Date: 2024-05-18 Page is: DBtxt003.php txt00025956
RUSSIAN OLIGARCHS
Rinat Akhmetov
Rinat Akhmetov
Original article: https://www.icij.org/investigations/cyprus-confidential/oligarchs-offshore-clients/
Peter Burgess COMMENTARY
Rinat Akhmetov is not a Russian oligarch but his wealth arose in the same manner ... that is during the post-Soviet sell off of state assets in the 1990s. With the demise of the Soviet Union, there was a mad scramble for the national assets in Russia and all the Soviet Union including Ukraine.
At that same time in the 1990s I was engaged to do an assignment with KPMG in Kazakhstan. After the collapse of the Soviet Union, the 'West' deployed many teams of consultants to advice the post Soviet leadership on the reforms needed to become successful capitalists. We should not have bothered.
During this time, I was recruited by KPMG to work with their Policy Economics Group (PEG) in Washington ... subsequently renamed The Barents Group. They assigned me to work with a Government Reform team at the Government Ministry of Finance in Almaty, Kazakhstan. I expected to be working on this assignment for about 2 years, but about three months in I travelled back to the USA over the Christmas break and never returned. Apparently the Kazakh Government had advised KPMG that I was no longer welcome. I was not told much more at the time but I concluded that there were a number of other consultants in Almaty that had been the root cause of this, and moved on.
This was a reasonable assumption because there were several international consultants that I had previously worked with ... that is worked in the same space on other assignments mostly in Africa. These individuals knew that I knew how unqualified they were for the work they were now doing in Kazakhstan. Because they knew that I knew how unqualified they were, they worked very hard to make sure that they were 'friendly' with the Kazakh government officials we all worked with and down-played all I did.
By way of example ... one of the international consultants involved with upgrading the budget process in the Kazakh Government had only done similar work in Liberia in West Africa ... which would have been funny if it was not so serious.
Another international consultant, this time from the IMF, had crossed my path when I was working in Namibia shortly after its independence. At the time Namibia had not 'joined' the IMF ... it was only weeks after independence ... and this individual simply did not do his homework. One example concerned the unit of currency used by Namibia, which at the time was the same as that of South Africa. I was in Namibia as part of a 3-person team preparing the first development plan for Namibia after Independence, a plan that facilitated the largest development plan financing every achieved by the United Nations up to that time! Later. I returned to Namibia to help administer the fund raising process and implement the initial stages of the plans.
It was a reasonable assumption on my part that my colleagues wanted me 'out of the way' and that this was why I was declared 'persona non-grata' with KPMG being told to replace me. Years later I don't think that was real reason at all. It was way more serious and consequential ... and I think I got it wrong!
Much more likely is that truly powerful people in Kazakhstan did not want someone like me doing the analysis of what was actually going on with the 'reform' process.
For examp;e, one of the things I did early on in my assignment in Kazakhstan was to implrement a small enhancement to the Government financial accounting system. At the time the Government accounts were operated using a FoxPro PC database ... probably pirated, and reworked to handle Russian language wording. I knew little Russian, but had some familiarity with FoxPro as well as a lot of knowledge of how Government accounting worked both in the West and in the former Soviet Union. Rather quickly, I added a modest amount of code to the FoxPro system so that the Government's financial reports could be printed with a choice of either Russian wording or English wording.
Now, essentially all the community of international consultants, most of whom did not undersstand Russion, could see all the government numbers in English, and make their recommendations accordingly. It also meant that powerful people in the Kazakh society could not rip-off the government and the people of the country with complete impunity. In retrospect, why would any of the top powerful people want someone like me getting in their way!
I did not knpw this at the time ... but many years later I learned that Jeffrey Sachs was doing similar work in Moscow in Russia at around the same time. The Russians also found a reason to stop him doing his work and he was removed as well!
Ukraine went through much the same process ... and this probably explains how Rinat Akhmetov became so wealthy in Ukraine!
Peter Burgess
Rinat Akhmetov
Ukraine’s richest person
Entities in the leak:
60 Companies
Sanctioned by:
No sanctions
Offshore providers:
Cypcodirect
About:
Ukrainian billionaire Rinat Akhmetov, the son of a coal miner, rose from modest roots in Donetsk to become Ukraine's wealthiest person, now worth an estimated $5.7 billion, according to Forbes. He amassed his fortune by buying mining assets during Ukraine's privatization era in the 1990s. Later, Akhmetov bankrolled and was a member of the Party of Regions, a Ukrainian political party with strong ties to Moscow.
