Russian Oligarch Fridman, Corporation Sued for Racketeering, Fraud That Used U.S. Banks and Exchanges

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 and penalties.

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.

Notes to Editors

* IPOC International Growth Fund, Ltd. is an open-ended mutual fund

company based in Bermuda.

* The suit, based on claims under the Racketeer Influenced and Corrupt

Organizations (RICO) Act, charges that Fridman conspired with Rozhetskin

to steal IPOC's interest through money laundering, bribery, wire fraud

and other criminal wrongdoings. Other defendants are Alfa Capital

Markets, Inc., a U.S. corporation; Alfa Telecom (n/k/a) Altimo; and Hans

Bodmer.

* Alfa Group Consortium is an association of various companies controlled

by Fridman. It controls major international corporations traded in the

United States, including VimpelCom (NYSE) Russia's second largest mobile

telecoms company, Golden Telecom (NASDAQ) and Turkcell (NYSE).

* For more information about IPOC, go to http://www.ipocfund.com. A copy

of the lawsuit is being posted on this Web site June 9.

The Many Ties to the United States

As the lawsuit states, "... defendants' tentacles reach into and injure numerous Americans...." The investors, taxpayers and financial markets of the United States have been harmed.

The below sets out the individuals and firms referred to in the lawsuit, and provides some further information:

The Defendants:

Leonard Rozhetskin: "Defendant Leonard Rozhetskin is a former director and principal shareholder of LV Finance Group Limited ("LVFG"). He is a United States taxpayer and citizen, owns property in the District, and lived in the District for more than a decade ... featured on the cover of the Russian edition of Forbes with the title: 'The Most Dangerous Shark in Our Waters.'... Rozhetskin resides in the United States...."[pg.6]"

Mikhail Fridman: "Defendant Mikhail Fridman currently serves as Chairman of the Board of Directors of co-conspirator Alfa Bank and as Chairman of the Board of Directors of Defendant Consortium Alfa Group. Fridman further served on the Board of VimpelCom, a NYSE company, and has control over Golden Telecom, a NASDAQ company ... purchased the United States trading firm owned by American, Mark Rich, the one time commodities baron pardoned by President Clinton with much controversy. Fridman purports to have become a philanthropist in the United States" and is a member of the Board of the Council on Foreign Relations based in New York. [pgs. 6-7]

Pyotr Aven: "Defendant Pyotr Aven also has been a major participant in the scheme and worked directly with Rozhetskin and Fridman in the misappropriation and theft of IPOC monies. Aven is a director of Golden Telecom, a NASDAQ company, which regularly files with the United States Securities Exchange Commission. He is a controversial figure: As observed by the United States District Court for the District of Columbia, a Russian 'corruption task force informed [the government] that Aven was engaged in various misdeeds, including drug trafficking. See OAO Alfa Bank v. Center for Public Integrity, Civ. Action No. 00-2208 (JDB), Mem. Op., Sept. 22, 2005 at 11 n.26." [pg. 8]

Hans Bodmer: "Defendant Hans Bodmer ... assisted Rozhetskin and Fridman with the Sonic Duo/MegaFon theft scheme ... worked with his co-conspirators to send instructions to IPOC to wire money through banks in New York for the benefit of the Defendants. Bodmer is no stranger to criminal prosecution in the United States, having recently pled guilty to the criminal conspiracy to launder money and conspiracy to violate the United States Foreign Corrupt Practices Act in connection with the scheme to bribe foreign leaders (along with Victor Kozeny, who is currently being extradited to New York from the Bahamas). Case No: 01: 05-CR-00518-RCC-ALL (S.D.N.Y.)." [pg. 9]

* Publicly Listed U.S. Corporations Affiliated with Defendants:

Vimpel-Communications, VimpelCom and Golden Telecom, Inc. "... Defendant Fridman has successfully obtained hundreds of millions of dollars from American investors through the sale of interests in his Russian telecommunications empire -- which includes New York Stock Exchange company Vimpel-Communications, also known as VimpelCom, and Golden Telecom, Inc., ("Golden Telecom"), a NASDAQ company. [pg. 3]"

