Exiled Russian oligarch Sergei Pugachev, who became dubbed “the Kremlin’s banker”, was once part of Vladimir Putin’s inner circle, until he was eventually cast out by the Russian president and took refuge abroad. In this interview with Mediapart, he details how Putin and his close allies, what he calls “a junta which has captured power, all the money and all the institutions of the state”, function. He denounces a system of corruption on a vast scale, including that of foreign politicians, argues why the decision to wage war on Ukraine marks “the end of Putin’s Russia”, and describes French President Emmanuel Macron’s frequent calls to Putin as “ridiculous”.
In this interview with Mediapart, exiled Russian oligarch Sergei Pugachev offers a rare and detailed insight into the workings of the regime of President Vladimir Putin, which he describes as “a junta which has captured power, all the money and all the institutions of the state”.
He says Putin is “cut off from reality, he lives in a parallel reality”, that “one has never seen such a political system in history”, and that the decision to wage war on Ukraine marks “the end of Putin’s Russia”.
For years, Pugachev, 59, once nicknamed “the Kremlin’s banker”, was part of Putin’s inner circle, before being cast out, beginning in 2009, and losing his vast business empire.
Pugachev was one of the first of the oligarchs to emerge in post-Soviet Russia, establishing a bank, the Mezhprombank, as early as 1992, subsequently climbing to the upper levels of Russian economic and business circles.
He played an important role in securing Putin’s selection as successor to Boris Yeltsin, the first president of the Russian Federation from 1991 to 1999, whose re-election in 1996 also owed much to Pukachev as an election campaign director. For a time, the oligarch and his family were neighbours of Putin in Moscow. Today he says he is among the “principal enemies” of the latter, along with opposition leader Alexie Navalny, now serving time in a penal colony, and Ukraine’s president, Volodymyr Zelensky.
Pugachev was behind the initial contract for the ill-fated sale by France to Russia of Mistral-class amphibious assault vessels, called “projection and command” ships, or BPCs, which he had planned to construct under licence at his shipyards in Saint Petersburg. In the end, Putin in person removed Pugachev from the deal, which was signed without him in January 2011.
That contract, for two of the helicopter- and tank-carrying ships, was inked by then French president Nicolas Sarkozy, and finally cancelled by Sarkozy’s successor François Hollande following Russia’s invasion of Crimea in 2014. They were subsequently sold on to Egypt.
On the orders of Putin, Pugachev lost his banking licence in 2010, along with large slices of his business empire, OPK, including its shipbuilding, mining and property development activities, which were sold off to others. Meanwhile, Pugachev in 2009 took up French nationality, subsequently finding refuge in France before moving on to Britain.
Pugachev became targeted by death threats, and Moscow launched what became lengthy legal action against him to reclaim assets he was accused of plundering, claims he firmly denies. In 2015, he succeeded in filing a 12-billion-dollar claim against the Russian Federation before the Permanent Court of Arbitration in The Hague for compensation of the huge assets in Russia that he lost.
That same year he secretly fled London, after the Russian Federation’s legal action successfully led to a court order for the impounding of his passport, and settled in Nice, on the French Riviera, where he has owned a property since 1996, from where he gave this interview, via video link, to Mediapart.
Mediapart: For you, with close knowledge of the workings of the upper spheres of the Russian government, was the decision to wage war on Ukraine that of Vladimir Putin alone, or was it taken collectively by the clan that surrounds him?
It was Putin who took the decision, while attempting to demonstrate on television that it was a collegial decision; we all saw this scene with Sergey Naryshkin. Putin took the decision by adopting the position of the hawks ready to attack Ukraine.
Mediapart: Is a large part of the state apparatus therefore in favour of the war?
Sergei Pugachev: It must be understood that Russia is a quasi-state which has nothing in common with the usual conception of the structures of a state. There doesn’t really exist a ministry of foreign affairs, or anything. What there is, is a group of people who represent the state. It is a junta that has captured one hundred percent of power. So there is nothing to say that the foreign affairs minister looks after foreign affairs, or that the head of the FSB [intelligence service] looks after security. Everything is mixed together. It involves a small number of people whose prerogatives are mixed, and who have usurped power. We’re talking about a total usurpation. From there, to know who is in charge of what has no importance.
As to whether the state apparatus, or let’s say the government, was in favour of going to war, the fact is that no such government exists. The Federation Council and the Parliament are institutions only on paper, attributes, in the grip of a small group of people.
Mediapart: Who are we talking about?
S.P.: The close entourage. Over the past twenty years, the balance has changed. Latterly, it can be seen clearly that the siloviki [editor’s note, individuals from the military, security forces or similar] prevail, people who Putin brought in – with the exception of [defence minister] Sergei Shoigu, who was already around before him –, military figures, men from the FSB. Apart from Shoigu, who is part of the inner circle, there is Nikolai Patrushev, secretary of the security council, Alexander Bortnikov, head of the FSB. It is them who take decisions. There exist no secret advisors who we don’t know about.
Mediapart: So Putin is not isolated, as one might have believed?
