The Kremlin is not yet aware of changes in the case of ex-Senator Pugachev

The Kremlin is not yet aware of changes in the case of ex-Senator Pugachev

Press Secretary of the President of the Russian Federation Dmitry Peskov noted that “it is not up to this yet”

MOSCOW, September 29. / TASS /. The Kremlin has not yet got acquainted with the information about the resumption of the investigation in Paris into the lawsuit of the former senator (2001-2011) Sergei Pugachev, the press secretary of the Russian president Dmitry Peskov told reporters on Wednesday.

“No, we didn’t have the opportunity to get acquainted. So far, to be honest, there is no time for that,” he said, answering the relevant question.

The Paris Court of Appeal has decided to open an investigation into the trial of former Mezhprombank owner Sergei Pugachev

PARIS, September 29. / TASS /. The Paris Court of Appeal has decided to open an investigation into the trial of former Mezhprombank owner Sergei Pugachev, in which Russian officials could be questioned. Pugachev’s lawyer, Mikael Bendavid, spoke to TASS about it.

“I can confirm that the Paris Court of Appeal made such a decision last week,” he said in response to a request for comment on the relevant information that appeared in the media.

The lawyer said that the court of appeal had entrusted the investigation to the examining magistrate Mark Sommerer. Previously, he had carried out an investigation into the financing of the campaign of the former French president (2007-2012) Nicolas Sarkozy. However, it is difficult to talk about the timing of the investigation, as well as exactly when the suspects and witnesses in this case can be questioned, Bendavid said.

“The investigating judge has a wide range of powers. He can interview a large number of people, if necessary, during the investigation of a case and determine the timetable for the investigation. Several names are already known, but their disclosure is impossible in order to preserve the secrecy of the investigation. A number of people will be investigated. , some of them are or were Russian officials. This is especially true of people associated with the Deposit Insurance Agency [DIA] “, – said the interlocutor of the agency.

The Power of Money: How Autocrats Use London to Strike Foes Worldwide

Olena Tyshchenko, a lawyer based in Britain, was facing years in a crowded Russian prison cell, when a chance at freedom came via an unexpected source.

An English lawyer named Chris Hardman, a partner at Hogan Lovells, one of the biggest law firms in the world, flew into Moscow while his firm helped draft a tantalising offer: Tyshchenko could be freed if she provided information that could be used to help his client in a sprawling web of litigation in London.

The twist is that Tyshchenko was one of the lawyers on the other side. To win her freedom, she would have to turn on her client. It was a ruthless exchange. But the Moscow prison had been ruthless, too, and she reluctantly agreed. In a later interview, she said that what seemed “most abnormal” was that lawyers opposing her in a trial in London could play a role in her fate in Russia.

“They are extremely aggressive,” she added.

A Moscow prison. A London courtroom. One is part of a Russian legal system widely considered corrupt and subordinate to the Kremlin. The other is a symbol of an English legal system respected around the world. Yet after Hardman returned to London, an English judge would accept into the case the evidence obtained from the Moscow prison.

The episode is a vivid illustration of how the brutal politics of authoritarian countries like Russia and Kazakhstan have spilled into England’s legal system, with lawyers and private investigators in London raking in huge fees and engaging in questionable tactics in the service of autocratic foreign governments.

An investigation by The New York Times and the Bureau of Investigative Journalism — involving a review of hundreds of pages of case documents, leaked records and more than 80 interviews with insiders, experts and witnesses — reveals how London’s courts are being used by autocrats to wage legal warfare against people who have fled their countries after falling out of favor over politics or money.

Four out of the past six years, litigants from Russia and Kazakhstan have been involved in more civil cases in England than have any other foreigners. Authoritarian governments, or related state entities, are often pitted against wealthy tycoons who have fallen from favor and fled. Neither side elicits much pity — but both pay generous legal fees.

Filing litigation in London can bring legitimacy for claims by autocratic governments, whose own legal systems are so tainted that their decisions carry little weight outside their borders. England also offers advantages: Judges have broad latitude to accept evidence, even if it is produced by corrupt security services or compromised foreign legal systems. London’s own private intelligence firms are unregulated, largely unrestrained and sometimes willing to use borderline methods for deep-pocketed clients.

In one example, our investigation found that private detectives working on a case with Hardman’s firm, Hogan Lovells, travelled to France to try to pay a potential witness to testify against an enemy of President Vladimir Putin of Russia.

But perhaps the biggest advantage is how lawyers like Hardman enabled their clients to pursue their foes by winning what one judge called a legal “nuclear weapon” — court orders freezing a defendant’s assets worldwide. These orders are similar to the ones the US government uses against terrorists or arms dealers, except they emerge from civil proceedings.

Much of this is initially secret, with orders in many cases issued before the target is aware or has been found liable in a trial. Even lawyers specialising in the freezing orders are uncertain how many are issued. But the fact that London lawyers, judges and private investigators are now deeply immersed in the savage political battles of the post-Soviet world is eliciting concern.