Vimpel-Communications/VimpelCom Web site is http://www.vimpelcom.com/index.wbp

Golden Telecom, Inc. Web site is http://www.goldentelecom.com/?id=12

Alfa Capital Markets (USA), Inc: "Alfa Capital Markets (USA), Inc. ("Alfa Capital Markets") is a member of the Alfa Group and is a corporation organized under the laws of the United States with its principal place of business and office in New York City. Upon information and belief, Alfa Capital Markets was used to structure the laundering of the proceeds of the Fridman M.C. Enterprise for investment in the United States, such as the recent acquisition of Golden Telecom, Inc., a publicly held American company, controlled by the Alfa Group. On information and belief, Alfa Capital Markets' accounts were used to fund the misappropriation of plaintiffs' property." [pg. 9]

The Alfa Capital Markets (USA), Inc. Web site is http://www.alfabank.com/usa/

A Wide Variety of U.S. Ties:

* The U.S. Banking System and the U.S. Treasury:

"... goal of cheating the American government of taxes due and owing ....": Rozhetskin knew the assets were unlawfully taken when he made use of the United States to transfer the assets in interstate commerce. Further, Rozhetskin's actions were in furtherance of his goal of cheating the American government of taxes due and owing on the transactions." [pg. 18]

"... money laundering and wire fraud that affected interstate and foreign commerce." "Defendants conspired to steal IPOC's money and property, and to conceal their wrongdoing and the true ownership of the proceeds through a series of sham transactions and transfer the stolen assets in interstate and foreign commerce with the intent of carrying on and furthering their unlawful activity. By doing so, Defendants engaged in money laundering and wire fraud that affected interstate and foreign commerce." [pg. 20]

"... substantial effect on the United States and its citizens....": "Their actions included assisting Rozhetskin in an international money laundering scheme by which Rozhetskin, using the United States banking systems as an integral part of his theft scheme, took the proceeds of his criminal conduct, and then transferred them to various off-shore companies as part of an attempt to conceal wrongdoing from IPOC, American taxing authorities, and others. 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." [pg. 21]

"... (Rozhetskin) defrauded the United States of taxes and his return.": "Although Rozhetskin claimed to have sold LVFG and 25% stake in MegaFon for hundreds of millions of dollars, he defrauded the United States of taxes monies. He failed to pay taxes on monies received from IPOC and from Fridman and his shell companies as part of their money laundering/fraud scheme. Defendant Rozhetskin did so while relying upon New York banks to launder the theft of Plaintiffs' money." [pg. 23]

"... tax fraud against the United States.": "Defendant Rozhetskin was aided by co-Defendants who participated in a variety of sham transactions using hold companies to collectively assist Rozhetskin in his tax fraud against the United States." [pg. 23]

* U.S. Lobbying Firm and Corporation:

Barbour Griffith and Rogers: "The Alfa Group conducts such significant and varied business in the United States that it has actually found it to be in its interest to spend millions of dollars courting the American political elite through Washington D.C. based lobbying firm of Barbour Griffith and Rogers, LLC which lobbies Congress and others in Washington on its behalf." [pgs. 7-8]

"In addition to using his lobbying firm, Alfa Group has retained Edward Rogers' Washington D.C. based "investigative" firm, Diligence, Inc. -- which has criminally misappropriated IPOC information as described further below ....[pg. 8]

"Having chosen to spend millions of dollars to influence the United States Congress and others, and having received millions of dollars from the American government and private citizens, it should not fairly be heard to complain of being called to task now in an American courtroom." [pg. 8]

Diligence, Inc.: "Defendants have also paid U.S.-based Diligence, Inc. to steal IPOC property in Bermuda. Indeed, at the Fridman M.C. Enterprise's direction Diligence bribed officials of an accounting firm and/or otherwise misappropriated IPOC property. More specifically, Diligence, Inc. describes itself on its web site and in its press releases as a company comprised of former Central Intelligence Agency ("CIA") and British MI5 operatives that 'specialize in obtaining non-public or hard-to-get information on corporations.' See http://www.diligencecorp.com. Diligence, Inc. is owned in part by Edward Rogers who has also been paid millions by defendants to lobby Congress and consult for Alfa." [pg. 24]

