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Persecution of Hermitage in Russia in order to steal US$ 230 million from the Russian

Persecution of Hermitage in Russia in order to steal US$ 230 million from the Russian people

July 2008

1

Visa withdrawal

Visa withdrawal On 13 November 2005, Hermitage’s founder and CEO, William Browder was refused entry into

On 13 November 2005, Hermitage’s founder and CEO, William Browder was refused entry into Russia. His visa denial was based on Mr. Browder being declared a threat to

“national security, public order or public health”

to “national security, public order or public health” Persona non grata “The decision to deny entry
to “national security, public order or public health” Persona non grata “The decision to deny entry

Persona non grata

“The decision to deny entry into the Russian Federation for Mr. William Felix Browder has been made by the competent authorities in accordance with Article 27, Item 1 of the Federal Law No 114FZ”

- Letter from the Ministry of Foreign Affairs to the UK Embassy in Moscow, 25 November 2005

Article 27, Item 1 says:

“Entry into the Russian Federation can be denied to a foreign national or stateless person if it is in the interest of ensuring the security of the state, public order or public health.”

222

Visa withdrawal:

New application

Visa withdrawal: New application At the World Economic Forum in Davos on 28 January 2007, Mr.

At the World Economic Forum in Davos on 28 January 2007, Mr. Browder appealed directly to Dmitry Medvedev (the current President of Russia) to issue him a new visa

2007, Mr. Browder appealed directly to Dmitry Medvedev (the current Pres ident of Russia) to issue
2007, Mr. Browder appealed directly to Dmitry Medvedev (the current Pres ident of Russia) to issue
2007, Mr. Browder appealed directly to Dmitry Medvedev (the current Pres ident of Russia) to issue
2007, Mr. Browder appealed directly to Dmitry Medvedev (the current Pres ident of Russia) to issue
2007, Mr. Browder appealed directly to Dmitry Medvedev (the current Pres ident of Russia) to issue

?

Visa Withdrawal – Visit from the Interior Ministry

Visa Withdrawal – Visit from the Interior Ministry No visa was issued. Instead, on 17 February

No visa was issued. Instead, on 17 February 2007, Artem Kuznetsov, a Lieutenant Colonel of the Interior Ministry, called Hermitage:

Colonel of the Interior Ministry, called Hermitage: Lieutenant Colone l Artem Kuznetsov Moscow Interior Ministry

Lieutenant Colonel Artem Kuznetsov Moscow Interior Ministry Department of Tax Crime

Transcript of telephone conversation between Vadim Kleiner and Artem Kuznetsov February 17, 2007

“We were notified by the Immigration Service that the CEO of your company wishes to visit our country and asked if we had any response. Before I reply, I wanted to come by your office and talk, show you some papers, ask a few questions. I can’t tell you my questions over the phone – unfortunately it’s not so simple as that. My answer will depend upon how you behave, what you provide, et cetera. If you are interested in meeting, that’s fine. If not, no problem. It’s up to you. The sooner we meet and you provide what is necessary, the sooner your problems will disappear.

Raid on Hermitage Office

Raid on Hermitage Office On 4 June 2007, the same lieutenant colone l Kuznetsov lead a

On 4 June 2007, the same lieutenant colonel Kuznetsov lead a team of 25 officers in a raid at Hermitage’s office, allegedly in order to gather information on the tax payments of a Russian company named Kameya

Interior Ministry of Moscow

Hermitage Offices in Moscow

Items Taken during Search

Hermitage Offices in Moscow Items Taken during Search 1 Server 7 computers 5 boxes of documents
1 Server 7 computers 5 boxes of documents
1 Server
7 computers
5 boxes of documents

25 officers, led by Lieutenant Colonel Kuznetsov

documents 25 officers, led by Lieutenant Colonel Kuznetsov Allegations against Kameya $44 million of underpayment in
documents 25 officers, led by Lieutenant Colonel Kuznetsov Allegations against Kameya $44 million of underpayment in

Allegations

against

Kameya

$44 million of underpayment in dividend withholding tax; criminal investigation

5

Raid on Firestone Duncan Office

Raid on Firestone Duncan Office Also on 4 June 2007, the same division of Interior Ministry

Also on 4 June 2007, the same division of Interior Ministry raided the offices of Firestone Duncan, a law and audit firm used by Hermitage. Lieutenant Colonel Kuznetsov showed up to supervise the search

Interior Ministry of Moscow

Firestone Duncan Moscow Office

Interior Ministry of Moscow Firestone Duncan Moscow Office 25 officers, reporting to Lieutenant Colonel Kuznetzov

25 officers, reporting to Lieutenant Colonel Kuznetzov A.K.

officers, reporting to Lieutenant Colonel Kuznetzov A.K. Items Taken during Search All servers & computers 2
officers, reporting to Lieutenant Colonel Kuznetzov A.K. Items Taken during Search All servers & computers 2

Items Taken during Search

All servers & computers

Kuznetzov A.K. Items Taken during Search All servers & computers 2 vans full of client documents
Kuznetzov A.K. Items Taken during Search All servers & computers 2 vans full of client documents
Kuznetzov A.K. Items Taken during Search All servers & computers 2 vans full of client documents
Kuznetzov A.K. Items Taken during Search All servers & computers 2 vans full of client documents
Kuznetzov A.K. Items Taken during Search All servers & computers 2 vans full of client documents

2 vans full of client documents were taken away

Kuznetzov A.K. Items Taken during Search All servers & computers 2 vans full of client documents
Kuznetzov A.K. Items Taken during Search All servers & computers 2 vans full of client documents

Raid on Firestone Duncan Office

Raid on Firestone Duncan Office During the search of Firestone Duncan, Lawy er Victor Poryugin, who

During the search of Firestone Duncan, Lawyer Victor Poryugin, who tried to stop the seizure of unrelated documents, was taken into a conference room, punched repeatedly in the throat and face, then arrested and fined 15,000 rubles

Lawyer Victor Paryugin, from Firestone Duncan tried to stop the confiscation of unrelated documents belonging to other clients

of unrelated documents belonging to other clients Was beaten up Was arrested Was fined 15,000 Rubles

Was

beaten up

documents belonging to other clients Was beaten up Was arrested Was fined 15,000 Rubles Hospitalized for
documents belonging to other clients Was beaten up Was arrested Was fined 15,000 Rubles Hospitalized for

Was

arrested

belonging to other clients Was beaten up Was arrested Was fined 15,000 Rubles Hospitalized for 2
belonging to other clients Was beaten up Was arrested Was fined 15,000 Rubles Hospitalized for 2

Was fined

15,000

Rubles

belonging to other clients Was beaten up Was arrested Was fined 15,000 Rubles Hospitalized for 2
belonging to other clients Was beaten up Was arrested Was fined 15,000 Rubles Hospitalized for 2

Hospitalized for 2 weeks

belonging to other clients Was beaten up Was arrested Was fined 15,000 Rubles Hospitalized for 2

77

Targeting Hermitage Lawyers

Targeting Hermitage Lawyers All the lawyers involved with Hermitage were burglarized or had documents stolen in

All the lawyers involved with Hermitage were burglarized or had documents stolen in the two-week timeframe before and after the office raids

the two-week timeframe before and after the office raids Hermitage's long-time civil lawyer His house
the two-week timeframe before and after the office raids Hermitage's long-time civil lawyer His house
the two-week timeframe before and after the office raids Hermitage's long-time civil lawyer His house
the two-week timeframe before and after the office raids Hermitage's long-time civil lawyer His house

Hermitage's long-time civil lawyer His house burglarized Some money was taken with essential valuable items left intact

Hermitage

Office

Raid

Hermitage's criminal lawyer

In the week of his appointment his briefcase was stolen from his car; it was found in the police station 5 hours later

Hermitage's tax lawyer In the same week the apartment of tax lawyer of Hermitage was broken into, nothing was taken

of tax lawyer of Hermitage was broken into, nothing was taken Two weeks before raid June
of tax lawyer of Hermitage was broken into, nothing was taken Two weeks before raid June
of tax lawyer of Hermitage was broken into, nothing was taken Two weeks before raid June
of tax lawyer of Hermitage was broken into, nothing was taken Two weeks before raid June
of tax lawyer of Hermitage was broken into, nothing was taken Two weeks before raid June
of tax lawyer of Hermitage was broken into, nothing was taken Two weeks before raid June
of tax lawyer of Hermitage was broken into, nothing was taken Two weeks before raid June
of tax lawyer of Hermitage was broken into, nothing was taken Two weeks before raid June
of tax lawyer of Hermitage was broken into, nothing was taken Two weeks before raid June
of tax lawyer of Hermitage was broken into, nothing was taken Two weeks before raid June
of tax lawyer of Hermitage was broken into, nothing was taken Two weeks before raid June

Two weeks

before raid

June 4,

2007

Week of June 11, 2007

8

What was the basis for these raids?

What was the basis for these raids? The offices were raided because the invest igators alleged

The offices were raided because the investigators alleged that a client company of Hermitage – Kameya – had underpaid $44 million of dividend withholding tax

– had underpaid $44 m illion of dividend withholding tax Interior Ministry Decree of 8 May
Interior Ministry Decree of 8 May 2007 Interior Ministry Chief Lieutenant Malofeeva: • The company
Interior Ministry Decree of 8 May 2007
Interior Ministry Chief Lieutenant Malofeeva:
• The company Kameya underpaid 1.15 bln
Rubles (US$44 mln) in dividend withholding
tax;
• General Director of Kameya illegally applied
The Cyprus-Russia Double Tax Treaty;
• The shareholder of Kameya didn’t have a
Certificate of Cyprus Tax Residency;
• The Dividend Withholding Tax Rate should
be 15% not 5%
didn’t have a Certificate of Cyprus Tax Residency; • The Dividend Withholding Tax Rate should be

9

Were the Dividend Withholding Taxes paid correctly?

Were the Dividend Withholding Taxes paid correctly? The Russian Ministry of Finance confirmed the correctness of

The Russian Ministry of Finance confirmed the correctness of the tax rate applied

Finance confirmed the correctness of the tax rate applied Request for Clarification from Kameya’s Russian Tax
Request for Clarification from Kameya’s Russian Tax Counsel
Request for Clarification from
Kameya’s Russian Tax Counsel

Official Confirmation of Tax Rate from the Russian Ministry of Finance

of Tax Rate from the Russian Ministry of Finance given that the sole shareholder of our
given that the sole shareholder of our company is Cyprus tax resident who invested more
given that the sole shareholder
of our company is Cyprus tax
resident who invested more than
US$100,000 in our charter capital,
please confirm what dividend
withholding tax should be applied
… in the situation described in your request, the dividends paid in April 2006 should
… in the situation described in
your request, the dividends paid
in April 2006 should have been
taxed at a 5% dividend
withholding tax rate

10

10

Were the Dividend Withholding Taxes paid correctly?

