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How Western firms quietly enabled Russian oligarchs

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How Western firms quietly enabled Russian oligarchs

Behind installing metal doors in an easy-to-remove office building in a New York City suburb, a small team manages billions of dollars for a Russian oligarch.

According to people familiar with the matter, over the years, a group of wealthy Russians have used Concord Management LLC, a financial-advisory company in Tarrytown, NY, to secretly pump money into large US hedge funds and private equity firms.

A web of offshore shell companies makes it hard to know for sure whose money Concorde manages. But many said most of the money belonged to Roman Abramovich, a close aide of Russian President Vladimir V. Putin.

Concorde is part of a group of American and European consultants – including some of the largest law firms in the world – who have long helped Russian oligarchs navigate the Western financial, legal, political and media landscape.

Now, with US and European sanctions targeting people close to Mr Putin, firms are wrestling with what to do with these lucrative but controversial clients.

Many people are leaving him. Some seem to be clinging to them. Others won’t say what they are doing.

Meanwhile, lawyers and investment advisors are coming under intense scrutiny for work that weeks ago was going almost entirely below the public radar.

Concorde, whose representatives declined to comment, has attracted the attention of congressional investigators. On Wednesday, a lawmaker wrote to the Biden administration requesting a freeze on Mr Abramovich’s funding in Concord.

In Britain, which has a thriving industry of lawyers who specialize in asset concealment, lawmakers have taken to the table of parliament to condemn lawyers and law firms that continue to work with oligarchs.

Legally, at least, there’s nothing wrong with working for approved companies, individuals, or governments, as long as certain rules are followed.

In the United States, attorneys are allowed to represent approved clients in court or before government agencies, and may also advise them on adhering to sanctions. Lobbyists and public relations firms must obtain a license from the Treasury Department to represent approved entities.

As a result of bureaucratic hurdles and reputational risks, the running rate for law and lobbying firms representing accepted elites has soared into the millions of dollars, according to people familiar with the industry.

For many firms, paydays are not enough to make up for the potential reputation damage of working for the Kremlin-affiliated oligarchs. A flurry of Western lobbying, law and public relations firms have recently abandoned their Russian clients or operations.

A spokesperson for the law firm Skaden Arps said it is “in the process of terminating our representation of Alpha Bank,” an approved, elite-controlled company. (Skaden has also represented Mr Abramovich, the billionaire owner of England’s Chelsea Football Club, but she would not say whether work is ongoing.)

International law firms Linklaters and Norton Rose Fulbright both said they were leaving Russia. A spokesman for another large firm, Debivois & Plimpton, said it was terminating multiple customer relationships and would not take any new customers in Moscow. Ashurst, a large London-based law firm, said it “will not act for any new or existing Russian clients, whether or not they are subject to sanctions.”

Accounting giants PWC, KPMG, Deloitte and EY – which have provided extensive services to oligarchs and their network of offshore shell companies – also said they were leaving Russia or breaking ties with their local partners.

Some firms parted ways with Russian clients, whose praise they were singing in the days of the invasion.

Last month, a former Treasury official wrote a letter to the White House arguing that Russia’s Sovcombank should not face sanctions, citing the bank’s commitment to gender equality, the environment and social responsibility. Giving.

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Sovcombank had agreed to pay the lobbyist’s firm, Mercury Public Affairs, $90,000 a month for her work.

The Biden administration recently approved Sovcombank. Within hours of the announcement, Mercury filed paperwork with the Justice Department indicating it was terminating its contract with Sovcombank.

As recently as mid-February, British law firm Schillings represented Russian oligarch Alisher Usmanov, a longtime ally of Mr. Putin.

Two weeks later, the European Union and the US Treasury approved Mr. Usmanov. Shillings spokesman Nigel Higgins said the firm is “not working for any approved individuals or entities.”

Another lawyer, Thomas A. Claire has written threatening letters on behalf of clients to news organizations, including Russian oligarch Oleg V. Deripaska. In 2019, for example, he warned that he might try to hold The New York Times “liable for the catastrophic economic damage” facing Mr Deripaska, who was then subject to sanctions.

Mr. Claire said this week that his firm, Claire Lock LLP, has not worked for Mr. Deripaska since September, “and we do not expect to do so again in the future.”

Russian companies such as Rosneft, VTB, Alfa Bank, Gazprom and Sberbank, which are now subject to sanctions, are represented by major US law firms including White & Case, DLA Piper, Dechert, Latham & Watkins and Baker Bots.

