Reuters: The Hermitage case and corruption in Russia
October 20, 2009
Foreign investors have come to accept that Russia is a pretty unforgiving place to put your money. Just ask BP, which was embroiled last year in a bitter feud at its joint venture TNK-BP, during the course of which BP endured a slew of questionable investigations and court cases. Or Norway’s Telenor, pressured recently into settling a dispute with its local partners under pain of seeing its stake at Russian mobile operator Vimpelcom confiscated by the government.
Such cases show how powerful interests seem able to use the legal process to extract money and concessions from foreign investors. But one foreigner’s tale makes even these well-known controversies look mild. Hermitage Capital Management, once the largest foreign investor in the Russian stock market, has become embroiled in a case that raises even more disturbing questions about the Russian justice system.
Hermitage claims to have uncovered evidence which shows that Russian gangsters conspired with bent cops and corrupt courts to steal three of its Russian subsidiaries, and subsequently used them to loot $230 million from the Russian budget by reclaiming taxes those companies had paid.
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