How Western Companies Quietly Helped Russian Oligarchs

Behind a set of imposing metal doors in an ordinary office building in a suburb of New York, a small team manages billions of dollars for a Russian oligarch.

For years, a group of wealthy Russians has used Concord Management LLC, a financial advisory firm in Tarrytown, New York, to secretly invest money in large hedge funds and private equity firms in the United States, according to people familiar with the matter. Subject.

A network of offshore shell companies makes it difficult to know for sure whose money Concord manages. But several people said most of the funds belong to Roman Abramovich, a close ally of Russian President Vladimir Putin.

Concord is part of a constellation of American and European consultancies — including some of the world’s largest law firms — that have long helped Russian oligarchs navigate the West’s financial, legal, political and media landscapes.

Now, with US and European sanctions targeting those close to Putin, companies are struggling over what to do with these lucrative but controversial customers.

Many are leaving them. Some seem to be staying with them. Others don’t say what they’re doing.

Meanwhile, lawyers and investment advisers are under intense scrutiny for work that weeks earlier took place almost entirely under the public’s radar.

Concord, whose representatives declined to comment, caught the attention of congressional investigators. On Wednesday, a lawmaker wrote to the Biden administration asking for a freeze on Abramovich’s Concord funds.

In the UK, which has a thriving industry of lawyers specializing in asset hiding, lawmakers have taken to the floor of Parliament to denounce lawyers and law firms that continue to work with oligarchs.

Legally speaking, at least, there is nothing wrong with working for sanctioned companies, individuals or governments, as long as certain rules are followed.

In the United States, attorneys can represent sanctioned clients in court or before government agencies, and can also advise them on sanctions compliance. Lobbyists and public relations firms must obtain licenses from the Treasury Department to represent sanctioned entities.

As a result of bureaucratic hurdles and reputational risks, the current fee for law firms and lobbyists representing sanctioned oligarchs has climbed into the millions of dollars, according to people familiar with the industry.

For many companies, paydays are not enough to offset the potential reputational damage of working for Kremlin-linked oligarchs. A flurry of Western lobbying, advocacy and public relations firms have recently abandoned their Russian clients or operations.

A spokesperson for the law firm Skadden Arps said it is “in the process of terminating our representations of Alfa Bank”, a company sanctioned and controlled by oligarchs. (Skadden also represented Abramovich, the billionaire owner of English football club Chelsea, but she did not say whether that work would continue.)

International law firms Linklaters and Norton Rose Fulbright said they are leaving Russia. A spokesman for another major firm, Debevoise & Plimpton, said it was terminating several client relationships and would not accept new clients in Moscow. Ashurst, a large London-based law firm, said it would not “act for any Russian clients, new or existing, sanctioned or not.”

Accounting giants PWC, KPMG, Deloitte and EY — which have provided extensive services to oligarchs and their networks of offshore shell companies — have also said they are leaving Russia or cutting ties with their local affiliates.

Some firms turned away from Russian clients they had praised in the days leading up to the invasion.

Last month, a former Treasury official turned lobbyist wrote a letter to the White House arguing that Russia’s Sovcombank should not face sanctions, citing the bank’s commitment to gender equality, environmental and social responsibility.

Sovcombank agreed to pay the lobbyist’s firm, Mercury Public Affairs, $90,000 a month for his work.

The Biden administration recently sanctioned Sovcombank. Within hours of the announcement, Mercury filed documents with the Department of Justice indicating that it was terminating its contract with Sovcombank.

In mid-February, the British law firm Schillings represented Russian oligarch Alisher Usmanov, a former Putin ally.

Two weeks later, the European Union and the US Treasury sanctioned Usmanov. Nigel Higgins, a spokesman for Schillings, said the company “is not acting for any sanctioned individual or entity.”

Another lawyer, Thomas Clare, wrote threatening letters to news organizations on behalf of clients, including Russian oligarch Oleg Deripaska. In 2019, for example, he warned that he might try to hold The New York Times accountable “for the catastrophic economic damage” faced by Deripaska, who at the time was under sanctions.

Clare said this week that her company, Clare Locke LLP, has not worked for Deripaska since September, “and we do not anticipate doing so again in the future.”

Russian companies such as Rosneft, VTB, Alfa Bank, Gazprom and Sberbank, which are now under sanctions, were represented by leading US law firms including White & Case, DLA Piper, Dechert, Latham & Watkins and Baker Botts.

None of these companies said whether they continue to work with Russian firms.

Baker McKenzie, one of the largest law firms in the world, goes on to say on its website that it represents “some of the biggest companies in Russia”, including Gazprom and VTB. The company said it is “reviewing and adjusting our Russia-related operations and work for customers” to comply with the sanctions.

In Washington, Erich Ferrari, a leading sanctions advocate, is suing the US Treasury on behalf of Deripaska, who is trying to overturn sanctions imposed on him in 2018 that he says cost him billions of dollars and made him “radioactive.” in international business circles.

Concord Management, whose representatives declined to comment, appears to be devoted almost entirely to managing the money of a small group of ultra-rich Russians.

The unregistered investment firm has been operating since 1999 with a staff of 20-something. It specializes in investing in hedge funds and real estate funds managed by private equity firms, according to online profiles of current and former Concord employees.

Wall Street bankers and hedge fund managers who have interacted with Concord and its founder, Michael Matlin, said it manages between $4 billion and $8 billion.

It’s unclear how much of this belongs to Abramovich, whose fortune is estimated at $13 billion.

Abramovich was not sanctioned. His spokesperson, Rola Brentlin, declined to comment on Concord.

While companies prefer to keep their work for unpalatable clients private, a 2017 leak provided a glimpse into how Western companies helped Russian oligarchs hide assets — and what happened when those clients were targeted with sanctions.

The leak, part of the Paradise Papers project, involved the files of the Appleby law firm in Bermuda. At least four customers owned private jets through shell companies managed by Appleby.

When companies and individuals linked to Putin were sanctioned in 2014, Appleby ruled out customers it believed were affected.

The Russians have found other Western companies, including Credit Suisse bank, to help fill the void.

Ben Freeman, who tracks foreign influence for the Quincy Institute for Responsible Statecraft, said Russians are likely to find new companies this time as well.

“There’s that initial reaction when these customers are too toxic,” Freeman said. “But when these lucrative contracts are open, sometimes it’s too much for some people, and they can turn a blind eye to any atrocity.”

Translated by Luiz Roberto M. Gonçalves