Akhmetov paid American political consultant Paul Manafort millions of dollars, reportedly via Cyprus-based shell companies, for his help in guiding the leader of the Party of Regions, Viktor Yanukovych, to Ukraine’s presidency. (Manafort also led Donald Trump’s 2016 presidential campaign.) In 2014, Yanukovych was exiled to Russia. (Later, Ukraine’s justice minister alleged that Yanukovych and his allies had funneled $40 billion out of Ukraine.) In May 2014, Akhmetov publicly opposed the Russian separatists who bulldozed through eastern Ukraine, where his mining empire is based.
Akhmetov's net worth dropped from an estimated $14 billion before Russia’s full-scale invasion of Ukraine to less than $6 billion a year later, according to Forbes. He then filed a lawsuit against Russia with the European Court of Human Rights for damages caused. Despite his financial losses, Akhmetov is reportedly awaiting delivery of a $500 million luxury yacht. He also owns a lavish French villa and properties in the U.K., including two London apartments bought together for £136.4 million about 13 years ago (more than $210 million at the time); and has investments in U.S. mining assets.
Cyprus connections:
The Cyprus Confidential leak reveals the scale of Akhmetov's global business holdings, including direct or indirect interests in 60 offshore companies, primarily registered in Cyprus. Most of the companies within Akhmetov's network are connected to System Capital Management Ltd. (SCM), a corporate conglomerate through which Akhmetov wields significant influence over vital sectors of the Ukrainian economy.
In July 2021, the files show, Akhmetov committed to buying an opulent two-story penthouse for £87.5 million (about $122 million) in Chelsea Barracks, London, through Gelion Properties Ltd., a British Virgin Islands-based shell company of which he is the beneficial owner. (The substantial price included not only the penthouse, but also several parking spaces and extra storage rooms.) An email chain between Cypcodirect and PwC Cyprus employees marked 'URGENT' and 'CONFIDENTIAL' reveals that Gelion would be used to buy the penthouse to ensure Akhmetov’s “confidentiality,” by keeping his name off the U.K.’s public property register. “Confidentiality is the main purpose behind the purchase of the real estate by Gelion,” an email from a PwC employee explains. Public documents suggest the sale went through the following year.
The files also shed light on Akhmetov's involvement in the coal industry in Russia beyond the country’s 2014 annexation of Crimea. In 2016, Akhmetov’s power generation firm DTEK transferred ownership of a number of coal mines it had bought in the southwest Russian region of Rostov four years earlier to a Cyprus-based subsidiary, Fabcell Ltd. DTEK also transferred liability for a substantial loan of around $400 million from Sberbank, Russia’s largest state-owned bank.
In January 2017, Fabcell reclassified its authorized shares into 7,999 ordinary shares and one golden share. The golden share was allocated to Sberbank, which would allow the bank to take control of Fabcell if it defaulted on its debt.
Number of companies and trusts in the leak:
Sixty companies appear in ICIJ's data, most of them registered in Cyprus. Out of those, 58 were also common clients of Cypcodirect and PwC.
Response:
In a statement to ICIJ, Akhmetov said SCM Holdings Ltd., the main investment company of the SCM group, is the only Cypriot firm in which he is a “direct shareholder” and that SCM is comprised of 500 legal entities in multiple jurisdictions. The holding company for DTEK is incorporated in the Netherlands, the statement noted.
The statement said that the financing provided by Sberbank and other lenders prior to the 2014 Russian invasion was 'standard practice for Ukrainian borrowers.' After the invasion, the statement said, 'the situation changed drastically' and DTEK sought to sell the Rostov coal mines. After failing to find a buyer, ownership of the mines was transferred to Fabcell as a way of 'limiting [DTEK's] exposure to the claims of Sberbank as creditor and paved the way to exiting DTEK’s investment in the Rostov Coal Mines.'
The statement did not address ICIJ’s questions on the acquisition of the London penthouse through Gelion. Akhmetov declined to comment on 'any investments or transactions that may or may not have happened, nor on their status.'