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

Moreover, just a few weeks earlier Curtis had taken another critical and high-risk decision: to cooperate covertly with British police officials. Until only recently a back-room lawyer (secretive, low profile, discreet), he found himself suddenly thrust into the spotlight as chairman of a highly controversial Russian company. Sensitive and highly strung at the best of times, he felt increasingly exposed in this new role. Sooner or later he feared the Russian authorities would come knocking on his door asking questions about his own role in alleged tax avoidance and the filtering of cash out of the country.

As he was legally obliged, Curtis had been scrupulous in reporting ‘suspicious transactions’, or the merest hint of criminal activity, to the National Criminal Intelligence Service (NCIS) at Scotland Yard, which investigates money laundering and organized crime. In May 2003, for example, he had filed a suspicious transaction report about one of his Russian clients. Now he needed protection for another reason: he feared that he might become the target of commercial enemies - rival oil companies and minority investors of Yukos who claimed that they were being defrauded. He also knew that contract killings in Russia were commonplace. ‘I have dug myself into a hole and I am in too deep,’ he told a colleague. ‘I am not sure that I can dig myself out.’

In the last few weeks of his life Curtis was under constant surveillance by commercial and Russian state investigators and was considering moving offices. His telephones were tapped and in early 2004 his security consultants discovered a small magnet used to secure a listening device at his country home in Dorset. According to Eric Jenkins, an uncle who often visited him in Gibraltar, where his nephew lived for most of the year, Curtis received numerous anonymous threats and intimidating phone calls. He took them seriously enough to hire a bodyguard. ‘There certainly were death threats against Stephen,’ confirmed Nigel Brown, whose company also provided security for Curtis’s clients Berezovsky and Khodorkovsky. ‘The timing of his death was very suspicious and there were people out there who had a motive to kill him. He just knew too much.’

At first Curtis dismissed the threats, but when one phone call mentioned his wife and 13-year-old daughter, he decided to act. In mid-February 2004, deeply worried, he approached the Foreign Office and NCIS and offered full but covert cooperation. He would provide information about Russian commercial activities in Britain and the oligarchs’ assets, in return for protection for himself and his family. Up to that point his relationship with NCIS had been a limited, almost standard form of cooperation, a role many solicitors play. For NCIS Curtis was a potentially prized informant with insider knowledge of controversial Russian business activity in London. He was immediately assigned a controller, but after only two meetings the NCIS officer was transferred to another operation. Curtis asked to be assigned another controller but before this was done, he was dead.

A week before the fatal crash Curtis had told a close friend at his apartment at Waterside Point, ‘If anything happens to me in the next few weeks, it will not be an accident.’ He had laughed nervously but he was not joking. He had played the messages left on his mobile phone to colleagues at his law firm. ‘Curtis, where are you?’ asked a voice with a Russian accent. ‘We are here. We are behind you. We follow you.’ At the inquest his uncle, Eric Jenkins, testified that his nephew had repeated the same words of warning to him.

The frequent threats convinced some of Curtis’s colleagues and relations that he was murdered. ‘Definitely’, one former employee of his law firm claimed. ‘It was done by remote control. They knew about his flight plans in advance because they were tapping his phones.’ Dennis Radford, the father of the pilot, told the subsequent inquest that he did not think that the Air Accidents Investigation Branch (AAIB) had properly investigated the possibility of foul play. ‘The lack of security at Bournemouth Airport is such that, had anybody wished to sabotage the aircraft, they would have unchallenged and unrestricted access for that purpose,’ he said.

Witnesses say that they heard an unexplained and incredibly loud bang just before the crash. ‘I heard a kind of thump noise and the dog started barking, so I came outside and I heard another couple of bangs. It made a particularly harsh noise, as if the engine was malfunctioning,’ Jack Malt, who lives near the crash site, testified at the inquest. ‘There was a period of silence in the moments before the explosion so I guess the engines must have cut out,’ said Sarah Price, who lives 300 yards from the site of the crash. She also heard a massive bang just before the explosion. And Gavin Foxwell, another local resident, told the inquest that the helicopter made ‘a stuttering, unusual sound, as if it was struggling to stay aloft’.