Were the Dividend Withholding Taxes paid correctly? The Federal Tax Service also confirmed the correctness of

The Federal Tax Service also confirmed the correctness of the tax rate applied

Request for Clarification from Kameya’s Russian Tax Counsel

for Clarification from Kameya’s Russian Tax Counsel Official Confirmation of Tax Rate from the Federal Tax

Official Confirmation of Tax Rate from the Federal Tax Service

given that the sole shareholder of our company is Cyprus tax resident who invested more
given that the sole shareholder
of our company is Cyprus tax
resident who invested more than
US$100,000 in our charter capital,
please confirm what dividend
withholding tax should be applied
… according to Russia –Cyprus
Double Taxation Treaty
companies should be taxed at a
5% dividend withholding tax
rate
to Russia –Cyprus Double Taxation Treaty companies should be taxed at a 5% dividend withholding tax

11

Did Kameya owe any money to the Federal Tax Service?

Did Kameya owe any money to the Federal Tax Service? No, on 13 September 2007 Kameya

No, on 13 September 2007 Kameya received confirmation from The Federal Tax Service that there was no tax indebtedness in existence and the company had overpaid taxes by 4.0 million Russian rubles

company had overpaid taxes by 4.0 million Russian rubles mln Rubles 1,000 500 0 -500 -1,000
company had overpaid taxes by 4.0 million Russian rubles mln Rubles 1,000 500 0 -500 -1,000

mln

Rubles

1,000

500

0

-500

-1,000

-1,500

4.0 -1,145 Interior Ministry Tax Allegation Assessment Actual Tax status per Federal Tax Services
4.0
-1,145
Interior Ministry Tax
Allegation
Assessment
Actual Tax status per
Federal Tax Services

Did Kameya owe any money to the Federal Tax Service?

Did Kameya owe any money to the Federal Tax Service? Even more so, Tax Authority No.

Even more so, Tax Authority No. 7, the federal tax body that supervises Kameya, conducted an official tax audit and found no violations

An audit verified that Kameya paid its dividend withholding taxes in full and on time;
An audit verified that
Kameya paid its
dividend withholding
taxes in full and on time;
no violations found

Automaker)

Automaker)

Retailer)

Pipe Maker)

Monopoly)

(Largest Airline)

Bank)

Dairy Maker)

bank)

Gazprombank

TMK

Rostelecom GAZ

VTB

Aeroflot

Wimm X5

Bill Dann

Kameya Baltika

Avtovaz

(Largest Brewer)

largest (Top-five

(Largest

Largest (Largest

(Long-distance

(Largest

nd

(Largest

(2

nd

(2

Was Kameya a good taxpayer?

(Largest nd (Largest (2 nd (2 Was Kameya a good taxpayer? In contrast to what the

In contrast to what the investigators were alleging, Kameya was one of the largest tax payers in Russia

USD mln

$250

$200

$150

$100

$50

$0

Taxes paid by some of the leading Russian companies (2006, US$ million)

$232 $190 $158 $135 $131 $130 $103 $97 $71 $57 $42
$232
$190
$158
$135
$131
$130
$103
$97
$71
$57
$42

Source: Companies’ financial statements, and St Petersburg newspaper “ Versia v Pitere” 25 June 2007

14

How should the process really work?

How should the process really work? If there had been a legitimate tax claim, there is

If there had been a legitimate tax claim, there is a normal procedure for this to be dealt with

Step 1

Step 2

Company

files Tax

Tax

Authority

Returns

Audit

files Tax Tax Authority Returns Audit Excerpts from Russia’s Tax Code: Step 3 Company has a

Excerpts from Russia’s Tax Code:

Step 3

Company has a chance to address concerns

Tax Code: Step 3 Company has a chance to address concerns Step 4 Tax Authority comes

Step 4

Tax Authority comes up with claim

concerns Step 4 Tax Authority comes up with claim Step 5 Interior Ministry Officials get involved

Step 5

Interior Ministry Officials get involved if claim is unpaid

If underpayment is found, the demand for payment must be presented to a taxpayer within at least three months

Where there are tax violations detected in the course of a tax authority audit, the officials shall draw up the established tax claim within 10 days after the completion of the tax authority audit

If the taxpayer does not pay a tax within two months of receiving a tax claim, the tax authorities shall, within 10 days of learning of such non-payment, forward the relevant documents to the appropriate internal affairs body for the purpose of

deciding on the initiation of criminal proceedings to recover the tax arrears

15

How should the process really work?

How should the process really work? The Interior Ministry launched an investig ation completely leapfrogging the

The Interior Ministry launched an investigation completely leapfrogging the normal process of investigation concerning tax payments

Step 1 Step 2 Step 3 Step 4 Step 5 Company Tax files Tax Authority
Step 1
Step 2
Step 3
Step 4
Step 5
Company
Tax
files Tax
Authority
Returns
Audit
Company
has a chance
to address
concerns
Tax
Authority
comes up
with claim
Interior
Ministry
Officials
get
involved
if tax is
unpaid

If taxes weren’t the real target, what was?

If taxes weren’t the real target, what was? Instead of investigating taxes, the real pu rpose

Instead of investigating taxes, the real purpose of the “Kameya Case” was to justify a wide-ranging search for all of the Hermitage Fund assets

a wide-ranging search for all of the Hermitage Fund assets Colonel lieutenant Artem Kuznetsov Subpoena of

Colonel lieutenant Artem Kuznetsov

Subpoena of all bank accounts and documents related to Hermitage fund assets 14, 27 June
Subpoena of all bank accounts and documents
related to Hermitage fund assets
14, 27 June 2007
17 July 2007
26 July 2007
28 August 2007

What was the real aim of the investigation?

What was the real aim of the investigation? Interestingly, the investigators were search ing for assets

Interestingly, the investigators were searching for assets well beyond the scope of their investigation into Kameya. Instead, they focused on Hermitage Fund entities

Target of Tax Investigation

Target of Asset Search

International Advising Investor Client 100% Cyprus Holding Company 100% OOO Kameya, Moscow
International
Advising
Investor
Client
100%
Cyprus
Holding
Company
100%
OOO Kameya,
Moscow
International Advising Investor Client 100% Cyprus Holding Company 100% OOO Kameya, Moscow

HSBC PRIVATE BANK (Guernsey) LIMITED

HSBC PRIVATE BANK (Guernsey) LIMITED Trustee to Hermitage Fund

Trustee to Hermitage Fund

PRIVATE BANK (Guernsey) LIMITED Trustee to Hermitage Fund 100% Advising Client 100% Corporate Director GLENDORA

100%

Advising

Client

100%

100%
Corporate Director
Corporate
Director

GLENDORA

HOLDINGS

LTD

Cyprus

HSBC MANAGEMENT

(Guernsey) LIMITED

HSBC MANAGEMENT (Guernsey) LIMITED Corporate Director

Corporate Director

Corporate

Corporate

Director

KONE

HOLDINGS

LTD

Cyprus

100%

   
HOLDINGS LTD Cyprus 100%     General Director OOO MAKHAON, Moscow 100% General Director
General Director OOO MAKHAON, Moscow
General Director
OOO MAKHAON,
Moscow
100%
100%

General Director

General Director OOO RILEND , Moscow

OOO RILEND,

Moscow

100%

100%

General Director

General Director OOO PARFENION , Moscow

OOO PARFENION, Moscow

General Director OOO RILEND , Moscow 100% General Director OOO PARFENION , Moscow Hermitage Capital 18

Hermitage Capital

18

Next, mysterious lawsuits started appearing

Next, mysterious lawsuits started appearing In October 2007, Hermitage and HSBC learned that on 27 July

In October 2007, Hermitage and HSBC learned that on 27 July 2007, an unknown company called Logos Plus filed six lawsuits against the three Hermitage Fund companies (Rilend, Makhaon, Parfenion) in the St. Petersburg Arbitration Court

Lawsuit
Lawsuit
HSBC PRIVATE BANK (Guernsey) LIMITED Trustee to Hermitage Fund 100% 100% Corporate HSBC MANAGEMENT Corporate
HSBC PRIVATE BANK
(Guernsey) LIMITED
Trustee to Hermitage Fund
100%
100%
Corporate
HSBC MANAGEMENT
Corporate
Director
(Guernsey) LIMITED
Director
GLENDORA
KONE
HOLDINGS
HOLDINGS
Corporate Director
LTD
LTD
Cyprus
Cyprus
100%
100%
100%
General Director OOO PARFENION, Moscow
General Director
OOO PARFENION,
Moscow
General Director OOO MAKHAON, Moscow
General Director
OOO MAKHAON,
Moscow

General Director

General Director OOO RILEND , Moscow

OOO RILEND,

Moscow

Director OOO MAKHAON, Moscow General Director OOO RILEND , Moscow Lawsuit Lawsuit US$500 mln claims in
Lawsuit
Lawsuit

Lawsuit

Director OOO MAKHAON, Moscow General Director OOO RILEND , Moscow Lawsuit Lawsuit US$500 mln claims in
Director OOO MAKHAON, Moscow General Director OOO RILEND , Moscow Lawsuit Lawsuit US$500 mln claims in

US$500 mln claims in total!

19

What did these lawsuits allege?

What did these lawsuits allege? The sham lawsuits alleged that three Hermitage Fund companies agreed to

The sham lawsuits alleged that three Hermitage Fund companies agreed to sell Gazprom shares to a shell company called Logos Plus, and then later cancelled the agreements but didn’t pay the supposed foregone profit

12 May

2005

21 December

2005

Fake agreements

$$$
$$$

Regional

General Director Power of OOO OOO RILEND, RILEND, Moscow Moscow Attorney
General Director
Power of
OOO OOO RILEND, RILEND,
Moscow Moscow
Attorney

Logos Plus

representative

Kozlov M.V.

General Director Power of Foregone profit OOO OOO Moscow RILEND, RILEND, Moscow Attorney Regional $$$
General Director
Power of
Foregone profit
OOO OOO Moscow RILEND, RILEND,
Moscow
Attorney
Regional
$$$
representative
Kozlov M.V.

Logos Plus

Was there any basis to these lawsuits?

Was there any basis to these lawsuits? No, the agreements that the lawsuits were based on

No, the agreements that the lawsuits were based on never existed. The Hermitage Fund never did business with any company named Logos Plus

the lawsuits were based on never existed. The Hermitage Fund never did business with any company
the lawsuits were based on never existed. The Hermitage Fund never did business with any company

The people who forged the agreements made numerous mistakes

The people who forged the agreements made numerous mistakes 1. The Power of Attorney “authorizing” u

1. The Power of Attorney “authorizing” unknown Mr. Kozlov was issued four months

before the actual formation of the company issuing the alleged Power of Attorney

Parfenion "issued" Power of Attorney to Mr. Kozlov Parfenion was formed 17 Jan 12 Apr
Parfenion "issued"
Power of Attorney
to Mr. Kozlov
Parfenion
was formed
17 Jan
12 Apr
Four months before!
2005
2005

2. The corporate seal used to validate one of the agreements was only produced for the first

time 6 days after the alleged agreement “was stamped” with the same corporate seal

Agreement signed and "stamped" by Rilend's corporate seal

and "stamped" by Rilend's corporate seal Rilend's Corporate seal was produced 12 May 2005 Six
and "stamped" by Rilend's corporate seal Rilend's Corporate seal was produced 12 May 2005 Six

Rilend's Corporate seal was produced

by Rilend's corporate seal Rilend's Corporate seal was produced 12 May 2005 Six days before! 18
by Rilend's corporate seal Rilend's Corporate seal was produced 12 May 2005 Six days before! 18
by Rilend's corporate seal Rilend's Corporate seal was produced 12 May 2005 Six days before! 18
by Rilend's corporate seal Rilend's Corporate seal was produced 12 May 2005 Six days before! 18

12 May

2005

by Rilend's corporate seal Rilend's Corporate seal was produced 12 May 2005 Six days before! 18

Six days before!

