Sergei Pugachev, the oligarch who claims 12 billion from Putin.

INVESTIGATION – The Russian billionaire used to be the owner of shipyards, coal mines and of Hédiard. Fallen from grace, tracked by the Russian justice, and also by the British, he contends that he was expropriated. We have met the “Tsar”’s former advisor, who is now seeking remedy before a tribunal in Paris.

For a long time he used to be known as “Putin’s banker”. Today, the banker has turned against his “client”, and demands nothing less than 12 billion dollars from the latter. This stupendous amount is being claimed from the Russian Federation and, thus, from Vladimir Putin, because according to the Claimant, “Putin is the State”. The man who dares to defy the almighty Russian president is Sergey Pugachev, a fallen oligarch and a longtime citizen of France. It is in his capacity as a French citizen that he shall fight the next round of this power struggle on Tuesday 12 November in Paris — the struggle that aims to recover his expropriated assets’ value.

In the busy crowd of Russian oligarchs there are those who are still at the sovereign’s court, those fallen from grace and those who disappeared under more or less mysterious circumstances. Sergei Viktorovich Pugachev used to be the owner of the delicatessen brand Hédiard and, through his son Alexander, of the daily newspaper France Soir. He is now preparing to take part in a hearing of the International Arbitration Court of The Hague, commencing this Tuesday. Four days of judicial confrontation, taking place in Paris rather than in the Netherlands. “This was done to ensure the safety of a French citizen”, says Sergei Pugachev.

The former banker has arrived by plane from Nice, where he lives, and has offered to meet Le Figaro’s journalists in a cosy salon of a luxury hotel in Paris. The man is tall and slender, casually dressed in a leather jacket, a dark jumper and jeans. His beard and moustache are trimmed shorter than in the 2000s, when his face invariably reminded one of Nicholas II. He comes accompanied by his body guard, who is sporting a conspicuous earpiece and sits down a few meters away. “I have been receiving death threats for years”, Pugachev explains.

In 2015, when he was still living in London with Alexandra Tolstoy, the mother of his three younger children, strange boxes were discovered under his car. He believes them to be explosive devices; they might have been beacons. The case was referred to Scotland Yard, then brought before a French court. The investigation is still ongoing. “My lawyers here, Pugachev says in a bantering manner, have figured out they were being followed. As to me, I’m already used to it, you know.” Unrelenting intimidation? Genuine desire to have Pugachev killed? When you are up against the Kremlin, no hypothesis can be excluded.

But how did the former owner of Hédiard get himself in this most uncomfortable situation? We ask him, and he tells us, his speech somewhat harried. Sergei Viktorovich, 56 years old, has several lives behind him. He understands French, is fluent in English, but he prefers to use the language of Pushkin when pleading his case. “I was close to Patriarch Alexis (head of the Russian Orthodox Church from 1990 to his passing in 2008), he knew my father”, Pugachev begins. “It is through him that I came to be Boris Yeltsin’s adviser”. Pugachev had not yet turned thirty, when he founded “the first private bank” in post-Soviet Russia: the International Industrial Bank a.k.a. Mezhprombank. The financier denies having been the Patriarchate’s banker, leave alone having laundered the Church’s money. This, according to him, is a “fake story”, that is being spread around.

Having become part of the “Family”, that is President Yeltsin’s inner circle, Sergey Pugachev moved to a dacha, one of those lavish villas built in the suburbs of Moscow for the Soviet establishment. There, in the Gorki residential area, the young banker and councillor to the reigning sovereign had a neighbour: one Vladimir Putin, the new head of FSB. The two men got acquainted. For whoever would be inclined to doubt his close relationship with “Volodia”, Pugachev has posted on his personal website photographs of a birthday party and a snooker game at Brezhnev’s former country house. The picture shows Pugachev’s two elder sons, born from his marriage with Galina, still in their teens, keeping company to Masha and Katia, Putin’s daughters. The latter are a taboo subject in Russia.

He may be ten years younger than Putin, but Sergey Pugachev claims to have brought the king to power. He insists that he was the one to mention the FSB chief to the Yeltsin clan, as a potential prime minister and successor to the declining president. Against the widespread clichés, Pugachev depicts Putin as a weakly character, “incapable of saying no” — one who would always side with the most powerful clan at a given moment. A description at odds with his own assertion that “today all the high-ranking officials, governors, former KGB men —  they have all been appointed by Putin; I was one who owed nothing to him”.

The businessman is brimming with memories; so much so that it is sometimes hard to keep track of the precise chronology of his various personal interactions with Putin. One such crucial exchange, “dragging on until 3 am”, took place in 2009 in the President’s residence of Novo-Ogarevo. “He failed to realise that the situation in the country had changed. He kept telling me that the people needed a Tsar.” On that day the oligarch tells the Tsar that he wants to leave the country and settle in France, where he owns, among other assets, Hédiard, purchased in 2007. According to him, his Russian financial and industrial empire, employing 300 000 people, amounted to 15 billion dollars back then. “I understand that Putin did not want my assets to end up in the hands of the wrong people.” According to Pugachev, quite a number of documents analysed by his innumerable lawyers — who are Russian, British, American and French — clearly show that back then the State was still prepared to buy his assets from him. “The choice morsels were my shipyards in Petersburg, with their order book of 60 billion dollars” — the very shipyards that were to build the Mistral-class combat ships bought from France, before François Hollande repudiated the contract in response to Russia’s annexation of the Crimea. From then on, Pugachev says, Putin’s entourage, “the pack”, were set on grabbing his assets.

Problems started to pile up. Mezhprombank went bankrupt. The Russian justice allegedly established Pugachev’s subsidiary liability for nearly a billion dollars. The oligarch swears that he “had nothing to do with the bank at least for the past nine years”, and points to “a case that has been fabricated from beginning to end”. But this bank, which he had founded, and whose licence was withdrawn in 2010, was actually financing all of his other companies. He made the point in a letter addressed to Putin in 2014. In a television speech Putin threatened Pugachev, and enjoined him to “return what he has taken”. “This TV show came as a real shock to me. It marked the beginning of aggressive expropriation”, the President’s former adviser tells us. The takeover of the shipyards was followed by the freezing of assets of the world’s biggest coking coal mine, which Pugachev was developing in Siberia. Pugachev was also ousted from the prestigious real estate development project on Red Square, which was going to involve Jean-Michel Wilmotte. Hediard’s bankruptcy, too, was allegedly caused by the Kremlin’s cutting his cashflows.

Moscow succeeded in obtaining a worldwide freezing order on Pugachev’s assets from the British justice. Pugachev, who failed to comply with the orders of the London courts and left the United Kingdom, has been condemned in absentia to two years of emprisonnent for contempt of court.

The French justice, on the other hand, in a decision of the Tribunal de Grande Instance of Nice rendered in February 2019, ruled against a seizure of Pugachev’s assets in France by the Deposit Insurance Agency, acting as Mezhprombank’s liquidator. The businessman was thus able to retain ownership of the château de Gairaut — a stunning property build in 1904 on a hill above Nice, offering an unrivalled view over the Angels’ Bay and now guarded by intimidating Malinois dogs.

In 2015 Pugachev filed a claim before the International Arbitration Court at The Hague. His former partner, Countess Alexandra Tolstoy — related to the famous Russian writer — is known to have asked him to withdraw his claim in exchange for the right to see his children. “My children’s mother has been corrupted by the Russians… I have not seen my youngest six-year old daughter for three years”, the ex-oligarch breathes out, his razor-sharp green-grey eyes suddenly getting misty. As to Alexandra Tolstoy, she has complained to the British press that she has been denied any financial support by her ex-partner.

How, then, does he now manage to finance his lifestyle on the French Riviera, pay his lawyers, afford personal safety measures? Pugachev tends to stay discreet about his “business”. He is also a young grand-father: he has six grand-children, born in France to his two older sons. He launches into an enthusiastic speech about OPK Biotech, a Boston start-up working on artificial blood, in which he has had stock for years.

In Paris, the three arbitrators (a Columbian, designated by the Claimant, a Spaniard designated by the Russian side, and a Frenchman) have called high-ranking witnesses to appear, among whom Aleksei Kudrin, former minister of Finance of the Russian Federation and current Chairman of the Court of Audit, and former Prime minister Viktor Zubkov. Their actual appearance at the hearing would be a surprise. There are seven lawyers approved for each side by the Tribunal’s order, but Jean-Georges Betto, representing Sergey Pugachev, and David Goldberg from the London firm White&Case, representing the Russian Federation, have both refused to comment.

Can the oligarch win? An historical arbitration precedent was set in 2015, when the International Arbitration Court of The Hague issued an award in favour of the majority shareholders of the Yukos group, founded by Mikhail Khodorkovsky, condemning Russia to pay the gigantic amount of 50 billion US dollars. The award was subsequently set aside, and this 15-year-old case is still ongoing. Sergey Pugachev believes his own case to be sounder from the legal standpoint, because it relies on a bilateral agreement on investment protection, signed by the USSR and France on 4 July 1989.

This week’s hearing will mark an additional step in a seemingly endless judicial saga. If Pugachev wins the arbitration and Russia refuses to pay, this will mean “that the 160 bilateral agreement on investment protection signed by Russia are worth nothing”, the banker warns. This would signal disaster for such French companies as Total, Renault or Auchan, that have invested billions in Russia. According to Pugachev, Emmanuel Macron should use this legal case as a trump card to exert pressure on Russia. The former protégé of the Orthodox Patriarch has faith in his case and in the international justice. Even faced with his former neighbour and friend Volodia, he declares that “it is impossible to lose”.

FSB colonel Cherkalin has testified against Miroshnikov, former deputy head of the DIA.

FSB colonel Cherkalin has testified against Miroshnikov, former deputy head of the DIA. The latter is charged with setting up a scheme for racketing banks.

According to one of the versions pursued by the Investigation Committee of the Russian Federation, part of the billions found at the colonel’s home were in fact the “share” belonging to DIA’s top manager Miroshnikov, who has left Russia.

Testimony of an officer

Kirill Cherkalin, the former head of the Second Section of the “K” Department of the FSB Economic Security Service, has told the investigators of the role played by the First Deputy Head of DIA, Valery Miroshnikov, in setting up schemes for criminal “protection” of banks (known in Russian as kryshevanie — translator’s note). This information has been shared with “Open Media” by a contact familiar with the above individuals, both of whom are currently under criminal investigation; it has also been confirmed by a source close to the investigation. Miroshnikov currently has the status of witness in this case, but Cherkalin insists that the Deputy Head of DIA was the one setting up all the criminal schemes. Furthermore, according to Cherkalin’s statement, a large part of the record amount of 12 billion rubles, found during home searches, did in reality belong to the state agency’s top manager and was merely “deposited” at the officer’s parents’ place. “A man who is being blamed for all has cropped up in this case”, stresses an acquaintance of the colonel’s.

The statement of Oleg Shigaev, former owner of Baltiysky Bank, also mentions Miroshnikov’s receiving large bribes. Shigaev’s statement is currently being checked by the Investigation Committee. Shigaev also alleges that Miroshnikov used to force the management of the targeted financial institution to agree to a restructuring procedure, threatening that failure to comply would result in the withdrawal of the bank’s licence and “unavoidable problems with law enforcement bodies”. Out of the funds allocated to the restructuring, one billion was to be paid to Miroshnikov and his “supervisors from the FSB, for organising and facilitating the deal”.