The death of Stephen Curtis remains a mystery to this day. However, no credible evidence of sabotage or murder has ever been discovered. The investigation by the AAIB concluded:

The possibilities of unauthorised interference were considered. An improvised explosive device could have been positioned in the cabin or the baggage hold. All cabin doors at the undamaged skin of the baggage door were, however, recovered from the accident site. No evidence of damage other than consistent with ground impact was found on any of them. In particular no high velocity particle impacts were noted in any of these door components.

At the inquest Paul Hannant, the Senior Inspector of the AAIB, said, ‘If you are going to bring an aircraft like this down, you have either got to destroy the main rotor system or interfere with the main gearbox. The only other real way is to interfere with the controls. If you disconnect the controls, that would be immediately apparent to the pilot…Any attempt to use a corrosive device or a remote control device would also have been apparent to Captain Radford.’

Ultimately, deteriorating weather conditions and pilot inexperience were blamed for the crash. According to the AAIB inspector, ‘The most likely cause of the accident was that Captain Radford became disorientated during the final stages of the approach to Bournemouth Airport.’ Yet, while the weather on the fateful night of 3 March 2004 was poor - light drizzle, broken cloud, and overcast sky - flying conditions were not especially hazardous. As his father Dennis later claimed, ‘Max had flown many, many times in considerably worse conditions than that. And if he became disorientated, why was he on the radio describing the runway and talking to the control tower twenty-nine seconds before the crash?’

At the inquest assessments of Radford’s experience and competence were mixed. He had been a pilot since 1993, had recorded 3,500 flying hours, and had been flying Curtis regularly. During his operational training for flying the new, upgraded Agusta A109E, Radford consulted two flight instructors. ‘I felt his confidence exceeded his competence,’ testified Alan Davis, but Richard Poppy concluded that Radford was ‘competent’ to fly the Agusta A109E. While the AAIB found that he had not used instrument flying since 2000, they accepted that he was very familiar with the route and had ‘already achieved seventy-eight hours’ over the previous two months.

The inquest jury at Bournemouth Town Hall took just over one hour to reach a verdict of ‘accidental death’. Despite the verdict, however, some close relations remain sceptical to this day. They point out that Radford was a responsible, cautious pilot who had refused to fly Curtis in the past when the weather was poor, notably for a New Year’s Eve party at Pennsylvania Castle.

Curtis’s former security advisers remain suspicious, too. Nigel Brown is adamant that it was an assassination and is highly critical of the police. ‘What I cannot understand is why there has never been a proper murder investigation’, he has said. ‘There was a just cause of suspicion because Stephen had received death threats, there was a motive because of what he knew, and there were suspicious circumstances. But the police did not interview me or my colleagues or Stephen’s clients or his employees. Usually, the police would interview the last person to speak to him and I was that person. We may not know for sure what happened to Stephen but I think there could have been a more thorough inquiry.’

While Curtis’s wife Sarah has never believed that her husband was murdered, she has reflected on why it was a Russian businessman who first informed her about the death of her husband. ‘I am sorry that Stephen is dead,’ he told her. The police did not telephone until an hour later to say that ‘there has been an accident’.

It is a measure of the accuracy of the premonitions Curtis had about a premature death that he left detailed instructions for his funeral. This was partly influenced by his superstitious, almost fatalistic nature. He believed in ghosts and in the afterlife and always thought that he would die young. ‘I will never make old bones’, he once said, well before he met the Russians.

But Curtis had also been diagnosed with leukemia and a rare blood disease. This manifested itself in bizarre ways. During a sailing trip he once hit his head heavily on the boom of the boat and a friend was stunned to see his bloody flesh wound apparently heal before his very eyes. Curtis needed regular blood transfusions to stabilize him and took Warfarin to thin his blood and prevent clotting. He also wore surgical stockings to inhibit deep-vein thrombosis. After two operations at a private clinic, he was told that he could no longer travel by airplane because this would worsen his condition. But he could fly by helicopter, which was why, just three months before his death, he upgraded to the Agusta A109E.

Typical of his flamboyant and irreverent personality, he requested that his funeral should not be a mournful event but a ‘celebration of his life’ and that mourners were ‘not obliged to wear traditional black’. On Wednesday, 7 April 2004 some 350 relations, friends, and business associates gathered inside All Saints Church in Easton on the Isle of Portland near the Curtis family home at Pennsylvania Castle. Such was the lawyer’s popularity that a further 100 stood outside and loudspeakers were installed to broadcast the proceedings. At 1.50 p.m. a glass carriage bearing Curtis’s coffin arrived, drawn by two blackplumed horses and adorned with flowers that spelt the word ‘Daddy’. The carriage was followed by a Rolls-Royce Phantom, carrying his widow Sarah and his daughter Louise, and two Bentleys and a Ferrari, ferrying other relations and close friends.