S.P.: No, not at all, he is not alone. He is cut off from reality, he lives in a parallel reality, but he is not alone. It’s obvious. These last years, Putin had lost influence over his entourage, just like over his country. But with going to war, he has taken back power. Today, he is fully the leader of the country, and that came about at the very moment he declared war, on television. It changed all the power construction.
Mediapart: What might be the impact of sanctions on Putin and his entourage?
S.P.: Let’s make one thing clear, this bloc which took the initiative of war, not involved with looking after the economy but rather with pseudo-politics, did absolutely not take into account the economic issue. It did not anticipate the capacity of the West to be united, nor the force of pressure exerted by the sanctions. The other thing is that they are also cut off from life and that they don’t really understand how the economy functions. In Putin’s entourage, there is no-one who had envisaged that. No-one.
In my view the fact that in one week the military objectives were not achieved, and that such sanctions were adopted, allows one to mark the end of Putin’s Russia. It no longer exists. We are in a state of rupture, like the transition between the USSR of Gorbachev and the Russia of Yeltsin. We are exactly at that moment of rupture. There will be no going back. Nothing will subside.
Mediapart: The end of Putin’s Russia perhaps, but not yet the end of the war?
S.P.: It is politicians who begin wars and it is them who put an end to them. The military cannot put an end to the war. That the military take hold or not of all of Ukraine, it is not that which will end the war. The end of the war is a political decision. Putin is at a dead end. He anticipated nothing.
Mediapart: What do you think can be expected to happen?
S.P.: Several thousand Russian soldiers are already dead. The consequences of the war are catastrophic. An enormous number of civilians have died. Kharkiv resembles Stalingrad. It is the first war of its kind since the Second World War in Europe. We had never seen anything like it anymore; the total destruction of European cities, civilian deaths by the thousands.
Over ten years in Afghanistan, around 10,000 Russian troops died. In Ukraine, it’s 5,000 in ten days. It is a brutal catastrophe of which the effects will be lasting. Moreover, the sanctions are catastrophic for Russia on the economic front – the freezing of gold and currency reserves – as was the case with Iran. But Russia is in a more difficult situation than Iran, because seventy-five percent of what it consumes is imported. People will very quickly be hard-hit to find anything other than bread in the shops. The sanctions work, and they work immediately.
Mediapart: Jailed Russian opposition leader Alexei Navalny has denounced the extent to which the Russian president’s path has been marked by corruption, and that this corruption was characteristic of the regime. Do you agree with that analysis?
S.P.: The corruption is total, but it is nothing like ‘corruption’ as it is understood in France. Navalny used that word for want of another, but what he is designating is what we spoke about at the beginning; a junta which has captured power, all the money and all the institutions of the state. It is very different to corruption as it is usually talked about, when you give money so that a person with power does something for you.
In Russia, the so-called businessmen, or the oligarchs as they are called, are an integral part of the political system. It seems to me that one has never seen such a political system in history. There is no longer any distinction between the siloviki and the oligarchs, all that is merged as the state. Where have you seen such a decision-making system? Zero-point-one percent of a population of 140 million inhabitants possess one hundred percent of power and one hundred percent of resources. That’s no longer corruption.
Putin and those in office have simply to serve themselves. Before the sanctions, Putin could dispose at will of gold reserves, of Gazprom, of Rosneft, of any private company, and that’s what he did. Putin’s palace is exotic. What’s essential however is to be able to buy the European Union, political leaders from the EU or elsewhere. We’re talking here of a total corruption. That type of corruption, outside Russia, has occupied Putin a great deal these last years. That’s his foreign policy.
Mediapart: Did those in power in Russia, and Putin in particular, take control of your assets in the country, notably the shipyards, before they were taken in hand by the state? Otherwise put, were you an oligarch like Roman Abramovich and others?
S.P.: I was an oligarch in the sense that I have had money and power. But I owe nothing to Putin. When he arrived in power, thanks to me, in 2000, I already had the totality of assets which were subsequently taken away from me. The arrival of Putin gave me nothing, on the contrary. Abramovich is the opposite. It is often said that Putin placed the oligarchs under a tight rein. That’s false. He took hold of their assets for his profit, while handing them fortunes to manage.
Which is why today all the Russian businessmen, great or small, should be considered as Putin’s serfs. They have all accepted the rules of the game. When the presidential administration summons them to urgently demand 10 million dollars for this or that, they bring the money straight away. With me, it was never like that, and Putin knew that it wasn’t even worth talking about.
Mediapart: Do the sanctions that have now been taken against the oligarchs appear to you to be effective in their targeting, or still insufficient?
S.P.: They have forgotten a lot. I think that 2022 should be taken as a demarcation line. All those who possessed significant assets at the beginning of this year should be placed under sanctions, without giving it any thought, because these people finance Putin’s regime.
In Russia, ownership is fictional. It’s the same principal as the ‘nominees’ of offshore companies who, on paper, possess the assets. Putin has made sure that all of Russia is populated by fictional owners, because everything belongs to him.