18 May

2005

22

The person suing the Hermitage Companies did not exist

The person suing the Hermitage Companies did not exist “Mr. Strazhev,” the director of Logos Plus

“Mr. Strazhev,” the director of Logos Plus who filed the lawsuits against HSBC and Hermitage appeared before the court using a stolen passport

Federal Migration Service Letter “Passport 7804#368347 is fake it was issued not to Mr. Strazhev
Federal Migration Service Letter
“Passport 7804#368347 is fake it was
issued not to Mr. Strazhev but to a
different person. According to this
person his passport was lost on 25
July 2005 in St. Petersburg.”

Unknown lawyers showed up on the scene

Unknown lawyers showed up on the scene Even though Hermitage was unaware of these lawsuits, the

Even though Hermitage was unaware of these lawsuits, the three investment companies were represented before the St. Petersburg court by unknown lawyers not appointed by Hermitage

HSBC PRIVATE BANK (Guernsey) LIMITED

General Director OOO RILEND, Moscow
General Director
OOO RILEND,
Moscow
General Director OOO PARFENION, Moscow
General Director
OOO PARFENION,
Moscow
General Director OOO MAKHAON, Moscow
General Director
OOO MAKHAON,
Moscow
Not Trustee to Hermitage Fund aware 100% 100% Corporate HSBC MANAGEMENT Corporate Director (Guernsey) LIMITED
Not
Trustee to Hermitage Fund
aware
100%
100%
Corporate
HSBC MANAGEMENT
Corporate
Director
(Guernsey) LIMITED
Director
GLENDORA
KONE
HOLDINGS
HOLDINGS
Corporate Director
LTD
LTD
Cyprus
Cyprus
100%
100%
100%
Director LTD LTD Cyprus Cyprus 100% 100% 100% Advocate A.A.Pavlov rep. of OOO Rilend E.A.Maltzeva rep

Advocate A.A.Pavlov rep. of OOO Rilend

100% 100% 100% Advocate A.A.Pavlov rep. of OOO Rilend E.A.Maltzeva rep of OOO Parfenion Advocate Y.M

E.A.Maltzeva rep of OOO Parfenion

Advocate A.A.Pavlov rep. of OOO Rilend E.A.Maltzeva rep of OOO Parfenion Advocate Y.M Mayorova rep. of

Advocate Y.M Mayorova rep. of OOO Mahaon

Advocate A.A.Pavlov rep. of OOO Rilend E.A.Maltzeva rep of OOO Parfenion Advocate Y.M Mayorova rep. of
Advocate A.A.Pavlov rep. of OOO Rilend E.A.Maltzeva rep of OOO Parfenion Advocate Y.M Mayorova rep. of

24

Unknown lawyers showed up on the scene

Unknown lawyers showed up on the scene These three lawyers fully acknowledged and accepted all the

These three lawyers fully acknowledged and accepted all the claims

“Hereby, the defendant confirms that he understands the charges, doesn’t have any objections and fully
“Hereby, the defendant
confirms that he
understands the charges,
doesn’t have any objections
and fully accepts the
claims”
Advocate Pavlov, attorney
for the defendant

Fake POAs to lawyer from Rilend, Parfenion and Mahaon

Fake POAs to lawyer from Rilend, Parfenion and Mahaon Advocate A.A.Pavlov rep. of OOO Rilend “According
Fake POAs to lawyer from Rilend, Parfenion and Mahaon Advocate A.A.Pavlov rep. of OOO Rilend “According

Advocate A.A.Pavlov rep. of OOO Rilend

“According to p.3 art. 70 of APC the acceptance of the claim by the defendant
“According to p.3 art. 70 of
APC the acceptance of the
claim by the defendant
releases the plaintiff from
the requirement to prove
the case”
Judge Orlova

Judge Orlova

claim by the defendant releases the plaintiff from the requirement to prove the case” Judge Orlova
claim by the defendant releases the plaintiff from the requirement to prove the case” Judge Orlova
claim by the defendant releases the plaintiff from the requirement to prove the case” Judge Orlova

25

Since all claims were accepted by the lawyer, the judge ruled in favor of Logos Plus

by the lawyer, the judge ruled in favor of Logos Plus The St. Petersburg Court awarded

The St. Petersburg Court awarded Logos Plus with US$376 million

St. Petersburg Court awarded Logos Plus with US$376 million St.Peterburgs Court Awards against Hermitage Fund companies
St. Petersburg Court awarded Logos Plus with US$376 million St.Peterburgs Court Awards against Hermitage Fund companies
St.Peterburgs Court Awards against Hermitage Fund companies on fake allegations 350 $308 300 250 200
St.Peterburgs Court Awards against Hermitage Fund
companies on fake allegations
350
$308
300
250
200
mln
US$
150
100
$68
50
$0.1
0
Award against Parfenion
Award against Makhaon
Award against Mahaon
Award against Rilend
OOO RILEND, Moscow
OOO RILEND,
Moscow
OOO PARFENION, Moscow
OOO PARFENION,
Moscow
Award against Rilend OOO RILEND, Moscow OOO PARFENION, Moscow OOO MAKHAON, Moscow US$376 million Logos Plus
OOO MAKHAON, Moscow
OOO MAKHAON,
Moscow

US$376 million

Logos Plus
Logos Plus

26 26

How did these lawyers end up representing Hermitage Fund companies without being instructed by HSBC - the Hermitage Fund Trustee?

being instructed by HSBC - the Hermitage Fund Trustee? Because HSBC’s name had been fraudulently wiped

Because HSBC’s name had been fraudulently wiped off the companies’ share registrar and replaced by a new company called OOO Pluton

HSBC PRIVATE BANK (Guernsey) LIMITED

HSBC PRIVATE BANK (Guernsey) LIMITED Trustee to Hermitage Fund

Trustee to Hermitage Fund

100% 100%
100%
100%
Corporate HSBC MANAGEMENT Corporate Director (Guernsey) LIMITED Director GLENDORA KONE HOLDINGS HOLDINGS
Corporate
HSBC MANAGEMENT
Corporate
Director
(Guernsey) LIMITED
Director
GLENDORA
KONE
HOLDINGS
HOLDINGS
Corporate Director
LTD
LTD
Cyprus
Cyprus
100%
100%
100%
General Director
General Director
General Director
OOO RILEND,
OOO PARFENION,
Moscow
OOO MAKHAON,
Moscow
Moscow
OOO PARFENION, Moscow OOO MAKHAON, Moscow Moscow OOO Pluton, (Kazan, Tatarstan) 100% 100% 100%
OOO Pluton, (Kazan, Tatarstan) 100% 100% 100%
OOO Pluton,
(Kazan, Tatarstan)
100%
100%
100%

General Director

General Director OOO PARFENION , Moscow

OOO PARFENION, Moscow

General Director OOO RILEND, Moscow
General Director
OOO RILEND,
Moscow
General Director OOO MAKHAON, Moscow
General Director
OOO MAKHAON,
Moscow

Who owned Pluton?

Who owned Pluton? Pluton was owned by a man named Victor Markelov V. Markelov 100% OOO

Pluton was owned by a man named Victor Markelov

Pluton? Pluton was owned by a man named Victor Markelov V. Markelov 100% OOO Pluton, (Kazan,

V. Markelov

100% OOO Pluton, (Kazan, Tatarstan) 100% 100% 100% V.Kurochkin V.Markelov V.Khlebnikov OOO RILEND, OOO
100%
OOO Pluton,
(Kazan, Tatarstan)
100%
100%
100%
V.Kurochkin
V.Markelov
V.Khlebnikov
OOO RILEND,
OOO PARFENION,
Moscow
OOO MAKHAON,
Moscow
Moscow

28

Who is Victor Markelov?

Who is Victor Markelov? It turns out that Victor Markelov is a 41 year old Saratov

It turns out that Victor Markelov is a 41 year old Saratov resident convicted of murder in 2001

Victor Markelov? It turns out that Victor Markelov is a 41 year old Saratov resident convicted
Victor Markelov? It turns out that Victor Markelov is a 41 year old Saratov resident convicted
Victor Markelov? It turns out that Victor Markelov is a 41 year old Saratov resident convicted

29 29

Once the ownership was fraudulently transferred, Pluton replaced HSBC’s directors with a new set of directors

replaced HSBC’s directors with a new set of directors …who issued Powers of Attorney to the

…who issued Powers of Attorney to the unknown lawyers

Real Directors

General Director General Director General Director
General Director
General Director
General Director

OOO RILEND,

Moscow

OOO PARFENION, Moscow
OOO PARFENION,
Moscow

OOO MAKHAON,

Moscow

, Moscow OOO PARFENION, Moscow OOO MAKHAON , Moscow V. Kurochkin OOO RILEND, Moscow New Directors
, Moscow OOO PARFENION, Moscow OOO MAKHAON , Moscow V. Kurochkin OOO RILEND, Moscow New Directors
V. Kurochkin OOO RILEND, Moscow
V. Kurochkin
OOO RILEND,
Moscow

New Directors

, Moscow V. Kurochkin OOO RILEND, Moscow New Directors V. Markelov OOO PARFENION , Moscow V.Khlebnikov

V. Markelov

OOO PARFENION, Moscow

Kurochkin OOO RILEND, Moscow New Directors V. Markelov OOO PARFENION , Moscow V.Khlebnikov OOO MAKHAON, Moscow
V.Khlebnikov OOO MAKHAON, Moscow
V.Khlebnikov
OOO MAKHAON,
Moscow

Who were the other two directors?

Who were the other two directors? They were individuals with criminal records 31

They were individuals with criminal records

Who were the other two directors? They were individuals with criminal records 31
Who were the other two directors? They were individuals with criminal records 31

How could ownership be transferred?

How could ownership be transferred? The only way to change ownership of a Russi an company

The only way to change ownership of a Russian company is to obtain the corporate seal, two original certificates of registration and the original charter …

Documents needed to change the ownership Corporate Seal Original Certificate of Registration with the State
Documents
needed to change
the ownership
Corporate Seal
Original Certificate of
Registration with the
State Registrar
Original Certificate of
Registration with Tax
Authorities
Original Charter

Who had all of these documents?

Who had all of these documents? All of these documents were in the exclusive custody of

All of these documents were in the exclusive custody of the Moscow Interior Ministry (since the 4 June raid of Hermitage’s law firm’s office)

the 4 June raid of He rmitage’s law firm’s office) Major Pavel Karpov Colonel lieutenant Artem

Major Pavel Karpov

of He rmitage’s law firm’s office) Major Pavel Karpov Colonel lieutenant Artem Kuznetsov Russian Interior Ministry

Colonel lieutenant Artem Kuznetsov

Russian Interior Ministry Letter On 4 June 2007 during the raid in Firestone Duncan office
Russian Interior Ministry Letter
On 4 June 2007 during the raid in Firestone
Duncan office in Moscow were seized the
documents and electronic copies of
documents of Mahaon, Parfenion and Rilend
… These documents and seals of these
companies were not given to anybody.