Preceded by a Scottish piper who played the ‘Skye Boat Song’, the coffin was carried by six bearers into the church, followed by a tearful Sarah and Louise, both wearing pink coats and dresses. As they slowly walked down the aisle, Sarah noticed the intense, brooding figure of Boris Berezovsky, dressed in black, in the congregation with his girlfriend, two bodyguards, and a Russian entourage. Most of Curtis’s clients attended. Notable absentees were representatives of his clients IKEA, which did not want to be associated with his controversial Russian clients, as well as most Yukos executives. Indeed, the only Yukos executive to attend was Vasily Alexanyan, a close friend of Curtis and the oil company’s former legal director. Alexanyan was furious that his colleagues had boycotted the funeral despite the risky operations Curtis had conducted for their company.

At 2.00 p.m. the service began with traditional hymns, followed by a piano solo by Louise. It was evident that Curtis was well loved. One speaker described him as epitomizing a line from Rudyard Kipling’s poem If, which reads: ‘If you can talk with crowds and keep your virtue/or walk with kings - nor lose the common touch’. His closest friend, Rod Davidson, told the congregation, ‘In business he was in a league of his own. He would start off with an earthquake, build it up to a crescendo and [was] always setting his sights beyond the stars…He was the most generous of men and I think of him now at the pearly gates giving St Peter a red Ferrari and providing Playstations for the cherubs.’

But there was also palpable tension in the air because of the conspicuous and, to some, menacing presence of the Russian contingent, who attracted frequent nervous glances. When Berezovsky and his colleagues left their seats at the end of the service, the remainder of the congregation moved out of the way to let them pass first.

The local mourners and Sarah’s friends were mostly conventional, middle-class English people who lived quiet, rural lives in the pristine Dorset village of Easton. They were hardly used to the hard Russian faces or the battery of television cameras, photographers, and police that greeted them as they left the church that bright spring afternoon. To the local villagers it must have looked like the cast of The Godfather or The Sopranos had arrived.

Sarah was devastated by her husband’s death, but she was also confused by and concerned about the media attention. ‘Why are there so many cameras here?’ she asked outside the church. ‘I don’t understand.’ A former secretary, Sarah’s life was family, music, friends, the castle, and the English countryside. Stephen had told her nothing about his secret life in London, Gibraltar, and Russia. A lover of James Bond films, Curtis revelled in this covert existence. He compartmentalized his life, mainly to protect Sarah. ‘I don’t want to know,’ she once remarked and would have recoiled from the dark, cut-throat world of the Russian super-rich.

Sarah recognized none of the Russian mourners.‘Who’s this? Who’s that?’ she asked one of Stephen’s colleagues in a state of increasing bewilderment. ‘What on earth was my husband doing with those Russians?’ she asked another friend. Not wanting to worry her, they declined to answer.

After the service the procession escorting Curtis’s body was accompanied by the song ‘You’ll Never Walk Alone’, with Sarah’s soprano voice ringing out the final words as she followed her husband’s coffin. The burial took place in the gardens of Pennsylvania Castle, attended only by family and close friends. Curtis was laid to rest to the strains of the bagpipe melody ‘Highland Cathedral’.

As the guests mingled in the marquee after the burial the atmosphere was tense and apprehensive. Many former clients were anxious to know the identities of the other guests and whom they worked for. ‘It was a weird situation for a wake,’ said a former employee of Curtis’s law firm. ‘People were looking over their shoulders to see who was talking to who. The strange thing was that I knew some of our clients knew each other, but they would not acknowledge each other at the funeral in case they were photographed or associated with other clients. It was very bizarre, almost comical.’ At 9.45 p.m. a spectacular fireworks display erupted over the English Channel.

The funeral of Stephen Langford Curtis brought together an uneasy, unsettling gathering of two cultures: the conventional, light-hearted, understated English middle class and the dark, intense, stern-faced, focused Russian business elite.