“We’re being asked in the UK to adjudicate on political dynamics that English courts don’t fully understand,” said Tom Mayne, a researcher at Exeter University, who focuses on how English courts handle corruption cases related to the former Soviet Union. “It seems like an abuse of English law courts, because we’re basically reinforcing the status quo of the regimes in these kleptocratic countries.”

Lawmakers in Britain are increasingly expressing alarm over Russian influence, warning in a parliamentary report last year that a growing industry of London professionals, including lawyers and private investigators, has emerged “to service the needs” of the Russian elite.

“As the Russia Report laid bare, an industry of enablers has grown up in our capital city to protect and sustain the interests of corrupt elites,” said Lisa Nandy, the shadow foreign secretary. “The court system has now become the latest battleground as they seek to use the institutions of an open society to defend ill-gotten gains.”

Hardman and his protégés at Hogan Lovells have been industry leaders in representing powerful clients from the former Soviet Union, routinely working with Diligence, a London private intelligence firm with a reputation for aggressive surveillance. The firms are teamed up on behalf of Russia’s Deposit Insurance Agency in pursuit of Sergei Pugachev, a one-time confidant of Putin now accused by the state of stealing billions from a Russian bank, which he denies.

Another example is a bitter and sensational legal battle that originated in the brutal, autocratic politics of Kazakhstan and involves a state-owned bank, a fugitive tycoon and allegations of stolen billions. The much-publicised dispute began 12 years ago in London, involves numerous lawyers on both sides and is focused on Mukhtar Ablyazov, a former insider in Kazakhstan’s kleptocratic elites who said he was singled out for prosecution after he fell out of favor for political reasons.

Tyshchenko was a lawyer for a company related to Ablyazov. She had gone to Moscow in August 2013 but was grabbed from her luxury hotel near the Kremlin, tossed in prison and accused of helping Ablyazov hide assets. Russian authorities blessed the deal with Hardman’s client that set her free. She denied any wrongdoing, but the affidavit that she later provided to Hardman became evidence in a case that saw an English judge issue a freezing order against Ablyazov’s son-in-law.

In a statement, Hogan Lovells denied all allegations of acting inappropriately, adding that Ablyazov and Pugachev had “committed some of the largest frauds that the world has ever seen,” and that “given its well justified reputation for fair and open justice, it should be no surprise that such claims are tested in London where the result can be trusted around the world.”

To understand the lengths to which Diligence, the private intelligence firm, has gone to produce evidence in these cases, consider the example of Natalia Dozortseva, a Russian lawyer.

Sitting in a hotel in Nice, France, in 2017, Dozortseva was joined at the bar by Trefor Williams, the head of Diligence in London. Speaking over the tinkling of a piano, Williams mixed flattery with offers of money if she would turn on her client, Pugachev, the former Putin confidant who was residing in France to avoid a prison sentence for breaching a 2014 freezing order issued in London.

Williams described a menu of options: gold, silver or bronze. Each band, he said, represented a level of cooperation, and compensation.

Telling him everything she knew about her client would earn bronze. Silver would require a sworn statement. Gold would entail her testifying in court against her client.

“I always want to get gold,” Williams said. He said Dozortseva’s knowledge could help end what he described as a legal “stalemate” and promised her “financial independence” and, through his contacts in Moscow, the possibility of travelling freely to and from Russia.

“For that,” Williams said, “we want something, we want some sort of cooperation.”

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In the competitive world of private intelligence, Diligence has built a reputation for deceptive tactics and intrusive surveillance that gets results, while often working on cases, such as this one, for Hogan Lovells.

Unlike many European countries — and US states — Britain has no statutory regulation of private investigators, even after the 2011 tabloid phone-hacking affair, arguably the most infamous private investigation scandal in modern history. Investigators are bound by privacy and other laws and legal procedures in local jurisdictions, but even those are sometimes looser in civil cases brought by private parties.

The New York Times and the Bureau of Investigative Journalism learned about Diligence’s approach to Dozortseva after listening to a secret recording of her conversation with Williams. In the end, she never betrayed Pugachev, but instead told him in advance of the meeting, and recorded it.

Lawyers for Diligence admitted that Williams had attended an “exploratory” meeting with Dozortseva but noted that “it is not illegal to offer payments to witnesses” and said no agreement on payment was reached.

The offer to Dozortseva would run afoul of England’s strict rules governing public prosecutions, but nothing would explicitly ban it in private-party civil proceedings. In France, offering to pay witnesses is illegal only if the intent is to induce false testimony. Some legal experts believe, however, that a substantial payment could be evidence of such intent, a point Diligence strongly rejected.

Lawyers have been able to benefit from these gaps in the law to obtain evidence and tactical advantages while distancing themselves from the techniques of firms like Diligence. It would, for example, be against industry regulations for a lawyer to pay any witness except for “specific and reasonable” expenses, such as travel or accommodation.

Hogan Lovells refused to answer questions about its relationship with Diligence or its knowledge of the firm’s tactics, including the offer to Dozortseva. The law firm noted that its use of “enquiry agents” had not been criticised by the English courts and said it would always “expect such firms to ensure that they operate within the law.”