Putin’s Russia is like the inside of a watch, a clock mechanism. There are little cogwheels, big cogwheels, average ones, and enormous ones like [Mikhail] Fridman’s Alfa Group and [Petr] Aven, Abramovich, [Alisher] Usmanov, the big, well-known names. But by just taking out a small [watch] part you stop the mechanism. Only Putin knows how the whole of it should work, and that’s been the case for twenty years.
Mediapart: France’s far-right Front National party was bailed out by a loan from an oligarch. Can one presume that that was a decision at a level of the state?
S.P.: It should be understood that when these people finance Marine Le Pen [leader of the Front National, now renamed Rassemblement National] they couldn’t care less if it’s Le Pen, Macron or Lukashenko or whoever. We come back to the junta, a junta which has totally captured financial, economic, administrative and military power.
When they are told ‘Marine Le Pen must be given funds’, it’s not for them to decide. It’s a question of survival for them. That they finance tanks or Le Pen is of no difference, it’s an order from Putin. A political decision. The decision was taken at the Kremlin, ‘finance Le Pen’. It doesn’t work – that’s no big problem, their opinion isn’t asked for. Don’t imagine a gathering of oligarchs who are invited to reflect on the question of who to give funds to. It’s much simpler: ‘100 million has to be sent over there. Is it done? Very good.’
This is what the West did not prepare for after the Cold War. The USSR tried to corrupt, recruit agents, but it was the ideology that took precedence, not money. Russia [today] doesn’t have an ideology. So it uses money, that’s all.
Mediapart: Is the offering of places on the boards of Russian companies to former French president Nicolas Sarkozy, and his ex-prime minister François Fillon, also a thought-out, centralised strategy?
S.P.: I’m going to tell you something terrible. One hundred percent of these people, beginning with [former German chancellor, Gerhard] Schröder, who after their exit from office were signed up in Russia, receive their money not for their position at Rosneft, Rostelecom or MTS, but in thanks for the services they rendered when they were in government. I saw how Putin behaved with Schröder, he well knew that he had recruited him when he was still chancellor.
It is very difficult to follow them all. There is Schröder, his friends, the former president of the Bundestag, they all sit on companies over there. They are retired, they no longer serve any purpose, but they receive this money as a thank you, for what they did when they were in office: the Nord Stream lobby, the awarding of the Légion d’honneur, whatever you want. It’s in compensation for their services at the time. It’s a way of legalising corruption – they were promised 10 million, 100 million, and here’s how they receive it.
Mediapart: It’s a tried-and-tested system aimed at establishing Russia’s influence?
S.P.: I’ve seen how it works. Someone lives in Germany, they call someone in Russia among Putin’s entourage. They have good contacts with so-and-so – the chancellor, his deputy, whatever. ‘Does it interest you?’, ‘Yes’. ‘Right, we can organise a delegation in Russia, an invitation to an agricultural fair’. And it moves along like that.
It is systemic. There are whole queues of people who offer their ‘services’. Imagine, you know the French prime minister, and you know a friend of Putin’s. You organise a rapprochement and you sell the connection, it’s a business. And you are told, ‘Super, we’ll have a contract made out with Gazprom to be paid 10 million, 100 million or perhaps 200 million, if you do that well’.
Putin disposes, or rather disposed, of an instrument that is unique in the world: an incredible amount of money, outside of any book-keeping, totally free and which can be used at will – contracts, constructions. We’re talking about billions of dollars. It’s like the operations of special services. They’re everywhere, journalists, friends, friends of friends. They look for contacts. When they find them, they begin to recruit them. The services in every country do the same thing.
With what aim? Find information. In Russia, as those who came to power were from the services, they don’t know how to do anything else. So they recruit spies and, even better, decision-makers. With spies, you wait for information. But if you recruit a prime minister from one country or another it’s for a decision, ready to be executed.
Mediapart: If you had the possibility of sending a message to Putin, what would it be?
S.P.: I have that possibility. I think that it is too late for me to say anything at all to him. I have known him since 1990, and I have already told him everything I had to say to him over all these years. But one must think of the future. Putin is the past.
To call Putin to tell him to stop the war is grotesque. And it’s pathetic. Look at Macron. When Macron phones him like that, I can’t stop myself from thinking of Schröder. Macron who calls, for the twenty-fifth time, and tells us that he tries to convince Volodia [Vladimir] to stop killing children, that’s ridiculous. Before the war, one could still talk. It was necessary. Twenty-four hours per day. But today?
I don’t understand Macron. He is nonetheless an intelligent person. He knows well that these conversations only lead to a sad confusion. He cannot fail to understand that it doesn’t work. On each occasion that he calls him, he tells himself ‘what follows will be even worse’, but the day after he calls him up again. What is the aim of these calls? Either they themselves don’t understand what’s going on, or they are too focussed on their interests, gas for Germany, re-election for Macron – even if these calls are not good for his campaign, it seems to me.
Imagine Hitler in his bunker in 1945, ready to commit suicide, and the English, the Americans and the Russians call him to ask his news: ‘Adolf, how are you feeling? Be careful, eh. Don’t target children too much.’ What is the sense of these calls? Where is this diplomacy heading?
I believe the strategy should be a total isolation of Russia, not only financially and economically, but above all politically.
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.
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.
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 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.
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
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.