Interior Ministry takes documents during the raid

Fraudulent change of ownership and directors

Documents still held by the Interior Ministry

change of ownership and directors Documents still held by the Interior Ministry 4 June 2007 September

4 June

2007

September

2007

Today

2008

33

What was the real aim of the whole tax investigation?

What was the real aim of the whole tax investigation? The real aim of the investigation

The real aim of the investigation appears to be to fraudulently obtain court judgments and then to use them to seize Hermitage Fund assets

Fake

Criminal

case

use them to seize Hermitage Fund assets Fake Criminal case Examination and questioning of employees of

Examination

and

questioning of

employees of

F&D and

Hermitage

Court decision on documents withdrawal from the banks

Examination and questioning of outsource contractors to justify enhancement of the case

Major Pavel Karpov Fishing About 50 Interior expedition Information requests on cash accounts and securities
Major Pavel Karpov
Fishing
About 50 Interior
expedition
Information requests on cash accounts and securities
balances of Russian and foreign Hermitage advised entities
Lieutenant Colonel
Artem Kuznetsov
Ministry officers
led by A.Kuznetzov
raided offices of
Hermitage
Moscow and its
Filed groundless report
requesting the criminal
case to be opened
account adviser
Firestone &
Duncan tree trucks
of documents
confiscated
May 2007
4 Jun
2007
Fraud

execution

confiscated May 2007 4 Jun 2007 Fraud execution Advocate Pavlov & Co Forgery of 2005 agreements

Advocate Pavlov & Co

Forgery of 2005 agreements
Forgery of
2005
agreements

Substitution

real

directors

with criminal

fake ones

Substitution of legitimate shareholders with the fake one

9 fake lawsuits filed
9 fake
lawsuits
filed
Fake Execution lawsuits orders awarded issued by worth US$1.26 bln the court
Fake
Execution
lawsuits
orders
awarded
issued by
worth
US$1.26 bln
the court

34

Did their plan succeed?

Did their plan succeed? No, there were no assets or cash in the stolen Hermitage Fund

No, there were no assets or cash in the stolen Hermitage Fund companies in Russia

OOO Pluton, (Kazan, Tatarstan) 100% 100% 100% V.Kurochkin V.Markelov V.Khlebnikov OOO RILEND, OOO PARFENION,
OOO Pluton,
(Kazan, Tatarstan)
100%
100%
100%
V.Kurochkin
V.Markelov
V.Khlebnikov
OOO RILEND,
OOO PARFENION,
Moscow
OOO MAKHAON,
Moscow
Moscow
100% 100% V.Kurochkin V.Markelov V.Khlebnikov OOO RILEND, OOO PARFENION, Moscow OOO MAKHAON, Moscow Moscow 35

However the perpetrators did not stop their activities…

However the perpetrators did not stop their activities… … we learned in late March 2008 that

… we learned in late March 2008 that the perpetrators had continued filing bogus cases even after they did not find assets

Early Sep 2007 Search for Hermitage’s assets ended with no result, but…

Moscow:

Hermitage’s assets ended with no result, but… Moscow: Kazan: 19 Oct 2007 14 Nov 2007 Instar
Hermitage’s assets ended with no result, but… Moscow: Kazan: 19 Oct 2007 14 Nov 2007 Instar

Kazan:

19 Oct 2007

14 Nov 2007

no result, but… Moscow: Kazan: 19 Oct 2007 14 Nov 2007 Instar files $312m lawsuit against

Instar files $312m lawsuit against Rilend

22 Oct 2007

Rilend lawyer Ms. Mayorova appointed by criminals “admits liability” and judge awards Instar $312m

13 Nov 2007

liability” and judge awards Instar $312m 13 Nov 2007 Grand Active files $575m lawsuit against Parfenion

Grand Active files $575m lawsuit against Parfenion

New Parfenion director Mr. Markelov (convicted of murder in 2001) “admits liability” and judge awards Grand Active $575m

What was the Moscow lawsuit about?

What was the Moscow lawsuit about? The same as St. Petersburg. It was a lleged that

The same as St. Petersburg. It was alleged that one Hermitage Fund company agreed to sell Gazprom shares to a company called Instar, and then later cancelled the agreements and was subject to pay the foregone profit to Instar

16 Nov

2005

5 May

2006

Fake agreements

General Director Instar OOO RILEND, Moscow General Deputy $$$ Director Director
General Director
Instar
OOO RILEND,
Moscow
General
Deputy
$$$
Director
Director
Plaksin G. Kurochkin V. General Director Foregone profit Instar OOO RILEND, Moscow Deputy General $$$
Plaksin G.
Kurochkin V.
General Director
Foregone profit
Instar
OOO RILEND,
Moscow
Deputy
General
$$$
Director
Director
Kurochkin.V.
Plaksin G.
OOO RILEND, Moscow Deputy General $$$ Director Director Kurochkin.V. Plaksin G. Fake liabilities for $ 312

Fake liabilities for $ 312 m

37

This lawsuit was flawed as well

This lawsuit was flawed as well 1. Rilend has never had a Deputy Director Deputy Director

1. Rilend has never had a Deputy Director

was flawed as well 1. Rilend has never had a Deputy Director Deputy Director Kurochkin V.
was flawed as well 1. Rilend has never had a Deputy Director Deputy Director Kurochkin V.

Deputy Director Kurochkin V.

2. Rilend’s corporate seal did not match the company’s location, despite being registered in Moscow for nearly 7 months

Rilend was

registered in

Moscow

Fake agreement was sealed with an invalid address

Rilend was registered in Moscow Fake agreement was sealed with an invalid address 5 May 2005
Rilend was registered in Moscow Fake agreement was sealed with an invalid address 5 May 2005
Rilend was registered in Moscow Fake agreement was sealed with an invalid address 5 May 2005
Rilend was registered in Moscow Fake agreement was sealed with an invalid address 5 May 2005

5 May

2005

7 months

16 Nov

2005

What was the Kazan lawsuit about?

What was the Kazan lawsuit about? The same as St. Petesburg. It was alleged that one

The same as St. Petesburg. It was alleged that one Hermitage Fund company agreed to sell Gazprom shares to a company called Grand Active, and then later cancelled the agreements and was subject to pay the foregone profit to Grant Active

19

Sep

2005

14

Aug

2006

Fake agreements

Power of Attorney General Regional $$$ Director
Power of
Attorney
General
Regional
$$$
Director

representative

Kozlov M.V.

Sheshenia

Power of Foregone profit Attorney Regional General $$$ representative Director
Power of
Foregone profit
Attorney
Regional
General
$$$
representative
Director
Grand Active
Grand Active
General Director OOO Parfenion, Moscow
General Director
OOO Parfenion,
Moscow
General Director OOO Parfenion, Moscow
General Director
OOO Parfenion,
Moscow
Grand Active
Grand Active

Kozlov M.V.

Sheshenia

This lawsuit was flawed as well

This lawsuit was flawed as well 1. Parfenion never had any regional representative Regional representative Kozlov

1. Parfenion never had any regional representative

as well 1. Parfenion never had any regional representative Regional representative Kozlov M.V. 2. Mr. Sheshenia,

Regional representative Kozlov M.V.

2. Mr. Sheshenia, a convicted murderer, became General Director of Grand Active only 2 years after he signed the alleged agreement in the capacity of the General Director

Agreement signed by Mr Sheshenia in capacity of the General Director of

Grand Active

in capacity of the General Director of Grand Active Appointment of Mr. Sheshenia as a General
in capacity of the General Director of Grand Active Appointment of Mr. Sheshenia as a General

Appointment of Mr. Sheshenia as a General Director

Director of Grand Active Appointment of Mr. Sheshenia as a General Director 19 Sep 2005 2
Director of Grand Active Appointment of Mr. Sheshenia as a General Director 19 Sep 2005 2
Director of Grand Active Appointment of Mr. Sheshenia as a General Director 19 Sep 2005 2
Director of Grand Active Appointment of Mr. Sheshenia as a General Director 19 Sep 2005 2

19 Sep

2005

2 Years after!

3 July

2007

Total fake court orders

Total fake court orders In total, fake judgments were issu ed in 3 courts of US$

In total, fake judgments were issued in 3 courts of US$ 1.26 billion

St.Petersburg Moscow Kazan
St.Petersburg
Moscow
Kazan
in 3 courts of US$ 1.26 billion St.Petersburg Moscow Kazan In total 15 claims were files

In total 15 claims were files in St.Petersburg, Kazan and Moscow that resulted in US$1.26 billion of awards

issued for the benefit of fraudsters

In addition to the perpetrators filing lawsuits, we learned that they also set up bank accounts for the stolen companies

that they also set up bank accounts for the stolen companies On June 5, 2008 we

On June 5, 2008 we requested the extracts of our stolen companies from the state registrar and learned that 3 new bank accounts were opened in December 2007

V.Kurochkin OOO RILEND, Novocherkassk
V.Kurochkin
OOO RILEND,
Novocherkassk
V.Khlebnikov OOO MAKHAON, Novocherkassk
V.Khlebnikov
OOO MAKHAON,
Novocherkassk
Novocherkassk V.Khlebnikov OOO MAKHAON, Novocherkassk Universal Savings Bank New account 1 7 D e c e

Universal Savings Bank

New account

MAKHAON, Novocherkassk Universal Savings Bank New account 1 7 D e c e m b e

17 December 2007

New account

17 December 2007

c e m b e r 2 0 0 7 New account 17 December 2007 New
New account 13 December 2007
New account
13 December 2007
7 New account 17 December 2007 New account 13 December 2007 Intercommerz Bank V.Markelov OOO PARFENION,

Intercommerz

Bank

V.Markelov OOO PARFENION, Novocherkassk
V.Markelov
OOO PARFENION,
Novocherkassk

Bank formed: 28.02.2002Intercommerz Bank V.Markelov OOO PARFENION, Novocherkassk Region: Moscow Equity: $1.5 mln Total Assets: $25.6m* Ranked

Region: MoscowOOO PARFENION, Novocherkassk Bank formed: 28.02.2002 Equity: $1.5 mln Total Assets: $25.6m* Ranked No. 920 **

Equity: $1.5 mlnNovocherkassk Bank formed: 28.02.2002 Region: Moscow Total Assets: $25.6m* Ranked No. 920 ** Bank formed:

Total Assets: $25.6m*Bank formed: 28.02.2002 Region: Moscow Equity: $1.5 mln Ranked No. 920 ** Bank formed: 10.12.1991 Region:

Ranked No. 920 **Region: Moscow Equity: $1.5 mln Total Assets: $25.6m* Bank formed: 10.12.1991 Region: Moscow Equity: $11.8m Total

Bank formed: 10.12.1991Equity: $1.5 mln Total Assets: $25.6m* Ranked No. 920 ** Region: Moscow Equity: $11.8m Total Assets:

Region: MoscowAssets: $25.6m* Ranked No. 920 ** Bank formed: 10.12.1991 Equity: $11.8m Total Assets: $571m* Ranked No.

