Mail and Guardian Online
Friday, November 10, 2006
Viktor Vekselberg, the 48-year-old Russian oligarch, is not known for his corporate ethics. Described by Forbes as a "deal junkie", Vekselberg is ranked the third-richest Russian and the 44th richest person in the world by the magazine. His net worth is about $10-billion, accumulated predominantly through metals and oil.
Vekselberg is one of Russia's infamous oligarchs -- a tiny group of entrepreneurs who exploited the disintegration of the Soviet system to amass tens of billions of dollars.
In 2004 he bought the largest private collection of Fabergé imperial eggs. No price was disclosed for the sale, but a price tag of $100-million has been rumoured.
His stated intention was to return to his country "one of its most revered treasures", but the purchase allegedly also protects a portion of Vekselberg's wealth -- their legal title is reportedly vested in a non-profit fund out of the reach of Russian tax authorities.
Vekselberg's first business was reportedly the importation of goods, mainly computers. His investment holding group, Renova, was established in 1991 and is now registered in the Bahamas.
Through Renova, Vekselberg orchestrated Russia's first successful hostile takeover, of the Vladimir Tractor Factory in 1994. Later he bought aluminium smelters and bauxite mines, uniting them in 1996 into Siberian-Urals Aluminium Company (Sual) Holding, Russia's second-largest aluminium company. Sual is now merging with Rusal, its larger competitor.
Vekselberg reportedly made the bulk of his fortune when he and Mikhail Fridman's Alfa Group took over Tyumen Oil Company (TNK), which merged with BP in 2003 for cash and BP shares worth about $7-billion each. In recent years, Vekselberg's methods of wealth accumulation have been challenged in courtrooms in Russia and the United States:
Norex
Norex Petroleum of Canada is demanding about $2-billion in compensation in a lawsuit filed under US racketeering laws against Vekselberg, Renova and others. Norex's complaint alleges the defendants had used fraud, bribery and a variety of strong-arm tactics to appropriate Yugraneft, a Siberian oil company of which it was the majority owner.
Once they had acquired Yugraneft, Vekselberg and his partners rolled it into TNK, which they sold on to BP in 2003 to form TNK-BP.
The Norex court challenge queries whether the TNK assets that Vekselberg and his associates sold BP were properly theirs to sell. In a first ruling in 2004 a New York judge rejected US jurisdiction over the case, but an appeal court overturned that judgement last year. The appeal court ruling summarises part of Norex's claim as follows:
"During the 1990s, Norex acquired a 60% interest in Yugraneft ... Norex alleges that, by the end of the decade, defendants had hatched a scheme to take over Yugraneft by means of various Rico [Racketeer Influenced and Corrupt Organizations Act] predicate acts of mail and wire fraud, extortion, interstate and foreign travel in aid of racketeering enterprises, and money laundering."
Renova and Vekselberg have denied Norex's claims and are opposing them in the case, which is pending.
Nikopol
In civil litigation currently before the US District Court in Massachusetts, Vekselberg and Alexander Abramov, a member of the board of Evraz Holdings, Russia's second-largest steel-maker, have been accused of jointly paying a $25-million bribe to officials in the Ukrainian government.
This was allegedly in a bid to reverse Ukrainian government efforts to renationalise Nikopol, the world's second-largest ferro-alloy smelter, used primarily for manganese smelting.
The civil complaint, filed by Nikopol minority shareholders under US racketeering law in March, alleges that in December 2002, soon after billionaire Victor Pinchuk married the daughter of then Ukrainian president Leonid Kuchma, the Ukrainian government announced it was prematurely lifting a moratorium on the privatisation of Nikopol. Three months later Kuchma's government announced the intended sale of a controlling interest in Nikopol. A consortium led by Pinchuk won a tender process designed to favour him.
According to the complaint, Kuchma's regime became infamous for "the near-total corruption of its official economic life". In 2004 Ukrainian voters took to the streets in what has come to be known as the Orange Revolution. Its leader, opposition candidate Victor Yushchenko, ultimately defeated Kuchma's successor-designate and took office early last year.
Once elected president of Ukraine, Yushchenko appointed another leading opposition figure, Julia Timoshenko, as prime minister. She immediately set about reversing "the most obviously influenced and corrupt privatisations, including Nikopol's". According to the complaint, Pinchuk saw the writing on the wall and tried to sell his stake to Vekselberg and Abramov. But Timoshenko warned them not to because court rulings were affirming the government's position to renationalise.
As a final court verdict loomed, Abramov reportedly met with Yushchenko, who then appears to have backed him and Vekselberg.
According to the complaint, "in an attempt to block the new government's efforts to undo Nikopol's privatisation, Pinchuk, Vekselberg, and Abramov conspired to pay up to $50-million in bribes to top Ukrainian government officials, with Vekselberg and Abramov paying $25-million and Pinchuk paying another $25-million".
When the final court verdict ruled in favour of the renationalisation, President Yushchenko fired Timoshenko as prime minister.
The plaintiffs are claiming multimillion-dollar damages from the defendants for allegedly looting Nikopol. The case is being contested by Abramov and Vekselberg, who deny the allegations.
Volgograd
Vekselberg's multibillion-dollar aluminium company Sual is in the dock in the Russian courts for an alleged $20-million share fraud. Shota Mikhelashvili, the erstwhile major shareholder in the Volgograd Aluminium Plant -- one of Russia's biggest smelters -- has brought the case against Vekselberg's company.
In 2004 a Volgograd court ruled in Mikhelashvili's favour, invalidating a share emission for the plant, allegedly manipulated by Sual shareholders to favour Sual's takeover of the smelter. Mikhelashvili has warned that this was only the start of a bid to recover a stake in the smelter worth about $20-million.
Renova did not answer detailed questions submitted before publication