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By John Helmer, Moscow

Leonid Lebedev (lead image) has been charged with stripping millions of dollars from TGK-2, the regional electricity utility he controls. Details of the lawsuit have been revealed this week in the files of the Eastern Caribbean Supreme Court in Tortola, British Virgin Islands (BVI).

The 4-page court filing of June 24, 2015, names Lebedev personally, according to the court’s registry clerk, plus seven of his companies in the scheme. The core allegation against Lebedev is that he arranged to strip cash out of TGK-2 through transactions with Russian subsidiaries of his Sintez holding and offshore companies which Lebedev registered as TGK-2 shareholders. These sold shares among themselves, passing cash out of TGK-2 on terms which ran up TGK-2’s liabilities and diminished the value of its assets, and hence the equity value left to minority shareholders and investors. When they woke up, they described the “knowingly unprofitable transactions” on the internet in this way. Unless the culprits are sent to jail, another investor said, the probability of recovering the money which has been moved offshore “tends to zero.”

The defendants named in the new court papers are Lebedev fronts — Akolyn Investments Holdings (BVI), Litim Trading (Cyprus), Janan Holdings (BVI), Raltaka Enterprises (BVI), and Divent Enterprises (Cyprus).

Suing Lebedev is Prosperity Capital Management, a share portfolio specialist in Russian investments, run by Mattias Westman in London and Alexander Branis in Moscow.

Court sources in BVI say proceedings in the commercial division of the Supreme Court are closed until the court issues its judgement. The only open record of the new case against Lebedev is the claim form filed a month ago. Westman in London, Branis in Moscow, and their Tortola lawyer were all asked to provide a copy; they refuse.

An internet record service has obtained the claim form, which has been assigned the case number 77/2015. After a recital of the names of the plaintiffs and defendants, the claim asks the court to award “damages on a joint and several basis against each of the defendants under the [Russian] JSC [Joint Stock Company] Law Article 84(2) consequent upon a derivative claim brought on behalf of OJSC Territorial Generating Company no. 2 (TGC-2) under Russian law for breach of Russian law provisions on unauthorised related-party transactions.”

Article 84 is the part of the Russian statute which regulates shareholding transactions of companies in which there is concealed insider or related-party dealing to the disadvantage of minority shareholders. Section 2 provides the losers in such deals with recourse against the “interested person [who] shall bear responsibility to the company in the amount of losses caused by him to the company.”

Prosperity Capital operates up to a dozen funds with at least £562 million, and as much as £820 million under management, according to market reports. Last September Westman (below left) told a US financial publication his firm has $3.5 billion in assets. The Prosperity Capital website provides net asset value estimates for nine current funds, but no current aggregate value. According to the fund website, Branis (right) manages a specialized fund which “holds large stakes and board seats in three Russian generation companies and two distribution companies – all ripe for capacity-building and other efficiency gains, as the domestic economy develops.” Branis occupies one of the four seats his company currently holds on the 11-seat board of directors at TGK-2.

Westman_Branis

The BVI lawsuit plaintiffs are fronts for Westman and Branis; they are named in court as Sonara Ltd., Jamica Ltd., and Medvezhonok Holdings. They are reported in Russian media sources to own at least 27% of the TGK-2 shares.

Lebedev’s companies, including those named in the lawsuit, started with 44.8% of TGK-2‘s shares, for which they paid Rb16.5 billion (in 2008 that was about $660 million). He then bought more TGK-2 shares for the majority stake. For an English translation, read this. Janan of the BVI was reported last year as holding 14.54% on Lebedev’s behalf.

Andrew Thorp (below, left), head of litigation at Handley Westwood & Riegels confirms that his firm is representing the plaintiffs in the case. Claire Goldstein (left), another partner in the firm, has signed the claim form. They refuse to discuss details of the claim. No estimate of the multi-million dollar damages at stake is included in the court filing.

Andrew Thorp

Their allegations and claims aren’t new. In 2013 Russian press reports identified the Prosperity Capital companies as accusing Lebedev of illegally diluting their stake in TGK-2. They commenced litigating against him in Russian courts. The new Caribbean court action has been launched, legal sources in London speculate, because it is the only way to go after the money which Lebedev has allegedly transferred offshore. If the court rules in favour of Prosperity Capital, enforcement against Lebedev’s assets in the US, UK and Europe is likely to follow.

In the latest court action in BVI, plaintiffs Sonara and Jamica are obscure Cyprus registrations, sharing a common address in Nicosia with Medvezhonok (in Russian “Little Bear”). London and other exchange records, plus the BVI court claim form, show they belong to Prosperity Capital. Medvezhonok is the vehicle through which that group acquired stakes in GAZ, Oleg Deripaska’s automobile company; Silvinit, a potash company taken over by Suleiman Kerimov; and Highland Gold, which is controlled by Roman Abramovich and his partner, Yevgeny Shvidler. Russian court records reveal that Westman and Branis have sued Deripaska and Kerimov for transactions they claim cheated minority shareholders of fair value. For details of their case against Deripaska, read this; for their suit against Kerimov during the merger between Silvinit and Uralkali, click. To protect the asset backing for their shares, they have also sued TNK-BP and its successor, Rosneft.

Akolyn Investments, Lebedev’s BVI stakeholder in TGK-2 and the first of the defendants in the new court claim, has been in deep trouble in the courts already. In 2012 it was hit with a freeze order from a Cyprus court over $180 million in cash which had allegedly passed through Lebedev’s hands on loan, but had not been repaid.

TGK-2 operates in several Russian regions – Arkhangelsk, Vologda, Kostroma, Novgorod, Tver and Yaroslavl. An investigation of cash stripping is under way by prosecutors in Tver, and in civil court action in Yaroslavl. The Yaroslavl court is scheduled to hear more in the case on August 4.

Lebedev’s lawyers have not yet filed an appearance or reply to the new lawsuit, the court clerk confirmed on Friday in Tortola. Lebedev, who has reportedly left Russia for the UK and US, was asked to comment on the charges against him. He has not done so.

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