Miroshnikov was involved from the start in the setting up of the Russian deposit insurance system, having first worked for the Central Bank, then for the Agency for the Restructuring of Credit Institutions, which was subsequently replaced by the DIA. Miroshnikov has thus worked at DIA from the very beginning, being first appointed Deputy Head, then First Deputy Head in 2005, when he was put in charge of all the issues connected with the liquidation and reorganisation of credit institutions. The authors of the joint investigation conducted by the media “Proekt” and “The Bell” quote bankers, who wished to remain anonymous, saying that Cherkalin and Miroshnikov tried to obtain money from them for preventing the withdrawal of their banking licence and suspending criminal pursuits launched against those bankers for diversion of funds.

Three persons are currently facing charges in this case: Kirill Cherkalin, and two of his colleagues, namely Dmitry Frolov, his predecessor as head of the “banking” section, and one Andrei Vasiliev. They were arrested on 25 April 2019. Cherkalin is charged with having provided “overall protection” to commercial entities, against payments amounting to 850 000 US dollars. All three are also under suspicion of fraud. A “Kommersant” article mentions that Cherkalin allegedly received money for “protecting” Aleksandr Mazanov, co-owner of Transportnyi Bank, and was also part of a criminal group, that embezzled profits from the selling of luxury residential properties in Moscow.

Cherkalin is actively cooperating with the law enforcement bodies. “Rosbalt” writes that the colonel has repented and asked to sign a preliminary agreement. “Businessmen and bankers, who at some point had to face the Cherkalin-Frolov tandem and their accomplices, are currently coming to the FSB to declare amounts that were transferred to the latter in exchange for protection and other such services. However these statements can seldom be taken into account, for lack of substantial evidence. Now that Cherkalin has made his statement, some of these cases might perhaps be investigated further”, says a source within the Agency. Finally, Cherkalin has agreed to hand over to the State some 6 billion rubles, which, according to his lawyer, were derived from “sources not provided for by the law”. Cherkalin’s lawyer Vladimir Mikhailov refused to comment on the ongoing investigation.

An Israeli partner

The investigators grew interested in Miroshnikov’s correspondence with Cherkalin, but have so far been unable to interrogate him: being summoned by the authorities, Miroshnikov failed to appear. On 10 July the DIA announced that Miroshnikov had resigned from his post. According to a person acquainted with the Agency’s Deputy Head, interviewed by “Open Media”, Miroshnikov has not been seen at the workplace for at least two months before his resignation. He appears to have left the country immediately after Cherkalin and his two colleagues were arrested. The FSB colonel somehow seems to only use the past tense to speak about the former Deputy Head of the DIA: “Cherkalin testifies against Miroshnikov, speaking as if the latter was already dead”, stresses one of the colonel’s acquaintances.

According to one of the sources mentioned in the joint investigation by “Proekt” and “The Bell”, after Cherkalin was arrested, Miroshnikov first went on vacation to Australia with his family, then moved to Germany. The investigators believe that he might currently be in Israel, says a source close to the Investigation Committee. According to that source, Miroshnikov might have joined his former business partner and colleague Aleksandr Dunaev. Dunaev had been previously mentioned by Mezhprombank’s former owner Sergei Pugachev. The senator accused Miroshnikov of attempting to extort 350 million dollars from him, threatening him with physical reprisal and criminal pursuits. Incidentally, these threats were allegedly conveyed to Pugachev in June 2011 by Aleksandr Dunaev.

Dunaev is also mentioned as a “consultant working with the DIA” in the testimony of Oksana Reinhardt, executive director for emerging markets at the Japanese financial firm Nomura. Reinhardt gave an affidavit in 2012 in relation with the Pugachev case and  in view of potential international arbitration proceedings (which were effectively launched when Pugachev filed a claim with the Permanent Arbitration Court at The Hague). “Open Media” has a copy of the materials mentioned above, and their authenticity has been confirmed by a source familiar with the investigation.

Given that Nomura was a creditor of Mezhprombank’s, Reinhardt attempted to find out from Miroshnikov how her firm might recover its funds. According to her, during their first meeting with Miroshnikov, the Deputy Head claimed to “have experience in putting pressure on oligarchs who have left Russia”. During their second meeting Dunaev was also present, and stated that issues related to the debts of Pugachev’s entities would be solved by selling his Severnaya shipyard. Creditors would then be able to claim funds, but not Pugachev, Dunaev added. This is what effectively happened: the shipyard was auctioned during the summer of 2012 and sold for a price nearly eight times lower than what Pugachev had expected to obtain.

In 2012 Dunaev fell under criminal investigation in a case of embezzlement for over half a billion rubles, but he was able to flee the country. In 2014 he was arrested in Israel, but no extradition occurred, because an Interpol red warrant was been issued against him in 2017. Dunaev is still wanted by the Ministry of Interior, according to the Ministry’s database.

Top officials invited to The Hague Tribunal to testify in $12 bln case “Sergei Pugachev VS Russia”

President Putin and Senator Pugachev

Audit Chamber head Aleksei Kudrin ( Deputy Prime Minister of Russia from May 2000 to March 2004 and from September 2007 to September 2011 ) , chairman of Gazprom’s board of directors Viktor Zubkov ( Prime Minister of Russia, Vice Prime Minister from May 2008 to May 2012 ) and investment banker Oksana Reinhardt have been invited to testify in a case filed by former billionaire Sergei Pugachev, once a member of President Vladimir Putin’s inner circle, against the Russian Federation in Paris. The legal battle began when ex-senator Pugachev, who left Russian in 2011, demanded $12 billion from Russia for allegedly expropriating his assets. The lengthy proceedings have finally reached the decisive phase.

Mr Pugachev is represented by “Betto Perben Pradel Filhol

  • The hearing will take place between 12 and 17 November. Kudrin, Zubkov and Reinhardt have been asked to testify in person; and they may be cross-examined by the judge, as well as both the prosecution and the defense, according to two sources who spoke with The Bell. Pugachev and those invited to testify either declined to comment or didn’t respond to The Bell’s requests for comment.
  • Kudrin and Zubkov have been asked to testify in relation to plans from the early 2000s to build an elite hotel on Red Square. Companies close to Pugachev signed $300 worth of contracts with a firm created specially for the project and, in return, Pugachev was supposed to get a stake in the finished complex. Instead, in 2007, construction was frozen, and ownership of the site transferred to the Federal Security Service. Pugachev successfully sued the Ministry of Finance for $26.2 million in 2011, but this did not cover all of his losses.
Sergei Pugachev and Vladimir Putin
  • It seems likely that Reinhardt has been invited to talk about Mezhprombank, which was founded by Pugachev but lost its license in 2010 (when Pugachev no longer owned the bank). Reinhardt, who was an executive at Japanese bank Nomura at the time, has once before provided written legal testimony — in 2012 — relating to Pugachev and Mezhprombank’s loss of its banking license, and she might have a lot of interesting things to say, one source told The Bell.
  • Kudrin, Zubkov and Reinhardt received invitations rather than a formal summons, so they will not face any sanction should they chose not to comply. But if they are no-shows this could also influence the court’s decision, according to a lawyer at a European law firm who spoke with The Bell.
  • Lawsuits have flown between Russia and Pugachev for almost a decade, and have led to legal battles in several different countries. In the Hague, Pugachev is accusing Russia of expropriating four groups of assets that used to belong to him: shipbuilding companies, Yenisei Industrial Company, the Red Square development project, and land near Moscow. A criminal case has been filed in Russia against Pugachev in which he is accused of embezzlement. Finally, Russia’s Deposit Insurance Agency is using a London court to helpy it locate and seize Pugachev’s global assets. One former top executive from the Deposit Insurance Agency, who has a long-standing disagreement with Pugachev, was the subject of The Bell’s recent investigation into the FSB and money-laundering.

Why the world should care. The story of Pugachev is one of the most significant corporate conflicts in recent Russian history. While lawsuits heard abroad like this often shed fascinating light on how business is really done in Russia, unfortunately this will not be the case with Pugachev as the Russian Federation’s defense team has succeeded in ensuring proceedings take place behind closed doors. Any information that does emerge, however, will be worth watching.

Anastasia Stognei

21/10/2019 The Bell

The Rise and Fall of an FSB-Run Money Laundering Empire

The Bell and investigative website The Project looked into an FSB backed financial empire, and why it all fell apart.

As the head of the banking oversight department at Russia’s domestic intelligence agency, Colonel Kyrill Cherkalin wielded immense power: With a click of his fingers, he could cause bankruptcy or give a zombie bank a new lease of life. But then it all went wrong: earlier this year he was arrested on fraud charges and 12 billion rubles ($180 million) in cash and jewelry was found in his apartment and other places linked with him and his colleagues. The Bell and investigative website The Project looked into how Cherkalin became a key figure in the money laundering business, how he ran his financial empire, and why it all fell apart.

For a meeting at Moscow’s Vogue cafe with banker Alexander Zheleznyak in summer 2014, Cherkalin arrived in a chauffeured Range Rover wearing an expensive Rolex watch. At that moment, Zheleznyak was co-owner of Life, a large financial holding. Cherkalin immediately got down to business, suggesting that a retired officer from the Federal Security Services (FSB) be made vice-president at Probiznesbank (one of Life’s main assets) with an annual salary of $120,000, a private office, personal driver and assistant.

But this was a mere detail. Zheleznyak had already received the main demand: cede a large stake in Life to a company that will share its income with senior officials from the FSB and the Prosecutor General’s Office.

These details come from a statement from Zheleznyak, acquired by The Bell and The Project, which he gave under oath this year in the United States. His testimony is set to be used in legal proceedings that Life’s former owners have launched in the U.S. and Europe.

For the co-owners of Life, childhood friends Zheleznyak and Sergei Leontiev, dealings with Cherkalin ended very badly. After the meeting, the partners agreed to take part in the protection racket involving Probiznesbank, but they did not hand over shares in all their businesses. Later, their banking license were revoked by the regulator, criminal cases were started against them, and both fled Russia. The Central Bank believes that Life was engaged in illegal financial activity, while Zheleznyak insists they went bankrupt because of pressure from the authorities.

The tale of Life is just one in which Cherkalin, 38, and his FSB colleagues played starring roles. Cherkalin’s department at the FSB oversees the financial sector (banks, pension funds and insurance companies) and is one of the most powerful branches of the notorious Department K, which is responsible for economic security.

The two men arrested at the same time as Cherkalin were his former boss, Dmitry Frolov, and the more junior Andrei Vasiliev. While Cherkalin was still in his post when he was detained, Frolov and Vasiliev were dismissed several years earlier, after newspaper Novaya Gazeta published details of real estate allegedly owned by them on the shore of Lake Maggiore in Switzerland and Italy.

Protection racket

“Brilliant, very smart, well-versed in the field” is how Cherkalin was described by one major Russian banker. “But these are business guys, that’s what their [whole] generation is like.”

These sorts of commercially-minded FSB officers rose to power in the early 2000s at the same time as Russia’s money laundering business was booming, according to a source close to the FSB familiar with Cherkalin and his colleagues. “You know the principle: If you realize it’s useless to fight something, you have to lead it,” he explained.

Department K at the FSB had two main ways of interacting with banks: either they demanded a percentage of all withdrawals into cash (up to 0.2% of the transaction), or they took bribes and payoffs for specific violations, said a source close to the FSB.

To ensure the percentage was paid, whole protection rackets were established. This usually took the form of a retired FSB officer being given a position at the bank’s security team from where he could monitor cash flows. The ex-officer was also responsible for collecting information about the market. This scheme exactly matches what Zheleznyak said in his testimony about the ex-FSB officer that Cherkalin suggested employing at Probiznesbank.

The FSB did not respond to a request for comment.

At the end of May 2019, Cherkalin was visited in prison by prison monitors, who were surprised to see him wearing an expensive Givenchy tracksuit. Cherkalin’s cell was decorated with so many icons that some newspapers compared it to an Orthodox chapel.