Established in 2000, Diligence took its corporate DNA from Nick Day, its founding chief executive, who, according to former colleagues, reveled in the thrill of undercover operations. A big breakthrough came in 2005, while the firm was assisting a Russian conglomerate in a multimillion-dollar commercial dispute in the British Virgin Islands.

Day was accused of bamboozling an accountant with KPMG into handing over some confidential documents. He impersonated a British intelligence officer while an American working for the company pretended to be from the CIA, claiming to be “Liz from Langley.”

When KPMG was tipped off about the deception, Diligence paid $1.7 million to the accounting firm to settle a fraud claim, Bloomberg reported.

Hardman worked on the case alongside Diligence at the time and has continued to put work the firm’s way. Hogan Lovells paid Diligence nearly $2.3 million for work carried out in 2012 alone, documents show, around half of the London headquarters’ total income for the year.

In a statement, Day said that both he and Diligence’s Swiss spinoff, which he now runs, denied “all allegations of wrongdoing.” Day — who did not deny impersonating an intelligence officer to obtain documents — stated that the company had stringent protocols to “ensure that its techniques are lawful, necessary and proportionate.” It uses “creative and cutting edge investigative techniques” to obtain information that is “admissible in court and meets all applicable rules of evidence,” he added.

For the Pugachev case, Diligence’s approach to Dozortseva was arranged by Pugachev’s butler and driver, a keen amateur pianist and an admirer of Russia and its culture.

In return for spying on Pugachev and copying some documents, the butler, Jim Perrichon, said in an interview that Diligence had promised him a monthly retainer. Perrichon said he delivered on the bargain by setting up the hotel meeting with Dozortseva. “I realised that if we could recruit Natalia we could crush Pugachev,” Perrichon recalled.

But Perrichon, while still a believer in Russia, said he now no longer trusted Diligence, which he said failed to fully pay him. In a March 2020 email, the firm also offered him a one-off “36k” settlement and promised to increase its payments if he prepared a report on what he knew about Pugachev and stated his willingness to testify in court. He rejected the deal.

Diligence admitted to paying Perrichon for information on Pugachev but said it did not recruit him as an informant. The company said it was Williams who sought to end the relationship, after Perrichon did not deliver the promised intelligence. It denied owing him money.

Like a military drone, a global freezing order can strike its target without warning.

Pugachev, for example, learned that his assets had been frozen only when a Diligence agent and a Hogan Lovells lawyer tried to hand him the order on a London street. After Pugachev refused to take the papers, the lawyer dropped them at his house.

England introduced the freezing orders in 1981, and by 1998 a judge had ruled that they had global reach. The timing was propitious. Money and businessmen from Russia and other post-Soviet states had poured into London, supposedly a safe haven.

Ablyazov fled Kazakhstan in 2009 after the Central Asian state accused him of embezzling billions from BTA Bank, of which he was chairman. Ablyazov denies wrongdoing, and maintains that the government only pursued him because he posed a political threat.

An English judge declared Ablyazov untrustworthy, but France’s highest administrative court in 2016 overturned a government decision to extradite him on the grounds that the case against him had a “political motive.”

Hardman’s legal team won the freezing order against Ablyazov in 2009 and has since filed scores of court applications, winning judgments that have gradually widened the order’s scope and expanded the list of defendants to associates and members of his family.

The civil rulings ultimately turned into a 22-month prison sentence in 2012 for contempt of court for Ablyazov, after he was found to have breached an order to disclose assets. He fled to France, which eventually granted him refugee status.

Since then, English freezing orders, backed by international respect for England’s courts and London’s centrality as a financial hub, have become unparalleled in power and reach, experts say. The orders can be applied to an individual target with even a loose link to Britain, and courts have ruled they can also apply to connected companies, trusts and associates anywhere in the world.

“A worldwide freezing order is an incredibly draconian measure,” said Lloydette Bai-Marrow, a former senior prosecutor for Britain’s Serious Fraud Office who now runs a white-collar investigations consultancy. “There is a trend toward them being used potentially in a very harmful way and weaponised against individuals, and that should be a cause for concern for all of us.

“We can’t allow ourselves to be used as a pawn in a bigger game.”

The pursuit of Ablyazov

2009 Mukhtar Ablyazov flees Kazakhstan, accused of embezzling more than $6bn by state-owned BTA Bank

July 2013 Ablyazov is arrested after being tracked down in Nice by London law firm Hogan Lovells with help of intelligence outfit Diligence

August 2013 Olena Tyshchenko is arrested in Moscow and Hogan Lovells lawyer Christopher Hardman presented evidence allegedly connecting her to Ablyazov

November 2013 After three months in pretrial detention and facing a lot longer still, Tyshchenko is offered a freedom-for-cooperation deal. After her release she described the operation as “extremely aggressive”

July 2015 Ablyazov’s son-in-law is slapped with asset-freezing order, obtained in London high court by Hogan Lovells using evidence including Tyshchenko’s testimony

October 2017 Diligence agent is detained by Belgian police after he is reported for spying on Botagoz Jardemalie, a Kazakh lawyer working with Ablyazov. Subsequently released without charge.

