a beneficiary of Providencia Holding Ltd.
The “internationally recognized lawyers” from Andreas Neocleous & Co. LLC suddenly hoisted the black flag, gained support from Elena, the widow of Oleg Zakharov (who became his wife long after the construction of Rosinka and was not entitled to a share in this asset), and started an offense in Russian courts using time-tested raiding techniques and levers of influence established in Russia by that time.
‘All-Russia money laundry’
The sunny island in the Mediterranean Sea is well-known in Russia not only as a popular tourism destination. According to economists from Finnish Aalto University, in the 20 years prior to its accession to the European Union in 2012, the ‘All-Russia money laundry’ had received and ‘laundered’ over $30 billion from Russia. A traditional money laundering scheme was used: the funds are transferred to Cypriot banks and then return back to Russia as “direct foreign investments”.
The high level of corruption in Cyprus is very beneficial for the above scheme. Abuses of official powers for personal financial gain are an everyday occurrence on the island. According to the Transparency International Corruption Perceptions Index, Cyprus is actively combating this issue (it holds the 47th position in the rating – as opposed to Russia with its 131st position) – but still, there are plenty of corrupt officials in any Cypriot governmental institution.
After joining the European Union, the republic has lost some features of a classic offshore territory, but it still remains a very lucrative place for Russian businessmen. The turnover of money between Russia and Cyprus is stable. According to a CrimeRussia source, more than half of funds deposited in Cypriot banks belong to Russian companies and individuals. And the worldwide renowned law firm Andreas Neocleous & Co. LLC plays an important role in the legalization of these funds having suspicious or sometimes outright criminal origin.
Family business of Andreas Neocleous
The importance of Cypriot firm Andreas Neocleous & Co. LLC for the world offshore business (and especially for Russia) is comparable with the significance of Panama-based Mossack Fonseca & Co. prior to the Panama papers scandal.
This is the only Cypriot law firm included into Lex 100 comparative guide published by Legalease, a global leader in the provision of legal market information. It has nine branches in various European countries, including Russia; in total, 134 respected lawyers are employed there. The list of company’s clients includes major international corporations. In Russia, it used to work with Inter RAO United Energy Systems, Rusagro Group, ITERA International Group of Companies, Yukos, and Mechel. According to some sources, businessman Dmitry Rybolovlev, ex-Mayor of Moscow Yuri Luzhkov, and ex-Governor of the Moscow Region Boris Gromov were among its clients in the 1990s.
Andreas Neocleous in the company headquarters
Andreas Neocleous, the 78-year-old founder of the law firm, is a Vice President of the Mediterranean Maritime Arbitration Association and International Academy of Tax Advisors, world-class legal expert, winner of numerous professional awards, and former politician. But there is also another side of the story not mentioned in his official biography – it explains, to some extent, the aggressive business practices used by Neocleous.
In the 1950s, Andreas Neocleous was an active fighter for the independence of Cyprus; in 1957 he joined EOKA, a Greek Cypriot nationalist guerrilla organization fighting for the end of British rule using all methods, including terrorist attacks. Later he was arrested and sentenced to death. But a year later, he was unexpectedly pardoned and released from the death row cell. According to the Cypriot media, this happened because Neocleous had turned his comrades in and made a deal with British secret services. In 1967, after a military coup in Greece, Neocleous joined pro-American EOKA B known for 13 failed assassination attempts against Archbishop Makarios, former President of the Republic of Cyprus. Historians wrote that Neocleous was a mediator between KYP (the national intelligence agency of Greece), CIA, and Cypriot rebels. After the military coup in 1974, he was in charge of the Cypriot Ministry of Internal Affairs for one week. In 1980s, Neocleous has withdrawn from politics and started practicing business and jurisprudence using his connections with special services of many countries. For instance, he had actively lobbied the attraction of the American capital and Israeli businesses to the island and initiated the launch of first casinos on Cyprus.
Andreas Neocleous has long-term relations with Russia. In the ‘turbulent’ 1980s and 1990s, when Russian businesses started going offshore, Neocleous already had friendly relations with a number of Russian top-rank politicians and businessmen and, according to the CrimeRussia source, assisted them in laundering monies siphoned from Russia. In the 2000s, the presence of Neocleous in Russia has become truly invasive – he officially was a member of boards of directors in a number of major companies (for example, in oil and gas mining ITERA Group of Companies). According to some sources, Neocleous had secretly assisted the family of Yuri Luzhkov in legalizing funds siphoned from the country through FBME Bank. He is also known for his role in the offshore legalization of assets and funds belonging to Ukrainian President Petr Poroshenko.
The source states that raiding takeovers in Russia are a normal practice for Neocleous. The lawyer has strong connections in the law enforcement agencies and power structures (Senator Evgeny Tarlo and some other influential figures are named among the friends of Neocleous).
The former agent of secret services (or perhaps not former for some of those) has no scruples about the methods he uses, including bribes and forgery of entitling documents.
In 2011, Andrei Ermakov, a representative of Andreas Neocleous & Co. LLC in Russia, had forged signatures and seals of a notary public and falsified documents pertaining to Rosinka Closed Joint Stock Company. After the initiation of a criminal case against him under part 1 of Article 170 of the Criminal Code of the Russian Federation by colonel of justice Aleksander Gubanov, Head of the Investigative Department in Krasnogorsk of the Investigative Committee of the Russian Federation, Ermakov had offered him a bribe.
Ex-Colonel Aleksander Gubanov
However, Gubanov has estimated the interest of Cypriots to Rosinka much higher and demanded 700 thousand rubles per month. For approximately a year, the Cypriots had been diligently paying him the ‘kickbacks’, but when Gubanov has requested $5 million, they came directly to the Federal Security Service (FSB) of the Russian Federation. As a result, greedy Gubanov has got 10 years behind bars for bribe-taking, while Ermakov was exonerated from all charges. But Andreas Neocleous and his firm have been charged with swindling in Russia, and an international warrant was issued against him.
According to the CrimeRussia source, the ‘Providencia case’ is only a tip of the iceberg that has become known to the public. But nothing is secret, that shall not be made manifest – and the story of Mossack Fonseca & Co. confirms this. This is not only about Russia: the Interpol has also been expressing interest to the operations of Andreas Neocleous & Co. LLC for a while. The current legal action in Cyprus is an alarm bell for the whole empire of Andreas Neocleous – the raiding lawyer is now facing prosecution at the international level.