Milking the money launderers

The system over which Cherkalin ruled was built up over several years, and was familiar to many bankers, particularly those involved in the money laundering business.

Mikhail Zavertyaev, a former со-owner and deputy chairman of Intelfinance bank, which collapsed in 2008, is one of those bankers. His relationship with Department K began in 2007 when he met Yevgeny Dvoskin, a mysterious figure described as a key player in the money laundering market with close ties to both the FSB and criminal gangs.

In an interview, Zavertyaev recalled how, in December 2007, he caught his chief accountant trying to arrange a credit line to a front company supposedly linked to Dvoskin. The following day, Dvoskin and his bodyguard, who spoke like a mafia enforcer, arrived at his offices in an ambulance. “Dvoskin came up to me, hit me in the ear, and I struck him with my elbow,” Zavertyaev said of the encounter. “He dropped to the floor and my first thought was that he had fallen on top of my suitcase with documents and that he would grab the suitcase and flee. I bent down to move the suitcase, he hit me with a pistol and I lost consciousness.”

Dvoskin has always maintained that Zavertyaev is a liar and, in court, argued that he couldn’t have assaulted Zavertyaev as he had been giving evidence in another criminal case at the moment the attack was supposed to have occurred.

Zavertyaev said the encounter did not end with his hospitalization after the fight. His wife’s car was torched shortly after and, over the next two months, about 11.7 billion rubles was extracted from Intelfinance. Still trying to get the money back, half a year later, Zavertyaev said he met Frolov, Cherkalin and Sergei Smirnov, deputy head of the FSB, at the Palazzo Ducale, a plush restaurant in downtown Moscow.

According to Zavertyaev, his dining partners were courteous, insisting he try the salad. From the conversation, he said he realized they were well acquainted with Dvoskin and were trying to understand what evidence he had of Dvoskin’s visit. They also wanted to convince him to stop trying to retrieve Intelfinance’s lost money. Eventually, he was offered financial compensation, which he said he refused. All Zavertyaev’s subsequent efforts to use the courts to get the money back have come to nothing.

Dvoskin was under the protection of the FSB, according to two sources close to Russian security agencies. When asked about his connections to the FSB, Dvoskin hung up the phone.

Cooperation between the FSB and banks carrying out money laundering was apparently extensive. The FSB “took the money launderers under its wing and made them its informers,” one source close to the security agency told The Bell and The Project. One of these informers he named as Aleksei Kulikov, the former co-owner of a small bank, Kreditimpeksbank, who is currently serving a 9-year prison sentence for fraud.

A source close to the FSB recalled that, at first glance, Kreditimpeksbank’s offices in the mid 2000s never looked like much: a half-empty banking hall, about 20 shabby rooms for staff and a gloomy looking security guard. But, according to the source, the bank was a big player on the money laundering market and the company’s security team was headed by a former Department K officer who received up to 3% commission on all financial transactions. Kreditimpeksbank had several run-ins with the Central Bank, but, each time, the FSB was able to help resolve the problem. According to the source, Kreditimpeksbank had several large clients with access to state funds and used fake contracts to move large amounts to construction firms in Turkey and Malta.

When Kreditimpeksbank was shut down by the regulator, it was estimated it had a 229-million-ruble black hole in its balance sheet and was conducting 13.5 billion rubles ($200 million) worth of suspicious deals every year. About 2 million rubles in cash was found in Kulikov’s apartment during a police search.

Mysterious disappearance

Cherkalin’s influence was not restricted to banks in the money laundering game. He was also in contact with both the heads of the major Russian banks and the senior officials running the state’s financial regulatory bodies.

Valery Miroshnikov, the former head of Russia’s Deposit Insurance Agency (DIA), which guarantees deposits in the case of bankruptcy, is currently a witness in the case against Cherkalin. Immediately after Cherkalin’s arrest, Miroshnikov left Russia (according to friends he first went to Australia, and then to Germany for healthcare reasons) — and has never returned. Two and a half months later, the DIA announced his resignation without giving a reason.

There are few details about the link between Cherkalin and Miroshnikov, but one source called them “good friends” and news outlet RBC has reported that investigators are looking into messages the two men exchanged. Miroshnikov is also alleged to have been involved in extortion. The former owner of Mezhprombank, Sergei Pugachev, was allegedly approached in 2011 by two men, one of whom worked for Miroshnikov, with a simple message: hand over $350 million or risk your own life and that of your family.

Pugachev’s lawyers have been telling this story in court since 2014 when the DIA began a legal drive to track down his assets and hold him liable for Mezhprombank’s debts. The Bell and The Project were unable to contact Miroshnikov, but he has previously denied authorizing the intimidation of Pugachev.

The DIA’s task is to manage the assets of banks that have collapsed or been shut down by the regulator, paying out deposits and seeking to recover assets. Over the 15 years of its existence, it has received more than 1 trillion rubles ($30 billion) from the Central Bank.

FSB infighting?

Many have pointed out the big gap between the severity of the allegations levelled at Cherkalin, and the charges on which they were formally arrested. Officially, Cherkalin and his colleagues are accused of stealing assets worth 499 million rubles ($7.7 million) from Moscow developer Sergei Glyadelkin, and Cherkalin is accused of taking a bribe worth 50 million rubles ($770,000).

Glyadelkin, who appears successfully to have stood up to the FSB, is not widely known, but has had a long career in Moscow. Until 2005, he was employed by a state company that distributed plots in downtown Moscow to developers and builders. But he also worked with Igor Chaika, the son of Prosecutor-General Yuri Chaika, and in Fall 2013, they set-up Techno R-Region, a waste management company. The Prosecutor General’s Office did not answer questions from The Bell about its relationship with Glyadelkin.

One former senior security officer said that the 12 billion rubles found during the detention of Cherkalin and his colleagues indicated “someone inside the intelligence services knew such a payment was in the offing.” The raid was deliberately planned to catch them with the cash, he said. “To keep such a sum of money for a long time is pointless; it looks like they were stockpiling it before selling it or sending it abroad.”

When asked why Cherkalin was arrested now, a businessman with good connections in the security services replied simply: “infighting” A major Russian banker, who knew both Cherkalin and Frolov, agrees. FSB director Alexander Bortnikov is 68 and the prospect of his retirement is fueling bitter battles among possible successors, according to another source. With the FSB the most powerful institution in modern Russia, victory means nothing short of gaining total control over the country.

Sergei Pugachev, PhD., 56 years old: international investor, public person, politician, MP (senator from 2001 to 2011), citizen of France.

Sergei Pugachev, PhD., 56 years old: international investor, public person, politician, MP (senator from 2001 to 2011), citizen of France.

Born in the USSR. After the collapse of the Soviet Union Sergei Pugachev devoted himself to attracting investments to Russia. In the beginning of the 1990s he and his family settled in France.

He founded the very first private bank in Leningrad and was also the founder of one of the largest private investment companies in Russia: the United Industrial Corporation (“OPK”).

During the 1990s he was part of the inner circle of the first President of Russia, Boris Yeltsin, and in 1996 led Yeltsin’s electoral team to victory.

In 1999 Sergei Pugachev suggested that President Yeltsin appoint as Prime Minister one Vladimir Putin, a perfectly unknown character back then. Later on, when Vladimir Putin ran for president, Pugachev acted as director of Putin’s electoral campaign.

After Putin’s victory in the presidential election of 2000, Pugachev remained for many years President Putin’s chief advisor, while staying largely involved in the international investment business.

Pugachev was a member of the Senate from 2001 to 2011 and played a prominent part in Russian politics, adhering to ultra-liberal views on the economic and social organisation of the Russian State.

Acting as vice-chairman of the Russian Union of Industrialists and Entrepreneurs (RSPP) since the year 2000, he advised Vladimir Putin to reform the Union in view of establishing a dialogue between the President of Russia and the owners of Russia’s major private companies. Pugachev also organised the first official meetings between President Putin and the Russian oligarchs. Incidentally, it was after one such meeting that a conflict arose between Vladimir Putin and Mikhail Khodorkovsky (YUKOS).

In 2011, due to broadening political divergence with Vladimir Putin, Sergei Pugachev was compelled to resign from all State duties and took the decision to liquidate all his Russian assets.

Pugachev had been investing in the Russian economy from the early 1990s and by 2010 he was the sole owner of the investment company United Industrial Corporation (“OPK”), whose overall assets were worth 15 billion US dollars.

Sergei Pugachev practically succeeded in resurrecting the Russian shipbuilding industry, not least by building a mega-shipyard in Saint-Petersburg, which comprised dozens of high-tech shipbuilding and machine-building companies. Pugachev’s shipbuilding corporation built both civil and military vessels, including: ice-class ships used for the development of fossil fuel deposits in the Artic region and offshore; naval ships for India and China; supply vessels for Norway; the world’s largest nuclear icebreaker; the world’s first floating nuclear power plant. For the first time since the Soviet years (1970s) the building of icebreakers in Russia had reached an industrial scale.

It was also on Sergei Pugachev’s personal initiative that his shipyards began to build the French Mistral class helicopter carriers. It was planned to have twenty ships of that class built.

In 2010, following increased pressure on the part of Vladimir Putin, Sergei Pugachev had to sell 100 percent of his share in the shipbuilding assets to the State, at a notably devalued price. At that moment, according to different valuations, Pugachev’s shipbuilding assets were worth c. 7 billion dollars.

Russia, however, failed to stand by its contractual obligations and expropriated the above-mentioned assets with no compensation.

Later Vladimir Putin entrusted the management of the corporation to his close aide, Vice Prime Minister Igor Sechin (who had previously conducted the expropriation of YUKOS).

A large share of Pugachev’s investment activities in Russia pertained to property development (acquiring land and building luxury real estate in Moscow and suburbs as well as in the centre of Petersburg). Several billion dollars were thus invested by Pugachev into purchasing land, in view of carrying out development projects.

The central jewel in this crown of luxury property in the Russian Federation was meant to be a 76.000 sq.m. 5-star hotel on Moscow’s Red Square, opposite the Kremlin. The architectural project was authored by French architect Jean-Michel Wilmotte. President Putin had personally asked Pugachev to undertake the building of a top-luxury hotel on the Red Square.

In the historical centre of Saint-Petersburg, some five minutes away from the Ermitage, about 70 hectares of land were reserved on the bank of the Neva for the building of luxury real estate properties totalling over 4 million sq.m. of floor space.

In order to free the land for this project, Pugachev transferred most of the shipbuilding workshops from the territory of the Baltiysky shipyard to the new mega-shipyard he build in the suburbs of Petersburg, on the former location of Putilov’s historic plants. The entire project was supervised by the then governor of Petersburg Valentina Matvienko (currently speaker of the Russian Parliament), who officially approved a municipal programme aimed at transferring industrial sites from the historical centre of the city to the outskirts. The project was named “New Venice” and the city council even built a metro station next to the former Baltiysky shipyard territory.

Pugachev was also the biggest landowner in the unique and elite district of the Moscow area, on the banks of the Moskva river, where many of the wealthiest people in Russia had some property. This is also the area where Novo-Ogarevo, Vladimir Putin’s residence, is located.

After Pugachev’s conflict with Putin began, all of these projects were either cancelled, or expropriated.

During the 90s Pugachev had invested into the prospection and development of a coal deposit in South Siberia.

By the mid-2000, he had become the owner of the world’s largest deposit of coking coal, a type of fossil fuel widely used in metallurgy.

It was subsequently decided to build a 402 km railroad in the area. This was the biggest railway construction project since the “BAM”, the Baikal-Amur railway. Boris Gryzlov, president of “United Russia”, the party of power, volunteered to supervise the construction.