November 2020 London judge issues freezing order against billionaire Bulat Utemuratov, alleged affiliate of Ablyazov, which was swiftly reversed after a “confidential settlement” with BTA Bank. With Ablyazov having secured political asylum in France. Kazakhstan’s pursuit continues

Hogan Lovells said English law places a “very heavy burden” on any party applying for a freezing order to do so fairly. The law firm added that the defendant had the right to apply immediately on being served to have an order lifted if the injunction has been obtained using “improper or false” evidence, and noted that the litigant must put forward any arguments to the judge that the defendant might make if they were present.

Many English lawyers and judges maintain that freezing orders are essential to restrict fraudsters, and defend the openness of their courts to lawsuits and evidence originating in countries with compromised legal systems. Assessing all the evidence, they contend, regardless of where it came from or how it got there, better serves justice.

“Admissibility of evidence makes UK courts more attractive for this kind of litigation than countries like the US,” said Pavel Tokarev, a former Diligence investigator who left in 2019 to start his own agency. “The rules of accepting evidence, it’s very flexible in the UK.”

The jailhouse evidence from Tyshchenko is a case in point.

To acquire it, Hardman worked with Andrei Pavlov, a Russian lawyer hired by BTA Bank. The United States and Britain would later place sanctions on Pavlov for his alleged role in a criminal conspiracy that led to the 2009 death in a Moscow prison of the whistle-blower Sergei Magnitsky. Pavlov, in an interview in Moscow, said he had been unfairly smeared and had done nothing wrong. He said he was proud to have worked with Hardman because of his London partner’s reputation as an outstanding lawyer.

Faced with complaints that Hogan Lovells had not fully informed the court that Tyshchenko provided her evidence under duress, an English judge ruled they had followed disclosure rules by stating that she was incarcerated when she first provided the information. But the judge was not asked to rule on whether the circumstances of her incarceration — the fact that she was in a Russian prison — should also be considered, as well as the involvement of Pavlov and questions about whether Tyshchenko had been mistreated.

Moreover, while Tyshchenko remained in prison, another Hogan Lovells lawyer convinced an English judge to grant an order that required her husband in Britain to hand over records and other information. Among the supporting evidence were “press reports” from compromat.ru, a Russian website notorious as a clearing house for unverified and sometimes fabricated information.

Hogan Lovells said that London’s High Court had already rejected complaints of the firm “behaving improperly” in Tyshchenko’s case, and stated that it “complies fully” with the rules of evidence. The information from compromat.ru was “one small part of a much larger collection of evidence that the court accepted justified the granting of the order” in the case against Tyshchenko, the firm said.

Tyshchenko was less sanguine. “There are no good guys in this affair,” she said.

If some of London’s law firms have reaped rich rewards by defending oligarchs and former Soviet countries, they have sometimes been less successful at recovering funds for those clients. As of November 2020, BTA Bank had recovered just $45 million of the more than $6 billion it claims Ablyazov stole, its chairman said in a recent affidavit.

An internal report prepared by the bank in 2014 said that 89 percent of the $470 million it had spent worldwide on lawyers and other “consultants” was disbursed in London.

Legal battles rooted in former Soviet states are often “pretty lucrative just considering the rates of UK lawyers or investigative firms,” said Tokarev, the former Diligence investigator. “The UK is a pragmatic country and government, and they don’t have any interest in chasing any money out of the country.”

Indeed. The BTA case, for one, shows no sign of slowing down.

In November, for example, a London judge reviewed a request by the state-owned bank to freeze the assets of a Kazakh billionaire, Bulat Utemuratov, whom a British lawyer working for BTA Bank alleged in court was Ablyazov’s “money-launderer in chief.” The judge, presented with evidence partly generated by Kazakhstan’s security apparatus, issued the freezing order.

The following month, however, another London judge abruptly lifted the order after the bank reached a confidential settlement and dropped its case against Utemuratov, who denied the allegations. The law firm that introduced the evidence to an English court, Greenberg Traurig, declined to comment.

It was another reminder that the political fights of Kazakhstan, and other autocratic states, often end up in London.

On the 2th of November, Mr. Pugachev’s lawyers filed an appeal against the award of the Hague Tribunal made on June 18, 2020

On June 18, 2020, the Hague Tribunal made a ruling based on the hearings held last November in Paris.

The tribunal acknowledged that Mr Pugachev’s status as a legal citizen of France, allows him to rely on the protection of investor rights provided by the Bilateral Investment Treaty between France and Russia, but, nevertheless, this award did not completely suit Mr. Pugachev and on November 2, 2020, his lawyers filed an appeal with the TRIBUNAL SUPERIOR DE JUSTICIA DE MADRID.

Given that two arbitrators from the Tribunal panel refused to rule on the part concerning the claim, Mr. Pugachev’s lawyers believe that the award of June 18, 2020 is incomplete and should be amended.

Since, under the procedural terms of the Tribunal, the city of Madrid was designated as the place of arbitration, the appeal was filed with the Spanish court – TRIBUNAL SUPERIOR DE JUSTICIA DE MADRID.

An appeal date will be set shortly.

Decision of the last session of the Hague Tribunal on the claim of Sergei Pugachev against the Russian Federation

Today it became known about the decision of the last session of the Hague Tribunal on the claim of Sergei Pugachev against the Russian Federation, which examined the powers of the Tribunal to consider the claim.