Equity: $11.8mRanked No. 920 ** Bank formed: 10.12.1991 Region: Moscow Total Assets: $571m* Ranked No. 432** Source:

Total Assets: $571m*920 ** Bank formed: 10.12.1991 Region: Moscow Equity: $11.8m Ranked No. 432** Source: EGRUL statements *

Ranked No. 432**Region: Moscow Equity: $11.8m Total Assets: $571m* Source: EGRUL statements * Central Bank of Russia

Source: EGRUL statements

* Central Bank of Russia (www.cbr.ru)

** 2006 Total Assets Ranking, RBC.Rating (http://rating.rbc.ru/articles/2007/03/01/31383191_tbl.shtml?2007/02/28/31382412)

42

We looked at the banks and found unusual activity

We looked at the banks and found unusual activity It appeared that large amounts of money

It appeared that large amounts of money were flowing through these banks at the same time that the new accounts were opened

US$ mln.

Size of Corporate Accounts held at the UBS Bank

+$97 mln
+$97 mln
Size of Corporate Accounts held at the UBS Bank +$97 mln Account Opened US$ mln. Size

Account Opened

US$ mln.

Size of Corporate Accounts held at the Intercommerz Bank

+$143 mln
+$143 mln

Source: Central Bank of Russia (www.cbr.ru)

Account Opened

Bank +$143 mln Source: Central Bank of Russia (www.cbr.ru) Account Opened Universal Savings Bank Intercommerz Bank

Universal

Savings Bank

Bank +$143 mln Source: Central Bank of Russia (www.cbr.ru) Account Opened Universal Savings Bank Intercommerz Bank

Intercommerz

Bank

43

Deposits equal to taxes paid

Deposits equal to taxes paid The spike in corporate deposits was roughly equal to the capital

The spike in corporate deposits was roughly equal to the capital gain taxes that were paid by Hermitage Fund companies back in 2006 (stolen in 2007)

by Hermitage Fund companies back in 2006 (stolen in 2007) Source: Central Bank of Russia (

Source: Central Bank of Russia (www.cbr.ru), Hermitage Fund’s companies tax reporting

44

Fake claims equal to Hermitage Fund profits

Fake claims equal to Hermitage Fund profits We looked back at the fake lawsuits and realized

We looked back at the fake lawsuits and realized that the awards were exactly equal to Hermitage Fund profits in 2006

US$

mln

Parfenion Profits vs. Fake Claims (US$ Mln.) Rilend = Makhaon = = Profit of Profit
Parfenion
Profits vs. Fake Claims
(US$ Mln.)
Rilend
=
Makhaon
=
=
Profit of
Profit of
Profit of
2006
2006
2006

Fake Claims awarded to the Company (RUB 13.88 Bln.)

Fake Claims awarded to the Company (RUB 7.57 Bln.)

Fake Claims awarded to the Company (RUB 1.67 Bln.)

Source: Fake lawsuits, Hermitage Fund’s companies financials 2006

45

Fake losses adjusted the profits to Zero

Fake losses adjusted the profits to Zero The perpetrators seemed to be intend on eliminating any

The perpetrators seemed to be intend on eliminating any historic profits from the Hermitage Fund companies retroactively

Profit “Adjustment” via Fake Losses

2006
2006

Source: Fake lawsuits, Hermitage Fund’s companies financials 2006

46

Why would they want to eliminate historic profits?

Why would they want to eliminate historic profits? To steal the tax money paid by Herm

To steal the tax money paid by Hermitage by applying for a $230m tax refund

Taxes Paid vs. Tax Refund
Taxes Paid vs. Tax Refund

47

Source: Fake lawsuits, Hermitage Fund’s companies financials 2006

Central Bank Confirmation – USB Bank

Central Bank Confirmation – USB Bank USB reports to the Central Bank showed Rilend and Makhaon

USB reports to the Central Bank showed Rilend and Makhaon as the two biggest

depositors at USB Bank with deposits equal to taxes paid by Rilend and Makhaon in

2006

deposits e qual to taxes paid by Rilend and Makhaon in 2006 Universal USB Bank Savings

Universal

USB Bank

Savings Bank

V.Kurochkin OOO RILEND, Moscow
V.Kurochkin
OOO RILEND,
Moscow

open

USB Bank Savings Bank V.Kurochkin OOO RILEND, Moscow open account V.Khlebnikov open OOO MAKHAON, Moscow account

account

V.Khlebnikov open OOO MAKHAON, Moscow account
V.Khlebnikov
open
OOO MAKHAON,
Moscow
account

Top 10 Depositors

1.

Rilend

$75m

2.

Makhaon

$16m

3.

4.

5.

6.

7.

 
Makhaon $16m 3. 4. 5. 6. 7.   17 December 2007 Source: Reporting 0409157 01 January
Makhaon $16m 3. 4. 5. 6. 7.   17 December 2007 Source: Reporting 0409157 01 January

17 December 2007

Source: Reporting 0409157

01 January 2008

48

Central Bank Confirmation – Intercommerz Bank

Central Bank Confirmation – Intercommerz Bank Intercommerz Bank reports to the Centra l Bank showed Parfenion

Intercommerz Bank reports to the Central Bank showed Parfenion as the biggest depositor at Intercommerz Bank with deposits equal to taxes paid by Parfeion in 2006

Bank with depos its equal to taxes paid by Parfeion in 2006 Intercommerz Bank V.Khlebnikov OOO

Intercommerz Bank

V.Khlebnikov OOO PARFENION, Moscow
V.Khlebnikov
OOO PARFENION,
Moscow

open

Intercommerz Bank V.Khlebnikov OOO PARFENION, Moscow open account 13 December 2007 Top 10 Depositors 1. Parfenion

account

13 December 2007

Top 10 Depositors

1.

Parfenion

2.

3.

4.

5.

6.

7.

$139m

01 January 2008

1. Parfenion 2. 3. 4. 5. 6. 7. $139m 01 January 2008 Source: Reporting 0409157 49

Source: Reporting 0409157

49

The overall strategy of the perpetrators was to steal tax money

overall strategy of the perpetrators was to steal tax money The plan achieved the result of

The plan achieved the result of stealing $230m of taxes from the Russian government that had been paid by Hermitage in 2006

Legal owners

Companies stolen

Fraudulent owners

HSBC PRIVATE BANK (Guernsey) LIMITED Trustee to Hermitage Fund 100% 100% Corporate HSBC MANAGEMENT Corporate
HSBC PRIVATE BANK
(Guernsey) LIMITED
Trustee to Hermitage Fund
100%
100%
Corporate
HSBC MANAGEMENT
Corporate
Director
(Guernsey) LIMITED
Director
GLENDORA
KONE
HOLDINGS
HOLDINGS
Corporate Director
LTD
LTD
Cyprus
Cyprus
100%
100%
100%
General Director
General Director
General Director
OOO RILEND,
OOO PARFENION,
OOO MAKHAON,
Moscow
Moscow
Moscow
OOO PARFENION, OOO MAKHAON, Moscow Moscow Moscow February 2006 HSBC PRIVATE BANK (Guernsey) LIMITED Trustee

February

2006

HSBC PRIVATE BANK (Guernsey) LIMITED

HSBC PRIVATE BANK (Guernsey) LIMITED Trustee to Hermitage Fund

Trustee to Hermitage Fund

100% 100% Corporate HSBC MANAGEMENT Corporate Director (Guernsey) LIMITED Director GLENDORA KONE HOLDINGS
100%
100%
Corporate
HSBC MANAGEMENT
Corporate
Director
(Guernsey) LIMITED
Director
GLENDORA
KONE
HOLDINGS
HOLDINGS
Corporate Director
LTD
LTD
Cyprus
Cyprus
100%
100%
100%
General Director
General Director
General Director
OOO RILEND,
OOO PARFENION,
OOO MAKHAON,
Moscow
Moscow
Moscow
OOO PARFENION, OOO MAKHAON, Moscow Moscow Moscow Budget of Russian Federation OOO Pluton, (Kazan, Tatarstan)

Budget of Russian Federation

OOO Pluton, (Kazan, Tatarstan) 100% 100% 100% V.Markelov V.Khlebnikov OOO PARFENION, OOO MAKHAON, Novocherkassk
OOO Pluton,
(Kazan, Tatarstan)
100%
100%
100%
V.Markelov
V.Khlebnikov
OOO PARFENION,
OOO MAKHAON,
Novocherkassk
Novocherkassk

V.Kurochkin

V.Kurochkin OOO RILEND , Novocherkassk

OOO RILEND,

Novocherkassk

Novocherkassk V.Kurochkin OOO RILEND , Novocherkassk Universal Savings Bank Intercommerz Bank December 2007

Universal

Savings Bank

OOO RILEND , Novocherkassk Universal Savings Bank Intercommerz Bank December 2007 Universal Savings Bank

Intercommerz

Bank

, Novocherkassk Universal Savings Bank Intercommerz Bank December 2007 Universal Savings Bank Hermitage companies

December

2007

Universal Savings Bank Intercommerz Bank December 2007 Universal Savings Bank Hermitage companies paid $230 m in

Universal

Savings Bank

Bank Intercommerz Bank December 2007 Universal Savings Bank Hermitage companies paid $230 m in capital gain
Bank Intercommerz Bank December 2007 Universal Savings Bank Hermitage companies paid $230 m in capital gain

Hermitage companies paid

$230 m

in capital gain taxes to the Russian budget

Perpetrators

stole

$230 m

in capital gain taxes from the Russian budget

50

Destroying the evidence of the crime – Company Liquidation

Destroying the evidence of the crime – Company Liquidation On June 5, 2008 Boily Systems Ltd

On June 5, 2008 Boily Systems Ltd filed for liquidation of the three stolen companies

OOO Pluton, (Kazan, Tatarstan) 100% 100% 100% V.Kurochkin V.Markelov V.Khlebnikov OOO RILEND, OOO PARFENION, OOO
OOO Pluton,
(Kazan, Tatarstan)
100%
100%
100%
V.Kurochkin
V.Markelov
V.Khlebnikov
OOO RILEND,
OOO PARFENION,
OOO MAKHAON,
Novocherkassk
Novocherkassk
Novocherkassk

Pluton stole three companies from Hermitage Fund Sep, 2007

Source: EGRUL statements

from Hermitage Fund Sep, 2007 Source: EGRUL statements Boily Systems Ltd, (BVI) 100% 100% 100% R.Starova
Boily Systems Ltd, (BVI) 100% 100% 100% R.Starova R.Starova R.Starova OOO RILEND, OOO PARFENION, OOO
Boily Systems Ltd,
(BVI)
100%
100%
100%
R.Starova
R.Starova
R.Starova
OOO RILEND,
OOO PARFENION,
OOO MAKHAON,
Khimki
Khimki
Khimki

Boily purchase three stolen companies for $750 on February 8, 2008

three stolen companies for $750 on February 8, 2008 Boily Systems Ltd, (BVI) 100% 100% 100%
Boily Systems Ltd, (BVI) 100% 100% 100% R.Starova R.Starova R.Starova OOO RILEND, OOO PARFENION, OOO
Boily Systems Ltd,
(BVI)
100%
100%
100%
R.Starova
R.Starova
R.Starova
OOO RILEND,
OOO PARFENION,
OOO MAKHAON,
Khimki
Khimki
Khimki

Boily filed for liquidation of three stolen companies on June 10th, 2008

Khimki Khimki Khimki Boily filed for liquidation of three stolen companies on June 10th, 2008 Tax
Khimki Khimki Khimki Boily filed for liquidation of three stolen companies on June 10th, 2008 Tax

Tax Authorities

51

It is now obvious why we were a target

It is now obvious why we were a target Because our companies paid more taxe s

Because our companies paid more taxes than almost anyone else in Russia

Taxes paid by some of the leading Russian companies (2006, US$ million)

more taxe s than almost anyone else in Russia Taxes paid by some of the leading
more taxe s than almost anyone else in Russia Taxes paid by some of the leading

Interior Ministry Role in Hermitage Fraud

Interior Ministry Role in Hermitage Fraud The interior ministry played an active role in supporti ng

The interior ministry played an active role in supporting and executing the fraud against Hermitage

Who approved and supervised the spurious cases and asset searches?