Pugachev signed a contract with the Japanese corporation Mitsui in order to attract investments and jointly develop the project. Mitsui was thus able to acquire 49% of the Enissei Industrial Company (EPK), which was running the coke production.

By 2010 the capitalisation of EPK reached 5 billion US dollars.

At the end of 2012, however, upon an express order of President Putin, the coal production licence granted to the Enissei Industrial Company was illegally withdrawn. The company was plundered and destroyed, and one and a half billion dollars, earmarked for the development of the coal deposit, were stolen from the company’s bank account.

This is how most of Sergei Pugachev’s assets in the territory of the Russian Federation were expropriated to the benefit of Putin’s inner circle.

For several years Pugachev attempted to challenge in court the illegal actions of the Russian government, and was eventually drawn into an endless judicial intrigue in Russia. The outcome of these legal claims was of course predetermined: Putin had personally supervised the expropriation of Pugachev’s assets and had repeatedly warned Pugachev in public pronouncements of the risks the latter was taking if he continued to fight for his stolen assets.

After Pugachev had announced to Putin that he had no choice but to file a claim before The Hague International Court, the pressure upon him increased manyfold. Some of the top managers of Pugachev’s former companies were illegally sentenced to prison.

A criminal case was fabricated against Pugachev and an international arrest warrant was issued by Interpol. Interpol eventually recognised, however, that the case launched against Pugachev was politically motivated, and officially rejected Russia’s request.

By personal order of President Putin the Deposit Insurance Agency (DIA) was appointed to represent the interests of the Russian Federation in the numerous lawsuits against Pugachev worldwide, so as to divert Pugachev’s attention and financial means from The Hague claim.

But Putin did not stop at destroying Pugachev’s economic empire in Russia. He also tried to reach Pugachev’s foreign assets, turning to his advantage Russia’s international connections, having recourse to international organisations, treaties and agreements, and abusing the law.

Specifically, by invoking the agreement on mutual legal assistance signed between Switzerland and the Russian Federation, Russia succeeded in 2013 in freezing Pugachev’s funds deposited in Swiss banks. These funds being set aside for the development of Pugachev’s foreign-based assets, this led to the bankruptcy of a number of Pugachev’s companies outside Russia (among which OPK Biotech, a high-tech American company manufacturing artificial blood of a universal kind, one that did not need any special storage conditions and was suitable for all blood groups; the company had a capitalisation worth 3,5 billion dollars and had patented over 600 inventions.)

The French delicatessen brand Hédiard, also owned by Pugachev, went bankrupt for the same reasons. Hédiard was established in 1854 and, having 320 boutiques worldwide, has been recognised as part of the French heritage: it belonged the Comité Colbert, on the same footing with the Opéra National de Paris, Chanel, Christian Dior or Givenchy.

This also caused the bankruptcy of the Swiss watch-making company owned by Pugachev, which was manufacturing unique watch movements under the Polet brand. Back in Soviet times this legendary Soviet brand (also owned by Pugachev) rivalled Rolex in terms of sales volume. It had become as recognisable a symbol of the USSR as the Bolshoi Theatre, Palekh boxes or caviar.

The Russian State has persecuted Pugachev and is still using disgraceful methods to do so, from legal abuse in foreign courts to assassination attempts. Several attempts on Sergei Pugachev’s life have been made since 2010, and in 2015 SO15, the anti-terrorist section of Scotland Yard, found an explosive device under one of his cars. Thank to efficient collaboration the British and the French special services were able to thwart this attempt.

In 2013, Pugachev had a personal meeting with Vladimir Putin and was able to discuss a potential amicable settlement between the parties, conditional upon the Russian Federation’s paying a compensation for Pugachev’s expropriated assets.

Putin agreed to compensate the losses; lengthy negotiations began, for which Vladimir Putin appointed one of his close aides, a general in the special services, as his official representative.

After one year and a half of talks Vladimir Putin said: “Let him go to court. If he wins, we’ll pay up” (sic).

On 21 September 2015 Sergei Pugachev filed a 12 billion-dollar claim before the Hague International Court against the Russian Federation, based on the international Agreement on Mutual Encouragement and Protection of Investments signed between France and Russia on 4 July 1989.

In 2016 the President of the Hague Court appointed the arbitral tribunal, composed of Eduardo Zuleta Jaramillo (Presiding Arbitrator) and Prof. Thomas Clay and Bernardo Cremades (Arbitrators).

On 10 November 2016 the arbitration tribunal ordered that for reasons of Sergei Pugachev’s personal safety the hearings take place in Paris, instead of The Hague.

The Arbitration tribunal’s first public hearing took place on 13 February 2017 in Paris, on ICC premises.

Pugachev’s struggle against Putin and the Russian state to recover his stolen assets is a unique example of one man’s fortitude in single-handedly resisting an entire state.

According to Pugachev this has already become a full-time job for him. Yet he has trust in his “business model”. He is managing dozens of lawyers worldwide and regularly wins in court against the Russian state, which motivates him to keep on fighting.

In the course of those past years he has faced betrayal, duplicity and baseness from people who once were close to him. He is convinced that Putin holds nothing sacred. The Russians have suborned the mother of his three minor children (aged ten, nine and six), who currently lives in his luxury mansion in Chelsea, London’s most select area. Alexandra Tolstoy-Miloslavsky, Pugachev’s former partner and mother of his children, is kept by the Russian state and, in line with her ensuing obligations, was prepared to provide a false testimony in Pugachev’s case against Russia. When she left France she took the children with her, never to return. Sergei Pugachev has not seen his children, however briefly, for over three years. All these years the children practically have been kept hostage.

Pugachev insists that this legal cause is not his alone; it is neither a personal revenge taken on Putin, nor an attempt to gain money and to get back to the life he once had. He is convinced that this case is to be fought between France and Russia, and that it is about forcing Russia to fulfil its international obligations. All of the foreign companies present in Russia are closely following this case. Pugachev further believes that this is one more area in which the recently elected President Macron can deploy diplomatic action, given that he is currently trying to construct a relationship with the authoritarian leader of Russia.

This is one more opportunity to put an end to Putin’s aggression and impunity on the international arena, not only relatively to Ukraine and other Russian-occupied territories, but more largely by bringing Vladimir Putin before the UN International Court of Justice in The Hague.

This is one more opportunity to remind the world of the validity of international law.

Furthermore, it is a unique opportunity for President Macron to show the citizens of France that they can feel safe and protected wherever they be, in whatever situation, and that they can reasonably be proud of being citizens of the French Republic.

In one of his interviews Pugachev once said that had he been a citizen of the United States, and not of France, Trump would have long ago forced Putin to pay him a compensation for the expropriated assets.

When asked how he intends to use the 12 billion that the Russian Federation is going to pay him, Sergei Pugachev answers that he intends to allocate the major part to charity projects in the field of education, new medical technologies, and also to establish funds to help children deprived of parents.

On 17 March 2017 the Russian Federation requested from the arbitration tribunal that the hearings in the Pugachev case be confidential. This is contrary to the Rules of The Hague Court, yet the Tribunal issued a Procedural Order ordering partial restriction of information disclosure.

 

The next hearing is due to take place from 12 to 17 November 2019 in Paris.

Till Putin Do Us Part: Oligarch’s Ex-Wife Is Taking On Russia

The ex-wife of an exiled oligarch is at the center of his court battle with the Russian state, with each side accusing her of working for the other.

Galina Arkhipova is the former spouse of Sergei Pugachev, once an ally of Russian President Vladimir Putin. Pugachev is accused of siphoning more than $1 billion from a bailout of International Industrial Bank, which he co-founded. The ex-senator denies the allegations, which he calls part of a politically motivated campaign to confiscate his wealth.

The Deposit Insurance Agency, a Russian agency in charge of liquidating the bank, was in a London court this month to try to force Arkhipova to turn over paperwork in the case. The DIA accuses the divorcees of working together to protect Pugachev’s assets, an allegation he said was “an exceptional lie” in an email sent to Bloomberg.

In its filing to the London High Court, the DIA accuses Pugachev of asking her to make claims to frustrate confiscation orders. Pugachev, who now lives in France, makes his own allegation: that Arkhipova is acting in “collusion” with the DIA to “distract” his attention from his own lawsuit in Russia over its seizure of his assets. A legal representative for Pugachev repeated the allegation in email to Bloomberg.

Neither Pugachev nor his wife, Galina Arkhipova, were in the London court or had attorneys there.

The DIA and its attorneys at Hogan Lovells declined to comment on the case. Representatives for Arkhipova didn’t respond to emails requesting comment.

The London case — set for trial in early 2020 — revolves around a mansion in London’s upscale Chelsea neighborhood that he bought for 7.9 million pounds ($10 million) in 2011.

Five years ago, a London court froze his assets, beginning a global battle by the Russian state to claim what it says it’s owed. Arkhipova filed for divorce that same year, and started claiming her interests in some of their possessions.

The DIA is questioning whether the house was purchased while the couple was still married, and last week, its attorneys got an order forcing Arkhipova to hand over documents that could prove the timing of the end of the marriage.

The agency points to a July 2014 statement in a Moscow divorce court where Arkhipova said that she hadn’t had lived with Pugachev since 2002.

The DIA says Arkhipova is making only “desultory” attempts to disclose documents, which she says were lost when laptops were seized by Russian authorities in 2016.

Eddie Spence

THE FEDERAL RESERVE(S) An enquiry into how the FSB is ‘sheltering’ banks

 

PROEKT — ‘Corruption fights’ cycle

THE FEDERAL RESERVE(S)

An enquiry into how the FSB is ‘sheltering’ banks

By Anastasia Stogney and Roman Badanin, with Irina Malkova.

31 July 2019

Compiled jointly with The Bell

 

1 – How retired FSB officers become bankers

 

2 – How the FSB works along with ‘cashiers’

 

3 – ‘Bank-grabbing’ by official authorities

 

4 – Internal wars between special services

FSB officer Kirill Cherkalin and his former colleagues, who were recently arrested with 12 billion rubles in cash in their possession, were but a small part of a much larger ‘shelteringscheme targeting the Russian financial sector [known in Russian as kryshevanie: a form of criminal racket — translator’s note]. According to bankers who fell victim to the above, the scheme involved top managers of the DIA (Deposit Insurance Agency), legal specialists linked to the special services and dubious ‘cashiers’ [‘obnalshchiki’: entities offering to divert companies’ assets and cash them out illegally — translator’s note], who operated on an equal footing with high-ranking FSB officers.

 ‘We had an appointment at Café Vogue in Moscow. Cherkalin (Kirill Cherkalin, colonel of the FSB — editor’s note) arrived in a chauffeur-driven Range Rover. He wore plain clothes and had a Rolex on his wrist. I remember him paying the bill in full, which is rather unusual for those guys’, recalls Alexander Zhelezniak, former co-owner of the financial group Life. Zhelezniak, along with Life’s other shareholders, has been living abroad for four years now — ever since their banks’ licences have been withdrawn and criminal pursuits have been initiated against the banks’ shareholders and top managers.

The meeting with Cherkalin took place in the summer of 2014. Over lunch, the FSB officer proposed simple collaboration arrangements: Probiznesbank, one of the pillars of the Life Group, would appoint a retired FSB officer as vice-president, who would be paid an annual salary of $120,000 and would enjoy an office, a personal assistant and a company car with driver [information contained in Zhelezniak’s affidavit, which Proekt/The Bell were able to consult]. This was a precondition for a broader agreement to transfer a significant stake in the Life Group to a commercial entity, which would be sharing dividends with senior officials at the FSB and the Procurature.