The lawsuit against Russia on the basis of the Agreement between the Government of the USSR and the Government of the French Republic on mutual encouragement and mutual protection of capital investments dated July 4, 1989 (hereinafter referred to as the Agreement) in connection with the expropriation by the Russian Federation of Mr Pugachev’s assets was filed by Mr. Pugachev in 2015.

Jurisdiction hearings were held in Paris in November 2019, and the decision became known only today.

Two out of three arbitrators considered that the Tribunal did not have jurisdiction to consider the claim.

The Tribunal in its decision recognized many of the arguments of Mr. Pugachev, but unfortunately, deviated from the well established principle in judicial practice according to which the Agreement protects the investor at the time of expropriation, and not at the time of the investment.

One of the arbitrators does not agree with the opinions of the other two and wrote his dissenting opinion, in which he pointed out that the interpretation of citizenship issues by the other two arbitrators is incompatible both with the text of the Agreement itself and with established case law.

This decision does not mean termination of the proceedings of Mr. Pugachev v. Russia.

The decision of the Tribunal will be appealed within the established procedural timelines.

Mr. Pugachev’s lawyers are confident that this decision will be set aside.

Press Service of Sergey Pugachev

Putin’s People: How the KGB Took Back Russia and Then Took on the West

It was late in the evening in May 2015, and Sergei Pugachev was flicking through an old family photo album he’d found from 13 years ago or more. In one picture from a birthday party at his Moscow dacha, his son Viktor keeps his eyes downcast as one of Vladimir Putin’s daughter’s smiles and whispers in his ear. In another, Viktor and his other son, Alexander, are posing on a staircase in the Kremlin presidential library with Putin’s two daughters.

We were sitting in the kitchen of Pugachev’s latest residence, a three-storey townhouse in well-heeled Chelsea, southwest London. The late-evening light glanced in through the cathedral-sized windows and birds chirped in the trees outside. The high-powered life Pugachev had once enjoyed in Moscow — the secret deal-making, the “understandings” between friends in the Kremlin corridors of power — seemed a world away. But Moscow’s influence was still lurking like a shadow outside his door.

The day before, Pugachev had been forced to seek the protection of the UK counter-terrorism police. His bodyguards had found suspicious-looking boxes with protruding wires taped underneath his Rolls-Royce (later found to be tracking devices), as well as on the car used to transport his three youngest children to school.

Sergei Pugachev with his partner, Alexandra Tolstoy
Sergei Pugachev with his partner, Alexandra Tolstoy

Now, on the wall of the Pugachevs’ sitting room, behind the rocking horse and across from the family portraits, the SO15 counter-terrorism command had installed a grey box containing an alarm that could be activated in the event of attack.

Fifteen years before, Pugachev, a Russian Orthodox believer with a dark beard and broad grin, had been a Kremlin insider who’d manoeuvred endlessly behind the scenes to help bring Vladimir Putin to power. Once known as the Kremlin’s banker, he’d been close to the family of Russia’s first president, Boris Yeltsin. For years he’d seemed untouchable. But now the Kremlin machine he’d once been part of had turned against him. First, the Kremlin had moved in on his business empire, taking it for itself. Pugachev had fled Russia, ending up in Britain, but he still hadn’t felt safe.

And so one day in June 2015, a few weeks after we’d met in his Chelsea home, Pugachev was suddenly no longer in the UK. His phones had all been switched off, ditched by the wayside as he ran. He’d ignored the court orders forbidding him to leave the country. He hadn’t even told his partner and mother of his three children, the London socialite Alexandra Tolstoy, who was left waiting late into the night for him to appear at her father’s 80th birthday party. He’d fled to the relative safety of his villa high in the hills above the bay of Nice, a fortress surrounded by a high iron fence with a team of bodyguards and security cameras at every turn.

Before things had got tough in London, Pugachev had never given an interview on the record in his life. Few knew who he was. Most people believed it was the recently deceased oligarch Boris Berezovsky who had helped bring Putin to power — when in fact Pugachev had treated Putin as his protégé and been instrumental in making him president in 2000.

Putin and Pugachev in Moscow
Putin and Pugachev in Moscow
ITAR TASS/REUTERS

Now he was speaking out. He and other inner-circle sources I interviewed laid bare how Putin came to power 20 years ago and the rise of the tight-knit clan of KGB men surrounding him. First they enriched themselves and then they began to pose a threat to the West. And there is no sign of it stopping: earlier this month Putin set in train constitutional changes that will enable him to stay in power until 2036 — an autocrat in all but name.

“These people, they are mutants,” said Pugachev. “They are a mixture of Homo sovieticus with the wild capitalists of the past 20 years. They have stolen so much to fill their pockets. All their families live somewhere in London.”

What emerged as a result of Putin’s rise and the KGB takeover not only of the country’s political and legal systems but also the economy was a regime in which the billions of dollars at Putin’s cronies’ disposal were to be actively used to undermine and corrupt the institutions and democracies of the West.

