Londongrad: From Russia with Cash; The Inside Story of the Oligarchs

‘How?’ asked Berezovsky. ‘It belongs to me.’

‘We’ll take control. You need to sell.’

‘I don’t need to sell.’

The President then got up, said goodbye, and walked out. It was the last time they spoke.

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A shaken Berezovsky was now faced with the full reality of his decision to back Putin for President. Shortly afterwards, he was again questioned about the alleged embezzlement of Aeroflot funds. Unperturbed, Berezovsky ensured that ORT continued its hostile coverage of the handling of the Kursk disaster.

After his former cheerleader refused to sell his ORT shares and ignored his threats, Putin approached Badri. At that stage the two were still on friendly terms. Badri was telephoned by the head of the FSB, Nikolai Patrushev, and summoned to his office. From there, he was escorted to the Kremlin and greeted by an impatient Putin. ‘What strange game is Berezovsky playing?’ he asked. ‘I want both of you to clear out of television. No one has the right to take risks with television.’

(#litres_trial_promo) Putin said they could sell the shares and negotiate a price with media minister Mikhail Lesin. As Badri departed, the President said that they were friends but if he stayed in television they would become enemies.

Badri subsequently met with Mikhail Lesin, who offered $300 million for the ORT shares - the maximum the state would pay. But Berezovsky still refused to sell. Instead, he announced that he would put the shares into a trust to be managed by a group of journalists and other representatives (a bluff that came to nothing).

The rift between Putin and Berezovsky was now irreparable. In October 2000 Putin was asked by a journalist about his former supporter. ‘The state has a cudgel in its hands that you use to hit just once, but on the head,’ he replied.

(#litres_trial_promo) (He later told reporters, with a half-smile, that his favourite judo move was the ‘deashibati’, a swift attack that knocks one’s opponent off his feet.

(#litres_trial_promo)) On 17 October the media tycoon spent two hours at the Prosecutor-General’s office in Moscow, facing further questioning over the Aeroflot allegations.

A week later Berezovsky mounted the steps of his private jet, a Bombardier Global Express, to take him from Moscow to Nice, a journey he had made hundreds of times. On this occasion, however, there was to be no return flight. Life for Russia’s most controversial oligarch would never be the same again.

CHAPTER 4 Hiding the Money (#ulink_f4e3082c-db58-5045-80ae-67828373208e)

‘It’s like the Wild West out there [in Russia]. A few businessmen own everything. It’s amazing’

- STEPHEN CURTIS

CLOCHER DE LA GAROUPE is a spectacular, rambling villa in Cap d’Antibes in the heart of the Côte d’Azur. Set in 50 manicured acres of fragrant gardens, olive trees, and terraces that run down to the Mediterranean, the magnificent Italianate property is protected by a well-guarded gate tower and is a full mile from its ornate entrance. There are three sizeable villas - two for guests and one for its owner, commanding an impressive view of coastline and sea - along with a gymnasium, tennis court, and large swimming pool. The surrounding gardens are styled in the grand formal English manner with sweeping lawns and hedges.

The American composer Cole Porter rented the property in 1922. Along with fellow American, the artist Gerald Murphy, Porter famously raked the beach clean of seaweed that year, and wrote many of his most famous songs in the villa, notably his hit musical Hitchy-Koo.

Boris Berezovsky bought the place for $13.4 million in September 1997, a typically conspicuous statement of his personal wealth and extravagant tastes. It was soon put to good use and not just as a summer retreat. The chateau, just down the coast from Cannes, was the scene of many of Berezovsky’s most important business deals and much of his political scheming. It was here in 1998, during Russia’s deepening financial crisis, that he conspired with other oligarchs on who to back as Yeltsin’s successor when the President started to rapidly lose his faculties. The following year Vladimir Putin and his family were among those who were invited as guests.

