NEWS

Ayano Hodouchi and Anna Arutunyan

Another self-made billionaire in Russia appears to have taken flight as his business empire crumbles, authorities swoop in raids and his creditors close in.

Shalva Chigirinsky, a Russian businessman of Georgian origin, is hemmed on many sides by lawsuits these days, and the offices of an oil firm he controlled until recently were raided by law enforcement officers.

If reports of him having left for the US are true, Chigirinsky would join a growing list of oligarchs who have fled to the West in the face of legal problems.

Investigators descended on Oil Company Magma, a subsidiary of Sibir Energy, on August 8. According to a statement by Sibir Energy, investigators from the Interior Ministry were interested in the commercial activities of the Moscow Oil Company in 2002 and 2003 and the Moscow Oil and Gas Company in 2006. These companies were being run by Chigirinsky at the time.

Interfax reported that the inspection was related to suspected tax evasion, citing police sources.

Sibir Energy is also suing Chigirinsky. Until recently, he was a major shareholder of the company, and according to media reports, Sibir Energy is suing Chigirinsky over what it claims were unauthorized payments while he was directing the company, and has applied to the High Court of Justice in London. The claim currently stands at $328 million.

Sibir Energy declined to comment on the legal case.

Further complicating an already messy case, Chigirinsky now claims that Yelena Baturina, owner of Inteko and the wife of Moscow Mayor Yury Luzhkov, secretly controlled 50 per cent of his stake in Sibir Energy, and is now using a third person, Ruslan Baisarov, to attempt to take over Chigirinsky's shares in the company. These reports first emerged in the Financial Times on Monday, but in a copy of documents obtained by The Moscow News from a source close to the case, Chigirinsky claimed, through his lawyer, Christopher Grierson, that Chigirinsky was a partner with Baturina because Chigirinsky "considers that Ms Baturina's sphere of influence in Moscow is such that no major projects can proceed within the city without her backing." The authenticity of the witness statement obtained by The Moscow News has been confirmed by Grierson's law firm, Lovells, which said that the statement had been submitted to the High Court.

Their "partnership" dates back to 1999, Grierson claims, when Chigirinsky began developing his oil and real estate projects in Moscow. He was to put up the money for the projects, while she would ensure that "bureaucratic issues" would not create obstacles for the planned projects, Grierson says. Profits and losses were to be equally shared by the two, but Chigirinsky claims that not only was he the only one putting money into the projects, but he also was "obliged to spend large sums on her behalf, amounting to about US$12 million including bills for the maintenance of her private jet."

Baturina has denied these claims. They are "not only not true, but directly the opposite of reality," Baturina said in a statement on Monday via Inteko's press office. "There is only one issue concerning a loan between us, a loan which I gave to Mr. Chigirinsky and that he has still not paid back... his lies are just an attempt to avoid paying back his undeniable debt."

Grierson could not be reached for comment, but a spokesperson for his law firm, Lovells, said that he had "no idea" where Chigirinsky was located.

In another lawsuit, the London court on July 6 froze Chigirinsky's assets, acting on a complaint from Russian state-controlled bank VTB.

The court order bans him from dealing with his assets: two apartments in Moscow, a mansion in London, a villa in France, a personal collection of clocks (including Faberge timepieces) and several real estate projects such as the Russia Tower in Moscow and the luxury shopping center Passazh in St. Petersburg.

According to Kommersant, a loan of 3 billion roubles ($92 million at current rates) originally taken out from Deutsche Bank in 2007, came due on June 30. VTB took over the loan in February.

A VTB spokeswoman declined to comment on the case, but confirmed that the London court had frozen a series of Chigirinsky's assets.

Dmitry Abzalov, an analyst at the Moscow Centre for Political Trends, said there were several players involved in the Chigirinsky affair - Chigirinsky himself, his partners in the Moscow Oil and Gas Company, the Moscow city government, GazpromNeft and the creditors - chiefly VTB.

"Chigirinsky has a lot of short-term loans, meaning he has to pay up," said Abzalov. "First he tried to exchange his bad assets for better ones. He was trying to get money out of his structures. He also tried to transfer his bad real estate assets to companies within the holding, companies which were controlled by the Moscow city government."

The upshot of it was that he managed to annoy everyone, from his partners in the Moscow Oil and Gas Company to the Moscow city government, Abzalov said.

This seems to be a classic case of creditors swooping down on a man who borrowed left and right, reached the end of his credit and is trying to get away with what little he has left.

He expressed scepticism about the idea that GazpromNeft might have initiated the search of companies linked to Chigirinsky.

"Gazpromneft will get hold of the Moscow Oil Refinery Plant in any case. As for Sibir Energy, it will be sold, and [Gazpromneft] can just wait until it is sold," Abzalov said.

It is more likely that the searches were initiated by Chigirinsky's creditors, who want to keep the pressure on Chigirinsky so that he will not cash out on his assets and leave his creditors empty-handed, Abzalov said.

Recently, the Finanical Times reported that Chigirinsky's lavish house on London's exclusive Eaton Square in Balgravia was sold for £33 million, at £12 million cheaper than the listed price. The unnamed buyer is said to be a wealthy European.

Abzalov commented that Chigirinsky would probably want to hold on to his real estate for now, if he can get the banks to hold on to the loans. "He still has a lot of real estate, and its value will start growing in about a year and a half. Now, it's so cheap that even if he sells it all he won't be able to cover his debt."

But it is not clear that VTB would wait for its money, Abzalov said.

Chigirinsky amassed most of his fortune through oil and Moscow real-estate projects, and seems to have enjoyed a comfortable working relationship with City Hall. Most of his real-estate projects, such as the Russia Tower, and the demolition of the Hotel Rossiya, are related to City Hall. He is also the second Moscow tycoon, following Telman Ismailov, to get in trouble recently, leading some to speculate that Mayor Yury Luzhkov might not be as powerful as he once was.

Vladimir Pribylovsky, president of the Panorama think tank, said that Chigirinsky may no longer have such a good working relationship with the mayor's office. "Where Luzhkov is concerned, no one wants to take him down outright, but they are nibbling away at him - a lot of people close to the Kremlin are keen on taking a piece of him. This was seen in the case with Telman Ismailov. Inteko is going through a lot of problems. ... It doesn't mean [Luzhkov] will go, but some of his [influence] could be taken away."

The clampdown on the Cherkizovsky market is largely seen as a sign that Luzhkov is no longer powerful enough to protect all his allies. He recently replaced Fazil Izmaylov, the brother of Ismailov, who owns the company controlling the Cherkizovsky market, as the prefect of the city's northern administrative district. In his place, he appointed Oleg Mitvol, an environmental official best known for his high-profile campaign against Shell at Sakhalin Island, and one against illegal dacha construction in the Moscow region.

Chigirinsky was reported by Forbes last year to be worth some $ 2.3 billion. This year he disappeared from the list of the 500 richest men in the world, and was reported to have left for the US in late March. His whereabouts now are unknown.