In 2019, Zhelezniak, who was then in the United States, signed an affidavit to be produced before international courts, in which he described in detail the events around the Life Group [the former shareholders of Life have filed several lawsuits in Europe and the United States against Russian creditors. The editors were able to consult Zhelezniak’s affidavit and the statements of several other managers of the Life Group]. His affidavit as well as the accounts of other bankers have shed some light on how the FSB and other official authorities are ‘sheltering’ banks in Russia.

 

Excerpt from Alexander Zhelezniak’s affidavit

Mr. Cherkalin, a long-time civil servant, arrived at the meeting in a luxury car with driver, sporting a Rolex watch on his wrist. He confirmed that my letter to the FSB had been countersigned, and said that he was taking the case under his personal control. We then briefly discussed some logistical aspects. PRBB was to pay an annual salary of US$120,000 to the Vice-President of the Bank appointed by the FSB, who would also have a personal office, a company car with driver and a personal assistant.

 

Rickety-rackety-racket

‘Very bright, very intelligent, knowing the trade to a tee… I would have hired him without hesitation, were it not for all that happened…’ This is how one of the major Russian bankers describes Cherkalin. ‘But all these boys are profit-minded, their generation is like that’, he adds.

When the 38-year-old colonel was arrested in April of this year for corruption and fraud, he had already had made a fine career with the Economic Security Service of the FSB (SEB). When his meeting with Zhelezniak took place, he was already Head of Section ‘K’, which practically had all of the financial sector under its supervision: banks, pension funds, insurance companies.

During the search conducted at the colonel’s home, the police found 12 billion rubles (189.6 million dollars) in cash and valuables [according to another version, the 12 billion rubles were found at the homes of the three suspects]. This is an absolute record for property confiscated from a Russian official accused of corruption.

‘You know the famous principle, don’t you? When you are up against something that you cannot fight, then your best bet is to lead it’, explains an interviewee, who has personally known Cherkalin and many of his colleagues, speaking of the time when the FSB was seeking to establish its dominion over the banking market. This was in the early 2000s, when the ‘cashing-out’ market in Russia was booming.

 

Section ‘K’ had two modes of informal interaction with banks, according to a source close to the FSB: levying a commission of c. 0.1-0.2% on cashed out funds; collecting fixed bribes and pay offs for specific offences. ‘Cashiers’, i.e. banks that helped to cash out funds illegally, were required to set up a ‘subscription’ with section ‘K’, says a former co-owner of a major bank, whose licence has been withdrawn.

In order to receive its percentage in due course, the FSB would ‘out-post’ its man to the ‘shelter’: usually a retired FSB officer, who was most often appointed head of the bank’s economic security department. The ‘seconded’ officer was thus able to control all the financial flows, while ‘keeping it in the family’. He was furthermore usually responsible for collecting up-to-date information on the market [according to the same contact person].

The system was not closed: it would have been impossible to control the entire banking sector on one’s own. To control the ‘cashing-out’ market it was necessary to find cash, explains a source close to the FSB. To do this, Section ‘K’ had to collaborate with the regional sections of the FSB. In the regions, particularly in southern Russia, where the ‘grey’ market is quite large, it has always been cheaper and easier to obtain cash, according to the same source. ‘Let’s say a Moscow bank has a network of remote regional subsidiaries; the latter are responsible for accumulating cash and transferring it to the head office. The head office has access to bigger customers, to whom it sells that cash; part of the profit is then shared with the regional subsidiaries, since they have few customers of this calibre in the regions’, says our interviewee.

The transport of cash within Moscow was carried out thanks to the FSB’s special sections ‘Alpha’ and ‘Vympel’, whose members took on their working hours to give a hand. ‘They would take sick leave, and the transport vehicle was allegedly sent for technical revision’ [as indicated by a source close to the FSB, describing the logistics of the scheme]. Of course, it was also necessary to find an agreement with the FSB’s Internal Oversight Service, which was well aware of the business their colleagues were running.

 

What could it have to do with Navalny?

In May 2019 members of civil society came to visit colonel Cherkalin in his cell in Lefortovo prison, where he was held in pre-trial detention. The colonel, who greeted the visitors dressed in a Givenchy tracksuit, had meanwhile transformed his prison cell into a ‘monastic cell’, having covered every wall with icons [according to Kommersant magazine].

The FSB’s Economic Security Service (SEB)

SEB is one of the most influential services within the FSB. It is behind almost all the high-profile cases of recent years, from the arrest of Aleksei Uliukaev and of the Magomedov brothers to the ‘Argentine cocaine’ case. And the position of Head of SEB has been an outstanding career springboard for many.

 

Successive directors of the SEB

 

1998 Alexander Grigoriev

Member of the KGB section for the city of Leningrad since 1975. He served there alongside Vladimir Putin, with whom he was good friends, according to the media. Died in 2008.

 

1998 Nikolai Patrushev

Head of the Ministry of Security of Karelia (where Zaostrovtsev used to work). Head of the FSB from 1999 to 2008. Currently Secretary of the Security Council of the Russian Federation.

 

1999 Viktor Ivanov

Member of the KGB section for the city of Leningrad since the 1970s. In the mid-1990s, Head of the Directorate of Administrative Bodies at Saint-Petersburg’s Mayor’s Office (Putin was then deputy to the Mayor of Saint-Petersburg, A. Sobchak). Headed the FSKN (Anti-Narcotics Service) until 2016.

 

2000 Yury Zaostrovtsev

Graduate of the KGB School of Leningrad. Worked at the Ministry of Security of Karelia in the early 1990s (which was headed at that time by Patrushev). Acquainted with Putin (cf. Kommersant), who at the time when Zaostrovtsev worked in Karelia was head of the external relations committee at the Saint-Petersburg’s Mayor’s Office.

 

2004 Alexander Bortnikov

Director in office of the FSB since 2008.

 

2008 Yury Yakovlev

Left SEB almost at the same time as Voronin (RBK). Currently Vice-President of Rosatom in charge of security.

 

2016 Sergei Korolev

Acting Director of SEB. Lobbied to have Tkachev appointed [according to data from the Investigation Management Centre (TsUR)].

 Section ‘K’

One of the main sections of SEB. In charge of supervising banks, insurance companies and pension funds.

 Up to 2016

Viktor Voronin

Resigned when one of his subordinates became involved in a case of smuggling. Included in the ‘Magnitsky Act’. Gave the green light to launch criminal proceedings against Hermitage Capital. In 2019 was appointed Deputy Director General in charge of the Interaction with State Bodies at a contractor of Rosatom’s.

 

As of 2016

Ivan Tkachev

Acting Head of Section ‘K’. Did his military service in the border guards in Karelia, together with Oleg Feoktistov, former deputy director of the Internal Oversight Service of the FSB [according to  data from TsUR]. Before being appointed to Section ‘K’, he headed the 6th Office of the FSB Internal Oversight Service, known as ‘Sechin’s commandos’ [nickname given by the TSUR and Proekt/The Bell interviewees]. He personally issued the order to have Uliukaev’s vehicle intercepted.

 

Banking department

Part of Section ‘K’

 

Up to 2013

Dmitry Frolov

The newspaper Novaia Gazeta discovered that his family owns an undeclared house as well as four plots of land in Italy. Shortly before the article went to press Frolov was discharged for ‘loss of confidence’.

 

As of 2016

Kirill Cherkalin

Succeeded Frolov. ‘Cherkalin was, effectively, raised by Frolov’ [according to an interviewee of Proekt/The Bell]. Arrested in spring 2019.

Until then, Cherkalin did not give the impression of being a particularly religious man to those who met him. On the few photos to be found on Telegram channels, he looks more like a bon viveur, posing in European resorts, dressed in well-cut clothes and carrying bags from expensive shops. ‘He knew how to be affable, but he was the type of person with whom you would immediately want to cut off any connection’, Zhelezniak recalls today. When former co-owners of the Life group and childhood friends Alexander Zhelezniak and Sergei Leontiev met Cherkalin, the result was very bad indeed. After the meeting at Café Vogue in 2014, the partners agreed to a ‘secondment’ to their Probiznesbank. Zhelezniak himself sent a letter to that end to Viktor Voronin, who at the time was head of Section ‘K’. According to Zhelezniak, he did so upon the advice of one Kamo Avagumian, co-owner of the Avilon car dealership, a VIP client of the bank and a long-standing acquaintance of Zhelezniak’s [the editors have sent an information request to Avilon, which has remained unanswered so far]. The said letter, so Zhelezniak claims, was countersigned by Voronin [Proekt/The Bell sent a request for information to the postal address of Fizpribor, where Voronin is currently employed, having left the Service in 2016. We have not received any answer so far]. But the owners of Life refused to give away stock.

 

Zhelezniak claims that at the time when these events occurred the group’s banks were financially stable, even though in 2014 the Life Group incurred losses of several billion rubles. Probiznesbank’s  figures for arrears on loans issued to natural and legal persons were very much above the national average [according to Vedomsti]. Towards the end of the year, the rating agency Finch cancelled Probiznesbank’s ratings. At the time Finch’s concerns were primarily related to the securities portfolio in which Probiznesbank had invested 47 billion rubles, that is nearly half of its total assets; the majority of these securities were deposited in Cypriot depositories. The crisis meant that the other banks were selling frantically to stay liquid, while Probiznesbank‘s portfolio was the only one to remain stalled [recalls Fitch analyst Alexander Danilov]. This also raised some questions at the Central Bank.

 

In September 2014 the banking regulator withdrew the licence of Bank24.ru, which belonged to the owners of the Life Group. The following year, it withdrew the licence of Probiznesbank itself. Bank24.ru allegedly lost its license for violating laws on money laundering, although at the time of the withdrawal the bank’s assets were 2 billion rubles in excess of its liabilities. According to Zhelezniak, the bank had no money-laundering activity; the regulator held it responsible because of ‘a mere five banking transactions, of which the bank failed to notify the Central Bank in due time’. According to the information provided by the regulator, Probiznesbank invested funds in ‘low quality assets’ and ‘lost all its capital’; furthermore the subsequently appointed bankruptcy managers claimed to have uncovered large-scale transactions showing signs of misappropriation. The regulator ultimately estimated that the ‘hole’ in Probiznesbank‘s accounts amounted to nearly 35 billion rubles. ‘Today’s Russia is not yet ready for a group like Life’, Leontiev wrote in the company’s internal blog. ‘It seems that the time has not yet come for companies like Life in this country. This is why for the next fifty years I am going to build a Life elsewhere on the globe.’ Neither he nor Zhelezniak have ever returned to Russia since.

 

In his testimony, Zhelezniak claims that their banking business withered away for political reasons. In 2012 Life’s directors invited Alexei Navalny to a strategy session designed for managers. At that time Bank24.ru, which belonged to the group, proposed to support the opposition leader by secretly launching the ‘Navalny credit card’, whereby 1% of the amount of each purchase made with the card was donated to Navalny’s Anti-Corruption Fund. [Navalny’s spokesperson Kira Iarmych indicated that this idea had indeed been discussed with the FBK Fund, but has never been put into practice and no transfers have ever taken place.] The promotional action did not remain secret for very long: as soon as the media heard of it, Alexei Pliakin, former head of department at the Central Bank, warned Zhelezniak that such kind of collaboration would raise ‘numerous questions’ at the Central Bank and at the Procurature [so Zhelezniak claimed in his testimony; the Central Bank’s press service did not wish to comment on this episode]. The idea of supporting Navalny had to be abandoned, but ‘the Kremlin did not forget the incident’ [so Zhelezniak said in his testimony].

