My weekend email contained this gem of a RICO suit from IPOC against Alfa. It alleges that the stake in Megafon acquired by Alfa was illegally acquired from Rozhetskin and should instead have been delivered to IPOC. Not entirely unsurprisingly the suit fails to mention that IPOC is a vehicle which a Zurich tribunal has ruled contains the ill-gotten gains of the Minister of Communications (sic).
This is not the first time that a RICO suit has been used against Alfa to resolve a Russian business dispute. For those of you with memories of the Sidanco dispute between, (broadly) Potanin and Sputnik one one side and Alfa, Access Industries led TNK/BP on the other you will find various RICO suits which were subsequently dropped when the business dispute was settled. For truly salacious details you will have to find a way to deliver high quality bacon (the stuff from a pig, I just miss it) to my door on a regular basis.
This is the opening of a new front by IPOC who need to divert attention from the hammering they are taking on the original front. The press release is very short on specifics and long on blah (posted below for your edification) so I have no idea if it holds any water. Though I struggle with the concept that by buying the stake from Rozhetskin, that Alfa has been racketeering unless the original Option agreement was ruled to be in force - but as I am not a lawyer who knows.
“IPOC INTERNATIONAL GROWTH FUND LIMITED
48 Par-la-Ville Road, Hamilton HM 11, Bermuda
P.O. Box HM 1737 Tel: (441) 295-9294
Hamilton HM GX Bermuda Fax: (441) 292 8899
FOR IMMEDIATE RELEASE Contact: Prism Public
RUSSIAN OLIGARCH FRIDMAN, CORPORATION SUED FOR
RACKETEERING, FRAUD THAT USED U.S. BANKS AND EXCHANGES
”Defendants’ Tentacles Reach Into and Injure Numerous
NEW YORK – Russian corporation Alfa Group Consortium
and its U.S. entity, Alfa Capital Markets, Inc., are a
criminal enterprise that has used U.S. banks and stock
exchanges as an integral part of their theft schemes,
costing American taxpayers and stockholders hundreds
of millions of dollars, IPOC International Growth
Fund, Ltd., alleges in a federal racketeering lawsuit
filed late Thursday.
The suit alleges that Alfa, one of the largest
business conglomerates in the Russian Federation –
along with Russian oligarch Mikhail Fridman and U.S.
citizen Leonid Rozhetskin – engaged in a vast
international money laundering and fraud scheme in an
attempt to take control of the Russian cellular
industry. ”By doing so, defendants’ conduct has had a
substantial effect on the United States and its
citizens, and much of the criminal conduct occurred in
the United States,“ the suit, filed in U.S. District
Court for the Southern District of New York, said.
The criminal enterprise affected Americans, U.S.-based
investors and U.S. interests in numerous ways, the
complaint alleges, involving the evasion of U.S.
taxes, insider trading of shares on U.S. stock
markets, and wiring payments through New York banks.
The Alfa Group Consortium received support from the
Overseas Private Investment Corporation, a U.S.
government development agency, to provide a
significant portion of funding for one of Alfa’s
”The complaint alleges that the racketeering and other
wrongs cited in this case hurt U.S. investors, U.S.
taxpayers and U.S. financial markets,“ said W. Gordon
Dobie, an attorney with Winston & Strawn LLP, which
filed the case for IPOC International Growth Fund,
Ltd. ”It’s my opinion that the defendants should be
called to account in court for their conduct.“
A Daisy Chain of Nine Shell Companies
The suit details how Alfa, in a series of sham
transactions over a 10-day period, knowingly and
fraudulently colluded to steal IPOC’s 25.1 percent
stake in Russia’s third largest mobile telecom
company, MegaFon. IPOC had originally signed two
options agreements to buy the stake from LV Finance,
had paid for the shares and at all junctures honored
the terms of the agreements. At the final stage, IPOC
discovered that LV Finance, acting through its
chairman Leonid Rozhetskin, had negotiated a purported
sale of LV Finance’s interest in MegaFon to Mikhail
Fridman’s Alfa Group, involving a complex web of nine
offshore companies. Both companies are alleged to
have been aware of IPOC’s prior ownership rights, but
rode roughshod over the agreement and fraudulently
colluded to sell the same stake twice. They ”bought“
and ”sold“ the $50 million stake, and yet there is no
evidence of money having changed hands throughout this
daisy chain of sham transactions.
”What was a legitimate business opportunity for IPOC
evolved into a vehicle for Rozhetskin’s and Mikhail
Fridman’s theft and misappropriation,“ the suit
Scheme Concealed Wrongdoing
The suit alleges that at the center of the enterprise
was Fridman, a major VimpelCom shareholder, who used
associates working directly for him and for VimpelCom,
to transfer the assets in the summer of 2003. The
scheme involved wiring payments through New York
banks, taking the proceeds, and then transferring
those proceeds to various off-shore companies ”to
conceal wrongdoing from IPOC, American taxing
authorities, and others.“
The suit states that Rozhetskin acted ”as a point
person to obtain additional cellular phone assets“ and
worked closely with Fridman to assist with the sham
transactions. He later relied on New York banks to
launder the theft of $50 million, the money IPOC paid
for the stake.
The complaint also alleges that Rozhetskin and Fridman
were assisted by Hans Bodmer, who served as escrow
agent and sent instructions to IPOC to wire money
through banks in New York for the benefit of the
defendants. Bodmer recently plead guilty to criminal
conspiracy to launder money and conspiracy to violate
the U.S. Foreign Corrupt Practices Act in connection
with an unrelated scheme to bribe foreign leaders.
Insider Dealing and Manipulation of VimpelCom Tax
The suit also alleges that Fridman and the Alfa Group
attempted to manipulate VimpelCom’s share price for
their own gain, in their position as major VimpelCom
shareholders. On Dec. 8, 2004, the suit said,
VimpelCom, a New York Stock Exchange Company,
disclosed the Russian tax authorities were
investigating the company for back taxes carrying
potential for heavy fines and penalties.
The news coincided with the auction of a $10 billion
subsidiary of Russian conglomerate Yukos to satisfy
back-dated tax obligations. Yukos later went through
an unprecedented bankruptcy filing in the United
The suit claims that manipulation was insider dealing
that advanced the defendants’ goal of obtaining
control and consolidation of the telecommunications
market in Russia, furthering the ability to raise
prices for cellular services through a near-monopoly
Notes to Editors
• IPOC International Growth Fund, Ltd. is an
open-ended mutual fund company based in Bermuda.
• The suit, based on claims under the Racketeer
Influenced and Corrupt Organizations (RICO) Act,
charges that Fridman conspired with Rozhetskin to
steal IPOC’s interest through money laundering,
bribery, wire fraud and other criminal wrongdoings.
Other defendants are Alfa Capital Markets, Inc., a
U.S. corporation; Alfa Telecom (n/k/a) Altimo; and
• Alfa Group Consortium is an association of various
companies controlled by Fridman. It controls major
international corporations traded in the United
States, including VimpelCom (NYSE) Russia’s second
largest mobile telecoms company, Golden Telecom
(NASDAQ) and Turkcell (NYSE).
• For more information about IPOC, go to
www.ipocfund.com. A copy of the lawsuit is being
posted on this Web site June 9. ”
[composed and posted with ecto]
[composed and posted with ecto]