The inner circle
The former president Boris Yeltsin at Putin’s inauguration, 2000
The former president Boris Yeltsin at Putin’s inauguration, 2000
GETTY

As Vladimir Putin strode alone through the vaulted halls of the Grand Kremlin Palace, he seemed dwarfed by the majesty of the presidential inauguration. Solemn, with a slight smile, downcast gaze and light, lopsided gait, he was dressed in a dark suit that differed little from the garb of an everyday office worker. He’d been trained to be bland and unremarkable, to blend in anywhere. But on this day trumpeters dressed in an imperial uniform of white and gold heralded his entrance, while the state officials who thronged the gilded palace rooms applauded his every step down the red carpet into the glittering Andreyevsky Hall.

It was May 7, 2000, and the kandidat rezident (the spy candidate, cast as a patriot who would restore the Russian state) had arrived in the Kremlin. Putin, a former KGB officer who only eight months before had been just another faceless bureaucrat, was about to take on the mantle of Russian president.

Unnoticed in the mass of officials were the KGB men Putin had brought with him from St Petersburg, where he had been deputy mayor. Among them were KGB-linked businessmen such as Yury Kovalchuk, the former physicist who’d become the largest shareholder in Bank Rossiya, a St Petersburg bank created by the Communist Party in the twilight of the Soviet Union. There too was Gennady Timchenko, an alleged one-time KGB operative who’d worked closely with Putin and held a near monopoly on the city’s oil exports. (Timchenko, however, has denied working for the KGB.) And there was Nikolai Patrushev, the gnarled head of the FSB, successor to the KGB. A year older than Putin, he’d served with him in the St Petersburg KGB’s counter-intelligence division in the late 1970s.

From left: Vladimir Yakunin, Gennady Timchenko and Igor Sechin
From left: Vladimir Yakunin, Gennady Timchenko and Igor Sechin
GETTY

Perhaps the closest to the new president, though, was Igor Sechin. Eight years younger than Putin, he had followed him like a shadow ever since Putin’s appointment as deputy mayor in St Petersburg. He had served as his secretary, standing like a sentry behind a podium in the anteroom leading to Putin’s office. He controlled access to Putin and all the papers Putin saw.

Eventually, said Pugachev, this inner circle made Putin. “They changed him into someone else.” Putin had begun his presidency appearing to pursue liberal economic reforms and a closer relationship with the West. But the initial steps turned out to be short-lived and illusory. “He got disappointed in the US and then he just wanted to get rich,” said Pugachev. The influence of the St Petersburg security men, steeped in the zero-sum thinking of the Cold War, soon began to outweigh all else. The economy was a weapon to be harnessed to further their own power.

All the while Pugachev moved in the shadows watching over his protégé. Pugachev said that in Putin’s first year in office he spent £30m on meeting the Putin family’s every need, down to buying the cutlery they used in their home. He bought apartments for prosecutors to make sure they were under the president’s — and his — control.

Pugachev claimed that he was trying to bring an end to the era when the oligarchs of the Yeltsin years believed they controlled the Kremlin by giving “donations” to Kremlin officials — not realising, perhaps, that essentially he was doing exactly the same.

But the KGB men had long been looking at the situation intently. Vladimir Yakunin, a bluff former KGB officer who’d been close to Putin since the early 1990s, had prepared a study on the ownership of the Russian economy. It found that in 1998-99 almost 50% of the nation’s gross domestic product was produced by companies owned by just eight families. “All the profits were going into private pockets. No taxes were paid,” says Yakunin now, nearly 20 years later. “It was looting, pure and simple. Without greater state involvement, it was clear to me it was a path to nowhere.”

For Putin’s security men, the Yeltsin-era oligarchs’ sending of cash to the West provided a useful argument for shoring up their own power. They could claim that the dominance of the oligarchs was a threat to national security, though it was mostly a threat to their own positions. They saw themselves as the anointed guardians of Russia’s restoration as an imperial power, and believed the resurgence of the state and their own fates were inextricably — and conveniently — linked.

So those close to Putin, his old allies and former KGB associates, began to seize Russia’s prize assets for themselves. One of those who went on to be most successful was Timchenko, who had worked with Putin in St Petersburg — and, some associates suggested, may have had links to him even earlier than that when Putin served in the KGB in Dresden, East Germany.

Putin’s money

For a time the rise of Gunvor, an oil-trading company part-owned by Timchenko, was one of the industry’s great mysteries. At first few noticed when Rosneft, a Russian state oil company run by Putin’s ally Sechin, began redirecting the bulk of its exports through Gunvor. Then the state-controlled gas and oil company Gazprom also began awarding large contracts to Gunvor. Cowed by the Kremlin’s growing might, other oil majors, anxious to curry favour, followed suit. Within four years, Gunvor was trading 30% of all seaborne oil exports from Russia.

By 2008 it had become the world’s third-biggest oil trader, with revenues of £35bn. But who owned it? Where did the profits go?