"In violation of 18 U.S.C. section 912 and at Defendant Alfa's instructions, Diligence, Inc. posed as United States Agents acting under the authority of the United States to misappropriate IPOC information from an accounting firm. Defendants further violated 18 U.S.C. section 913 by searching IPOC property while falsely representing, through Diligence, Inc., to be agents of the United States. By doing so, Defendants have had an effect on the United States."[pg. 24]

* U.S.-related Investigations:

Norex Case: "In fact, the Second Circuit Court of Appeals recently reversed a District Court decision which had dismissed RICO claims against these Defendants based upon a RICO conspiracy to defraud Norex, its Canadian partner, of its ownership interest in another company. Discovery is now proceeding in that case. [pg. 5]

The ruling is available at http://www.norexpetroleum.com/norex_vs_alfa/us_court_of_appeals_ruling/eng.pdf

Oil for Food Program: "The United Nations in New York, through former Federal Reserve Board Chairman, Paul Volcker, has named Defendant Alfa Group for criminal wrongdoing and cited its $2.3 million in illegal kickbacks and bribes to Saddam Hussein in the Oil for Food Program. See Independent Inquiry Committee into The United Nations Oil-For Food Programme ("Volcker Report") at 44-66 (Oct. 27, 2005), http://www.iicc-offp.org/story27oct05.htm; http://www.timesonline.co.uk/article/03-1846855,00.html (noting an Alfa payment of $2.3 million). In light of the Volcker report and other activities in this Country, Alfa has found it to be in its interest to retain its own politically connected Washington D.C. lobbying firm to protect its interest as discussed further below." [pg. 5]

Center for Public Integrity Case: "Recently, Mikhail Fridman along with Pyotr Aven availed themselves of American courts as a plaintiff in litigation brought in September 2005. Fridman and Aven lost that case on the merits at summary judgment. See OAO Alfa Bank v. Center for Public Integrity, 387 F. Supp. 2d 20 (D.D.C. 2005)." [pg. 7]

The opening paragraph of the court ruling states:

Plaintiffs are two Russian businessmen and their companies who have

sued the defendants, a public interest organization and its reporters,

for defamation for publishing an article alleging that plaintiffs have

connections to organized crime and have engaged in narcotics

trafficking. Defendants have filed a motion for summary judgment in

which they argue, among other things, that plaintiffs are limited

public figures, and that the evidence demonstrates as a matter of law

that defendants did not publish the piece with actual malice. The Court

agrees. Although defendants' actions are not beyond reproach, they do

not rise to the level of actual malice that the Constitution demands in

order to preserve a vibrant exchange of ideas on issues of public

concern. For this reason, the Court grants defendants' motion for

summary judgment on all plaintiffs' claims.

The ruling is available at http://www.dcd.uscourts.gov/opinions/2005/Bates/2000-CV-2208~12:14:20~9-27-2005-a.pdf

* U.S. Government Agency Funded Investment Firm:

The Great Circle Fund: The Alfa Group "[i]s also the regional manager for a US/OPIC sponsored investment firm called 'The Great Circle Fund.' The Alfa Group makes use of this United State agency's (OPIC's) support to provide a significant portion of the funding to meet its investment objectives." [pg. 7]

Per the Overseas Private Investment Corporation (OPIC) Web site, it was "established as a development agency of the U.S. government in 1971. OPIC helps U.S. businesses invest overseas, fosters economic development in new and emerging markets, complements the private sector in managing the risks associated with foreign direct investment, and supports U.S. foreign policy. OPIC evaluates all project applications on the basis of their contribution to economic development to ensure successful implementation of the organization's core developmental mission, and prioritizes the allocation of scarce resources to projects on the basis of their developmental benefits."