Little more than a decade earlier the Russian presence in Britain had been barely noticeable. It would have been rare to hear a Russian accent in a Knightsbridge boutique, a Mayfair restaurant, or even on the London underground, let alone at the funeral of a mysterious, even obscure, British lawyer. There was no sign then of what was to come: the arrival in Britain of a wave of middle-class, affluent Russians. The influx that followed the collapse of communism in 1991 started slowly but by the end of that decade the Russian desire to move to London had reached what one insider has described as ‘fever pitch’.

Although there are no official figures for the size of the London-based Russian and former-Soviet community, it is widely accepted that by 2008 it numbered well in excess of 300,000. This was large enough to spawn four Russian-language newspapers, the glossy magazine New Style, a plethora of Russian networking clubs and internet sites, and a host of Russian social events.

Although by then the Russian community was diverse, most of its members were ordinary professionals who had chosen to live, work, and settle in London. Many had British husbands or wives. It is this group, rather than the oligarchs, who jokingly referred to London as ‘Moscow-on-Thames’. Some worked for international organizations or Russian companies based in London while others had set up their own businesses. Some found jobs as estate agents, in the City, and in retail to target or cater for Russian clients. They mostly came to Britain to escape the crime, political uncertainty, and economic turbulence and were a very select middle-class group compared with the wider Russian population.

Some still commuted back and forth from Moscow, by commercial rather than by private jet. Flight SU247 from Moscow touched down at Heathrow on Friday evenings, carrying what its Aeroflot crew called ‘voskresnuy muzh’, which translates as ‘Sunday husbands’. These were transcontinental commuters, a mix of oil executives, bankers, and importers and exporters who had homes and families in London but who worked in Moscow. For them it was a weekly ritual: Friday and Sunday nights on a four-hour flight, weekends in London, and the week in their Moscow office.

Dominating this steady stream of migrants was a tiny but much more high-profile group - the oligarchs, a tiny cadre of privileged insiders who had acquired Russia’s state-owned natural resources and, by the end of the 1990s, had come from nowhere to join the ranks of the world’s super-rich. While some of Russia’s nouveaux riches - billionaires and multi-million-aires - have remained in Russia, most have moved or built a base abroad, shifting their mountain of assets with them. While a few have selected Israel, New York, or Switzerland, most have chosen London. From the millennium, this group scattered its new-found wealth like confetti, helping to transform London into the world’s leading playground of the super-rich, contributing to runaway property prices, soaring profits for luxury goods retailers, and bringing displays of opulence not seen since the 1920s.

Some of the Russian ultra-rich were, through fear of arrest, driven out of Russia and took up residence in London. Others became international super-nomads, living partly in London, partly in Russia, while travelling the globe in their private jets and luxury yachts. Many kept a discreet foot in both camps. Along with the next tier of the Russian rich, the oligarchs were lured by London’s accommodating tax laws, compliant banking system, relaxed lifestyle, unobtrusive City regulations, elite schools, and independent judicial system.

This book tells the story of four Russian oligarchs: Boris Berezovsky, the intense, extrovert fugitive who has plotted against Putin’s Russia from his gilded London base; Roman Abramovich, the wily, reserved owner of Chelsea Football Club whose multi-billion-pound oil fortune came from outmanoeuvring his former friend and now bitter enemy Berezovsky; Mikhail Khodorkovsky, the intellectual who naively believed that he was more powerful than the state and ended up in a Siberian jail; and Oleg Deripaska, the ruthless young pretender and aluminium magnate who rose to become the richest of all of them, helped along by his cosy relationship with Vladimir Putin.

During the course of the 1990s these four men built huge fortunes at electric speed by exploiting the flawed post-Soviet scramble to build a Western-style market economy. Though it was Russia itself that was the source of their personal wealth, it was London that provided the backdrop to the next phase in their meteoric climb up the global rich lists.

For Abramovich, London has helped to satisfy his apparently insatiable appetite for conspicuous consumption. For Deripaska, banned from entering the United States, the capital has been a crucial base for building his diverse and colossal global business empire. Before his incarceration, Khodorkovsky used London to woo the British political and business establishment in his international campaign to transform his tarnished global reputation. For Berezovsky, who has been fighting extradition since 2001, London has provided a refuge from Russian prosecutors who have accused him of alleged tax evasion and fraud, charges that he has strenuously denied.

