How Abramovich Moved Billions With US Shell Companies

In July 2012, a shell company registered in the British Virgin Islands transferred $20 million to an investment vehicle in the Cayman Islands that was controlled by a large US hedge fund manager.

The transfer was the culmination of months of work by a small army of intermediaries and facilitators in the United States, Europe and the Caribbean. It was a covert operation, with the aim of masking, even partially, the origin of the funds: Roman Abramovich.

For two decades, the Russian oligarch has relied on a winding investment strategy — involving a series of shell companies, transferring money through a small Austrian bank and using the connections provided by major Wall Street firms — to of putting billions of dollars quietly into US hedge funds and private equity groups, according to people briefed on the transactions.

The key was that every lawyer, board member, hedge fund manager and investment adviser involved in the suit could claim that they were not working directly for Abramovich. In some cases, scheme participants were not aware of who owned the money they were helping to manage.

Well-heeled foreign investors like Abramovich have long been able to transfer money to funds in the United States using secretive structures and devious paths, taking advantage of the investment industry’s lax regulation and Wall Street’s willingness to ask few questions about where the money comes from. .

Now that the United States and other countries are imposing sanctions on people close to President Vladimir Putin of Russia, chasing those fortunes could present considerable challenges.

Last week, the IRS [serviço de receita federal americano] asked Congress for more resources to help it oversee the Biden administration’s sanctions program, and called for the formation of a new working group at the Justice Department to combat kleptocracy. And in Congress, lawmakers have proposed a bill known as the Facilitators Act that would require investment advisers to more carefully identify and vet their clients.

Abramovich is worth an estimated $13 billion, derived in large part from the timely acquisition of an oil company that was formerly controlled by the Russian government and which he later resold to the state at a huge profit. This month, European and Canadian authorities imposed sanctions against him and froze his assets, which include London’s famed Chelsea Football Club. The United States has so far not imposed sanctions on Abramovich.

His US assets include millions of dollars in real estate, for example two luxury homes near Aspen, Colorado. But Abramovich also invested large amounts in American financial institutions. His ties to Putin and the source of his wealth have long made him a controversial figure.

Many of Abramovich’s US investments were brokered through a small company, Concord Management, which is run by Michael Martin, according to people briefed on the transactions who are not authorized to speak publicly about the matter.

Martin declined to comment, instead releasing a statement describing Concord as “a consultancy that provides independent research, partner scrutiny and investment monitoring.”

A spokesperson for Abramovich did not respond to emails and text messages seeking comment.

Concord, founded in 1999, does not directly manage any of Abramovich’s money. It operates more as an investment advisory and research and fact-finding firm, making recommendations to the boards of shell companies based in Caribbean tax havens about potential investments in large US financial firms, according to people familiar with the matter.

Big Wall Street banks such as Credit Suisse, Goldman Sachs and Morgan Stanley have often referred hedge funds to Concord, according to people briefed on the meetings at which this took place.

Over the years, Concord has brokered more than 100 investments in different hedge funds and private equity firms, mostly for Abramovich, according to an internal document prepared by a Wall Street firm. The investment destination included funds managed by Millennium Management, BlackRock, Sarissa Capital Management, Carlyle Group, DE Shaw and Bear Stearns, according to people briefed on the matter and the document.

Concord operates very discreetly. The company does not have a website. It is not registered with US regulatory authorities. One of the few times her name has emerged in public was in 2020, when she applied for a loan worth US$265,000 to the federal government’s Payroll Protection Program, created during the pandemic. (Concord has already repaid the loan, a company spokesperson said.)

The secrecy with which the company operates draws caution from some on Wall Street.

In 2015 and 2016, investigators from the financial services group State Street filed “suspicious activity reports” in which they alerted the US government to Concord-organized transactions involving some of Abramovich’s front companies in the Caribbean, BuzzFeed News reported. State Street declined to comment.

US law requires financial institutions to file such reports to help the US government fight money laundering and other financial crimes, although one report is not sufficient evidence that any wrongdoing has been committed.

But most American financiers had no information about — or interest in finding — the source of the money Concord was directing. As long as the basic background checks didn’t result in any alerts, everything was fine.

Paulson & Co., a hedge fund run by John Paulson, received investments from a company Concord represented, according to a person familiar with the transaction. Paulson stated in an email that he “had no knowledge” about Concord’s investors.

Concord also forwarded tens of millions of dollars from two shell companies to Highland Capital, a Texas hedge fund. Highland hired a subsidiary of JPMorgan Chase, the largest bank in the United States, to ensure that the companies were legitimate and that the investments complied with federal anti-money laundering rules, according to federal court documents in a failed bankruptcy process. related.

JPMorgan Chase has cleared the investment. Highland Capital never discovered the source of the money, according to court documents.

The big hedge funds could have accepted the money even if they were aware that it belongs to Abramovich. At the time, the oligarch was not under any sanctions.

Translation by Paulo Migliacci