Posts Tagged ‘gazprom’
Russia: why Magnitsky matters, even to hard-headed investors
By curious coincidence, Russia is prosecuting a dead man on the 60th anniversary of Stalin’s death. Just days after the commemoration of the Soviet leader, the trial is due to start on of Sergei Magnitsky, the lawyer who died in a Moscow jail after accusing officials of fraud.
It perverts the law in a way which even the ruthless Georgian did not attempt. But Stalin would have appreciated the idea: like his show trials, it is a demonstration of power, not of justice. Many foreign investors will say this has nothing to do with them. They are wrong. It has.
Indeed, Russian prosecutors have established a direct connection with the investment world by naming as Magnitsky’s co-defendant his former client, Bill Browder, a UK-based American fund manager, who was once the biggest investor in Russia.
Browder’s troubles began after he criticised the management of Gazprom, the state-run gas monopoly. He was denied entry into Russia and put under investigation by interior ministry officials whom he and Magnitsky later accused of involvement in a $230m tax fraud.
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Russia plans new fraud charges against Hermitage’s Browder
The Kremlin is about to shoot itself in the foot again after it announced that it will open an investigation into Hermitage Capital Management’s Bill Browder for illegally trading in locally listed Gazprom shares during the naughties.
Browder has gone from being Russia’s biggest portfolio investor to spearheading a relentless campaign in exile in London against the Kremlin following the death of his associate, the accountant and auditor Sergei Magnitsky, while in custody in 2009.
The two sides hate each other, but this time the Russian government took the initiative after a senior Interior Ministry official told journalists on March 5 that companies belonging to Hermitage violated the so-called ring fence around Gazprom’s locally listed shares that banned foreigners from ownership. “The Interior Ministry’s Investigative Department is investigating a criminal case concerning the illegal purchase of Gazprom shares by legal entities that were majority owned by foreign nationals, notably William Brower,” said Mikhail Aleksandrov, head of the department’s section which investigates organized crime and corruption cases. Aleksandrov said that Russia lost some RUB3bn ($97m) from 29 transactions with Gazprom shares concluded by Browder’s firms.
Hermitage denied the allegations. “The ownership of Gazprom shares was completely legal,” the company said in a statement. “It was approved by the Russian authorities and the Russian Federal Securities Commission as well as Gazprom itself. If one took these accusations seriously, then every foreign investor in Russia should be under arrest.”
Browder claimed that the charges are politically motivated and as a result of his campaign to sully the Kremlin’s name and hold high officials to account for Magnitsky’s death. The US Congress passed in December a bill called the “Magnitsky Act”, which withholds visas and freezes financial assets of Russian officials thought to have been involved with human rights violations.
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Russia Opens Case Into Browder’s Hermitage Buying Gazprom Stock
Russia opened a criminal case into purchases of OAO Gazprom (GAZP) stock by Hermitage Capital Management Ltd. as prosecutors prepare for the trial of the fund’s founder and his dead legal adviser on tax-fraud charges.
Hermitage head William Browder is accused of illegally buying about 131.6 million Gazprom shares for about 2.1 billion rubles ($70 million) at a time when foreign ownership of the world’s biggest natural-gas producer was restricted, Mikhail Alexandrov, head of the Interior ministry’s investigative directorate for organized crime and corruption, said today on state television.
“Buying Gazprom shares through derivative structures was entirely legal,” Browder said by phone today, adding that neither he nor Hermitage has been notified of the case.
The accusations follow separate tax evasion charges brought against Browder, a British citizen whose London-based fund was once the largest foreign portfolio investor in Russia. Browder, who has been barred from entering Russia since 2005 as a security threat to the state, is being tried in absentia on the same accusations made against Sergei Magnitsky, a Hermitage tax and legal adviser who died in a Moscow prison in 2009. Magnitsky’s family has said the posthumous trial is “politically motivated.”
Browder attempted to use share ownership to exert influence on the company, Alexandrov said. He estimated the damage to the government at no less than 3 billion rubles.
