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Another American is arrested in Moscow; prominent investor is accused of fraud

Another American is arrested in Moscow; prominent investor is accused of fraud
American Michael Calvey attends a hearing in his fraud case in a Moscow district court on Feb. 15. (Maxim Shipenkov / EPA/Shutterstock)

A prominent American investor with business ties in Russia since the early 1990s has been detained on suspicion of fraud in a case that is likely to shake a Moscow business community already reeling from the country’s uncertain investment climate.

Michael Calvey, the founder and senior partner of the private equity firm Baring Vostok Capital Partners, was detained Thursday evening. Russian media reported that five other employees from the firm were detained on Friday.

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An investigator with the Basmanny court in Moscow said Calvey is suspected of embezzling 2.5 billion rubles, or about $37 million, from the Vostochny Bank, of which Baring Vostok has a controlling stake, the Russian Interfax news agency reported.

Baring Vostok said in a statement released to Russian news agencies that the charges were related to a dispute among Vostochny Bank shareholders and would not affect its investment activities. According to its website, Baring Vostok has managed $3.7 billion in investments in the former Soviet Union since 1994.

Calvey, 51, has been a central figure among foreign investors in Russia since then, starting the investment firm in the early days of Russia’s transition to capitalism after the breakup of the Soviet Union.

While other investors sank large sums into Russia’s lucrative oil and gas sectors, which were dominated by government ownership, Baring Vostok focused on technology, retail and telecoms. Calvey invested heavily in Yandex, the Russian search engine giant that has spun off into various other applications under the same brand. Baring Vostok sold its remaining shares in Yandex three years ago, bringing huge profits to the investment fund.

Calvey’s detainment sent shock waves through Moscow’s business community Friday, with immediate comparisons drawn to U.S.-born British fund manager Bill Browder, who was also a prominent name among foreign investors in the chaotic early days of Russia’s capitalism. Browder tweeted that Calvey’s arrest “should be the final straw” for investors in Russia.

Browder supported Russian President Vladimir Putin when the former KGB officer took office in 2000, promising to clean up corruption and bring oligarchs in line with the law. Browder invested in state-run companies, including gas giant Gazprom, and advocated for exposing corruption.

He ran afoul of the Kremlin in the late 2000s, when he and his lawyer, Sergei Magnitsky, began investigating a tax fraud scheme involving state-owned companies. Russian security agents raided Browder’s Hermitage Capital Management. The state seized the investment company and banned Browder from the country. Magnitsky was arrested and thrown in jail, where he later died after being beaten and denied medical care.

Browder, who left Russia and is now a fierce Putin critic, championed passage of the Magnitsky Act, a U.S. law that sanctions Russian human rights violators. Russia has placed Browder on the Interpol wanted list.

In a meeting with President Trump in Helsinki last July, Putin suggested that he would allow special counsel Robert S. Mueller III’s team access in Russia to investigate allegations of interference in the 2016 presidential elections if there was a reciprocal agreement to allow Russian intelligence permission to conduct an investigation in the U.S.

“For instance, we can bring up Mr. Browder,” Putin said.

Calvey is a former Salomon Bros. banker and also worked for the European Bank for Reconstruction and Development. He holds a seat on the board of the Atlantic Council, a think tank in Washington that has been critical of Putin’s authoritative governance and annexation of Crimea.

The detentions come at a time when foreign investors have sought to sell off their Russian holdings amid market uncertainty around sanctions and worsening relations between Moscow and the West. Another American, Paul Whelan, was arrested in late December on espionage charges. His attorney said Whelan was carrying documents that contained state secrets. Whelan’s family said he was in Moscow to attend a wedding.

After hearing of Calvey’s arrest, Kirill Dmitriev, the chief executive of the Russian Direct Investment Fund, a government investment fund, told a Russian news agency that he would personally vouch for the American investor.

“I am ready to provide personal guarantees for Michael Calvey and believe that he did a lot for attracting foreign investment in Russia and helped many Russian companies to grow and mature,” he told the Tass news agency in Germany, where he was attending the Munich Security Conference. Dmitriev said he knew Calvey and the team of Baring Vostok as “highly professional investors, committed to the highest ethical standards accepted in the investment community.”

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Ayres is a special correspondent.

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