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Russian Detainment of U.S.-Born Investor Strikes Fear Into Russian Financial World

U.S. born investor Michael Calvey was recently detained in Russia on accusations of embezzlement and fraud in connection to Calvey’s private equity firm Baring Vostok Capital Partners. Calvey founded Baring Vostok in Russia in 1994, with the company allegedly having injected upwards of $3.7 billion into the Russian economy over the years. Given Baring Vostok’s significant stakeholder position in the Russian economy, the allegations facing Calvey and five other business affiliates create a wary uncertainty for other foreign investors and financiers in the country, unsettling prospects of future financial security in Russia.

Baring Vostok Capital Partners. Photo.    Source: Keylight via The Moscow Times

Baring Vostok Capital Partners. Photo. Source: Keylight via The Moscow Times

The accusations of fraud against Calvey purport that Baring Vostok took part in the theft of nearly $38 million, or roughly 2.5 billion rubles, from Russia’s Vostochny Bank. In the process, Calvey, the founder of Baring Vostok, has been incriminated alongside three other major partners of Baring Vostok-- Vagan Abgaryan, Phillipe Delpal, and Ivan Zyuzin. Also arrested were Alexei Kordichev and Maxim Vladimirov, respectively a former CEO of the Vostochny Bank in question and a debt management firm director who reportedly aided in the facilitation of the theft. Notably, the arrests of these men have struck fear into the Russian business world. Their pretrial detainment is being seen as going beyond the formalities of dealing with what is reportedly a run-of-the-mill corporate dispute, yet now verging on the processing of “illegal” arrests purportedly by the Russian business ombudsman Boris Titov.

Michael Calvey, founder of Baring Vostok, in a pretrial detainment hearing in Moscow. Photo.    Source: Andrey Rudakov/Bloomberg

Michael Calvey, founder of Baring Vostok, in a pretrial detainment hearing in Moscow. Photo. Source: Andrey Rudakov/Bloomberg

Other figures in the Russian business world have spoken out against the treatment of Calvey and his affiliates, claiming that Calvey has been an entrenched figure in the Russian financial society, both “well respected,” and viewed as “cautious” and “[committed]” to his field of work. However, this process of pretrial detainment is not necessarily unique to the case of Baring Vostok. Reportedly, almost 6,000 other individuals involved in the Russian business world are currently being held under pretrial detention for variously associated allegations. Supposedly, the detainment process is utilized by the Russian judiciary to intervene in typical corporate disputes in order to drive the party in question into yielding to financial or business-related concessions.

Presently, Calvey and Baring Vostok have denied the fraud accusations against them. The U.S. Embassy in Moscow is still being denied access to Calvey, despite an obligation for Russia to permit embassy access after a period of four days. Moreover, requests for house arrest for the detained individuals has been denied. As of now, Calvey is set to remain in custody until Apr. 13. In attempts to ensure parity in the case against Baring Vostok, the company issued an open letter to Russian President Vladimir Putin asking Putin to take control of the case, “in order to ensure a comprehensive, independent and objective investigation,” given that the charges were launched amidst a corporate dispute between Baring Vostok and Vostochny Bank. However, recent accounts state that Putin has decided to go forth with supporting the case against Calvey and Baring Vostok, claiming that the Russian secret services have evidence of Baring Vostok’s malfeasance. Amidst this dismal setback for Calvey and the prospects of further foreign investment in Russia, Calvey is set to bear his appeal to the court on Thursday, Feb. 28.