Buying and trading shares of Gazprom by foreigners was restricted before the state raised its ownership in the gas producer to more than 50 percent in 2005. Russia had banned foreigners from holding more than 20 percent of the stock and restricted them to American depositary receipts.
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Magnitsky case: Russia accuses Browder over Gazprom
Russia is preparing new charges against UK-based fund manager Bill Browder, whose lawyer died in a Russian jail but now faces tax evasion charges.
Mr Browder will be accused of illegally buying shares in Russia’s gas monopoly Gazprom, the interior ministry said. Mr Browder called the move “absurd”.
On Monday a Russian judge ruled that a trial of the dead lawyer, Sergei Magnitsky, should go ahead next week.
Mr Browder, who runs Hermitage Capital Management, is to be tried in absentia.
Speaking to BBC Russian, Mr Browder said Russia’s President Vladimir Putin “has given an instruction to law enforcement agencies to charge me with any crime they can think up, no matter how spurious or absurd”.
“Every single securities firm in Russia set up derivatives structures which were legal, to invest in Gazprom shares… there was nothing illegal going on,” he said.
Mr Magnitsky died after his pancreatitis went untreated. He had uncovered an alleged $230m (£150m) tax fraud involving Russian government officials.
Nobody has been convicted over his death or the alleged theft from Russian state coffers.
However, Mr Magnitsky and Mr Browder were charged with tax evasion in the wake of Mr Magnitsky’s offer of evidence to the Russian authorities.
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Russia alleges $70m fraud against Browder
Russia authorities are seeking to charge former investor and shareholder activist Bill Browder with illegally obtaining Gazprom shares worth $70m, interior ministry officials announced on Tuesday.
The American fund manager based in London said the allegations were yet another attempt to intimidate him as he campaigns for Europe to adopt US-style legislation barring Russian human rights violators known as the “Magnitsky Law” named for Mr Browder’s former lawyer who died in a Russian prison in 2009.
The announcement that charges would be brought against Mr Browder followed a well-tested formula in Russia, where criminal indictments usually follow denunciation on state television. Russian network First Channel on Sunday night devoted a seven-minute slot to Mr Browder’s financial dealings in Russia prior to his ejection from the country in 2005.
The allegations themselves focus on whether Mr Browder violated any Russian laws when his fund, Hermitage Capital, used Russian companies registered in the region of Kalmykia to purchase shares in the gas monopoly between 2001 and 2004. At the time, according to presidential decree, foreigners were barred from directly owning Gazprom shares, but many funds used Russian derivative structures to play the market nonetheless.
“Browder used specially developed schemes according to which foreign companies bought liquid shares in the name of Russian legal entities, registered in zones with special tax treatment,” said Mikhail Alexandrov from the Interior Ministry’s Investigative Department on Tuesday. He also accused Mr Browder of seeking to use share holdings in Gazprom to gain a seat on the board, and to exercise influence at the gas monopoly.
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Police Set to Charge Browder for Buying Gazprom Stock
The Interior Ministry is preparing to bring criminal charges against U.S.-born investor Bill Browder, the latest turn in a feud that has led to U.S. sanctions against Russian officials, a Russian ban on U.S. adoptions of Russian children and the upcoming posthumous trial of Sergei Magnitsky.
Magnitsky worked as a lawyer for Browder’s Hermitage Capital, once a minority shareholder in the state-controlled gas giant, Gazprom. He died in jail in 2009 after his pancreatitis went untreated. The Kremlin human rights council said in a 2011 report that Magnitsky had been repeatedly beaten and deliberately denied medical treatment.
Magnitsky and Browder are due to be put on trial next week for tax evasion.
Browder, a British citizen, has been barred from Russia since 2005 as a security threat, according to Russian officials. He has campaigned to bring those responsible for Magnitsky’s death to justice.
Mikhail Alexandrov from the Interior Ministry’s Investigative Department said Tuesday that there is sufficient evidence to charge Browder with misappropriation for allegedly using subsidiaries to amass a 3 billion ruble stake in Gazprom between 2001 to 2004. Until 2005, foreign investors were not allowed to hold more than 9 percent of Gazprom shares.