In the autumn of 2000, when Berezovsky was facing up to the full implications of his spectacular rift with Putin and the Russian prosecutors were closing in, the chateau provided the perfect retreat. On 30 October 2000 the state seized his high-security nineteenth-century dacha in Alexandrovka, which he leased from the Kremlin. On 1 November 2000 the Russian Deputy Prosecutor, Vasily Kolmogorov, announced that he was launching criminal proceedings and summoned Berezovsky to appear in Moscow for questioning over the hundreds of millions alleged to be missing from Aeroflot’s Swiss-based accounts. The prosecutor said that if he failed to attend, an international arrest warrant would be issued. Knowing he would not emerge from the process unscathed, the next day he took a momentous decision: to remain in the South of France and become a fugitive. Berezovsky has repeatedly denied the accusations, claiming that they were politically motivated.

As he reflected on his predicament in his Cap d’Antibes retreat, the oligarch decided to remain defiant. Publicly, Berezovsky said that he still planned to return to Russia, but privately the decision had already been made. Two weeks later, on 14 November, he declared that he would not return to Moscow. ‘I have been compelled to choose between becoming a political prisoner or a political emigrant,’ he said.

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For the next month Berezovsky stayed in France. With his future now in the balance, his options were bleak: return to Moscow and face trial or lead a life of exile. The threatened international arrest warrant was then issued by the Russian Prosecutor-General. Although Interpol issued a ‘red notice’ that alerted other countries to this warrant, it did not oblige or mandate police to arrest him. But with the threat intensifying and his options rapidly narrowing, Berezovsky took a life-changing decision - London would be a safer refuge. He already had links to the UK - his daughters had gone to Cambridge and he owned a luxury apartment at Palace Gate in Kensington Palace Gardens - and so in early 2001 he travelled to London, a move he hoped would be temporary.

Berezovsky’s immediate concern as he quit Russia was how to protect his personal fortune. He still owned - or believed he still owned - large stakes in LogoVaz, Aeroflot, Sibneft, Rusal, and ORT - all jointly with Patarkatsishvili. He also had interests in the television channel TV6 and several newspapers. One of his greatest fears was that Putin would simply seize these assets. Then, several weeks after he fled Russia, he received a telephone call from his old friend Roman Abramovich.

Berezovsky’s former protégé, also a shareholder in Sibneft and Rusal, explained that he wanted to meet on ‘urgent business’. It was mid-December 2000 and Berezovsky was somewhat bemused by the call. The next day Abramovich drove the ten minutes from his own magnificent villa at Château de la Croix to Berezovsky’s Château de la Garoupe, where they were joined by Badri Patarkatsishvili. The meeting was not the usual informal, backslapping event the three men were used to. Instead, the atmosphere was uncharacteristically tense. There was now much at stake between the three men and Berezovsky had every reason to be wary of his old friend. While Berezovsky had turned himself into an enemy of Putin, he suspected that Abramovich had become the President’s consigliere.

Top of the agenda was the media company ORT. Putin was still fuming about Channel One’s critical coverage of the sinking of the Kursk and he was still demanding that the two tycoons sell their 49 per cent holding back to the state.

It was a measure of the tension and importance of this meeting that conflicting versions of what was said later emerged and have since become the subject of a hard-fought lawsuit being contested between the two oligarchs in London. According to Berezovsky, Abramovich was sent on the specific orders of Putin to exert intense pressure on them to sell up. He claims that Abramovich, in the role of the President’s willing messenger, warned him that unless he sold his ORT shares, Putin would simply seize the television station without compensation. Berezovsky later maintained that this was a trick to force him and Patarkatsishvili to sell their ORT stake at a knockdown rate, thereby cheating them out of millions.

According to Berezovsky, central to the negotiations was the fate of Nikolai Glushkov, who had been arrested on 7 December 2000 on charges relating to his management of Aeroflot. He was being held at Lefortovo jail in Moscow, notorious as the place where the KGB tortured political prisoners in the Soviet era. Berezovsky believed the arrest was part of the wider campaign by the Kremlin to curb his power. He claimed that Glushkov was essentially being used by the Putin administration as a hostage to prompt him and Patarkatsishvili into relinquishing their assets. According to Berezovsky, Abramovich told the partners that, if they sold their shares in ORT, Putin would release Glushkov from prison. Frustrated and cornered, Berezovsky had no leverage and reluctantly accepted the terms. He needed substantial funds to finance his London lifestyle and knew there was a risk that his stake might otherwise be seized without compensation.