Active participants in the cases

Active

Participants'

Role

Moscow Interior Ministry

Moscow Interior Ministry

Federal Interior Ministry

Major General

A. Mihalkin

Federal Interior Ministry Major General A. Mihalkin Colonel A. Klevtsov Major General I. Glukhov Colonel A.

Colonel

A. Klevtsov

Ministry Major General A. Mihalkin Colonel A. Klevtsov Major General I. Glukhov Colonel A. Stepantsov Colonel

Major General I. Glukhov

A. Mihalkin Colonel A. Klevtsov Major General I. Glukhov Colonel A. Stepantsov Colonel of Justice A.

Colonel A. Stepantsov

A. Klevtsov Major General I. Glukhov Colonel A. Stepantsov Colonel of Justice A. Anichin Major R.
Colonel of Justice A. Anichin

Colonel of Justice A. Anichin

Colonel of Justice A. Anichin
Colonel of Justice A. Anichin
Glukhov Colonel A. Stepantsov Colonel of Justice A. Anichin Major R. Ahmedzhanov Continued spurious cases long

Major

R. Ahmedzhanov

Colonel of Justice A. Anichin Major R. Ahmedzhanov Continued spurious cases long after it was clear
Colonel of Justice A. Anichin Major R. Ahmedzhanov Continued spurious cases long after it was clear

Continued spurious cases long after it was clear that there were no tax claims

Lt. Colonel

A. Kuznetzov

Lt. Colonel A. Kuznetzov
Lt. Colonel A. Kuznetzov

Raided Hermitage offices under false pretensesthat there were no tax claims Lt. Colonel A. Kuznetzov Supervised search where lawyer was assaulted

Supervised search where lawyer was assaulted by officersA. Kuznetzov Raided Hermitage offices under false pretenses Confiscated documents later used in fraud Major P.

Confiscated documents later used in fraudSupervised search where lawyer was assaulted by officers Major P. Karpov Kept custody of documents used

Major

P. Karpov

Major P. Karpov
Major P. Karpov

Kept custody of documents used in a fraud

Threatened

witnesses

used in a fraud Threatened w i t n e s s e s Major N.

Major

N. Budilo

Opened new

spurious cases

against Hermitage

companies

Accepted forged documents from perpetrators to assist with fraud

Conducted wide ranging asset search beyond the scope of investigationOpened new spurious cases against Hermitage companies Accepted forged documents from perpetrators to assist with fraud

The FSB also played a role

The FSB also played a role From the court documents presented by inves tigator Major Karpov,

From the court documents presented by investigator Major Karpov, we learned that the opening of the Kameya case was also sanctioned by FSB Department “K” (Economic espionage department)

by FSB Department “K” (Economic espionage department) V. Voronin General major Head of Department "K"

V. Voronin General major Head of Department "K" Federal Security Service "FSB"

A. Kuvaldin   D. Vasiliev Capitan FSB Capitan FSB
A. Kuvaldin   D. Vasiliev Capitan FSB Capitan FSB

A. Kuvaldin

 

D. Vasiliev

Capitan FSB

Capitan FSB

- Wrote a report requesting to open tax criminal case against Kameya, based on non-existence of Cyprus tax certificate, which they should have known existed and was in the possession of the Russian tax ministry

- Invited representative of Firestone Duncan for questioning to verify position in relation to stolen companies;

- Supervised opening of spurious tax cases on behalf of FSB

54

Involvement of Russian Courts

Involvement of Russian Courts Judges from three courts committed numerous vi olations of Russian judicial procedure

Judges from three courts committed numerous violations of Russian judicial procedure and law in permitting their courts to issue $1.26 billion of sham judgements

     
       
 
       
         
         
         
         

Judge

Judge

Judge

Judge

Judge

E. Kim

 

E. Orlova

S. Alekseev

M. Kuznetzov

I.Salimzianov

 

Sham awards for $372 million were issued after the following violations of Russia judicial procedure and law

Sham award for $575 million was issued after the following violations of Russia judicial procedure and law

Sham award for $312 million was issued after the following violation of Russia judicial procedure and law

The court relied on photocopies of documents as opposed to the originals, as required by law;

The court did not notice that the person who filed the claim was not an officer of the company he was representing (which was clearly stated in the documents filed with the court

Relied on fake documents of a non-existent commercial court to award the 3 Hermitage Fund companies to Pluton

The court accepted forged agreements (with the wrong company addresses) as decisive evidence, despite the fact that the mistakes were clearly outlined in court filings

 

The claims were increased by 214,125% during the court hearings without arising any suspicion;

The court did not take any steps to verify the authority of the lawyers appearing fraudulently on behalf of the Hermitage companies on the basis of fake powers of attorney;

The court hearing lasted 5 minutes and resulted in a $372 million award

 

55

Involvement of Lawyers

Involvement of Lawyers St. Petersburg Kazan Moscow No one attended Claimant's from Advocates Instar Advocate
St. Petersburg Kazan Moscow No one attended Claimant's from Advocates Instar Advocate Advocate Advocate A.
St. Petersburg
Kazan
Moscow
No one
attended
Claimant's
from
Advocates
Instar
Advocate
Advocate
Advocate
A. Pavlov
A. Turukhin
K. Yakovlev
Grand Active
Logos Plus
Logos Plus
Defendant's
Advocates
Advocate
Advocate
Advocate
Y. Mayorova
E. Maltzeva
A. Pavlov
Director
Y. Mayorova
Mahaon
Director
Parfenion
Rilend
Sheshenia
Rilend
Parfenion
Parfenion
V. Markelov
Husband
&
Wife

Hermitage Attempts to Stop Fraud

Hermitage Attempts to Stop Fraud Since 3 December 2007, we have filed 35 comp laints in

Since 3 December 2007, we have filed 35 complaints in Russia and 7 overseas to try to stop and reverse these frauds

Litigation Complaints Hermitage activities to stop fraud Appeals Complaint Complaint
Litigation
Complaints
Hermitage activities
to stop fraud
Appeals
Complaint
Complaint

Russian tax

authorities

Russian

government

officials

Arbitration court to overturn fake judgement

Russian law

enforcement

agencies

International law enforcement agencies

We gave the Russian law enforcement agencies every chance to stop these frauds starting a month in advance in 35 different complaints

starting a month in advance in 35 different complaints But they prevented nothing Selection of complaints

But they prevented nothing

Selection of

complaints

filed by

HSBC/

Hermitage

Execution of tax fraud

 

HSBC/Hermit

 

lawyer complaint to Head of Internal Affairs of Interior Ministry Y. Draguntsov

 

HSBC /Hermit

 

HSBC/Hermit.

 

HSBC/Hermit

   

complaint to

HSBC/Hermit

HSBC/

Head of

complaint to

Head of

Investigative

Committee

lawyer

complaint to

Head of

telegram to Head of Moscow Investigative Committee V. Spasennyh

Hermitage

letter to

Central District

St.Petersburg

Investigative

Moscow Tax

Investigative

       

Committee A.

Service

Committee

HSBC/Hermit

Hermitage

HSBC/Hermit

A. Bystrykin

Bystrykin

P. Vymetsu

   
 

HSBC/Hermit

complaint to

complaint to 19 members of Anticorruption Committee set up by President Medvedev

third

           

HSBC /Hermit Complaint to Head of Internal Affairs of Interior Ministry Y. Draguntsov

HSBC/Hermit

HSBC/Hermit

HSBC/Hermit

HSBC/Hermit

secondary

Head of

complaint on

HSBC/Hermit

complaint to

General

Prosecutor

Y. Chaika

lawyer

complaint to

General

Prosecutor

acomplaint to

Invetigator

R.Rassohov of

Investigative

telegram to

Head of

Investigative

Committee

HSBC

/Hermitage

letter to

Federal Tax

Service

complaint to

Head of

St.Petersburg

Investigative

Committee

A.

complaint to

Head of

Investigative

Committee

Investigative

Committee of

Interior

Ministry A.

inaction to

Head of

Investigative

Committee

Y. Chaika

Committee

A. Bystrykin

Lavrenko

A. Bystrykin

Anichin

 

A. Bystrykin

3 Dec 3 Dec 11 Dec 30 Jan 13 Feb 14 Feb 19 Feb 26
3 Dec
3 Dec
11 Dec
30 Jan
13 Feb
14 Feb
19 Feb
26 Feb
3 Apr
25 May
7 Jun
2007
2007 2007
2008 2008
2008 2008
2008
2007
2008 2008
$240m
$113m
$36m
$41m
3 Dec
3 Dec
11 Dec
30 Jan
13 Feb
14 Feb
19 Feb
26 Feb
3 Apr
25 May
7
Jun
2007 2007
2007
2008 2008
2008 2008
2008 2007
2008
2008 58

What happened to the complaints?

What happened to the complaints? Six criminal complaints were filed D ecember 3 – 11, 2007

Six criminal complaints were filed December 3 – 11, 2007 by HBSC and Hermitage with the major Russian authorities

255-page 1 Complaint 255-page 2 Complaint 255-page 3 Complaint 255-page 4 Complaint 255-page
255-page
1
Complaint
255-page
2
Complaint
255-page
3
Complaint
255-page
4
Complaint
255-page
5 Complaint
5
Complaint
6
6

255-page

Complaint

4 Complaint 255-page 5 Complaint 6 255-page Complaint Yuri Chaika Russian General Prosecutor Yuri Draguntsov
4 Complaint 255-page 5 Complaint 6 255-page Complaint Yuri Chaika Russian General Prosecutor Yuri Draguntsov

Yuri Chaika

Russian General Prosecutor

Complaint Yuri Chaika Russian General Prosecutor Yuri Draguntsov Internal Affairs of Russian Interior

Yuri Draguntsov

Internal Affairs of Russian Interior Ministry

Draguntsov Internal Affairs of Russian Interior Ministry Alexander Bastrykin Russian State Investigative Committee

AlexanderBastrykin

Russian State Investigative Committee

Hermitage
Hermitage
Affairs of Russian Interior Ministry Alexander Bastrykin Russian State Investigative Committee Hermitage Lawyers 59
Affairs of Russian Interior Ministry Alexander Bastrykin Russian State Investigative Committee Hermitage Lawyers 59

Lawyers

59

What happened to the complaints?

