Russian corporation Alfa Group Consortium and its U.S. entity, Alfa Capital Markets, Inc., are a criminal enterprise that has used U.S. banks and stock exchanges as an integral part of their theft schemes, costing American taxpayers and stockholders hundreds of millions of dollars, IPOC International Growth Fund, Ltd., alleges in a federal racketeering lawsuit filed late Thursday.
The suit alleges that Alfa, one of the largest business conglomerates in the Russian Federation -- along with Russian oligarch Mikhail Fridman and U.S. citizen Leonid Rozhetskin -- engaged in a vast international money laundering and fraud scheme in an attempt to take control of the Russian cellular industry.
"By doing so, defendants' conduct has had a substantial effect on the United States and its citizens, and much of the criminal conduct occurred in the United States," the suit, filed in U.S. District Court for the Southern District of New York, said.
The criminal enterprise affected Americans, U.S.-based investors and U.S. interests in numerous ways, the complaint alleges, involving the evasion of U.S. taxes, insider trading of shares on U.S. stock markets, and wiring payments through New York banks. The Alfa Group Consortium received support from the Overseas Private Investment Corporation, a U.S. government development agency, to provide a significant portion of funding for one of Alfa's related businesses.
"The complaint alleges that the racketeering and other wrongs cited in this case hurt U.S. investors, U.S. taxpayers and U.S. financial markets," said W. Gordon Dobie, an attorney with Winston & Strawn LLP, which filed the case for IPOC International Growth Fund, Ltd.
"It's my opinion that the defendants should be called to account in court for their conduct."
A Daisy Chain of Nine Shell Companies
The suit details how Alfa, in a series of sham transactions over a
10-day period, knowingly and fraudulently colluded to steal IPOC's 25.1 percent stake in Russia's third largest mobile telecom company, MegaFon. IPOC had originally signed two options agreements to buy the stake from LV Finance, had paid for the shares and at all junctures honored the terms of the agreements. At the final stage, IPOC discovered that LV Finance, acting through its chairman Leonid Rozhetskin, had negotiated a purported sale of
LV Finance's interest in MegaFon to Mikhail Fridman's Alfa Group, involving a complex web of nine offshore companies. Both companies are alleged to have been aware of IPOC's prior ownership rights, but rode roughshod over the agreement and fraudulently colluded to sell the same stake twice. They
"bought" and "sold" the $50 million stake, and yet there is no evidence of money having changed hands throughout this daisy chain of sham transactions.
"What was a legitimate business opportunity for IPOC evolved into a
vehicle for Rozhetskin's and Mikhail Fridman's theft and misappropriation," the suit alleges.
Scheme Concealed Wrongdoing
The suit alleges that at the center of the enterprise was Fridman, a
major VimpelCom shareholder, who used associates working directly for him and for VimpelCom, to transfer the assets in the summer of 2003. The scheme involved wiring payments through New York banks, taking the proceeds, and then transferring those proceeds to various off-shore companies "to conceal wrongdoing from IPOC, American taxing authorities, and others."
The suit states that Rozhetskin acted "as a point person to obtain
additional cellular phone assets" and worked closely with Fridman to assist with the sham transactions. He later relied on New York banks to launder the theft of $50 million, the money IPOC paid for the stake.
The complaint also alleges that Rozhetskin and Fridman were assisted by Hans Bodmer, who served as escrow agent and sent instructions to IPOC to wire money through banks in New York for the benefit of the defendants.
Bodmer recently plead guilty to criminal conspiracy to launder money and conspiracy to violate the U.S. Foreign Corrupt Practices Act in connection with an unrelated scheme to bribe foreign leaders.
Insider Dealing and Manipulation of VimpelCom Tax Inquiry
The suit also alleges that Fridman and the Alfa Group attempted to
manipulate VimpelCom's share price for their own gain, in their position as major VimpelCom shareholders. On Dec. 8, 2004, the suit said, VimpelCom, a New York Stock Exchange Company, disclosed the Russian tax authorities were investigating the company for back taxes carrying potential for heavy fines
The news coincided with the auction of a $10 billion subsidiary of
Russian conglomerate Yukos to satisfy back-dated tax obligations. Yukos later went through an unprecedented bankruptcy filing in the United States.
The suit claims that manipulation was insider dealing that advanced the defendants' goal of obtaining control and consolidation of the
telecommunications market in Russia, furthering the ability to raise prices for cellular services through a near-monopoly or oligopoly.
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