On paper Gunvor was owned by Timchenko and his Swedish business partner, Torbjorn Tornqvist, but also by a third shareholder whose name, the oil trader initially said, could not be revealed. Of all Putin’s close KGB cohorts who were now rising in business, Timchenko had kept the lowest profile. He operated in a world shrouded in secrecy, shuttling between Moscow and Switzerland, where he lived in a mansion surrounded by manicured gardens and a high, guarded fence overlooking Lake Geneva. The business he handled was so sensitive that he never used email. If he spoke by mobile phone, he did so in the full awareness that he was being listened to. He’d never given an interview until 2008, when Gunvor’s meteoric rise forced him into the light. At that point only one photograph of him had ever been seen.

In the early days Timchenko was kept almost invisible, even to those closest to Putin. Pugachev had seen him only once. “Putin had always hidden him from me,” he said. One wintry evening he’d arrived at Putin’s residence outside Moscow to find Timchenko in the kitchen. Putin had ordered Timchenko to wait outside in the snow while they discussed business. It was as if he was trying to demonstrate to Pugachev that Timchenko wasn’t important to him. But to Pugachev it revealed the sensitivity of the relationship between the two men.

The reason for the apparent secrecy became clear to Pugachev when a banker flew in to see him from Switzerland towards the end of 2003. The banker asked him about Timchenko, and said he’d been told that he was a holder of funds for the president: “He told me, ‘There’s a guy named Timchenko and he’s brought us a huge amount of money.’ He told me all this money is Putin’s,” Pugachev said.

Timchenko has always strongly denied that Gunvor’s success had anything to do with the president, insisting it was down to his own business savvy. Putin also swatted away such allegations, once telling reporters they were nonsense “picked out of someone’s nose and smeared on bits of paper”.

For Pugachev, however, the sensitivity and secrecy surrounding Timchenko could mean only one thing: at the beginning of Putin’s presidency, he was the first business ally to hold funds for him.

For two of Timchenko’s former KGB associates and two close Putin allies, the root of Gunvor’s success could lie only in financial connections with the Russian president. “Putin’s money, of course it’s there,” one of them told me. “How else do you think Timchenko became such a billionaire?”

“When Gunvor was created it was 100% Putin’s company,” said a Russian tycoon close to Putin. “Timchenko is just the holder of a purse that has $10bn in its account. He might differ over how much of it is his and how much of it is Putin’s, but really it is all the same.”

Later, the US Treasury Department said flatly that “Putin has investments in Gunvor and may have access to Gunvor funds.” Timchenko, again denying any connection between Gunvor and Putin, called American sanctions against the company no more than an attempt to put pressure on the Russian regime. He had never held or managed assets for Putin, he said.

As with others of the inner circle, Timchenko’s rise was about a lot more than the president’s personal finances. It was about creating a slush fund for Putin’s KGB clan, aimed at preserving and projecting their power. “Of course, in Timchenko’s activities there are some interests of Putin,” said a former senior KGB officer, an associate of the Geneva money men. “But this is not necessarily in the form of some personal money. This can be black cash for funding party activities or a charity fund that can influence the electoral situation. It can be strategic resources.” Putin’s people were replicating the KGB-run systems of the past, in which oil exports had been a key source of black cash to fund the influence campaigns of the Communist Party and clandestine operations abroad.

Pugachev’s downfall

While the fortunes of Putin’s KGB cohort were rising, men like Pugachev were on the way out. He had become an anachronism, a symbol of a different era, of the Yeltsin years and the transition to Putin. The KGB men had, in Pugachev’s words, “taken over like a tsunami”.

Some time in Putin’s second term Pugachev let go of his office in the Kremlin. He didn’t seem to need it any more and it felt too conspicuous. He’d remained close to some degree with Putin, helping organise a vacation for him and Prince Albert of Monaco in the summer of 2007 in the Siberian wilderness region of Tuva. There the two men fished in the Yenisei River and Putin, famously, posed topless, dressed only in green khaki trousers and wielding a fishing rod.

Angling for power: Putin in the Yenisei River, 2007
Angling for power: Putin in the Yenisei River, 2007
RIA NOVOSTI

Yet Pugachev had been unable to kowtow to Putin like the yes-men around him. Always irreverent, he’d often told him what he thought. There’d always been a friction between them, as if Putin resented knowing he was in debt to Pugachev for helping bring him to power.

In the summer of 2008 he received a call from Putin asking him to stump up £270m in loans to help out Putin’s childhood friend Arkady Rotenberg. “He told me, ‘It’s only a loan. It will be paid back to you in six months,’” said Pugachev. Rotenberg had grown up with Putin scrapping on the streets of Leningrad, and then training together at the same judo gym. Although Rotenberg’s business interests had grown after Putin took the presidency, he wasn’t widely known. But that spring Rotenberg acquired a series of construction companies from Gazprom and gathered them under a holding company, Stroigazmontazh. Soon afterwards, Gazprom awarded Stroigazmontazh a multibillion-pound pipeline contract. The deal would make him a billionaire.

Martial law: Putin, centre, with Arkady Rotenberg, left, and another judo compatriot, c1985
Martial law: Putin, centre, with Arkady Rotenberg, left, and another judo compatriot, c1985
REX FEATURES

The only problem was that by the summer Rotenberg still hadn’t been able to come up with the cash to pay Gazprom for the construction companies. It was then that Putin called Pugachev, who said he’d readily assisted. Putin’s direct interest in the matter made it clear to Pugachev who was really behind Rotenberg’s construction business. “Putin wanted to bring Rotenberg in because he really could control him,” said Pugachev. “He was absolutely his.”

