March 30, 2010
Stephanie Baker and Yuriy Humber for the athletic feat of reporting Mikhail Prokhorov’s all-win business career without detecting a single foul, penalty, or loss.
Cc: YURIY HUMBER, BLOOMBERG/ MOSCOW OF
Sent: Tuesday, March 30, 2010 12:27 PM
FROM JOHN HELMER
Dear Ms Baker and Mr Humber:
Your article, “From Russia with Cash”, Bloomberg Markets May 2010, has been nominated for the PAW award: http://johnhelmer.net/?page_id=1005 
This award is designed to encourage interaction, accountability, and ethical reporting on Russia, and you are invited to respond to the following questions regarding your article:
— you report that Mr Prokhorov holds “his stake in Polyus as a hedge against his cash pile, which he keeps in US dollars.” What evidence do you have of Mr Prokhorov’s financial means, and if you have this, why did you withhold it, since the point of your article suggests that he is replete with cash for spending in Russia and abroad?
— if Mr Prokhorov is “armed with cash”, and if he has “increased his stake in OAO Polyus Gold”, as you report, what explanation is there for his recent attempts to sell down part of his stake in Polyus Gold, the sole substantial cash-producing asset in his portfolio? Why does your article also omit to disclose the failure of this sale attempt?
— in your report of the January 2007 Courchevel arrest and the subsequent imprisonment of Mr Prokhorov in Lyon, and the investigation that followed for two further years, you appear to have ignored the evidence of obstruction of justice and blocking of efforts of the French investigating magistrates to question witnesses and pursue evidence? Are you unaware of the documented French evidence, published in the French press, suggesting that Mr Prokhorov used influence with Russian officials to prevent the French investigation from being undertaken and completed?
— you claim Mr Prokhorov “bought” a 50% stake in Renaissance Capital for $500 million. How do you know that verb is the correct one? Are you aware that at the time of the transaction, it was reported that Mr Prokhorov undertook to put $500 million in new capital into Renaissance Capital? Why did you not report the outcome of that pledge? Why did you not report that Renaissance Capital had defaulted on a $500 million loan from Onexim?
— in your report of Mr Prokhorov’s takeover of Norilsk Nickel, you describe the company as “a debt-ridden, mismanaged company”. You omit to report evidence of the debt, or your standard for “mismanagement”. You also omit to apply your own standard to the affairs of Norimet, when Mr Prokhorov oversaw Norilsk Nickel’s metal trading operations through that offshore unit; and yet you conclude that “his turnaround strategy worked”. Did you forget to substantiate that? What is the debt to earnings ratio of the company today, compared to what it was when the takeover occurred?
— in your report of the founding and operation of Mr Prokhorov’s Uneximbank, you report: “Doing business in Russia in the 1990s came down to survival of the fittest”. You also report that “the Soviet banking system began collapsing with the fall of communism”. Is there a reason you omit to report that Uneximbank collapsed in 1998, defaulting on an estimated $1 billion in liabilities? To whom should the responsibility, fault or credit for that bank failure go? Why do you withhold from your readers the evidence that such a milestone venture in Mr Prokhorov’s career went bankrupt?
— you report that “Prokhorov and Potanin profited from the crisis by exploiting the dollar-ruble exchange rate”. Why have you omitted to report that Mr Prokhorov’s wager on the rouble-dollar exchange rate in 1997-98 helped push Uneximbank into bankruptcy?
— regarding Polyus, you report: “Prokhorov wants Polyus to compete with industry leaders. He’s willing to merge the company with a foreign rival to create a global champion”. Have you an explanation for Mr Prokhorov’s conduct of the takeover of Kazakh Gold over more than a year, and the recent disclosures that he failed to discover that more than $200 million had been stripped out of Kazakh Gold, and fraudulently taken from shareholders and bondholders? If Norilsk Nickel before Mr Prokhorov’s takeover is your model of “mismanagement”, what does the evidence of the Polyus Gold-Kazakh Gold merger suggest regarding Mr Prokhorov’s management, due diligence, and M&A skills?
— regarding Mr Prokhorov’s transactions with Mr Ratner for the Nets basketball franchise and the Brooklyn arena and real estate development, you refer to “Prokhorov’s love of sports [as] part of the reason he wants to buy the Nets. He says he originally went after the New York Knicks because of their Manhattan base.” You also claim that the Brooklyn arena part of the transaction has been “held up for six years because of legal battles with local residents opposed to the new development.” Is it your view that Mr Prokhorov has succeeded in acquiring both the team franchise, and the real estate project? Are you unaware of the reports that Mr Prokhorov cannot close his deal for the team and for his share in the arena with Mr Ratner, until Mr Ratner has vacant possession of the properties standing in the way of the arena. and he does not have those yet. Are you aware that the borrowings Mr Prokhorov has said he will undertake for the transaction are also contingent on this? Are these reports incorrect, and that is why you did not report them? What evidence do you have that Mr Prokhorov and Mr Ratner can close their deal soon?
— there are two other omissions of the record of Mr Prokhorov, which your article reveals. Have you omitted recent statements by high-ranking Russian and US officials, casting negative light on Mr Prokhorov’s character and business practices, because you were intending to do, or had agreed with Mr Prokhorov, to do a promotion? Or because you were unaware of the officials and their criticisms? . The first of the criticisms of Mr Prokhorov came from the Prime Minister of Russia, Vladimir Putin, who criticized him for his management of the utility company TGK-4 for what might — in another country or in another medium than Bloomberg Markets — be called investment contract violations or cash stripping. Mr Putin made his statement on February 24. Also, according to Admiral Dennis Blair, the US Government’s Director of National Intelligence, Mr Prokhorov’s line of business in precious metals makes him susceptible to, or a witting party to, the “growing nexus in Russian and Eurasian states among government, organized crime, intelligence services, and big business figures. An increasing risk from Russian organized crime is that criminals and criminally linked oligarchs will enhance the ability of state or state-allied actors to undermine competition in gas, oil, aluminum, and precious metals markets.” Admiral Blair made this and related statements in testimony to the US Senate Select Committee on Intelligence on February 2. Did you miss it?
You are invited to respond within a reasonable period of time, allowing both these questions and your answers to be published alongside your PAW citation.
BLOOMBERG CONSIDERED CAREFULLY AND AT LENGTH WHETHER TO REPLY, BEFORE DECIDING AGAINST.