 

The banks’ licences were thus withdrawn, but Leontiev’s and Zhelezniak’s problems were just beginning.

 

The FSB and the ‘cashing out’ activity

 

The system which the Life group allegedly fell victim to, had obviously taken years to take root. Banks had to live with it, particularly those that were making money on ‘cashing out’ activities [according to Proekt/The Bell’s contacts in the financial sector].

 

For Mikhail Zavertiaev, former chairman of the board of Intelfinans bank, which perished in 2008, interaction with Section ‘K’ began with a meeting with Evgueny Dvoskin. Dvoskin, one of Russia’s most odious bankers, had once been designated by Bloomberg as ‘one of the key figures in the “cashing out” business’, with alleged links to the FSB and the mafia.

 

In early December 2007 two individuals entered Zavertiaev’s office; oddly enough, they had arrived at the bank’s headquarters in an ambulance. The first of the two was Dvoskin, the second was his bodyguard. ‘Walked in with a maffioso gait, then said: “So, which one here doesn’t know how to talk to people politely? That one?”’, this is how Zavertiaev remembers Dvoskin’s sidekick. The day before their visit, the banker reports having caught his chief accountant in a blatant attempt to grant a loan to a shell company, supposedly affiliated with Dvoskin.

‘Dvoskin came up to me and slapped me. I gave him an elbow strike. He collapsed. The only thought that crossed my mind at the moment was: he fell next to my briefcase, which contained important documents; he will take them and run away. I leaned over to move the case, but I was hit with a pistol’s butt and lost consciousness’, this was Zavertiaev’s version of the events.

According to Zavertiaev’s estimate, nearly 11.7 billion rubles were withdrawn from the bank in the course of the following two months (out of which 10 million were finally charged to Intelfinans’ chief accountant, who was sentenced to three years’ suspended imprisonment). During the same period, unknown persons set fire to the car belonging to Zavertiaev’s wife. The banker was forced to transfer his family to his country house and hire bodyguards to protect them [according to him].

Zavertiaev claims that the funds were misappropriated by means of a forged signature, although he had personally, while in hospital, ‘informed the Central Bank that the bank was being robbed, and requested a licence suspension in order to prevent acts of fraud’. But the regulator did not want to accede to his request: ‘Central Bank Vice-President Guennady Melikian explained that they had never been confronted with such requests and did not know how to act in these circumstances’ [said Zavertiaev]. Melikian then told the newspaper Vedomosti that ‘in the case of Intelfinans the reaction was actually very prompt, especially given that everyone was on holiday until 10 January’. When the licence was withdrawn, the Central Bank stated that the bank’s managers and employees had ‘effectively put an end to the bank’s activities, which resulted in a situation likely to harm the interests of the bank’s creditors and depositors’.

About six months after the incident Zavertiaev had a meeting with two members of Section ‘K’: Frolov and Cherkalin. Moreover, the former banker claims that the FSB’s first deputy head, Sergei Smirnov, was also present.

The meeting took place at the restaurant Palazzo Ducale on Tverskoi Boulevard. ‘What will you have? Maybe a small salad? Only water? Come, at least have a small salad!’ — the people on the other end were wonderfully considerate, recalls Zavertiaev. According to him, the interview had two objectives: to understand whether he had any evidence of Dvoskin’s visit, and if so, what kind of evidence; and, on the other hand, to convince him to renounce any attempt to recover the embezzled money. It seemed to him that the FSB officials knew Dvoskin very well. ‘Come on, stop worrying! We have already thrown him out’, Smirnov would say trying to reassure Zavertiaev and speaking of Dvoskin’s bodyguard. At the end of the interview, the FSB people allegedly offered the banker monetary compensation for ownership of his business.

Zavertiaev recounts having launched legal proceedings against everyone, and especially against Dvoskin, with the relentless determination of a desperate man. But in the end, he did not win a single case. Dvoskin was able to prove that he could not have assaulted Zavertiaev, because he was at that time testifying in another criminal case, in which he was a claimant. His statements were confirmed by investigators and by the call logs from his mobile phone. In answering questions from Proekt and The Bell, Dvoskin said that Zavertiaev had made it all up, that the alleged episode with the fight never took place, and that they first met during the judicial confrontation.

Dvoskin was under FSB protection, said two sources close to two distinct public authorities. In the interview with Proekt and The Bell Dvoskin reminded that he was wanted abroad [Dvoskin’s bank is known to have fallen under foreign sanctions because of its presence in the Crimea]; when asked if he did indeed enjoy FSB protection, hung up the phone. ‘The Service has always kept “cashiers” on hand; it turned them into informants, to avoid having to put them in prison’, explained one of our interviewees. Among the ‘cashiers’ he mentioned the former co-owner of Kreditimpeksbank Alexei Kulikov, who was sentenced several years ago to nine years’ imprisonment for fraud. At first glance, Kreditimpeksbank made a poor impression: a half-empty main room, about twenty poorly furnished offices and a grim-looking guard. But in the mid-2000s, this bank held a significant share of the ‘cashing out’ market, according to an interviewee close to the FSB. As in many other banks, the security department was headed by a retiree of Section ‘K’. His commission was 0.2-3% on all transactions carried out by the bank. Several times the Central Bank had expressed concerns about Kreditimpeksbank, but the FSB’s banking department had managed to resolve the issue [according to a Proekt/TheBell interviewee]. At the moment when the bank’s licence was withdrawn, missing funds were estimated at 229 million rubles; nearly two million rubles were found at Kulikov’s home.

It would seem that the supposed covert activities of the FSB’s banking department were not limited to controlling the ‘cashing out’ market. Cherkalin was in close contact with the managers of almost all major banks in Russia. Aleksei Khotin, the former owner of the recently bankrupt Ugra Bank [according to RosBiznesKonsalting, Khotin was placed under house arrest in the case concerning the misappropriation of Ugra funds], testified in court that for three years he had been paying a commission to Cherkalin in exchange for his protection [this information was published by RosBiznesKonsalting, but Khotine’s defense counsel denies it and affirms they have filed a complaint against RosBiznesKonsalting].

The protection of the FSB, as shown by the example of Ugra, was in no way a guarantee of the bank’s continued survival. Especially if one considers that for the members of Section ‘K’ the bankruptcy of a bank was just another opportunity to make money.

 

A case of dough or DIA (Deposit Insurance Agency)

‘$350 million is not such a high price to pay for your own life and that of your loved ones’, this was the proposal made to former Mezhprombank owner Sergei Pugachev in 2011 by subordinates of the DIA’s former Deputy Director Valery Miroshnikov. [This is what Sergei Pugachev himself told us. Sergei Pugachev’s lawyers have been telling this story before various courts since 2014, when the DIA began hunting down the former banker’s assets. Miroshnikov has already responded to these complaints, including in court, where he refuted all of Pugachev’s accusations and stated that Pugachev had himself threatened him with death via third persons].

The DIA deals with banks that have already gone bankrupt: the agency’s primary role is to collect the funds that have got ‘stuck’ in these banks. However, in order to do this, it is necessary to draw from the State’s pocket. The DIA came into existence in 2004. In fifteen years of liquidating and restructuring Russian banks, $500 billion have somehow left the banking system [information published by The Republic based on the Russian balance of payments]; furthermore the Agency itself received an additional 1 trillion rubles (nearly $16 billion) [according to the DIA’s own data] for the purpose of restructuring failed banks. Such amounts leave quite some room for manoeuvring…

The testimonies of Zhelezniak and of another banker show that Miroshnikov knew Cherkalin well. Zhelezniak remembers a meeting at which both were present. Without any embarrassment, the two officials discussed in front of their interlocutor ‘which bankruptcy manager they were going to appoint to which bankrupt bank’.

Miroshnikov was called as a witness in the Cherkalin case: this decision was taken by the investigator after examining the telephone correspondence between the two men [according to RosBiznesKonsalting]. But immediately after Cherkalin’s arrest, Miroshnikov left Russia never to return (according to his entourage, he first went to Australia, then to Germany ‘to receive medical treatment’). Two months later, the Agency announced his resignation, without giving any reasons.

Pugachev, for his part, even wrote a letter to Vladimir Putin to complain of DIA officials who allegedly tried to extort $350 million from him. In return for that money, Miroshnikov’s representatives offered their services to preserve a part of Pugachev’s assets not linked to Mezhprombank, but pledged as collateral. According to Pugachev, Cherkalin’s men were acting in tandem with those of the DIA. The proposed agreement was extremely simple. ‘Back then, following the bankruptcy of Mezhprombank, a criminal investigation was opened against X, and I was clearly told that this circle of “unidentified” people could quickly become “identified” and that I could easily become one of them’, says Pugachev. The FSB men reportedly asked for $20 million to prevent this from happening. Pugachev says he refused to pay.

Pugachev certainly has at least one reason to hold a grudge against the Agency and, possibly, to slander it: after he left Russia, the DIA managed to obtain a freezing order against his assets for nearly $2 billion. But Zhelezniak’s testimony, too, provides very similar details on the collaboration between Cherkalin and Miroshnikov.

In 2016 Probiznesbank lost its license and its owners left Russia. Soon after Zhelezniak was reportedly contacted by Miroshnikov, who suggested that he should get in touch with a certain Artem Zuev [Zhelezniak showed the editors the corresponding SMS sent from Miroshnikov’s number]. Miroshnikov described Zuev as a partner in Quorum Group, but Zhelezniak told the court in his statement that Zuev was ‘a well-known corporate raider’. The other Quorum partner [according to SPARK registry data] is the lawyer Andrei Pavlov, made famous by the part he played in Sergei Magnitsky’s case, as a result of which he fell under US sanctions. Pavlov, according to Novaia Gazeta’s publications, was closely linked to some members of law enforcement agencies.

The meeting with Zuev was scheduled to take place at Zurich airport in Switzerland. Zuev insisted that the interview be conducted face-to-face and Zhelezniak’s lawyer had to wait at a distance. Zuev informed Zhelezniak that he had a mandate to act on behalf of Quorum, which had been appointed bankruptcy manager of Probiznesbank. According to Zuev, his mandate had received the approval  of Miroshnikov and Cherkalin. Their emissary therefore proposed a deal: Leontiev and Zhelezniak would make a complete list of their assets, return to Moscow and cooperate with the Russian authorities. They would be sentenced to three to four years’ house arrest, after which they would be paid  a compensation from the mass of recovered assets, of which Quorum was going, of course, to  have its share. Zuev promised that if they did not comply, Zhelezniak and Leontiev would be ‘persecuted globally’. ‘You will not have a minute of peace, imagine the kind life it will be!’, he is alleged to have said. After this meeting in Zurich, Zhelezniak phoned Miroshnikov and asked him what the purpose of that meeting had been. ‘We want to help you’ Miroshnikov answered [from Zhelezniak’s affidavit].

The owners of Life rejected this ‘help’; Quorum is still tracking their assets around the world. Recently, the former managers of Probiznesbank were sentenced to real prison terms: from three to seven years’ imprisonment [according to Kommersant]. It was Miroshnikov himself who sent Voronin a request to initiate criminal proceedings against Life [Proekt/TheBell are in possession of this document].

 

Struggles within the species

The amounts for which Cherkalin and his fellow FSB men were sentenced to prison are out of proportion with the scale of their activities and with the 12 billion in cash found at their homes. Cherkalin was charged with receiving a bribe of 50 million rubles; the other two men under investigation were accused of seizing assets belonging to Sergei Gliadelkin, a prominent Moscow promoter, for a total amount of 499 million rubles.