Rotenberg has denied his rising fortune had anything to do with his friendship with Putin. But he fast joined the ranks of Timchenko, Sechin and Kovalchuk as one of the close Putin allies taking over ever greater swathes of the economy. This was the final favour Pugachev did for Putin before he was suddenly thrown out in the cold. When the 2008-09 financial crisis ripped through Russia’s banking system only months after he lent Rotenberg the money, Pugachev found himself in trouble.

The financial institution Mezhprombank, which Pugachev had co-founded (but claimed no longer to be a direct owner of), was left deeply in the red. At first Russia’s central bank had stepped in swiftly, as it had across the entire crisis-hit Russian banking system, providing £1.1bn in bailout loans to keep Mezhprombank afloat. But by summer 2010, when Mezhprombank had still not paid down the central bank’s support, the debt became a mechanism by which Putin sought to seize control of two shipyards owned by Pugachev: Northern Shipyard and Baltiysky Zavod. Putin wanted to create a state shipbuilding corporation.

Rotenberg as he appears today
GETTY

Then, in October 2010, the central bank suddenly revoked Mezhprombank’s licence after it missed an interest payment. It filed suit to seize the shipyard stakes, and a Moscow court agreed behind closed doors to their sale for a fraction of their value to the state-controlled United Shipbuilding Corporation.

Once again the court system had allowed Putin’s allies to acquire strategic assets on the cheap.

Pugachev was soon facing the loss of the rest of his assets. The state began a criminal investigation alleging that he had caused Mezhprombank’s bankruptcy when he transferred £450m from an account he held at the bank into a Swiss account at the height of the crisis in 2008. The man who’d manoeuvred to bring Putin to the Kremlin had become expendable. Pugachev no longer fitted the regime’s objectives; he was no longer judged to be sufficiently loyal.

Russians in London

In September 2014, we were sitting in Pugachev’s office in Knightsbridge, central London, a playground for Russia’s rich. Pugachev said he wished he’d never rented an office there. “It’s disgusting,” he said. The concentration of Russian cash in the square mile around him was a bitter reminder of how deep Russia’s reach into the London elite had become.

The power of the Russian cash that had poured into Europe over the past decade was also becoming visible in the rifts between European Union countries over how far economic sanctions, imposed against Russia after its invasion of Crimea, should go. In the UK, a Foreign Office official was photographed with a briefing paper arguing that Britain must not “close London’s financial centre to Russians”.

For Pugachev, the danger was clear. The system of black cash to corrupt and buy off officials had extended to all the Russian billionaires who acted as fronts at the Kremlin’s command. “They all get calls to send money for this and for that. They all say, ‘We’ll give it. What else do you need?’ This is the system. It all depends on the first person, because he has unlimited power.”

For Pugachev, his manoeuvring to help propel Putin to power 20 years ago is now a constant source of remorse and regret. “I’ve learnt an important lesson,” he said when we talked at his home in France. “And that is: power is sacred. We all thought the people weren’t ready [for full democracy], and we would install Putin . . . Of course, we thought it was cool. We thought we’d saved the country from the communists.”

In the rush to help install Putin, though, Pugachev had ignored warnings that appointing someone from the KGB was “to enter a vicious circle”.

Those who believed they were working to introduce a free market and democracy had underestimated the enduring power of the security men.

“This is the tragedy of Russia,” said Pugachev.

Adapted from Putin’s People: How the KGB Took Back Russia and Then Took on the West by Catherine Belton (William Collins £25)

BBC2 docs probe lives of super rich

UK pubcaster BBC2 has picked up two factual shows detailing the lives of the super rich, titled Inside Monaco and The Countess & The Russian Billionaire.

Three-parter Inside Monaco will cover the season of grand events Monaco is famous for: the Grand Prix weekend, Red Cross Ball and the international yacht show. It sheds light on the amount of work that goes on behind the scenes to make this jet-set destination relevant to today’s rich and famous.

London-based indie Spun Gold TV and UK prodco Whisper will jointly develop the project for BBC2. Bridget Boseley, Jonathan Smith, Sunil Patel and Richard Gort will exec produce the project, with Michael Waldman directing.

Stand-alone doc The Countess & The Russian Billionaire steps inside the secret world of Russian oligarch Sergei Pugachev and his British partner, Countess Alexandra Tolstoy.

Filmed in the UK, France and Russia, it tells the story of their romance, unimaginable wealth and privileged lifestyle. Sergei, once known as Putin’s banker, amassed a US$15bn fortune, owning one of Russia’s largest private banks, shipyards, a coal mine and designer brands until he fell out of favour with the president.

With his empire now at risk from the Russian government and threats made to his life, Sergei fled to his chateau in France in a bid to fight back.

The Countess & the Russian Billionaire is produced by UK prodco Summer Films, with Lucy Hilman and Sam Whittaker both exec producing and directing.

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.