The Great Circle Capital Web site http://www.greatcirclecapital.com/ for the Great Circle Fund LP states that "Great Circle Capital has appointed Moscow-based Alfa Capital as the regional manager and Brussel's based probel (sic) Capital Management as investment advisor. A substantial portion of the fund's capital is provided by the Overseas Private Investment Corporation (OPIC), an independent, developmental US government agency."

* Defendants Used U.S. Banks for Transfers. Some Examples Follow:

Barclays Bank in New York and Credit Suisse First Boston: "On April 11, 2001, IPOC wired $5,065,000 from its bank in Bermuda to Barclays Bank in New York for further transfer to the Credit Suisse First Boston account of Rozhetskin." [pg. 16]

Barclays Bank in New York and Chase Manhattan: "Using a number of intermediaries and at Rozhetskin's requirement, such money was wired from IPOC's account in Bermuda through Barclays Bank in New York and Chase Manhattan to Rozhetskin and his designees in November 2001." [pg. 16]

Bank of New York and Credit Suisse First Boston. "[o]n December 20, 2001, IPOC through intermediaries wired an additional $3,070,000 to Rozhetskin and his designees through the Bank of New York located at One Wall Street in New York to Credit Suisse First Boston." [pg. 17]

"... using the American banks as a vehicle for the fraud scheme. ...": "Plaintiff IPOC made all such payments and others through the United States without knowledge that Defendants Rozhetskin, Bodmer, Fridman, Alfa Group, Alfa Capital and Alfa Telecom were all conspiring whereby Rozhetskin, using the American banks as a vehicle for the fraud scheme, would obtain IPOC's cash, while Fridman through a labyrinth of associates and individuals would obtain effective control over Plaintiffs' interest in Sonic Duo/MegaFon." [pg. 17]

"... use of the United States to transfer assets in interstate commerce": "Rozhetskin knew the assets were unlawfully taken when he made use of the United States to transfer the assets in interstate commerce. Further, Rozhetskin's actions were in furtherance of his goal of cheating the American government of taxes due and owing on the transactions." [pg. 18]

Related Articles

• Prepared Remarks of Attorney General Alberto R. Gonzales at the Hispanic Association on Corporate Responsibility
  8 June 2006



• Kenneth E. Barden, Asst. Attorney General for the Commonwealth of the Northern Mariana Islands, to Speak at GKC s The Patriot Act & AML Teleconference
  8 June 2006



• Former U.S. Attorney Thomas Heffelfinger Returns to Private Practice with Best & Flanagan
  6 June 2006



• Robyn C. Mitchell, Former Bank of America s Compliance Executive, Former Trial Attorney with the US Dept. of Justice Named Guest Panelist at GKC s AML
  2 June 2006



• Another Pleads Guilty In Baton Rouge to Federal FEMA Fraud Charges
  31 May 2006



• Attorney General Alberto R. Gonzales Marks National Missing Children's Day (1/2)
  28 May 2006



• Three More Alabama Residents Indicted on Federal FEMA Fraud Charges
  28 May 2006



• Media Advisory - Attorney General to Detail Ontario's New and Integrated Approach to Fighting Crime
  26 May 2006



• Attorney General Taking Steps To Help Prevent Wrongful Convictions
  25 May 2006



• Michigan Attorney General Cox Arrests Former Macomb Co. Assistant Prosecutor Turned Internet Sexual Predator
  25 May 2006



• Hundreds Arrested In 'Operation Global Con'; International Initiative TargetedMass-Marketing Fraud
  24 May 2006



• Michigan Attorney General Cox Announces Corporate Integrity Agreement with Metron Nursing Home Chain
  24 May 2006



• New No Cost Law Practice Management eCourse Debuts -- Reducing Attorney Work Hours While Attorney Increasing Revenues
  24 May 2006



• Personal Attorney Service Launches Electronic Filing in California Superior Courts
  23 May 2006



• Attorney Alan Becker Authors Guide to Personal, Professional and Financial Fulfillment
  23 May 2006