The man in question is not widely known, but he has been for a long time one of the major players on the very select real estate development market in Moscow. The newspaper Ekspress-Gazeta, where his photos pop up from time to time, thanks to his wife Evgenia Kriukova, an actress of the Mossovet, describes him as ‘a workaholic, who has made millions sweating his brow’. Before 2005, Gliadelkin was head of the state-owned company Moskva-Tsentr, where he was in charge of supervising the construction in Moscow’s city centre; among other things, he was responsible for distributing land in the Ostozhenka district, located within the famous golden triangle, where the price per square meter reaches unrivalled levels.

Cherkalin’s arrest is not the first case due to Gliadelkin. In 2010 a criminal investigation was launched at his request against Moscow’s Deputy Mayor Alexander Riabinin. When the lawyer defending Riabinin — whose client had just been sentenced to three-years’ suspended imprisonment — asked Gliadelkin at the hearing how long he had been working for the FSB and whether he had received official recognition for his work, Gliadelkin replied: ‘I will not answer these questions because I have signed a non-disclosure agreement’.

In addition to real estate development, Gliadelkin has some profitable activity in other areas. In 2017, the telephone number of Avenue Group, one of Gliadelkin’s companies, could be seen on the ‘golden’ public paying toilets, installed throughout the capital to replace the old blue cabins, which were judged obsolete and ‘outdated’. Gliadelkin is also said to have carried out joint projects with Igor Chaika, the son of the Prosecutor General of the Russian Federation, Yuri Chaika. [In 2013, Chaika and Gliadelkin registered a company called Tekhno-R-Region, whose proposed activities involved waste collection and treatment. Chaika declared in 2017 that he has never taken part in any waste treatment activities, and after the investigation conducted by the Anti-Corruption Fund, Chaika’s holdings sold their shares in Tekhno-R-Region to Gliadelkin’s managers. Nevertheless, Chaika subsequently acquired a stake in one of the largest companies in the waste recycling sector, Khartia. One of the waste treatment plants had been previously run by the owner of the company that won the tender for installing the infamous ‘golden’ toilets.]

Chaika Sr. is also mentioned in Zhelezniak’s affidavit. According to the banker, the share of Life‘s capital they tried to obtain from him was intended for the ‘two birdies’, who in exchange would have been able to halt the proceedings initiated against the group’s shareholders. The ‘two birdies’ was a way to refer to Prosecutor General Chaika, on the one hand, and to the Head of the FSB’s economic security service Voronin, on the other hand [according to Zhelezniak] (‘Chaika’ means ‘seagull’ in Russian and ‘Voronin’ is a name derived from ‘crow’ — translator’s note). The Procurator General’s Office did not wish to comment or answer Proekt/The Bell’s questions.

Voronin’s former position as Head of Section ‘K’ is now held by General Ivan Tkachev, famous for his role in investigating most of the major corruption cases of recent times. He already had Cherkalin in his sights when he was still with the FSB Internal Oversight Service [according to RBK]. The media reported that Tkachev and his supervisor Sergei Korolev, the current Head of SEB, were in conflict with the men of Voronin and his friend Smirnov, deputy head of the FSB — that very same man who, according to banker Zavertiaev, attended the interview at the Palazzo Ducale restaurant. [The conflict between the two groups within the FSB had been described, among others, by Open Media.]

It is a struggle within the species’, laconically concluded an entrepreneur enjoying a good relationship with law enforcement authorities. A perception corroborated by a leading Russian banker who knew the arrested officers well.

In just over two years’ time the current head of the FSB Alexander Bortnikov will celebrate his 70th birthday, reaching the age limit for his position. It means that the clan that will take the upper hand in the fight for Bortnikov’s chair ‘will have it all under control’[says a leading Russian banker, who knew Frolov and Cherkalin well].

Miroshnikov is ‘a very rich person according to his entourage. We reviewed his real estate assets only the properties he owns in Russia. Miroshnikov’s son Maxim, barely 22 years old, owns a 400m2 house and a plot of land in the village of Fominskoe, not far from Troitsk. According to official documents, it was a gift from Valery Miroshnikov’s mother, Tatiana Miroshnikova. Mrs. Miroshnikova is 68 years old and has never had any economic activity (according to the SPARK register), which does not prevent her from owning three apartments in the centre of Moscow: two in the Imperskii Dom residence in Yakimanka Street, with a total surface area of over 500m2, and one 200m2 apartment in the Ostozhenka Park Palace residence. Miroshnikov himself owns a luxury apartment on the 6th floor of the La Defence residence in the Khamovniki district. The whole could be worth more than a billion rubles.

 

 

Former banker Pugachev complained to Putin of threats received from runaway Miroshnikov

It has become known to The Bell that the former owner of Mezhprombank, Sergei Pugachev, wrote a letter to Vladimir Putin as early as in December 2014, to inform the President of blackmail attempts and threats received from ex-deputy head of the Deposit Insurance Agency Valery Miroshnikov, and from the latter’s subordinates. In the course of the past week Miroshnikov resigned from his post and left Russia, following the arrest of FSB colonel Kirill Cherkalin; Cherkalin was arrested in April with 12 billion rubles in cash in his possession.

 

Letter to Putin. Pugachev’s letter to Putin (made available to The Bell) is part of the materials of the case examined by the International Arbitrage Court at The Hague, in which Sergei Pugachev is the claimant. Indeed, in September 2015 Pugachev filed a 12 billion rubles claim before The Hague Court against the Russian Federation. The first hearing took place on 13 February 2017. The ex-banker accuses the Russian authorities, inter alia, of having forced him to enter unprofitable deals and expropriated his assets.

 

  • In his letter Sergei Pugachev mentioned the now former deputy head of DIA (Deposit Insurance Agency) Valery Miroshnikov as the “main agent” of the campaign launched against Pugachev after his former bank Mezhprombank lost its banking licence in 2010 and was put under DIA’s management.

 

Quote: “I have authentic information on violations committed by him [Miroshnikov — editor’s note], Pugachev wrote. The most blatant abuse was the extortion of 350 million dollars from me, attempted by an organised group of DIA’s staff members and their accomplices, under threats of physical harm and criminal pursuits against myself and my children, which they proposed to initiate thanks to their corrupt contacts within the Investigation Committee.”

 

  • In his letter Pugachev cited “crimes previously committed for personal profit” by Miroshnikov as the motive for the latter’s actions.
  • In his interview with The Bell Pugachev confirmed having written the said letter, which was then handed over to Putin at the end of 2014 through an intermediary appointed by the President. According to the former banker the letter was delivered to Putin personally.
  • The Kremlin’s spokesperson Dmitry Peskov did not wish to comment in response to The Bell’s enquiry.

 

“350 million is not such a high price to pay for your life”. Who threatened Pugachev, and how.

 

Threats to Pugachev are described in a different claim (also available to The Bell), lodged with the Tribunal de Grande Instance of Paris. In that claim Pugachev set forth facts including  “kidnapping, death threats, extorsion and fraud”. The former banker named several people as responsible for these crimes, among whom Miroshnikov, along with former DIA employee Alexandr Dunaev and one Mikhail Bashmakov, who allegedly was connected with DIA too.

 

  • This document provides an account of Pugachev’s first encounter with Bashmakov and Dunaev onboard a yacht off the coast of France. The meeting took place on 3 June 2011, that is after Mezhprombank’s licence had been withdrawn and Pugachev had to flee from Russia.
  • According to Pugachev, in the course of that meeting the people from DIA threatened him, saying that “350 billion is not such high price to pay for your life and the life of your loved ones”.
  • “This was by no means a civilised conversation, but real threats, Pugachev said to The Bell. They promised to send my son’s finger to me to that very yacht. They called Miroshnikov on the phone in my presence, calling him by his small name, Valera, which showed that they were closely connected.” Pugachev also reported that in the course of the conversation Bashmakov and Dunaev repeatedly mentioned having close ties with the FSB.
  • “You probably imagine that you are out of reach, just because your children live abroad, in Monaco, London and Paris”, Pugachev quoted one of the men who came onboard the yacht.
  • In the same claim it is stated that Pugachev was threatened with assassination, if he refused to pay 350 million dollars to Miroshnikov and Roman Trotsenko (the then chairman of the State United Shipbuilding Company (Obedinennaia Sudostroitelnaia Kompaniia), which was in the process of acquiring from the Central Bank of Russia shipyards that had belonged to Mezprombank). At the moment when this article is going to press, Trotsenko still has not answered phone calls and text messages from The Bell’s corresponden
  • This is how Pugachev himself explained the above-mentioned request in his interview with The Bell: he said that he had previously concluded an agreement with the Central Bank and the government on the selling of his shipyards. Various options were considered: for instance, it was suggested that he could buy a small bank, which would then receive a loan from the CB for an amount corresponding to the value of his shares; the small bank would default on the loan and the deal would be successfully completed. But eventually the plan changed: it was decided that the loan would be issued to Mezhprombank instead, and that Pugachev would act as guarantor, pledging his shipbuilding assets as collateral for the loan. The shipbuilding assets were valued diversely, with the final agreed valuation being 3,5 billion dollars.
  • Almost immediately after the deal was concluded, Mezhprombank lost its banking licence. A number of legal proceedings were initiated, further to which the assets pledged were assessed against Pugachev. According to Pugachev, the 350 million dollars mentioned earlier were supposed to be a compensation to Miroshnikov for DIA’s accepting to challenge the above deal. Pugachev refused to pay, claiming that “they had to challenge that deal in any case, it is their job”. He said that if the deal had been challenged and reviewed, some of the shares would have remained with the Central Bank as payment for Mezhprombank’s liabilities, but the remaining part would have been added to the bankruptcy estate and he would have at least party “recovered it as guarantor”. “To my ears their proposal sounded like: you have a flat with furniture for a hundred thousand dollars; you give us 10 percent of the furniture’s value and then we won’t set you flat on fire”, said Pugachev. “In other words, they were not offering a deal, they did not guarantee anything, they just wanted the money.”
  • In the interview with The Bell Pugachev said that he found out who Miroshnikov actually was only a year before the meeting on the yacht; their paths had never crossed before that. After Mezhprombank’s licence had been revoked, people from DIA began to get in touch with him, offering to organise a meeting with Miroshnikov.
  • Pugachev said that he never responded to any of these “cooperation proposals”.

 

In 2012 Bashmakov and Dunaev faced indictment in a major legal case that involved the selling of historical houses in the centre of Moscow. The overall amount of misappropriation was estimated at 10 billion rubles. Bashmakov, then employed by DIA, and Dunaev, Director General of the management company Proekt, allegedly misappropriated over 120 buildings and pieces of real estate, 28 of which were of historical importance. Initially all the indicted individuals were arrested, while a search warrant was issued against some, including Dunaev. Two years later, however, in 2014, the court returned the case to the Procurature, and the indicted persons were released. As to Alexandr Dunaev, he was nevertheless arrested in 2014 in Israel, further to an international arrest warrant.

 

Yet another emissary from Miroshnikov: a conversation in Paris

 

Yet another man figures in the materials of the cases examined by the High Court of London and the Paris Court: a businessman named Gore Khechoyan, whom Pugachev calls an “emissary from Miroshnikov”. According to the former banker, it was the ex-deputy mayor of Moscow and a member of the Russian State Duma at the time, Vladimir Resin, who suggested in a telephone conversation that Pugachev should meet Khechoyan. It was Khechoyan who organised the memorable meeting on the yacht in France; in May 2011 he flew to France and promised Pugachev that he would organise a meeting with Miroshnikov. But on the arranged date it was Dunaev and Bashmakov, as well as Khechoyan himself, who showed up in place of Miroshnikov.