Abramovich’s account of events is entirely at odds with Berezovsky’s. While he accepts that he was at such a meeting, he maintains that he was present in a quite different capacity - in order to assist Berezovsky, at his request, to sell Berezovsky’s ORT shares. Abramovich has denied making any threats or acting as an agent of Putin or the Russian state, claiming that Berezovsky was anxious to sell his ORT shares and actually asked for his help. Far from making threats, the future Chelsea FC owner claims that he, in fact helped Berezovsky and made money for him - by buying his stake in ORT at a price higher than he would otherwise have got.

On any view of the matter, the deal was not going to be straightforward. Neither Abramovich nor Putin would want to be seen publicly doing business with a man being investigated by the Russian state for fraud and for whom there was an international arrest warrant. All sides knew that, in order for the transaction to work, it would need to be entirely clandestine. But how could such a deal be constructed?

The solution was provided by the lawyer Stephen Curtis. He had already been working for Khodorkovsky, knew Abramovich, and advised Berezovsky. He relished the challenge of constructing a convoluted scheme by which to sell the ORT shares.

The fast-talking Curtis found working for the Russians exciting and challenging. He loved the complex and often unorthodox structure of their business and finances, but his colleagues had been less than happy when he first started to work for them. Late one evening in 1998, sitting in the back of his Mercedes, he told a confidant, ‘I need to tell you something. We’ve got some major new Russian clients.’ The friend was dismayed. ‘That’s crazy,’ he replied. ‘Why are you getting into bed with the Russians? It will be a disaster. They play by different rules. If you fall out with them, they will come after you. You are dealing with the Devil.’ Curtis laughed and brushed aside the comments, ‘Well, I will jump on their backs and ride all the way down to hell.’ He was mesmerized by the high rollers and high stakes. This was his chance for the big time. After one particular trip to Moscow, he told his staff breathlessly, ‘It’s like the Wild West out there. A few businessmen own everything. It’s amazing.’

Blessed with remarkable intellect and a prodigious memory, Stephen Langford Curtis was born in Sunderland on 7 August 1958. His father was an accountant. With a law degree from Aberystwyth University, Curtis’s career took off in the early 1980s when he was a tax solicitor at the City law firm Fox and Gibbons. Most of their clients were from the Middle East and the astute, softly spoken Curtis developed an affinity with the Arabs, especially those from the Gulf States. In 1990 he set up his own law firm, Curtis & Co., specializing in commercial and property transactions.

It was in 1997 that Curtis first recruited Russian clients when he started working for Khodorkovsky’s Bank Menatep. Some months later, in 1998, he advised the American defence and communications contractor Lockheed Martin when they were looking for a local (Russian-based) partner to help establish a satellite company for direct broadcasting in Russia. Menatep recommended Berezovsky and that is how the two men first met. Meetings took place in London between Lockheed directors and Berezovsky executives but the deal never materialized.

Curtis was a gifted lawyer and a generous man, but he was also chaotic, disorganized, and extravagant. Despite having wealthy clients such as Mahdi Al-Tajir, the billionaire businessman and former customs official in Dubai, he was always overdrawn and beset by cash-flow problems. Even before the appearance of the Russians, he would buy Ferraris or Bentleys for rich new clients with his own money, something he could ill afford to do. He sometimes had to borrow cash from his own employees and once a client even had to help bail him out. He liked to take expensive holidays and was a regular gambler at London casinos. And he loved to buy jewellery, most especially from W. Roberts at Hatton Garden for his wife and girlfriends. He was also a frequent visitor to Chanel on New Bond Street, where one of his girlfriends worked.

