Maxim Bakun vs Michael Calvey

22-02-2019

Baring Vostok co-founder denies charges, refuses to be questioned

On Friday, the Investigative Committee of Russia has completed the lodging of charges in a case built against Michael Calvey, a major U.S. investor, senior partner of the Baring Vostok Fund. He and five more people were incriminated in a fraud on an especially large scale (amounting to RUB 2.5 billion). None of the defendants pleaded guilty and all of them refused to be questioned insisting that they have not yet developed a position on the case with their counsels.
 
The charges against Michael Calvey was brought by Maxim Bakun, an investigator of major crimes at division 2 of the department for crimes against the public order and economic crimes of the Main Investigative Directorate of Russia’s Investigative Committee. It should be noted that Major of Justice Bakun has a track record of investigating U.S.-related cases. One of his investigation targets was Irina Baranova, an infamous arbitration judge accused of corruption in her absence. While the investigation body sought consent of Ms. Baranova’s colleagues to her criminal prosecution, she fled to Miami where she gave birth to a child and received a residence permit (green card). The U.S. authorities refused to cooperate with Russia on that case referring to the absence of a mutual legal assistance treaty between the two countries.
 
The actual lodging of charges in the special unit of the Matrosskaya Tishina remand prison (also known as the “Kremlin Prison”) where Mr. Calvey is in custody by decision of the Basmanny district court of Moscow took about half an hour to complete. Major Bakun handed suspect Calvey and his lawyers the court ruling to officially charge the investor with the crime provided for by article 159 section 4 of the Criminal Code of Russia. Mr. Calvey who knows Russian fairly well read through the document, denied his guilt of fraud and refused to be questioned in the new procedural status insisting on the need to discuss his position on the case with his lawyers.
 
“Far from Michael being clean-handed, the actual crime was not even committed!” Dmitry Klyachkin, the U.S. investor’s lawyer, commented for Kommersant.
 
According to the defense counsel, the other defendants in this headline-making case also refused to testify. Among them is French citizen Philippe Delpal, Operational Partner for Financial Services at Baring Vostok Capital Partners (BVCP), who also fell under investigative actions in the "Kremlin Prison".
 
Their alleged accomplices, Vagan Abgaryan (BVCP partner), Ivan Zyuzin (Baring’s Investment Director) and Alexey Kordichev (adviser to Chairman of the Management Board, ex-Chairman of the Management Board, Orient Express Bank) were accused in remand prison no. 4 informally called “Medved”.
 
The defense counsels of the defendants in this high-profile case believe that the investigation was triggered by a business dispute between the shareholders of Orient Express Bank which should be subject to civil or arbitration proceedings and should not qualify as a criminal case.
 
It should be noted that the case as such was opened on February 13 at 7:30 p.m. by Lyudmila Samoylenko, Lieutenant Colonel of Justice of the Investigative Committee’s Main Investigative Directorate, who served in St. Petersburg before the transfer to the Investigative Committee HQ in Moscow. She gained renown through the criminal prosecution of St. Petersburg Legislative Assembly Deputy Svetlana Nesterova over fraud, and gynecologist Viktoria Kirillova who cheated her clients.
 
As follows from the description of the case against the investors and the charges brought later, the crime was committed in Moscow in February 2017 when Mr. Calvey, the beneficial owner of a controlling stake in Orient Express Bank, acting jointly with the alleged accomplices, persuaded Sherzod Yusupov, another shareholder and a member of the bank’s Board of Directors, to vote for an agreement unfavorable for the financial institution. Under the agreement, the bank received a 59.9% stake in Luxembourg-based International Financial Technology Group in settlement of a loan debt amounting to RUB 2.5 billion which the borrower, non-public JSC First Collection Agency, which borrowed the money to buy out third parties’ debts, failed to repay. Mr. Calvey, the controlling shareholder of First Collection Agency, estimated the shares at 3 billion rubles, while Mr. Yusupov’s auditors concluded that they the real value did not exceed 600,000 rubles.
 
The Main Investigative Directorate learned about the alleged fraud from employees of Russia’s Federal Security Service (FSB) and the Moscow Economic Security and Anti-Corruption Directorate who found evidence of fraud in Mr. Calvey and his partners’ actions. Given that cases provided for by Criminal Code article 159.4 cannot be opened absent victims, Sherzod Yusupov – who applied to the law enforcement bodies – and Orient Express Bank were recognized as the injured parties. So far, the defense team of the accused is not aware of any claims laid by the victims against the defendants in the process of investigation.
 
On a side note, when the court ruled to remand Mr. Calvey in custody, the investor complained about suffering from a corporate conflict. As Uniastrum Bank was merged into Orient Express Bank in 2017, a gap amounting to about 3 billion rubles was found at the latter bank. According to Mr. Calvey, it turned out that the money was withdrawn from the bank in ten transactions, which the American referred to as sham deals, a few days after the agreement was signed. A lawsuit seeking to terminate them was filed in the London court, with Artem Avetisyan, ex-President of Uniastrum Bank, currently a Board member at Orient Express Bank, and, according to some reports, Sherzod Yusupov being the defendants.
 
The Central Bank which inspected Orient Express Bank after a while demanded that the bank increase its provisions by 19 billion rubles. Michael Calvey, according to his later statement, was in a position to contribute the greater part of the required amount, but this would have diminished the stakes of other shareholders, including Mr. Avetisyan.
 
The parties currently refrain from commenting on the criminal case background. Mr. Calvey’s lawyers note that they are only authorized to discuss the criminal prosecution of their client.
 
On February 28, the Moscow City Court will consider the complaint of Mr. Calvey’s defense team against his remand in custody, following consideration of a similar complaint relating to his alleged accomplices. Just as when the court was deciding on the measure of restraint, dozens of well-known businessmen are ready to stand security, with Kirill Dmitriev, CEO of Russian Direct Investment Fund, joining them on Friday. A milder measure of restraint in relation to the accused was advocated by business ombudsman Boris Titov, as well as the Association of Institutional Investors, which believes that a more liberal position of the court and investigative authorities could help “minimize the risks of investment climate deterioration” and “encourage further investment in the Russian economy.” However, the court of appeal normally listens to the voice of the Prosecutor General’s Office supervising the preliminary investigation. Previously, this body recognized the legality of the criminal proceedings started against the investor and backed the charges brought against him in the court of first instance.
 


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