 

Pugachev and Khechoyan met again in January 2012, this time in the Paris hotel George V, a fifteen minutes’ walk away from the Arch of Triumph. Khechoyan, on behalf of DIA, took up the subject of the 350 million again. The transcript of that conversation is part of the materials of the case opened against Miroshnikov in France. Below is an excerpt for that transcript:

 

— Sergei Pugachev (SP): Look, I have a first question. <…> This Misha here, who is he?

— Gore Khechoyan (GKh): Bashmakov; his nickname is “Bashmak”, actually.

— SP: And who is he exactly? He works there [DIA], too?

— GKh: Yes, he is an official. <…> The second one present is Sasha Dunaev. Dunaev is their shell company, so to speak, used to divert assets. <…> It’s a regular practice <…> they kind of screen the banks in advance, for what I can understand, and then they may pick one or the other for embezzlement.

— SP: Yes, I see, something of a business they’ve set up.

— GKh: So we have the protagonists: this is Marina [Zinovina, the then deputy head of DIA] and Valera [Miroshnikov], right?

SP: And these guys [Dunaev and Bashmakov] are they under Valera, or aren’t they?

GKh: Yes, they are Valera’s, that’s right.

 

“The people can quickly become ‘identified’”. Enter FSB colonel Cherkalin.

 

Presently Khechoyan, who was recently declared bankrupt, is at the head of the Dynamo basketball club (traditionally linked with the FSB). Dynamo’s board of trustees includes Nikolai Patrushev (former  FSB head – translator’s note). But Pugachev believes that Miroshnikov’s connection with the FSB is not limited to the above. As early as in 2012, after the meeting that took place on the yacht, Pugachev’s representatives in Moscow were contacted by members of the “K” section of the FSB. According to Pugachev, Kirill Cherkalin and Dmitry Frolov were among those (both Cherkalin and Frolov were arrested in April in a case involving large-scale fraud and corruption). As soon as Cherkalin was arrested, Miroshnikov left Russia.

 

Quote: “At that time criminal proceedings were initiated against an unidentified group of persons for misappropriation of Mezhprombank’s funds, and I was made to understand clearly that the ‘unidentified’ persons could very quickly be identified and that I could become one of them”, said Pugachev.

 

  • Pugachev’s representative, Pugachev said, was shown a “draft criminal case, in which only the date and the signature were missing”. The people from FSB wanted 20 million dollars for that draft not to be set going.
  • Pugachev said that he refused to pay, as a result of which he did indeed become one of the persons indicted in the criminal case on Mezhprombank’s bankruptcy. In his conversations with Pugachev’s representatives Cherkalin actually mentioned Miroshnikov, referring to him as “Valera and I”, and making it clear that they knew each other well, but were also able to act independently if need be.
  • In the interview with The Bell Pugachev added that such ‘offers’ on Cherkalin’s part continued to reach him until very recently.

 

“Pugachev’s testimony contains not a gramme of truth”. What Miroshnikov said in court.

 

Miroshnikov was called to testify before the London court (testimony available to The Bell). He notably said that “Pugachev’s testimony contains not a gramme of truth”. According to him, he did indeed meet Khechoyan to discuss “the potential acquisition and utilisation of the assets added to the bank’s bankruptcy estate under DIA’s management”. These meetings, however, bore no relation to Pugachev, Miroshnikov stated. He also said that he was acquainted with Bashmakov and Dunaev, but claimed that DIA had never sent Bashmakov on assignment abroad (where the meeting on the yacht took place); as to Dunaev, Miroshnikov said that he had not been in touch with him for “over two years”. Testifying in court in October 2014 Miroshnikov thus claimed to have known nothing about Bashmakov’s and Dunaev’s talks with Pugachev.

 

After 11 July, when Miroshnikov resigned and left the territory of Russia, he remained unreachable by phone. According to Kommersant magazine he is concerned by the criminal case opened against FSB colonel Kirill Cherkalin, who was arrested in April with 12 billion rubles in his possession and is accused of large-scale fraud.

 

Mezhprombank’s bankruptcy and accusations made against Pugachev

 

  • Mezhprombank’s licence was withdrawn in 2010 and Pugachev fled from Russia.
  • According to the investigation, 32 billion rubles of loans issued by the Central Bank were stolen from Mezhprombank using a string of offshore companies (Pugachev, however, claims that he merely transferred his own funds from the correspondant account at VTB Bank, and for a slightly different amount).
  • Further to a claim filed by DIA, the Moscow Commercial Court ruled that Pugachev and the bank’s former top managers be brought to subsidiary liability for Mezhprombank’s debts, in the amount of 76 billion rubles.
  • The investigation Committee accused Pugachev of large-scale misappropriation and abuse of authority. A search warrant was issued against him and an arrest was ruled in absentia.
  • Further to a claim filed by DIA before the High Court of London, the latter issued in 2014 a freezing order for 2 billion dollars against Pugachev’s worldwide assets. Some of the assets have already been sold. Thus in 2018 the court ordered the seizure of Pugachev’s London house, which is valued at circa 9 million pounds sterling. DIA affirms that the product of the sale was added to the bankruptcy estate.
  • The English court also forbade Pugachev to leave the territory of England and Wales, but Pugachev was able to leave England for France. He explained that staying in Great Britain put his very life in danger. The English court also condemned Pugachev in absentia to two years of emprisonnent for contempt of court.

 

What next?

 

The “French” case against Miroshnikov and other DIA representatives is currently being examined by the juge d’instruction (equivalent to an investigator in the Russian judicial system), says Pugachev. According to him, in September 2019 the judicial commission shall decide whether the case is to be sent for trial before the court. If so, Miroshnikov might be qualified as suspect in that case, Pugachev says.

 

  • At the end of his letter addressed to Putin, Pugachev wrote that, given their long-term acquaintance, his appeal is the “only means to have a fair investigation conducted in Russia”. But the letter did not make any difference in actual fact, Pugachev said to The Bell during the interview. He did not receive any reply. The next hearing at which The Hague Court will examine Pugachev’s claim against the Russian Federation is scheduled for November 2019.

Anastasia Stogney, with Valerya Pozychaniuk

25 March 2019: the Tribunal de Grande Instance of Nice (first instance court) granted the claim filed by former senator Sergei Pugachev against the Russian Federation

On this 25 day of March 2019, the Second Civil Chamber of the Tribunal de Grande Instance of Nice granted the claim filed by former senator Sergei Pugachev against the Russian Federation, represented by the State corporation DIA (Deposit Insurance Agency), and ordered DIA to pay the costs.

Russia has once more attempted to abuse the rule of law in using a foreign jurisdiction to persecute Sergei Pugachev. In 2015 the latter initiated proceedings before the Hague International Court, suing the Russian Federation for the expropriation of his assets in the amount of 12 billion dollars.

In 2015 Mr Pugachev was illegally condemned by the Russian justice to pay over 75 million dollars. The State corporation DIA subsequently filed a claim before the French court, accusing Mr Pugachev of dissimulating his assets in France.

It is widely known that Russia is using its legal system to persecute the regime’s political opponents.

In its decision dated 25 March the French court pointed out that the decision on former senator Pugachev’s subsidiary liability, issued on 30 April 2015, is illegal, as are all the other decisions issued in that case between 2012 and 2016, because the Russian court, contrary to the law, failed to have the case examined by a panel of judges.

Mr Pugachev is convinced that this case was trumped up against him after he filed a claim for 12 billion before the Hague court against Russia. He believes that all the legal proceedings  brought against him by the Russian authorities are politically motivated. Over the course of the past few years, the Russian authorities have filed law suits against the former senator in foreign jurisdictions, on the basis of illegal and politically motivated decisions issued by Russian courts.

Nevertheless, some foreign courts and international organisations, that are not subservient to the Kremlin, have repeatedly refused to persecute Mr Pugachev.  Thus in 2015 the Interpol commission wrote his name off the Interpol register, having established the political nature of the proceedings.

The Second Civil Chamber of the Tribunal de Grande Instance of Nice established that the decision of the Russian court dated 30 April 2015, condemning Mr Pugachev to pay over 75 million dollars, was rendered in blatant violation of the Russian laws. The said decision is thus illegal in Russia and, therefore, has no legal value outside Russia.

The State corporation DIA has already spent 2.9 billion rubles on trying to have the above-mentioned illegal decision recognised in foreign jurisdictions, thereby causing substantial material prejudice to Mr Pugachev.

Mr Pugachev’s lawyers are currently getting ready to file a claim against DIA for  the compensation of the material prejudice caused to Mr Pugachev by DIA’s illegal actions in various jurisdictions. In 2014 the State corporation DIA pledged, of its own free will, to compensate Mr Pugachev for the prejudice potentially caused to him, within the limit of 75 million US dollars.

The aforementioned pledge was confirmed by the High Court of London on 11 July 2014.

 

Sergei Pugachev’s press service

Russia seeks to seize Russian billionaire’s property on the French Riviera… Oligarch takes the upper hand in legal battle

By Christophe Perrin, 30 January 2019. 6.30 a.m.

 

On Tuesday 29 January, the Civil Court of Nice, France, rejected as void the claim filed against the 56-year-old Russian billionaire Sergei Pugachev by the Deposit Insurance Agency (DIA), a State agency of the Russian Federation. DIA notably requested the seizure of the oligarch’s property on the French Riviera.

Sergei Pugachev, former owner of the French luxury grocery brand Hediard and of the daily newspaper France Soir, currently owns the Château de Gairaut in Nice, a chalet in Valberg, a yacht, as well as real estate in Saint-Jean-Cap-Ferrat.

The once almighty business tycoon, formerly known as ‘Yeltsin’s banker’, today complains that he has been put on President Putin’s black list.

Since the Mezhprombank bank, founded by Pugachev in 1990, went bankrupt in 2010, the Russian justice has been claiming from Sergei Pugachev the payment of 1.14 billion dollars. The Moscow Commercial Court hopes to have its decision executed in France.

 

Russian agency’s claim rejected by court

It seems that proceedings have come to a halt as the Nice Court of the first instance rejected DIA’s claim. According to Sergei Pugachev’s lawyer Anne-Jessica Fauré, ‘DIA is a governmental agency. It has no authority to represent a bank under bankruptcy proceedings!’. She is adamant that ‘the Agency is not entitled to undertake legal action against my client in France’ and describes DIA as a ‘weapon’ in President Putin’s hands.

 

‘An illegal decision of the Russian court’

The Parisian lawyer insists that the case is clearly a political one. ‘Mr Pugachev is sued for the bankruptcy of Mezhprombank, whereas he withdrew from the Bank’s leadership in 2003. The person accusing him of being de facto involved in the bank’s management has not only been set free by the Russian court, but has also been given a job in a different bank. Strange coincidence, isn’t it?’

In a press release published on Tuesday night, the oligarch’s press service made a strong counter-statement: ‘All legal proceedings launched by the Russian authorities against Sergei Pugachev are nothing but attempts to prevent the examination of the case filed by Mr Pugachev’s against the Russian Federation before the International Court at The Hague.’

 

‘Blatant procedural violations’

Pugachev’s press service also stressed that ‘the decision condemning Mr Pugachev to pay over one billion dollars was rendered by a single judge, instead of a panel of three judges, which constitutes a blatant violation of the law. The decision is, therefore, illegal in Russia and can have no legal consequences outside the territory of the Russian Federation.’

On 21 September 2015 Sergei Pugachev, who now lives in Nice, initiated legal proceedings against the Russian Federation for ‘expropriation of assets by the Russian authorities, that began in the early 2000’.

The law firm Betto Seraglini filed a claim for over 10 billion euros on behalf of the oligarch.

A legal battle has just come to an end in Nice, but the war between Pugachev and Putin is far from being over yet.