For a Mayfair law firm, the offices of Curtis & Co. were remarkably informal and the senior partner was gregarious and inclusive. Late on a Friday afternoon he would dispense champagne, his arm around the shoulders of members of his staff. People liked Curtis. He was amusing, endearing, and engendered trust. ‘He was one of those people who could remember everyone’s name and make them think that he was their closest and devoted friend,’ said a former colleague. ‘He was phenomenally charming and made you think that you were the most important person in the room.’ The Russians - by nature often sceptical, fearful, and paranoid - trusted him with hundreds of millions of their money. To the astonishment of his colleagues, he was able to buy properties, art, and jewellery on their behalf with few questions asked.

On one occasion Curtis was given a Russian doll with a diamond necklace inside the ornament. His young daughter nonchalantly played with the doll and then threw it into her toy box. Curtis did not realize its value until he saw the same doll in a store in Red Square, Moscow. He was stunned at the price of the bejewelled doll and immediately retrieved it from his daughter’s playroom on his return.

However, Curtis was too shrewd to be completely mesmerized by the mysterious new Russians. He knew there were risks and so applied the old adage of ‘know your client’ even more stringently. In 2000, shortly after starting to work for Berezovsky, he bought a private security firm, ISC Global Ltd, which he then used to investigate his intriguing new clients and their associates.

By late 2000, Curtis was a close confidant of Berezovsky and it was to him that the oligarch turned with the problem of how to sell his ORT shares discreetly. Curtis’s solution required the use of a middleman, ostensibly in order to keep the parties at arm’s length from one another. With his network of high-worth clients spread around the world, many with their own financial networks through which money could be funnelled, Curtis was perfectly positioned to put the pieces in place.

Soon Curtis was coordinating the deal. He set up accounts at Clydesdale Bank in London for Berezovsky and Patarkatsishvili and the ORT shares were transferred, via an intermediary, to an Abramovich-owned company, which then sold them on to the state-owned savings bank Sberbank for the same price - $160 million. Abramovich himself made no money from the clandestine deal, which was concluded by July 2002.

After fees had been paid to the lawyers and other parties who had provided services, Berezovsky and Patarkatsishvili each received around $70 million. Curtis even suggested that Patarkatsishvili - by then based in Georgia - take residence in the United Arab Emirates to avoid paying any tax on his receipts. True to form, details of the commissions received by all the parties were never put in writing.

Although Berezovsky received $70 million for his shares, he has long protested that they were worth more, and had indeed been offered more before he fled Russia. Yet some have claimed that he was fortunate to receive even this much for his 49 per cent stake in ORT, as Putin could easily have seized ORT and nationalized it, leaving Berezovsky with nothing.

Even more infuriating for Berezovsky, Vladimir Glushkov was not released from prison. The Kremlin failed, he claimed, to keep its part of the agreement and Glushkov continued to languish in Lefortovo jail. For Putin, however, mission had been accomplished: the state had regained control of the popular television channel and Berezovsky could no longer use it as a propaganda weapon. Meanwhile, Abramovich was soon to capture another prize - the highly profitable Sibneft oil company.

It was the division of this giant conglomerate that was to become the source of the next dispute between the two oligarchs. According to Abramovich he was the 100 per cent owner of Sibneft, although he was prepared to acknowledge that Berezovsky and Patarkatsishvili had played a crucial role in providing political protection when they had initially acquired the lucrative oil company together. For their part, Berezovsky and his business partner were adamant that they owned a substantial holding in Sibneft that was ‘held on trust’ on their behalf by Abramovich - as part of an option arrangement - even though there was no written agreement to that effect.

It was agreed that in May 2001 Abramovich met Patarkatsishvili at Munich Airport to discuss Sibneft, but Abramovich and Berezovsky are completely at cross-purposes as to what the precise purpose of this meeting was and what went on at it. According to Berezovsky, Abramovich offered another stark warning to his former business associates: as long as they retained a stake in Sibneft, there was a risk of confiscation by the Kremlin. Boxed in again, Patarkatsishvili raised the subject of the imprisonment of Glushkov. Abramovich assured Patarkatsishvili, according to Berezovsky, that if they sold their holding in Sibneft, this time Glushkov would definitely be released. Berezovsky alleges that, once again, on this occasion, Abramovich was acting with Putin’s knowledge and approval.