Email This Post - Print This Post Print This Post

By John Helmer in Moscow

It was ten years ago, almost to the day, that a lawyer from Philadelphia named Bruce Marks had a very smart idea.

If you are too small and weak, physically or legally, to recover money you unwisely entrusted to a big Russian crook, Marks recommended going to your nearest federal US District Court; and get the judge there to convict the bad guy of something that’s the crime of racketeering in the US, but regular biznes in Russia. And so, civil claims were born out of the US Racketeer Influenced and Corrupt Organizations Act (RICO). The first trial run by Marks was a 1999 lawsuit in New Jersey by Vyacheslav Bresht against a bunch of US investors, who had bought a rip-off scheme for the Russian titanium producer, Avisma-VSMPO. Rather than go to court and face disclosure of what they had done, they paid up.

A year later, I remember telling Alexander Bulygin, then CEO of Rusal, it was a bad idea to underestimate the RICO claims by the Zhivilo brothers, dispossessed owners of the Novokuznetsk aluminium smelter, also represented by Marks, this time in the southern district of New York. Bulygin said: “John, when we don’t like to honour a contract, it’s no problem. Here’s what we do”. Cut to video shot in which Bulygin makes a tearing motion with the forefingers and thumbs of his right and left hands.

Roll the tape forward to now, and here’s a surprise. Not a single RICO claim against an alleged big bad Russian has ever been heard by a US court and adjudicated. A handful of Marks’s cases is still awaiting final rulings on jurisdiction.

But RICO claims have worked nonetheless. In fact, a great many who have sued Rusal owner Oleg Deripaska in foreign courts have been paid off, as the threat of actually testifying, and losing, or being found guilty of perjury, gets too close for Deripaska’s comfort. Except for the man to whom he owes more than anyone else for his first start, and for his second, when Siberian Aluminium became Russian Aluminium — his godfather, Michael Cherney. Cherney towers over the fatherless Deripaska for height and punching weight, and as a comforter, Deripaska likes his bodyguards to be as big as Cherney. Watch Public Enemy (Jimmy Cagney) and Little Caesar (Edward G Robinson), and you’ll see what I mean – short, fatherless men trying to bring down Big Father Figures.

So here we are now in New York, where the mayor, a 5 foot-6 inch fellow named Michael Bloomberg, has spent $85 million to make sure noone has a chance of contesting the mayoral election against him on November 3; actually, by then he will have spent between $110 million and $140 million. With money like that, you might say the racket is already in power in New York City, and RICO is Mayor. So, you might also ask – how is it possible to file a lawsuit in a town whose mayor is Bloomberg against a Russian bad guy, whose legal exposure is that he conspired to make a lot of money, and got rid of any competition that stood in the way, mostly by paying for it to go away.

Hey Rico! Meet Micky Prokhorov – a man whose record for violating US-type stock manipulation and asset stripping regulations was allegedly so bad, an Englishman with an inherited title made the allegation in public. That man, Patrick Gillford (Lord Gillford, son and heir of the 7th Earl of Clanwilliam) made a lot of money himself working on projects which, according to Prokhorov, were paid for by Vladimir Potanin, Prokhorov’s original business partner in Moscow. Because Prokhorov was fighting Potanin for control of Polyus Gold, the listed goldmining company, whose stock they shared in roughly equal blocs, and because Gillford occupied a seat on the board as a purported independent, Prokhorov retorted in public that Gillford was toeing Potanin’s line, because he was being rewarded, and so wasn’t independent at all.

A man who works for Gillford in London named Locksley Ryan also busied himself in 2008, briefing institutional shareholders in the goldmining company. Ryan told them tales of how Prokhorov was threatening to steal the listed company’s assets, and urged them to vote against Prokhorov’s candidates for the board, and for Gillford.

A year on, and now that Mayor Bloomberg is backing Prokhorov to buy with some of his own, but mostly borrowed money, the Nets basketball franchise and a control stake in a Brooklyn real estate development, investigators from New York have been asking Gillford and Ryan to repeat what they said about Prokhorov’s business practices in 2008. But they refuse. Gillford is still sitting on the board of Polyus Gold; Potanin has cut his losses and sold out; and Prokhorov controls the company without challenge. Recently Ryan let slip: “In the end he didn’t have to steal the company’s assets, so what’s the point of repeating last year’s complaints that he might?”

Don’t get me wrong about Prime Minister Vladimir Putin. He studied Karl Marx as a young man,

so he knows the Marxian principle – in a situation of free competition, the rate of profit will fall. So, textbook capitalism is always heading for self-destruction — or towards fraudulent and military ways of putting off the inevitable.

So if you can’t have communism in Russia (Putin is not to blame for that), the only way you are going to have capitalism, the only alternative to communism, is if you let a gang of racketeers rig the economy non-competitively, so they make big and stable profits. Putin realized that the only way he could stay on top in a racket like this is for him to run the racketeers, destroying those who won’t kiss his ring, and reminding those who do, to bend from time to time; kiss again; pay for the privilege; and keep paying.

Time for Putin, like time for those who make a business out of Russia, is inevitably short term. The longer you can stretch the term, the more money you make. The trick for defendants in RICO lawsuits is to delay the trial for as long as you can. That way you’ll have more money with which to pay off, and a good chance that will never happen, minus your legal fees. The trick in running Russia is exactly the same.

In a political racket like this, there must always be a believable prospect of becoming rich or civilized, preferably both. That’s when the three primeval motivators in every society – force, fraud, and subversion – give ground to free choice and rational bargaining. Hey, hold the mayo in that Caesar Salad!

If Bloomberg’s New York doesn’t have civilization, it’s unreasonable to expect it of Putin’s Russia. So it ought to be understandable that Russians are only too glad to see more of fraud and subversion, in order to feel less compelled by force. They feel sorry for New Yorkers who think the only racketeers they will ever see perform are between the advertisements in replays of The Sopranos.

For Russians, the difference between Prokhorov and a civilized New Yorker like Bloomberg or Bernard Madoff is that there isn’t a difference; and that the only people who don’t realize this, and buy their promissory notes, are fools who ought to know better. And if they don’t, it’s a mitzvah to relieve them of the money they hardly deserve to keep. Madoff doesn’t count now, so you might ask Mayor Bloomberg whether he thinks Micky Prokhorov is that kind of mark.

Leave a Reply