In contrast to the corrupt, politicized judiciary in Russia, London has also offered legal sanctuary and a fair due process of law. While indicted Russian businessmen have been arrested and detained in Spain, France, Italy, and the United States, Britain has refused to accept any of the dozens of extradition attempts by the Russian authorities, souring diplomatic relations in the process. ‘I think they [Russians] feel that this is a country of law,’ said Berezovsky. ‘They feel that they are well protected here.’

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London has long attracted the extravagantly rich, but the post-millennium wave of foreign wealth was unprecedented. In the decade up to 2008, trillions of pounds of foreign capital settled in the UK. For those who make money out of money, it was a golden decade for tax lawyers, accountants, and bankers. ‘The British have found a new vocation,’ said William Cash, the well-connected publisher who founded Spear’s Wealth Management Survey, the glossy quarterly that chronicles the activities of the super-rich. ‘That is being the financial bag-carriers of the world. Britain’s ruling classes used to own the wealth. Now they’ve become the fee-earning servants, servicing the global financial elite.’

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By 2007, before the devastating impact of the global economic meltdown of the following year, London had displaced New York as the financial capital of the world. It did so by providing an unrivalled tax avoidance industry and a much lighter regulatory touch. After 9/11 and a series of highprofile financial scandals on Wall Street, the US Government passed a new law - the Sarbanes-Oxley Act - which imposed much tougher corporate requirements on the disclosure of information, accountancy procedures, and the process of listing on the New York Stock Exchange. This made New York less attractive to the world’s business rich and London seized its chance. The United States also introduced much tighter visa restrictions for foreign businessmen, which did not compare favourably with the more open UK border controls.

For moneyed Russians London also provides logistical advantages: the flight from Moscow is just four hours, while south-east England enjoys a ring of airports with facilities for private jets. According to James Harding, editor of The Times, ‘From London it is possible to work a normal day and talk to Tokyo in the morning and Los Angeles in the afternoon. A businessman can get on a plane from Moscow and be in central London in five hours, from Bombay in seven, even from Beijing in nine. This is one of the reasons why over the past twenty-five years London has turned itself into an international marketplace while New York has remained essentially a domestic financial capital.’

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However, tax remains the primary factor. ‘New York is obviously very stable, but most of the other big centres of wealth management would have questions over them’, said David Harvey of the Society of Trust and Estate Practitioners whose members unashamedly help wealthy families pay as little tax as is legally possible.‘Tokyo’s gone through a period of depression, Singapore is relatively new, and Germany was until recently a tax-heavy jurisdiction. If you’re looking to avoid tax legally, you’re as well going to London as anywhere else.’

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The UK boasts an unrivalled tax-avoidance industry - and an abundance of highly paid accountants able to devise complex ways of hiding an individual’s wealth. In 2007 the International Monetary Fund ranked London alongside Switzerland, Bermuda, and the Cayman Islands as ‘an offshore financial centre’.

Most countries have required their residents - including wealthy foreigners - to pay domestic taxes on their worldwide income and capital gains. In the UK foreigners can claim they are ‘domiciled’ abroad even though they may have lived in Britain for years and have British passports. Under this rule, ‘non-domiciles’ would only pay tax on their UK income and not on overseas income, usually the bulk of their earnings. Furthermore, by purchasing property through offshore trusts, foreign buyers could avoid both capital gains tax when they sell and most of the stamp duty usually paid at the initial purchase.

For a Russian billionaire living in London, his earnings from his homeland have been tax-free in the UK.‘There is one reason above all why these people are coming to London and that is the tax law,’ said Natasha Chouvaeva, a London-based Russian journalist. Although this advantage was partially reduced in 2008 when, following a mounting media and public outcry, the government introduced a £30,000 annual levy on non-domi-ciled residents, it was an inconsequential sum for the superrich.

The origins of the oligarchical influx lie in the privatization of Russia’s vast and valuable state assets in the 1990s, an explosive process that enriched the few, opened up a huge gulf between rich and poor, and enraged the Russian people. A World Bank report in 2004 showed that, in effect, thirty individuals controlled 40 per cent of the $225 billion output of the Russian economy in its most important sectors, notably in natural resources and automotives. The study concluded: ‘Ownership concentration in modern Russia is much higher than in any country in continental Europe and higher than any country for which data is available.’

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