Russia’s Offshore Telecom Corruption Case

This week the Wall Street Journal broke a pretty big story: Russia’s Minister of Telecommunications is alleged to illegally own a large chunk of the country’s telecom industry through offshore accounts in the British Virgin Islands. The report states that the BVI police has told the U.S. Department of Justice that there is “overwhelming evidence” that Mr. Leonid Reiman, a close friend and ally of Vladimir Putin, owns these assets through the IPOC International Growth Fund Ltd., a fund that suspected of being a huge money laundering vehicle. This is not the first time Mr. Reiman has been involved in controversy. More info after the jump; more info forthcoming. UPDATE: The FT has just weighed in also (see below)

Excerpt from the FT:

The disclosure looked set to deal a fresh blow to Mr Reiman, an ally of Vladimir Putin, the Russian president. Mr Reiman has repeatedly denied allegations he secretly amassed billions of dollars of assets in the telecom sector with the help of Mr Galmond, his Danish lawyer, who has claimed in court testimony he was the beneficial owner of Ipoc.The letter, dated August 21, was filed on October 31 in a US district court in Delaware as part of a request for legal assistance for what Mr Williams’ office described as an investigation into “whether or not Ipoc is simply a front for the laundering of the proceeds of crime of, amongst others, the Russian telecommunications minister Mr Leonid Reiman”.Mr Galmond declined to comment on Thursday. But Mr Reiman, in a statement relayed by a spokeswoman, dismissed the contents of the letter.“I have conflicting feelings about the latest set of ‘overwhelming evidence’,” he said. “On the one hand, I have feelings of sympathy for those whose efforts time and again end in nothing. And on the other hand I would like to own just the tiniest part of what is being claimed I do.”Ipoc has cited the results of an investigation by Russian prosecutors last year which cleared it of money laundering charges and said it found no evidence Mr Reiman had abused his position.Dmitry Peskov, Kremlin deputy press secretary, said yesterday: “In Russia, we have the presumption of innocence. There has been no decision by the court and therefore there is nothing to comment on.”

From the Wall Street Journal:

Russian Regulator Under Fire Virgin Islands Says Evidence Points To Telecom HoldingsBy GLENN R. SIMPSONNovember 14, 2007; Page A8WASHINGTON — The government of the British Virgin Islands told the U.S. Justice Department there is “overwhelming evidence” Russian Telecommunications Minister Leonid Reiman secretly owns a large chunk of Russia’s telecom industry through an offshore fund.In a potential black eye for the Kremlin, prosecutors in the Islands said they plan to charge one of Mr. Reiman’s associates for allegedly covering up Mr. Reiman’s role in the telecom investments. Mr. Reiman is one of Russian President Vladimir Putin’s oldest allies. The Royal Virgin Islands Police investigation, part of a series of international inquiries into alleged high-level corruption in the Russian telecommunications industry, could also spur the interest of U.S. prosecutors.BVI police are investigating whether an offshore fund called the IPOC International Growth Fund Ltd. “is simply a front for the laundering of the proceeds of crime of, amongst others, the Russian Telecommunications Minister Mr. Leonid Reiman,” wrote Director of Public Prosecutions Terrence F. Williams to the U.S. Justice Department in August.The letter, part of a formal request for U.S. assistance filed Oct. 31 in U.S. District Court in Delaware, claimed there is “overwhelming evidence” Mr. Reiman secretly owns a large chunk of Russia’s telecom industry through IPOC. Mr. Williams said the government in the British Virgin Islands plans to charge the minister’s business partner, Danish lawyer Jeffrey Galmond, with perjury and perverting the course of justice for allegedly covering up Mr. Reiman’s role.Prosecutors in the islands launched their investigation in 2004 after a court fight erupted in Tortola between some British Virgin Islands-registered offshore companies that invest in Russian telecommunications. Mr. Williams said he is seeking help from the U.S. because other companies involved in the case are domiciled there.The Russian Embassy in Washington didn’t immediately return calls for comment. Lawyers for IPOC and Mr. Reiman’s business partner at the U.S. firm Winston & Strawn couldn’t immediately be reached. Mr. Reiman has consistently denied having investments in the companies he regulates.The British Virgin Islands prosecutor and a civil tribunal in Switzerland both allege Bermuda mutual fund IPOC is secretly owned by Mr. Reiman through Mr. Galmond.Criminal charges against Mr. Galmond and others for lying and obtaining the proceeds of crime were “preliminarily drafted” in April of this year, Mr. Williams said in the letter to the Justice Department’s office of international affairs. The filing was reported yesterday by Offshore Alert, a newsletter that tracks developments in tax havens.The case originates from a dispute over the rights to a 25% stake in Megafon, one of Russia’s biggest mobile carriers, between Russian tycoon Mikhail Fridman and IPOC. The evidence that IPOC is owned by Mr. Reiman was the subject of an Oct. 17, 2006, article on page one of The Wall Street Journal.Mr. Galmond, a longtime lawyer for Mr. Reiman, claimed to be the owner of some $2 billion in Russian telecommunications assets in a series of sworn depositions in BVI court and other countries. As proof that he had the resources to purchase the stake and make other Russian telecom investments, he produced a sheaf of contracts and consulting agreements between various firms and his own companies.BVI prosecutors are asking for help from the U.S. because many of the companies named in the agreements are shell corporations established in Delaware, Kentucky and other states.”There is substantial evidence to suggest that these agreements are shams,” the prosecutor Mr. Williams wrote.”It is believed that the movement of money among IPOC and its group of companies and the consultancy agreements,” as well as the “overwhelming” indications that Mr. Reiman is the true owner of IPOC “are evidence that IPOC and its group of companies are corporate shams or facades designed to conceal the true facts about the source of the revenues in IPOC’s groups and its true beneficial owner,” he concluded.