Oligarchs 21 October 2019

Top officials invited to Paris to testify in $12 bln case "Sergei Pugachev VS Russia"

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

  • The hearing will take place between 12 and 17 November. Kudrin, Zubkov and Reinhardt have been asked to testify in person; and they may be cross-examined by the judge, as well as both the prosecution and the defense, according to two sources who spoke with The Bell. Pugachev and those invited to testify either declined to comment or didn’t respond to The Bell’s requests for comment. 
  • Kudrin and Zubkov have been asked to testify in relation to plans from the early 2000s to build an elite hotel on Red Square. Companies close to Pugachev signed $300 worth of contracts with a firm created specially for the project and, in return, Pugachev was supposed to get a stake in the finished complex. Instead, in 2007, construction was frozen, and ownership of the site transferred to the Federal Security Service. Pugachev successfully sued the Ministry of Finance for $26.2 million in 2011, but this did not cover all of his losses.

Sergei Pugachev and Vladimir Putin

  • It seems likely that Reinhardt has been invited to talk about Mezhprombank, which was founded by Pugachev but lost its license in 2010 (when Pugachev no longer owned the bank). Reinhardt, who was an executive at Japanese bank Nomura at the time, has once before provided written legal testimony — in 2012 — relating to Pugachev and Mezhprombank’s loss of its banking license, and she might have a lot of interesting things to say, one source told The Bell. 
  • Kudrin, Zubkov and Reinhardt received invitations rather than a formal summons, so they will not face any sanction should they chose not to comply. But if they are no-shows this could also influence the court’s decision, according to a lawyer at a European law firm who spoke with The Bell. 
  • Lawsuits have flown between Russia and Pugachev for almost a decade, and have led to legal battles in several different countries. In the Hague, Pugachev is accusing Russia of expropriating four groups of assets that used to belong to him: shipbuilding companies, Yenisei Industrial Company, the Red Square development project, and land near Moscow. A criminal case has been filed in Russia against Pugachev in which he is accused of embezzlement. Finally, Russia’s Deposit Insurance Agency is using a London court to helpy it locate and seize Pugachev’s global assets. One former top executive from the Deposit Insurance Agency, who has a long-standing disagreement with Pugachev, was the subject of The Bell’s recent investigation into the FSB and money-laundering. 

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

 

Anastasia Stognei