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Moscow Court Extends Custody Of American Financier Accused Of Fraud


Investment Manager Michael Calvey Denies Fraud Allegations
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WATCH: Investment Manager Michael Calvey Denies Fraud Allegations

A court in Moscow has extended the detention of the American founder of investment company Baring Vostok, Michael Calvey, who is accused of large-scale fraud, a charge which he rejects.

Moscow's Basmanny district court on February 15 said it had extended Calvey’s custody by 72 hours and accepted a request by his lawyers to reschedule a hearing into the accusations so they could have more time to provide documents supporting the financier.

"The detention has been extended for 72 hours. The meeting is postponed until 13:00 Moscow time on February 16," Judge Artur Karpov said in reading the ruling.

Calvey was present for the custody hearing and said he was willing to cooperate and wouldn’t “hide” from the investigation and the court.

“I agree to any house-arrest conditions," the lawyer said in a statement on Calvey's behalf, which also asked the court not to take him into custody.

The lawyer told the judge that the accusations against his client stemmed from a disagreement between his fund and Vostochny Bank.

"The reason he [Vostochny Bank board member Sherzod Yusupov] filed a report with law enforcement agencies is that he himself and his partner, Mr. Artyom Avetisyan, have been parties to a major corporate conflict regarding Vostochny Bank. And not only are they involved in the conflict, they also oppose us," the lawyer said.

The apprehension of one of Russia’s most prominent investors is likely to send a cold chill through the financial community, many members of which rushed to defend Calvey.

German Gref, head of Sberbank, Russia’s biggest state bank, told reporters that Calvey was a “decent and honest man,” while Kirill Dmitriyev, the head of Russia’s sovereign wealth fund, said he would personally vouch for the American investor.

“This is not going to play well with the investor community, nor I think [with] the U.S. government and Congress,” Timothy Ash, an emerging markets strategist for BlueBay Asset Management, was quoted by Reuters as saying.

“[It’s a] disaster from a Russian PR perspective,” he added, noting it could have an impact on sanctions legislation that has been introduced by U.S. senators to punish Russia for meddling in U.S. elections and for its actions in Ukraine.

Richard Hanrahan, citizen services officer at the U.S. Embassy in Moscow, attended the hearing just as he did last month when Paul Whelan, a former U.S. Marine, was jailed on an espionage charge he says is false.

Baring Vostok confirmed in a statement that four other employees were also detained in connection with the case and face similar charges.

"The actions of law enforcement are not directly related to the activities of Baring Vostok and other portfolio companies," the statement posted to the company's website said.

A court spokeswoman said Baring Vostok partner Vagan Abgaryan would also face a custody hearing on February 15.

The case stems from a protracted dispute with Vostochny Bank shareholders. Baring Vostok owns 52.5 percent of the bank. Prosecutors accused the defendants of embezzling 2.5 billion rubles ($37.5 million) by persuading Vostochny Bank shareholders to approve a share sale at an unrealistically low price.

Aleksei Kordichev
Aleksei Kordichev

Interfax also reported that former Vostochny Bank CEO Aleksei Kordichev was among those detained and that he would also face a custody hearing on February 15 at the Basmanny district court.

A defense lawyer told Interfax that "the criminal case is based on materials provided by the [Federal Security Service]."

Kirill Dmitriyev, head of Russia's sovereign wealth fund, was quoted by Reuters as saying he would personally vouch for Calvey, saying that he and his team were highly professional and committed to ethical standards.

Bernard Sucher, a U.S. investor and entrepreneur who worked in Moscow for two decades, told RFE/RL that Calvey "helped pioneer private equity in Russia and is viewed around the world as its unofficial leader."

"He's a good man, and the news that he has been detained for any reason at all is astonishing," Sucher said.

Founded in 1994, Baring Vostok is one of the largest private-equity firms in Russia and the former Soviet Union, according to the firm's website. It manages more than $3.7 billion in assets. It is particularly active in the technology sector and owns a stake in the Yandex search engine.

Before founding Baring Vostok, Calvey worked for the European Bank for Reconstruction and Development and Salomon Brothers. He is a member of the board of directors of the Atlantic Council think tank in Washington, D.C.

With reporting by Reuters, RBC, AP, and TASS