BusinessWeek: Hermitage Claims Russian Bankers May Have Helped With Fraud
July 31, 2009
In a New York court filing, Hermitage alleges that executives of Moscow investment bank Renaissance Capital Holdings had prior knowledge of theft and tax fraud
By Paul Barrett and Brian Grow
The saga of Hermitage Capital Management, once a major force in Moscow financial circles, has taken a new twist in the form of a potentially explosive court filing in New York.
Hermitage, now located in London, has alleged that it was the victim of Russian corporate raiders and corrupt government officials who cooperated to steal its assets, file bogus law suits, and reclaim $230 million in taxes previously paid by Hermitage to the Russian government. In its filing on July 28 in U.S. District Court in Manhattan, Hermitage alleges publicly for the first time that executives of another prominent Moscow financial institution, investment bank Renaissance Capital Holdings, may have helped defraud Hermitage.
The July 28 filing is an application for a court order permitting Hermitage’s lawyers to seek documents from Renaissance’s New York unit. In particular, Hermitage alleges that “certain current and former executives of Renaissance and its affiliates” had relationships with a Russian bank involved in the fraud. Hermitage also suggests in its filing that certain top Renaissance executives had “knowledge of the fraud before it became public knowledge.” Renaissance, the largest Russian investment bank, is one of the most active sellers of Russian securities to Western investors.
The Daily Telegraph: Hermitage points to RenCap in fraud case
July 31, 2009
By Philip Aldrick
Hermitage Capital Management, the hedge fund battling state corruption in Russia, has accused Renaissance Capital, one of Russia’s leading investment banks, of possible involvement in two alleged frauds costing the Russian taxpayer $337m (£204m).
In a testimony filed by Hermitage’s lawyer in a New York court, the hedge fund claims there is sufficient circumstantial evidence to suggest that RenCap and its former directors, including Stephen Jennings, the “Kiwi oligarch” who founded and is chief executive of parent company Renaissance Group, may be “implicated in the tax rebate fraud”.
Hermitage has been fighting the Russian authorities for two years to get them to acknowledge “a sophisticated conspiracy” involving “senior officers in the Russian Interior Ministry, the Russian Federal Security Service, senior officers of the Russian tax bureaux and certain senior Russian court judges”.
The hedge fund, once Russia’s largest foreign investor, led by US national Bill Browder, first uncovered the alleged fraud in 2007 after three of its subsidiaries were stolen in a complicated scam following a police raid on its Moscow offices, when legal documents and seals were confiscated.
The New York Times: Major Investor in Russia Sees Wide Fraud Scheme.
July 30, 2009
By ANDREW E. KRAMER MOSCOW
William F. Browder, once the largest foreign investor in the Russian stock market, filed court documents in New York this week contending that other Western investors in Russia had colluded with the authorities to steal hundreds of millions of dollars through tax refunds and then laundered the money through New York banks. Mr. Browder has hired the law firm of John D. Ashcroft, the former United States attorney general, to represent him in New York in a request for a subpoena for bank wire transfer and other records that Mr. Ashcroft contends will prove Mr. Browder’s allegations.
The filing is a new twist on Mr. Browder’s case, which began almost four years ago. His lawyers say the wire transfers will show a fraud larger than previously disclosed — remarkable even by the standards of Russia.
In its sweep and scale, the case has echoes of the Bank of New York money-laundering scandal in the late 1990s, though this time there are no allegations that American banks other than the subsidiary of a Russian investment company were involved. Mr. Browder was expelled from Russia in a politically tinged visa refusal in 2005, and relocated his business, Hermitage Capital Management, to London. Later, he said subsidiary companies he had formed in Russia to invest in Gazprom, the Russian gas monopoly, were used by others to acquire a fraudulent tax refund of $230 million.
The Financial Times: Russian sharks are feeding on their own blood
July 6, 2009
By William Browder
When presidents Barack Obama and Dmitry Medvedev met on Monday for their first major summit, the main agenda items were arms control and Iran, and progress was made on the former, at least. This may encourage those who believe these issues can be dealt with in isolation from other challenges to US-Russia relations.
As someone who has been familiar with the country for the past 15 years, I believe that approach ignores fundamental differences between Russia today and most other nations. Simply put, Russia is not a “state” as we understand it. Government institutions have been taken over as conduits for private interests, some of them criminal. Property rights no longer exist, people who are supposed to enforce the law are breaking it, innocent people are victimised and courts have turned into political tools.
Rather than a normally functioning bureaucracy, Russia’s clans fight over control of government positions and the power to use state resources to expropriate assets. While corruption and legal abuse go on everywhere, the scale of them in Russia should affect the way all countries, particularly the US, deal with it.
My own case is illustrative of the breakdown of the state in Russia. From 1996 until 2005, I was the largest portfolio investor in the country, with $4bn (£2.5bn, €3bn) invested. In November 2005, the government suddenly took my visa away and declared me a “threat to national security”, I believe because I was outspoken about corruption at state-owned companies. This was followed by a cascade of malfeasance so extreme it would make a hardened criminal blush – which I believe was orchestrated by the authorities.
The Washington Post: Corruption Taints Courts In Russia
June 24, 2009
By Philip P. Pan
A special European investigator issued a stinging report Tuesday that alleges widespread political abuse of the Russian courts and urges countries not to extradite people to Russia if they might be denied a fair trial.
The conclusions by Sabine Leutheusser-Schnarrenberger, a former German justice minister, are likely to further strain Russia’s relations with the Council of Europe, which commissioned the probe and is locked in a standoff with Moscow over the future of the European Court of Human Rights.
Russia joined the council in the 1990s, but it has recently attacked the court’s impartiality and is the lone council member blocking a plan to streamline its operations. The court, based in Strasbourg, France, acts as an appeals panel of last resort for residents of 47 member countries.
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