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For Putin’s inner circle, a penchant for secret deals

Russian President Vladimir Putin, then prime minister of the country, visits a former palace of Great Prince Alexei Alexandrovich Pomanov, in St. Petersburg, Russia, with longtime friend Sergei Roldugin, and then-president Dmitry Medvedev, on Nov. 21, 2009. A leak of records from an international law firm shows that Roldugin is a behind-the-scenes player in a clandestine network operated by Putin associates that has shuffled at least $2 billion through banks and offshore companies.
Russian President Vladimir Putin, then prime minister of the country, visits a former palace of Great Prince Alexei Alexandrovich Pomanov, in St. Petersburg, Russia, with longtime friend Sergei Roldugin, and then-president Dmitry Medvedev, on Nov. 21, 2009. A leak of records from an international law firm shows that Roldugin is a behind-the-scenes player in a clandestine network operated by Putin associates that has shuffled at least $2 billion through banks and offshore companies. AP/RIA Novosti Kremlin

Vladimir Putin and Sergey Roldugin forged a bond as young men. Fast friends, almost like brothers, they cruised the streets of Leningrad, singing and, in Putin’s case, occasionally getting into fistfights.

As Putin rose to power as Russia’s supreme leader and Roldugin made a name for himself as a classical cellist and conductor, the two remained close. Roldugin has performed for Putin and has given media interviews that softened Putin’s fearsome image.

Now a leak of secret documents reveals another, hidden side of their friendship.

The records show Roldugin is a behind-the-scenes player in a clandestine network operated by Putin associates that has shuffled at least $2 billion through banks and offshore companies , an investigation by the International Consortium of Investigative Journalists (ICIJ), German daily Süddeutsche Zeitung and other media partners, including McClatchy, has found.

The records reveal what until now has mostly been the stuff of rumor: how members of Putin’s inner circle secretly conduct their business.

In the documents, Roldugin is listed as the owner of offshore companies that have obtained payments worth tens of millions of dollars. A company linked to the cellist played a key role in the ownership remake of Russia’s largest truck maker, another snagged a big slice of Russia’s TV advertising industry.

It’s possible Roldugin, who has publicly claimed not to be a businessman, is not the true beneficiary of these riches. Instead, the evidence in the files suggests Roldugin is acting as a frontman for a network of Putin loyalists – and perhaps for Putin himself.

Roldugin did not respond to detailed questions. Reporters from the Organized Crime and Corruption Reporting Project, an ICIJ partner, met briefly with the musician after a concert in Moscow last week. Roldugin told them he needed more time to review the questions and determine what he could say.

About 100 financial deals related to the network are described in the leaked documents. They are complex. On paper, shares in companies are swapped back and forth in a day. Documents are backdated. Questionable financial penalties are assessed. The rights to multimillion-dollar loans are sold between offshore companies for $1.

In almost every instance, the result is the same: money and power moves in the direction of the network, to companies and people allied to Putin.

The leaked documents come from the files of Mossack Fonseca & Co., a Panama-based law firm that registered some of the Roldugin companies and helped administer the network’s holdings in the British Virgin Islands and other offshore havens.

The records reveal what until now has mostly been the stuff of rumor: how members of Putin’s inner circle secretly conduct their business.

Offshore corporations have one main purpose - to create anonymity. Recently leaked documents reveal that some of these shell companies, cloaked in secrecy, provide cover for dictators, politicians and tax evaders.

Loyalty and long-held relationships help bind the network together. It’s a fraternity of Putin confidants. Many of the men whose interests are reflected in the leaked files are Putin comrades whose history with him traces back decades to St. Petersburg, the city known, before the fall of the Soviet Union, as Leningrad.

 
 

There is Roldugin, 64, who is godfather to Putin’s eldest daughter. Then there is Yury Kovalchuk, 64, a banker who forged links with the future president when Putin was a municipal official, and Arkady Rotenberg, 64, a childhood chum who has become a billionaire through state-sponsored construction projects, oil pipelines and other ventures.

Many of the men linked to the network, including the 63-year-old Putin, share something else in common besides history. They are connected to the St. Petersburg-based Bank Rossiya, which the U.S. government has identified as Putin’s personal cashbox.

Of all those in his inner circle, Arkady and his billionaire brother, Boris, have known Putin the longest. Their friendship dates to the 1960s, when as boys they sparred together in a martial arts club. The ties of friendship grew to encompass business as well.

The European Union and the U.S. government issued sanctions against Arkady Rotenberg in 2014, in retaliation for Putin’s invasion of Ukraine. The U.S. also sanctioned his brother, Boris.

The friendship between Vladimir Putin and Arkady Rotenberg dates to the 1960s, when as boys they sparred together in a martial arts club.

The U.S. Treasury noted the two had “amassed enormous amounts of wealth during the years of Putin’s rule” from Russian government contracts, including roughly $7 billion for the Sochi Olympic Games. The sanctions document coyly describe the reason for the designation as “acting for or on behalf of… a senior official” of the Russian Federation.

In 2013, the year before the sanctions were issued, one of Arkady Rotenberg’s companies received potentially lucrative government contracts to work on a proposed $40 billion natural gas pipeline between Russia and Europe. Around the same time, three anonymous companies made huge payments into the Putin network, records show. Two of the shadow companies, and likely all three, were controlled by Arkady Rotenberg, according to the Mossack Fonseca files.

Loans from these Rotenberg companies totaling more than $231 million went to a British Virgin Islands-based company called Sunbarn Limited, created by a manager at Bank Rossiya. The loans had no repayment schedule.

Arkady Rotenberg did not respond to a request for comment.

The history of Bank Rossiya is all about its shareholders working together cooperatively.

Yury Kovalchuk and Putin turned their attention to Bank Rossiya in 1991, when its largest shareholder was still the Leningrad Communist Party. At the time, Putin was deputy mayor.

Kovalchuk became majority shareholder and board chair of Bank Rossiya. When the U.S. government sanctioned him in 2014, it described Kovalchuk as one of Putin’s “cashiers.”

In the mid-1990s, Kovalchuk and a few other shareholders of the bank owned dachas, or country houses, a few hours outside of town on the eastern shore of the Komsomolskoye Lake. Putin found the money to buy a property.

An enterprise called Sandalwood Continental Limited was the linchpin of the entire Putin-linked network. One of Sandalwood’s roles appeared to be to borrow money from the Russian Commercial Bank Ltd. (RCB) in Cyprus, which in turn was backed by Moscow-based, state-controlled bank, VTB Group.

Between 2009 and 2012, Sandalwood had lines of credit with RCB for about $800 million, according to the files. Sandalwood loaned out about $600 million in 2009, and at least $350 million in 2010.

The loans RCB made to Sandalwood were highly unusual for a bank. They went to a borrower who had no discernible business model that would allow it to pay back the money. The loans carried no security.

Additional reporting by Olesya Shmagun and Roman Anin of the Organized Crime and Corruption Reporting Project.

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