What happened to the complaints? Two of the criminal complaints filed with the Internal Affa irs

Two of the criminal complaints filed with the Internal Affairs Department of Interior Ministry and General Prosecutor did not result in any activity at all

Hermitage
Hermitage
255-page Complaint 255-page Complaint
255-page
Complaint
255-page
Complaint
255-page Complaint 255-page Complaint
255-page
Complaint
255-page
Complaint
Complaint 255-page Complaint 255-page Complaint Yuri Chaika Russian General Prosecutor Yuri Draguntsov
Complaint 255-page Complaint 255-page Complaint Yuri Chaika Russian General Prosecutor Yuri Draguntsov
Complaint 255-page Complaint 255-page Complaint Yuri Chaika Russian General Prosecutor Yuri Draguntsov

Yuri Chaika

255-page Complaint 255-page Complaint Yuri Chaika Russian General Prosecutor Yuri Draguntsov Internal

Russian General Prosecutor

Complaint Yuri Chaika Russian General Prosecutor Yuri Draguntsov Internal Affairs of Russian Interior

Yuri Draguntsov

Internal Affairs of Russian Interior Ministry

Russian Interior Ministry Letter (Office of Draguntsov):

“We are unable to open an inquiry into an investigator when such inquiry is requested by the target of the investigator’s current work.”

What happened to the complaints?

What happened to the complaints? The General Prosecutor’s Office and Internal Affairs Department of the Interior

The General Prosecutor’s Office and Internal Affairs Department of the Interior Ministry transferred two other complaints to the Moscow Prosecutor’s Office, who then passed the complaints to the individual in the Moscow Interior Ministry who was the target of the complaints

255-page Complaint Hermitage Lawyers 255-page Complaint
255-page
Complaint
Hermitage
Lawyers
255-page
Complaint
Complaint Hermitage Lawyers 255-page Complaint Yuri Chaika Russian General Prosecutor Yuri Draguntsov
Complaint Hermitage Lawyers 255-page Complaint Yuri Chaika Russian General Prosecutor Yuri Draguntsov

Yuri Chaika

Russian General

Prosecutor

255-page Complaint Yuri Chaika Russian General Prosecutor Yuri Draguntsov Internal Affairs of Russian Interior

Yuri Draguntsov

Internal Affairs of Russian Interior Ministry

Investigative Department of Moscow Interior Ministry

Investigative Department of Moscow Interior Ministry Major Pavel Karpov

Major

Pavel Karpov

255-page Complaint
255-page
Complaint
255-page Complaint
255-page
Complaint
Pavel Karpov 255-page Complaint 255-page Complaint 255-page Complaint 2 5 5 - p a g e

255-page

Complaint 255-page

Complaint

Prosecutor

of Moscow

What happened to the complaints?

What happened to the complaints? It turned out that authorities thought the be st person to

It turned out that authorities thought the best person to investigate the fraud was the person accused of it

Investigative Department of Moscow Interior Ministry

Investigative Department of Moscow Interior Ministry Major Pavel Karpov

Major Pavel Karpov

Person who confiscated the documents needed for the fraud

Person who confiscated the documents needed for the fraud Investigative Department of Moscow Interior Ministry
Person who confiscated the documents needed for the fraud Investigative Department of Moscow Interior Ministry

Investigative Department of Moscow Interior Ministry

Investigative Department of Moscow Interior Ministry Major Pavel Karpov

Major Pavel Karpov

Person investigating the fraud

What happened to the complaints?

What happened to the complaints? The St. Petersburg branch of the Russian State Investigative Committee was

The St. Petersburg branch of the Russian State Investigative Committee was unable to find any crime at all in their review of the complaint

to find any crime at all in th eir review of the complaint Response to Complaint
to find any crime at all in th eir review of the complaint Response to Complaint

Response to Complaint

5
5

Nothing wrong happened in St. Petersburg court

Defendant fully accepted the claim

The lawyer of HSBC will not be prosecuted for filing a false accusation according to Para. 1, Article 306 of the Russian Criminal Code due to an honest misunderstanding

The request to open a criminal case is declined due to the lack of a crime

What happened to the complaints?

What happened to the complaints? One case was ultimately opened by the Russian State Investigative Committee,

One case was ultimately opened by the Russian State Investigative Committee, but it was soon dragged down to the lowest level of the organization

Complaint

6
6

Russian

Investigative

Committee

the organization Complaint 6 Russian Investigative Committee Moscow City branch of Russian Investigative Committee
Moscow City branch of Russian Investigative Committee

Moscow City branch of Russian Investigative Committee

Moscow City branch of Russian Investigative Committee
Moscow City branch of Russian Investigative Committee

Southern District Department of Moscow City branch of Russian Investigative Committee

of Moscow City branch of Russian Investigative Committee Opened Criminal Case against fake directors of three
of Moscow City branch of Russian Investigative Committee Opened Criminal Case against fake directors of three
Opened Criminal Case against fake directors of three Russian entities of HSBC and unknown individuals
Opened Criminal Case
against fake directors
of three Russian entities
of HSBC and unknown
individuals

5 Feb 2008

entities of HSBC and unknown individuals 5 Feb 2008 R. Rassohov, from Major Crimes Department of

R. Rassohov, from Major Crimes Department of Russian Investigative Committee

Considered the Criminal Case against fake directors of three Russian entities of HSBC and unknown individuals and made decision to drag it down

and unknown individuals and made decision to drag it down Lowest possible level of investigation Appointed

Lowest possible

and made decision to drag it down Lowest possible level of investigation Appointed Mr. Gordievsky as

level of investigation

Appointed Mr. Gordievsky as investigator for opened criminal case
Appointed Mr.
Gordievsky as
investigator for
opened criminal case

What happened to the complaints?

What happened to the complaints? In February 2008, as part of this newly opened case, the

In February 2008, as part of this newly opened case, the Russian State Investigative Committee began to question the possible suspects

Committee began to questio n the possible suspects Investigative Committee questioned the officials involved

Investigative Committee

questioned the officials involved

Investigative Committee questioned the officials involved Judge Kuznetsovin St.Petersburg Investigator Yushkov

Judge

Kuznetsovin

St.Petersburg

Investigator

Yushkov

Major

Pavel

Karpov

Lieutenant Colonel A. Kuznetsov

Judge Orlova in St.Petersburg

etc

Investigator Yushkov Major Pavel Karpov Lieutenant Colonel A. Kuznetsov Judge Orlova in St.Petersburg etc 65
Investigator Yushkov Major Pavel Karpov Lieutenant Colonel A. Kuznetsov Judge Orlova in St.Petersburg etc 65

What happened to the complaints?

What happened to the complaints? In June 2008, Hermitage learned that the prime suspect, Lieutenant Colonel

In June 2008, Hermitage learned that the prime suspect, Lieutenant Colonel Artem Kuznetsov, had joined the group managing the investigation

Kuznetsov, had joined the group managing the investigation Investigative Committee questioned the officials involved

Investigative Committee

questioned the officials involved

Investigative Committee questioned the officials involved etc Judge Major Lieutenant Investigator Kuznetsovin
etc

etc

Judge Major Lieutenant Investigator Kuznetsovin Pavel Colonel Yushkov St.Petersburg Karpov A.Kuznetsov
Judge
Major
Lieutenant
Investigator
Kuznetsovin
Pavel
Colonel
Yushkov
St.Petersburg
Karpov
A.Kuznetsov
Pavel Colonel Yushkov St.Petersburg Karpov A.Kuznetsov Lieutenant Colonel A. Kuznetsov Judge Orlova in

Lieutenant Colonel A. Kuznetsov

Judge Orlova in St.Petersburg

Complaints to the Tax Authorities

Complaints to the Tax Authorities We also brought the fraud to the attent ion of the

We also brought the fraud to the attention of the federal tax authorities in a number of locations

Moscow Tax Authority #25
Moscow Tax Authority #25

Jan 17 and

Jan 25 2008

Jan 17 and

Jan 25 2008

25 Jan 2008
25 Jan 2008
Federal Tax Authority #7
Federal Tax Authority #7
Hermitage
Hermitage
Moscow Tax Authority #28
Moscow Tax Authority #28
Inter-Regional Tax Authority (Khimki)
Inter-Regional Tax Authority
(Khimki)
Inter-Regional Tax Authority (Rostov / Novocherkassk)
Inter-Regional Tax Authority
(Rostov / Novocherkassk)
30 April 2008
30 April 2008
June 2008
June 2008

67 67

What happened to the complaints?

What happened to the complaints? On 17 January 2008, in response to Hermit age’s initial complaint,

On 17 January 2008, in response to Hermitage’s initial complaint, Moscow Tax Inspectorate No. 25 replied that the registration file of “Rilend” had been confiscated in the course of document collection for a new criminal investigation

Registration file of “Rilend” was confiscated by the District Branch of the Moscow Interior Ministry
Registration file of “Rilend”
was confiscated by the
District Branch of the
Moscow Interior Ministry as
part of the investigation under
Criminal Case # 225589

68

What was the new criminal case about?

What was the new criminal case about? The new criminal case was a way for Mr.

The new criminal case was a way for Mr. Markelov, one of the perpetrators of the original theft of the Hermitage companies, to destroy all of the files relating to the fraud

companies, to destroy all of the files relating to the fraud Complaint Dmitry Yushkov, Investigator of
Complaint
Complaint
Complaint
Complaint

Complaint

Complaint
Complaint
Complaint
Complaint
to destroy all of the files relating to the fraud Complaint Dmitry Yushkov, Investigator of North
to destroy all of the files relating to the fraud Complaint Dmitry Yushkov, Investigator of North

Dmitry Yushkov,

Investigator of North Branch of Moscow Interior Ministry

Mr.Markelov, fraudster, owner of OOO "Pluton"

Criminal Case # 225589

Criminal

Case #

225589

Documents

disappeared

Criminal Case # 225589 Documents disappeared Registration file of Rilend seized by investigator ? All the
Criminal Case # 225589 Documents disappeared Registration file of Rilend seized by investigator ? All the

Registration file of Rilend seized by investigator

Documents disappeared Registration file of Rilend seized by investigator ? All the documents have now disappeared
?
?
Documents disappeared Registration file of Rilend seized by investigator ? All the documents have now disappeared

All the documents have now disappeared

What happened to the complaints to the tax authorities?

