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By John Helmer, Moscow

By all accounts, particularly his own, Alexander Lebedev, aged 52, has been one of those clever KGB agents whose training inculcated the Protestant work ethic, and whose tour of duty in London the wits, to enable him to make a fortune without stealing from anyone; without bribery or administrative resources; without even being on favourable terms with President Vladimir Putin, Moscow Mayor Yury Luzhkov, or indeed anyone of significance in post-communist Russia. A private bank belonging originally to Gazprom, and Aeroflot, the state airline, are said to be the hidden hands by which Lebedev helped himself to his plenitude.

Had it not been for a minority stakeholding in that paragon of Russian non-fiction, Novaya Gazeta, and a couple of martyrs, Lebedev’s reputation might be no more than that of a Johnny-come-early, rather than the epitome of Russian liberty, honesty, English wit, Protestant ethos, etc., by which he is celebrated by English pressmen impressed by their employment chances with him.

That Alexander’s only son Evgeny (image) claims to have inherited an even larger fortune than his father has made, before Papa is in the grave, is one of those puzzles for which you need, not a Protestant, but a Jew to understand. Sigmund Freud, to be precise.

According to Freud, projection is a defense mechanism whereby the subject projects his thoughts, motivations, desires, and feelings on to someone else — the negative ones to defend and reinforce the subject’s ego; the positive ones to expand on the subject’s sense of self-importance. Freudian psychologists have gone on to refine tests for narcissism, which is what happens when the projection goes too far in the direction of promoting the subject at the expense (hurt, pain, loss, damage) of the object.

In the Diagnostic and Statistical Manual of Mental Disorders (DSM-IV-TR), Axis II, Cluster B, the psychopathological narcissist is defined as suffering from a pattern of exaggeration in fantasy or behavior, need for admiration, and lack of empathy, which manifests itself in early adulthood and presents in a variety of contexts. Symptoms and clinical traits include: a grandiose sense of self-importance (e.g., exaggeration of achievements and talents, expectation to be recognized as superior without commensurate achievements); preoccupation with fantasies of unlimited success, power, brilliance, beauty, or ideal love; belief that he or she is uniquely recognizable only by other special or high-status people (celebrity); demand for excessive admiration (publicity). In short, this type is a patsy for London public relations firms to promote in the columns of that city’s rent media.

Apparently, it is a condition that may be inherited by sons from fathers. The clinicians also suspect it is caused in sons by fathers who convince their offspring they don’t genuinely love them. About one in a hundred of the population are afflicted.

Among Russians who concentrate on making money for occupation, counting their money in public is a well-known symptom of the narcissistic personality disorder. To his credit and psychological health, Lebedev senior has never displayed a self-valuation at the billion-dollar level. That is most likely because his assets, net of his borrowings and liabilities, are worth much less. Less than $700 million, when we last investigated the matter in 2009.

In the March 2012 calculation by the Forbes Rich List, Alexander Lebedev’s assets were valued at $1.1 billion, based on the magazine’s estimate of the private National Reserve Bank (NRB) and the holding which owns it, National Reserve Corporation (NRC), including the 15% stake in Aeroflot which the holding owns (at current market capitalization worth €196 million). On May 5, less than eight weeks later, the Guardian of London more than tripled this to $3.5 billion. That seems to have been a prompt from Evgeny, Lebedev Junior.

In the transcript of the Guardian’s interview with Junior on May 5, here’s the point when the son goes clinical. “I ask if he [Evgeny Lebedev] is a billionaire in his own right. “Well, yes we, what’s the word, we share, so you could call me a billionaire.” Note Junior is saying that he’s a billionaire “in his own right”, but that “we”, meaning Papa, “share”. What he means is that if you don’t divide by two, this sharing creates a singular billion-dollar net worth – without accounting either for the way the revenues are earned, or for the liabilities that Senior has piled up.

Since Junior acknowledges that the London newspapers he is managing – Evening Standard, The Independent — have yet to break even – read loss-making – it’s the National Reserve Bank in Moscow on which this claim depends for its veracity. But the bank doesn’t publish audited public accounts. The nearest it came recently to a cash flow statement is the bank’s claim, released on March 1, 2012, that in the first two months of this year, it earned a profit of Rb217.8 million ($7.4 million). The giveaway is in the February profit figure which the press release reports as Rb84.3 million ($2.9 million). That means the bank’s bottom-line fell 37% in just one month. Serious Russian banks issue quarterly financial reports according to International Financial Reporting Standards, not press announcements like this.

For all of 2011, the bank’s press releases claim it posted “balance sheet profits in excess of 600 million roubles (excluding events after the reporting date).” That’s less than $20 million – before the post-balance sheet events cut that down.

The Lebedev bank isn’t rated by RusRating, the one independent Russian ratings agency for banks. But a Fitch rating review, supplied with non-public data by Lebedev Senior and released in March 2011, reveals that at the start of last year, the assets of the bank amounted to Rb58.3 billion ($1.94 billion); that aggregate included all the attributable value of Lebedev Senior’s shareholdings in Aeroflot, Gazprom, and other Russian corporations.

