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SERGEI FRANK LOSES HIS FOOTING AT STATE TANKER COMPANY SOVCOMFLOT

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By John Helmer, Moscow
[2]  @bears_with [3]

Sergei Frank (lead image, right) is being removed from control of Sovcomflot, the Russian state tanker company and one of the largest oil and gas transporters in the world.  Frank is the only senior Russian state official to have been judged by the British courts to be dishonest and vindictive in litigation; to have perjured himself in courtroom testimony; and to have obstructed justice by a scheme of evidence fabrication against former Sovcomflot executives and partners.

Frank’s removal has yet to be confirmed officially; Sovcomflot is making no comments. The chief executive who has dominated the company for almost fifteen years appeared to be fully in charge at the July 24 board meeting.

Frank took over as Sovcomflot’s chief executive, replacing Dmitry Skarga at a board of directors’ meeting on October 4, 2004. Sovcomflot is a wholly owned state shareholding company, so it is the Kremlin which controls it and President Vladimir Putin who decided Skarga’s appointment in 2000, and Frank’s four years later.

In February of 2004 the president had removed Frank as federal Transport Minister. Frank and then-Prime Minister Mikhail Fradkov spent the next six months persuading Putin to put Frank in charge of a multi-billion dollar scheme to merge the Russian tanker fleets, privatize the combination, and list the shares on the New York or London stock exchanges. That scheme has collapsed in acrimony; read the details here [4]

To discredit opponents of the Sovcomflot privatization and share sale Frank directed thirteen years of litigation in the UK High Court, Court of Appeal and Supreme Court, which came to an end last year. “There is no support for the evidence of Mr Frank,” ruled [5] High Court Justice Sir Andrew Smith in December 2010, “whom, for reasons that I shall explain, I do not regard as a reliable witness…his evidence…was dishonest.”  “It is a vindictive claim,” declared [6] Lord Justice Longmore of the Court of Appeal in March 2013.  Several other Sovcomflot executives were also condemned in the court judgements.

The details of each of the court judgements can be followed here [7].

By the time the last of Sovcomflot’s appeals was dismissed, Sovcomflot has had to pay out more than $120 million in damages and costs to Frank’s targets – Skarga;  Tagir Izmailov, former head of Novoship; and Yury Nikitin, a former Sovcomflot chartering partner. Sovcomflot’s  costs in running the 13-year London litigation are estimated by court sources to have come to between $50 million and $70 million. Another liability claim for $90 million is still pending.

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Left to right: Dmitry Skarga, Tagir Izmailov,  and Yury Nikitin. The  British Government has granted them asylum to remain in the UK

Until now, Frank appeared to be unscathed. Last year, Moscow prosecutors announced they had successfully won Moscow court convictions of Skarga, Izmailov and Nikitin,  in their absence,  on evidence of criminal conduct which had been dismissed by the London courts. Warrants for their extradition from the UK to Russia were rejected by the Westminster Magistrates’ Court in December 2008.

Three months ago, Frank’s annual reappointment as chief executive of Sovcomflot was decided by the government.  [9]The first meeting of the new Sovcomflot board followed on July 24,  according to a company press release [10]. Since then Moscow sources say there has been a campaign by the Federal Security Service (FSB) to remove Frank, and appoint Igor Tonkovidov (right) in his place. Tonkovidov, 55, was trained as a marine engineer in Odessa and then in financial management at the University of London [11].  He has not been a member of the board of directors, and until now he was been ranked at the bottom of Sovcomflot’s senior management [12].  

In Moscow since Monday, sources close to the government have told the press that a new board meeting will be held shortly to vote Tonkovidov in Frank’s place. A Forbes report [13] claims a cabinet source for what is already under way but not yet finalized.  Reuters has reported several sources as claiming that Frank’s removal has been decided,  and also that he will become the non-executive chairman of the board while Tonkovidov will move up. 

In the Reuters version [14]  Frank is stepping down. Other sources close to the decision-making claim Frank is walking the plank. According to Forbes, its cabinet source “noted that in the near future directives on the convening of an extraordinary meeting of shareholders to approve the composition of the Board of Directors and the appointment of its chairman will be issued. The possibility of appointing Frank, the [source] spokesman refused to discuss.”

Sovcomflot is making no comment.

The press leaks are intended to prevent Frank’s closest supporters, Fradkov, who now runs the Foreign Intelligence Service (SVR) and Gennady Timchenko, the US-sanctioned oligarch, from persuading Putin to rescue Frank. “Timchenko’s health deteriorated in the summer,” an informed source says,” and because of the US sanctions he has been forced out of the oil trade, so the takeover he and Frank had planned is now impossible. Into the gap Tonkovidov is the FSB’s man.”

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SVR head Mikhail Fradkov meeting the President, January 2017.

Frank’s name doesn’t appear on the US sanctions lists which have included Timchenko since March 2014,   and by extension Timchenko’s family members including Frank’s son Gleb Frank, Timchenko’s son-in-law whom Timchenko is financing in a billion-dollar expansion [16] of the Russian fishing sector.

At the time the US Treasury sanctioned Timchenko as one of the “Members of the Inner Circle”, the American announcement claimed he had “acted for or on behalf of, or has provided material or other support to, a senior Russian government official [Putin]… Timchenko’s activities in the energy sector have been directly linked to Putin.  Putin has investments in Gunvor and may have access to Gunvor funds.” A Treasury official publicly called Timchenko one of Putin’s “cronies”.   From the American point of view, Frank is not.

Frank’s name also doesn’t appear in the US Treasury report to Congress required by the Countering America’s Adversaries Through Sanctions Act (CAATSA).  That paper was released [17] on January 29, 2018; it included a seven-page list of senior Russian political figures and oligarchs.  Also counted were twenty heads of state enterprises. The Treasury decided that to qualify for listing, and for possible sanctions in future, these state enterprises should have reported revenues in 2016 of at least $2 billion.  That was a bad year  for Sovcomflot – revenues came to just $1.5 billion, and profit fell by a third from the previous year. Not even in the boom year of 2007, before the crash,  have the shipping company’s revenues reached the $2 billion threshold; in 2018  they fell half a billion dollars short; this year they are still too short.   Sovcomflot’s misfortune was Frank’s good luck – the chief executives of Aeroflot;  Russian Railways; the oil pipeline company Transneft;   Igor Levitin, Frank’s successor as minister, and the current Transport Minister Maxim Sokolov were all  included on the Treasury list.

Frank’s fortunate insignificance with the US Government has continued:   United Shipbuilding Corporation (USC), the state holding of shipyards and design bureaux, was sanctioned in July 2014; Frank was chairman of the board of directors that year and the next.

Dmitry Medvedev had been President when the first judgements of the High Court came down in 2010; he was Prime Minister when Sovcomflot lost its court appeals in London. Medvedev ordered a private assessment, Sovcomflot learned, but Medvedev left no trace. He has invited Frank to no official meeting. He has been told much about Sovcomflot; there is no record of his saying anything.   

Putin last met Frank for an official one-on-one meeting in 2013. Since then the Kremlin has provided no official record of their meeting except that Frank has been present at shipyard ceremonies in 2017 and 2018 at which Putin presided. Frank was photographed near Putin; Putin and the Kremlin record ignored him.