Neither of those firms would say whether they are still working with Russian companies.

Baker Mackenzie, one of the largest law firms in the world, continues to state on its website that it represents “some of the largest companies in Russia”, including Gazprom and VTB. The firm said it was “reviewing and adjusting our Russia-related operations and customer work” to comply with the sanctions.

In Washington, Erich Ferrari, a leading sanctions lawyer, is suing the US Treasury on behalf of Deripaska, seeking to reverse the sanctions imposed on him in 2018, which he claims cost him billions of dollars. and made them “radioactive”. International Business Board.

And lobbyist Robert Strike said he recently held talks about representing a number of accepted Russian oligarchs and companies. They have previously represented clients targeted by sanctions, including the administrations of Venezuelan President Nicolas Maduro and former President of the Democratic Republic of the Congo, Joseph Kabila.

Mr Stryke said he would consider taking the job if the Treasury Department granted him the necessary licenses, and if potential customers protested Russia’s aggression in Ukraine.

Concorde Management, whose representatives declined to comment, appears to be almost entirely devoted to managing the money of a handful of ultra-rich Russians.

The unregistered investment firm has been operating since 1999 with about two dozen employees. According to online profiles of current and former Concorde employees, it specializes in investing in hedge funds and real estate funds run by private equity firms.

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Wall Street banker and hedge fund manager who spoke with Concorde and its founder, Michael Matlin, Said it oversees between $4 billion and $8 billion.

It is unclear how much of this belongs to Mr. Abramovich, whose net worth is estimated at $13 billion.

Mr. Abramovich is not approved. His spokeswoman Rola Brentlin declined to comment on Concorde.

Over the years, Concorde has channeled its clients’ money into marquee financial institutions: global money manager BlackRock, a fund run by private equity firm Carlyle Group and John Paulson, who famously anticipated the collapse of the US housing market. . Concorde also invested with Bernard Madoff, who died in prison after pleading guilty to a massive Ponzi scheme.

Another recipient of Concorde Money was Braven Howard, a multi-billion dollar European hedge fund company. A person familiar with the matter said Braven Howard is preparing to return the money to Concorde, which will no longer be a customer.

In a letter sent Wednesday to Attorney General Merrick Garland, Representative Steve Cohen, a Democrat from Tennessee, wrote that he has “recently received information from reliable sources in the financial industry” that Concorde oversees billions of dollars for Mr. Abramovich. .

Mr Cohen, co-chair of a panel focused on European security, requested that the US government impose sanctions on Mr Abramovich and confiscate assets in Concorde, “because this blood money presents a flight risk.”

Deeds done by law, lobbying and public relations firms are often publicly disclosed or disclosed in legal or foreign agent filings, but this is rarely the case in the financial sector.

While Russian oligarchs make headlines for shelling out extravagant superyachts and palatial homes, their large investments are often out of public view, thanks to a largely invisible network of financial advisory firms like Concorde.

Hedge fund managers and their advisors said they are beginning to check their investor lists to see if any clients are subject to restrictions. If so, their money needs to be set aside and disclosed to the Treasury Department.

Some hedge funds are also considering returning money to oligarchs that have not been sanctioned, fearing that Russians could soon be targeted by US and European authorities.

“The implication of sanctions being imposed on Russia and its oligarchs is through the private fund community,” said Ron Geffner, a lawyer advising the hedge fund.

While firms like to keep their work under wraps for unsolicited clients, a leak in 2017 provided a glimpse into how Western firms helped Russian oligarchs hide assets – and what happened when those clients were targeted by sanctions. it was done.

The leak, part of the Paradise Papers project, included files from the Appleby law firm in Bermuda. At least four customers owned private jets through shell companies managed by Appleby.

When companies and individuals linked to Mr Putin were sanctioned in 2014, Appleby jailed customers it believed had affected.

The Russians found other Western firms, including Credit Suisse, to help fill the void.

Ben Freeman, who oversees foreign influence for the Quincy Institute for Responsible Statecraft, said the Russians are likely to get a new firm this time as well.

“That initial reaction is where these customers are very toxic,” Mr. Freeman said. “But when these are lucrative contracts, it becomes too much for some people, and they can turn a blind eye to any atrocities.”

David Segal Contributed to reporting. Susan Beachy contributed to the research.

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