According to Fitch, as received from Senior, “NRB is a Moscow-based bank with assets of RUB58.3bn at end-2010, and accounts for about two-thirds of the assets of the broader NRC, a group with interests in the financial sector, recreation, agriculture, oil, construction and aviation. Alexander Lebedev is the largest shareholder of NRC, which holds a 59.8% stake in the bank. In addition, Mr. Lebedev and his son directly hold an 18.4% stake in NRB.”

Reports since the Fitch release indicate that in July of 2011 the Lebedev stake in the bank was reduced from a combined 78.2% to 73.7% by the sale of a 4.5% shareholding to UBS. The bank did not say what price was paid, and thus the value of the bank’s equity was hidden. Also, UBS acknowledged it was a nominee holding the stake for a concealed private client. It’s thus possible the Lebedevs sold to themselves.

The most recent data issued by Banki.ru, a Moscow-based ratings source, show that NRB’s net assets have been dwindling. As of this April, they were reported to be Rb40.3 billion ($1.4 billion), down 13% since December. According to this source, the bank’s bottom line is in the red with a loss of Rb246.7 million ($8.9 million).

Another way of valuing the bank and the Lebedev fortune is to check the price at which the federal state property agency attempted to sell its 2.74% shareholding in NRB last summer. The minimum bid price proposed for the stake was Rb781 million ($26 million); this values 100% of the shares at the equivalent of $949 million. There were no takers, so the auction was cancelled. A new announcement in March of this year from the property agency proposes to cut the price to Rb473.2 million ($16.3 million). The new valuation of NRB is $595 million – that’s makes a haircut for the Lebedevs of 40%.

How the owner’s son could claim a fortune double or triple the value of the bank’s assets is beyond explaining in accounting terms – the bank refuses. So does Junior.

According to Will Gore, deputy managing editor of the Evening Standard, the Independent, and Independent on Sunday, Lebedev appears at the newspaper offices “only once a week”. Gore claimed that most of Junior’s time is spent at an office in Mayfair, but he was reluctant to identify the physical address, telephone number or email contact. Gore also revealed that Lebedev’s personal assistant has recently changed, so the only way to contact him is relaying messages through Gore. That done, Lebedev was asked to clarify how he calculates his net worth to be that of a billionaire, either individually or with his father. He was also asked to estimate the net asset value of the bank, the net asset value of the National Reserve Corporation, and the price UBS paid for the 4.5% stake of the bank last July.

He has replied through a spokesman: “we won’t be commenting on this matter. By all means report that fact.”

Standard arithmetical deduction from the earlier, larger Fitch estimates suggests the combined Lebedev holding has assets worth Rb87.5 billion ($2.9 billion), but that Lebedev Senior and Junior together own bank assets worth Rb34.9 billion ($1.2 billion), plus Rb10.7 billion ($357 million) directly. The two stakes in the bank are thus worth no more than $1.6 billion, $800 million to Junior if his father allocates him half. But there is no accounting here for the Lebedevs’ debts, or the liabilities of the bank and the holding.

Assuming them to be zero, and ignoring the asset shrinkage, the red ink on the profit line, and the 40% cut in valuation by the government privatization agency, Lebedev Junior is exaggerating when he calls himself a billionaire. Assuming the liabilities to be significant, Junior’s exaggeration may be a clinical case.

The Fitch review also reveals that Lebedev Senior and Junior were dipping heavily into the bank for cash, about $300 million, during the first quarter of 2011. According to Fitch, they took “a large dividend payment… Fitch notes the concentrated funding base of the bank with a material share of related party funds, especially after the sizable dividend payment completed in Q111 (RUB9bn, or about 30% of IFRS equity at end-2010).”.

There is a limit to what unaudited unpublished accounting statements can reveal. But here is the rest of the Guardian’s profile of Junior:

“Everything about Lebedev is so immaculate, perfumed with privilege – the beard looks as if each hair has been individually trimmed. Look, I say, this is a pretty lavish lifestyle, isn’t it? ‘Yeah, but not by traditional oligarchs’ lifestyle.’ So Roman Abramovich would say this is rubbish? He smiles. ‘Yeah, he’d say, ‘Why don’t you fucking own the whole building? Why are you sitting in a building with other people? Why have you got a lithograph rather than a fucking real Bacon?’ Hehehehe.’ ”

“Does [Lebedev] hate being called one [oligarch]? ‘Yeah, because you paint every one with the same brush stroke.’ He says the material want experienced in the Soviet Union led to excess, and defines a typical oligarch. ‘They are driven by cash and nothing else. It’s a combination of having access to money and not having a lot of education or aesthetic understanding. Taste, you know. You suddenly just want everything, and most importantly, you want to show everybody you have it.’”

“Does he ever wish he had less money? He looks astonished. ‘I’ve never thought about that.’”

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