What happened to the complaints to the tax authorities? Two of the complaints were th rown

Two of the complaints were thrown out and never replied to

Letter on behalf of Makhaon

Hermitage and

Hermitage and
out and never replied to Letter on behalf of Makhaon Hermitage and Tax Authority #28 Letter
out and never replied to Letter on behalf of Makhaon Hermitage and Tax Authority #28 Letter

Tax Authority #28

out and never replied to Letter on behalf of Makhaon Hermitage and Tax Authority #28 Letter
out and never replied to Letter on behalf of Makhaon Hermitage and Tax Authority #28 Letter
out and never replied to Letter on behalf of Makhaon Hermitage and Tax Authority #28 Letter
out and never replied to Letter on behalf of Makhaon Hermitage and Tax Authority #28 Letter
out and never replied to Letter on behalf of Makhaon Hermitage and Tax Authority #28 Letter

Letter on behalf of Parfenion

out and never replied to Letter on behalf of Makhaon Hermitage and Tax Authority #28 Letter

Moving Companies

Moving Companies Immediately after writing to the tax auth orities, on 18 January 2008 the tax

Immediately after writing to the tax authorities, on 18 January 2008 the tax service website showed that “Rilend”, “Mahaon” and “Parfenion” had been re-registered in the remote city of Novocherkassk (Rostov region)

“Mahaon” and “Parfenion” had been re-registered in the remote city of Novocherkassk (Rostov region) 71 71
“Mahaon” and “Parfenion” had been re-registered in the remote city of Novocherkassk (Rostov region) 71 71
“Mahaon” and “Parfenion” had been re-registered in the remote city of Novocherkassk (Rostov region) 71 71

Moving Companies

Moving Companies Even after the tax authorities in Novocherk assk were alerted to the fraud, they

Even after the tax authorities in Novocherkassk were alerted to the fraud, they still agreed to re-register the stolen companies from Moscow to Khimki

Letter alerting them to the fraud

fraud, they still agreed to re-register the stolen companies from Moscow to Khimki Letter alerting them
fraud, they still agreed to re-register the stolen companies from Moscow to Khimki Letter alerting them
fraud, they still agreed to re-register the stolen companies from Moscow to Khimki Letter alerting them

We wrote to the Novocherkassk tax authorities and asked for all documents on the companies

authorities and asked for all documents on the companies On the same day, they refused to

On the same day, they refused to give us information “because it had not been received yet”, they provided this information to the perpetrators to further reregister the stolen companies

February 8, 2008 Letter from the Tax Authority to HSBС

“No registration documents have been received yet”
“No registration documents
have been received yet”

February 8, 2008 Extract from the registrar provided by the Tax Authority to Pluton

have been received yet” February 8, 2008 Extract from the registrar provided by the Tax Authority

Moving Companies

Moving Companies In spite having knowledge of the fraud, the tax authorities still allowed the companies

In spite having knowledge of the fraud, the tax authorities still allowed the companies to be transferred to a new company called Boily Systems

to be transferred to a new company called Boily Systems HSBC PRIVATE BANK (Guernsey) LIMITED Trustee
HSBC PRIVATE BANK (Guernsey) LIMITED Trustee to Hermitage Fund 100% 100% Corporate HSBC MANAGEMENT Corporate
HSBC PRIVATE BANK
(Guernsey) LIMITED
Trustee to Hermitage Fund
100%
100%
Corporate
HSBC MANAGEMENT
Corporate
Director
(Guernsey) LIMITED
Director
GLENDORA
KONE
HOLDINGS
HOLDINGS
Corporate Director
LTD
LTD
Cyprus
Cyprus
100%
100%
100%
General Director
General Director
General Director
OOO RILEND,
OOO PARFENION,
OOO MAKHAON,
Moscow
Moscow
Moscow
OOO PARFENION, OOO MAKHAON, Moscow Moscow Moscow September 11, 2007 OOO Pluton, (Kazan, Tatarstan) 100%
September 11, 2007 OOO Pluton, (Kazan, Tatarstan) 100% 100% 100% V.Kurochkin V.Markelov V.Khlebnikov OOO RILEND,
September 11, 2007
OOO Pluton,
(Kazan, Tatarstan)
100%
100%
100%
V.Kurochkin
V.Markelov
V.Khlebnikov
OOO RILEND,
OOO PARFENION,
OOO MAKHAON,
Novocherkassk
Novocherkassk
Novocherkassk
OOO MAKHAON, Novocherkassk Novocherkassk Novocherkassk March 17, 2008 Boily Systems Ltd, (BVI) 100% 100% 100%
OOO MAKHAON, Novocherkassk Novocherkassk Novocherkassk March 17, 2008 Boily Systems Ltd, (BVI) 100% 100% 100%

March 17, 2008

Boily Systems Ltd, (BVI) 100% 100% 100%
Boily Systems Ltd,
(BVI)
100%
100%
100%
Boily Systems Ltd, (BVI) 100% 100% 100% R.Starova R.Starova OOO PARFENION, OOO MAKHAON, Khimki Khimki R.Starova
R.Starova R.Starova OOO PARFENION, OOO MAKHAON, Khimki Khimki
R.Starova
R.Starova
OOO PARFENION,
OOO MAKHAON,
Khimki
Khimki

R.Starova

R.Starova OOO RILEND , Khimki

OOO RILEND,

Khimki

Political Appeals

Political Appeals On Jan 29, 2008 at the World Eco nomic Forum in Davos, Mr. Browder

On Jan 29, 2008 at the World Economic Forum in Davos, Mr. Browder met Alexei Kudrin, the Russian Finance Minister, to inform him about the fraud and hand over a letter to Dmitry Medvedev

Bill Browder

and hand over a letter to Dmitry Medvedev Bill Browder Al exei Kudrin, the Russian Finance

Alexei Kudrin, the Russian Finance Minister

Dmitry Medvedev, the Russian Prime-Minister then

Kudrin, the Russian Finance Minister Dmitry Medvedev, the Russian Prime-Minister then Now the President of Russia
Kudrin, the Russian Finance Minister Dmitry Medvedev, the Russian Prime-Minister then Now the President of Russia
Kudrin, the Russian Finance Minister Dmitry Medvedev, the Russian Prime-Minister then Now the President of Russia
Kudrin, the Russian Finance Minister Dmitry Medvedev, the Russian Prime-Minister then Now the President of Russia

Now the President of Russia

Appeal to the President

Appeal to the President Hermitage has written to each of the ni neteen members of the

Hermitage has written to each of the nineteen members of the newly created Presidential Anti-Corruption Committee, outlining this fraud and asking that it begin an immediate investigation

“Russia is a country of legal nihilism at a level that no European country can
“Russia is a country of legal nihilism at a level
that
no European country can boast of …corruption in the
official structures has a huge scale and the fight
against it should become a national program.”
the fight against it should become a national program.” Presidential Anti Co rruption Committee President Medvedev

Presidential Anti Corruption Committee

national program.” Presidential Anti Co rruption Committee President Medvedev Hermitage Letter 19 copies – sent to

President Medvedev

Presidential Anti Co rruption Committee President Medvedev Hermitage Letter 19 copies – sent to each member

Hermitage Letter

19 copies – sent to each member

- D. Medvedev (President)

- M. Varshchevsky (Member of Cabinet)

- Y. Chaika (General Prosecutor)

- A. Bastrykin (First Deputy General Prosecutor)

- A. Bortnikov (Director of the FSB)

- L. Bruichovy (Presidential Aide)

- A. Dvorkovich (Presidential Aide)

- V. Zorkin (Head of the Russian Constitutionl Court)

- A. Konovalov (Minister of Justice)

- A. Ivanov (Head of the Supreme Arbitration Court)

- A. Kycheren (Member of the Social Chamber)

- V. Lebedev (Head of the Supreme Court)

- O. Markov (Presidential Aide)

- S. Stepashin (Head of the Audit Chamber)

- K. Chuichenko (Presidential Aide)

- E. Nabiulina (Minister of Economic Development)

- S. Naryshkin (Head of the Presidential Administration)

- R. Nurgaliev (Minster of the Interior)

- S. Sobyanin (Deputy Prime Minister)

Some Legal Relief

Some Legal Relief HSBC/Hermitage have been able to re verse the fraudulent claims against the stolen

HSBC/Hermitage have been able to reverse the fraudulent claims against the stolen companies when they have direct control over the litigation

Fake court award for $ 307m against Rilend Hermitage learned about Cassation Cassation Fake award
Fake court award
for $ 307m against
Rilend
Hermitage
learned about
Cassation
Cassation
Fake award
fake case
appeal
won
nullified
3 Sep
21 Dec
29 Jan
13 May
18 Oct
2007
2008
2008
2007 2007
Fake court award
for $ 70 m against
Machaon
Hermitage
learned about
Cassation
Cassation
Fake award
fake case
appeal
won
nullified
3 Sep
28 Dec
14 Feb
18 Apr
18 Oct
2007
2008
2008
2007 2007
Fake court award
for $ 0.1 m against
Parfenion
Hermitage
learned about
Cassation
Cassation
Fake award
fake case
appeal
won
nullified
21 Sep
16 Jan
4 March
11 June
18 Oct
2008
2008
2008
2007 2007
Hermitage
Fake court award
for $ 575 m
against Parfenion
learned about
Cassation
Cassation
fake case
appeal
won
13 Nov
22 Apr
1 July
20 March
2007
2008 2008
2008
Hermitage
Fake court award
for $ 312 m
against Rilend
learned about
Cassation Cassation
fake case
appeal
won
6 Dec
5 May
9 June
20 March
2007
2008
2008

2008

won 6 Dec 5 May 9 June 20 March 2007 2008 2008 2008 St Petersburg Arbitration
won 6 Dec 5 May 9 June 20 March 2007 2008 2008 2008 St Petersburg Arbitration

St Petersburg Arbitration Court

June 20 March 2007 2008 2008 2008 St Petersburg Arbitration Court Kazan Arbitration Court Moscow Arbitration

Kazan

Arbitration Court

June 20 March 2007 2008 2008 2008 St Petersburg Arbitration Court Kazan Arbitration Court Moscow Arbitration

Moscow Arbitration Court

77

Global Law Enforcement

Global Law Enforcement International law enforcement agenci es have also opened investigations Date 5 June 2008

International law enforcement agencies have also opened investigations

Date

5 June 2008

20 May 2008

9 July 2008

3 April 2008

Jurisdiction

June 2008 20 May 2008 9 July 2008 3 April 2008 Jurisdiction Cyprus Guernsey Police British

Cyprus

20 May 2008 9 July 2008 3 April 2008 Jurisdiction Cyprus Guernsey Police British Virgin Islands

Guernsey Police

9 July 2008 3 April 2008 Jurisdiction Cyprus Guernsey Police British Virgin Islands United Kingdom Action

British Virgin Islands

Jurisdiction Cyprus Guernsey Police British Virgin Islands United Kingdom Action and Result Criminal Complaint Filed;

United Kingdom

Action and Result

Criminal Complaint Filed; Investigation Opened Investigation Opened

Criminal Complaint Filed; Investigation Opened

Freezing and Disclosure Order

re Boily Systems Ltd.; Order GRANTED on 10 July 2008

Meeting & Discussion; Vetting File Opened Vetting File Opened

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Disclaimer The information is based on data obtained from publicly availabl e sources, which have

Disclaimer

The information is based on data obtained from publicly available sources, which have not been verified by Hermitage Capital Management Limited, or any of its respective associates or affiliates. As a result of the difficulty in obtaining reliable data in Russia, we do not represent this information to be accurate and complete and we do not accept any responsibility for the reasonableness of any conclusions based upon such information.

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