“We’re talking about not only personal enrichment with the violation of Russian laws by illegally buying up stocks in strategically important gas monopolist Gazprom, but it’s about intending to impose their own rules on that company,” Alexandrov said.
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Magnitsky Partner Faces Charges In Gazprom Stock Case
Russian authorities say they are preparing to bring new charges against William Browder, the U.S.-born former employer of the late Russian anticorruption lawyer Sergei Magnitsky.
The Interior Ministry on March 5 said Browder, the founder of the Hermitage Capital investment fund, is accused of illegally purchasing $3 billion in shares in Russia’s state-controlled company Gazprom.
Browder has campaigned for the prosecution of those responsible for the death of Magnitsky, who died in pretrial detention after accusing Russian officials of fraud.
“They can sort of whip themselves up into a crazy frenzy of misuse of their own justice system, but it really has no impact on our campaign,” Browder told RFE/RL’s Russian Service after the announcement. “They killed Sergei Magnitsky, they tortured him to death. We’re going to get justice for Sergei Magnitsy. And the more of this crazy stuff they do, the more obvious it becomes that there is a criminal regime going on in Russia who are basically doing everything they can to cover up the murder, and we’re not going to let them cover it up.”
The announcement of the new charges against Browder came one day after a Russian court announced on March 4 that an unprecedented posthumous trial against Magnitsky for tax evasion will start on March 11.
Browder is a co-defendant in the trial and will be tried in absentia.
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RUSSIA TO CHARGE MAGNITSKY’S EX-EMPLOYER
Russia’s Interior Ministry is preparing to bring criminal charges against U.S.-born investor Bill Browder, the latest turn in a feud which has led to U.S. sanctions against on some Russian officials, a Russian ban on adoptions of Russian children by Americans, and the upcoming trial of a dead man.
The dead man is Sergei Magnitsky, a lawyer who worked for Browder’s Hermitage Capital, once a minority shareholder in the state-controlled gas giant, Gazprom.
Magnitsky died in jail in 2009 after his pancreatitis went untreated. The Russian presidential council on human rights said in a 2011 report that Magnitsky had been repeatedly beaten and deliberately denied medical treatment. The lawyer’s death became a litmus test for the Russian government’s commitment to the rule of law: no one has yet been found responsible for his killing.
Magnitsky and Browder are due to be put on trial next week for tax evasion.
Russia’s top court ruled in August 2011 that posthumous trials are allowed, with the intention of letting relatives clear their loved ones’ names. In Magnitsky’s case, prosecutors re-filed charges although family members said they didn’t want another trial.
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Investor doubts hold back Russian oil powerhouse
The Russian oil company Surgutneftegaz owns refineries and gas stations, sells a valuable product and makes a profit. But it sometimes fails another test of the capitalist world.
The company is valued by the Russian stock market at even less than its cash and easily sold assets. That astonishing fact suggests that investors see no real value in the business.
Surgut, as it is known for short, is Russia’s fourth-largest oil company after Rosneft, Lukoil and TNK-BP. Its sprawling oil fields, pipelines and drilling rigs should be highly valued in the investment arena. It pumps 1.1 million barrels of oil a day. So the struggle to raise its stock value in the eyes of portfolio managers, while more extreme than many of its Russian peers, is emblematic of investors’ broad lack of confidence in the country’s economy. Outsiders view Russia’s companies, however cash-rich, with an incredible degree of skepticism.
Shares in Surgut have fallen in recent weeks to a level where the market value of about $28.5 billion (U.S.) for its common shares on the Russian Micex stock exchange is now lower than the $31.4 billion in cash and liquid assets on its balance sheet, according to Troika Dialog bank in Moscow.
“It’s an illogical valuation,” Chris Weafer, the chief strategist at Troika Dialog brokerage in Moscow, wrote in a research note last week about the company.
The Russian market this spring fell faster than others of the BRIC countries of Brazil, Russia, India and China and since mid-March is down 18.8 per cent. Global oil prices have slumped, reducing expected earnings.
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