Billionaire investor Wilbur Ross, tapped by President-elect Donald Trump to serve as his commerce secretary, has been the top shareholder in a Cypriot bank with deep Russian ties and investors who made their fortunes under Russian President Vladimir Putin.
There’s no indication of any questionable behavior by Ross, but his partners in the bank are sure to attract scrutiny during his Senate confirmation hearing and underscore the financial orbit around Putin that intersects with figures in Trump’s campaign and administration.
Beyond the Russian ties, Bank of Cyprus’ chairman once headed Deutsche Bank, which has repeatedly run afoul of U.S. regulators and is a major lender to the Trump business empire.
Cyprus is often used by Russia’s politically connected businessmen. In a March 2013 report, McClatchy detailed how Russians had come to dominate Cyprus as both customers and providers of financial services. Russian depositors and investors took losses that year in Cyprus when the European debt crisis nearly crumbled major banks.
Ross led a September 2014 rescue of Bank of Cyprus, the largest and most important bank in that island nation off the coast of Turkey. Ross’ investment group took an 18 percent stake in the bank, and he remained the bank’s vice chairman after his nomination by Trump.
He is expected to leave the bank soon, but his investment is likely to be lucrative. The bank’s shareholders last week approved taking it public, offering shares to investors on the London Stock Exchange at a price that could mean strong returns for existing shareholders. Last spring, European Union leaders announced that Cyprus had exited the rescue program for ailing banks, using only three-quarters of the billions offered.
The second largest shareholder in Bank of Cyprus is a Russian conglomerate called Renova Corp., which is headed by Viktor Vekselberg, a Russian billionaire and associate of Putin who served on the management board of Russian oil giant Rosneft, which was under U.S. financial sanctions in 2014 after Russia’s annexation of Crimea.
Vekselberg, with a fortune estimated at more than $14 billion, was featured by Esquire magazine as the richest Russian who doesn’t live abroad. He made his money first in energy and aluminum, later in telecommunications and other businesses, but his Putin ties were emphasized with his selection by the Russian president to build a pair of hotels next to Sochi’s Olympic Park for the 2014 Winter Olympic Games. He gave one of them to the state, saddling Russian taxpayers with outstanding loans of more than $400 million, the AP reported in 2015.
None of that suggests that Ross himself is involved in questionable business dealings. But the roles of Vekselberg and him in Bank of Cyprus underscore the overlapping financial interests of associates of Trump and Putin.
Vekselberg also serves as the president of an offshore company in the Bahamas called Sual International, where one of his vice presidents is Len Blavatnik, the richest man in Britain, who bought storied music company Warner Brothers for $3.3 billion in 2011. Blavatnik was a co-founder, with Vekselberg, of Bank of Cyprus investor Renova.
Both men’s involvement in Sual is detailed in the Panama Papers, the 2.7 terabytes of leaked documents from the Panamanian law firm of Mossack Fonseca that revealed, among other things, that Putin’s closest associates collectively moved billions of dollars through offshore companies. McClatchy and international partners analyzed the law firm’s emails, incorporation documents and client interactions under the umbrella of the International Consortium of Investigative Journalists.
Renova has numerous offshore entities that appear in the Panama Papers, most in the Bahamas, including Renova US Holdings. Earlier this year, Vekselberg, through his conglomerate, took a minority stake in U.S. online tabloid Gawker Media.
Offshore companies and the asset protection they provide are legal and often used in international business. They provide privacy in mergers and acquisitions, ease of real estate transfers and estate planning. But they are also used for money laundering, tax evasion and camouflaging illicit earnings. Most offshore jurisdictions collect little information on true ownership, providing anonymity for reasons legitimate and otherwise.
Earlier this year, McClatchy revealed how the Panama Papers showed another intersection of the financial interests of the Trump and Putin camps. Sual later merged with the company Rusal, the world’s largest aluminum producer, whose president is Oleg Deripaska, another Russian who appeared in the Panama Papers. He had a Caribbean offshore firm established out of Cyprus to invest in Mongolian mining.
Deripaska was for years barred from entering the United States, and the State Department never openly said why. In a BBC interview in July 2009, he accused American authorities of blackmailing him by revoking his visa to obtain information.
Deripaska, who like Vekselberg has served as a Putin appointee on an economic board and invested in Sochi, famously fell out with Paul Manafort, who served for several months earlier this year as Trump’s top campaign adviser. Deripaska sued Manafort in the offshore tax haven of the Cayman Islands, alleging that Manafort had taken $19 million intended for investments in a deal they’d participated in together.
Ross’ spokespeople in New York and Washington declined to comment for the record.
Cyprus itself is referenced 530,937 times in the Panama Papers and the Bank of Cyprus is referenced 4,657 times. The Panama Papers confirmed what had long been suspected: that Russian money flows between offshore companies and Cyprus and Switzerland, long known for its secretive banks.
Because of its dependence on Russian clients, the banking system in Cyprus remains a money-laundering concern for the U.S. State Department.
“While significant progress has been made in recent years with the passage of ‘laws’ better regulating the onshore and offshore banking sectors and casinos, these ‘statutes’ are not sufficiently enforced to prevent money laundering,” the State Department said in a report on countries that pose special risks, covering 2015.
As the lead investor in Bank of Cyprus, Ross helped put together the board of directors and tapped as its chairman Josef Ackermann, the retired CEO of Germany’s Deutsche Bank. It was under Ackermann that Deutsche Bank repeatedly ran afoul of U.S. and European regulators.
Deutsche Bank agreed to a $37 million settlement last week with the New York Attorney General’s Office and the Securities and Exchange Commission over allegations of poor record-keeping on complex trades. Those problems began while Ackermann was still CEO in 2012.
In addition, Deutsche Bank is reportedly the subject of an ongoing probe by regulators in the United States, Europe and the United Kingdom for so-called mirror trades from 2011 to 2015. That complex scheme allowed wealthy Russian clients to buy securities in their native rubles in Moscow and simultaneously sell identical ones for foreign currency in London.
Regulators say they suspect allies of Putin used these trades to get hard currency and evade financial sanctions. Reuters, citing anonymous sources, has said these trades in Russia surpassed $6 billion.
Another settlement, this one with the U.S. Department of Justice, is reportedly imminent. The agency originally sought $14 billion from the bank, according to multiple news reports, accusing it of misleading investors during the U.S. housing crisis about complex housing bonds called mortgage-backed securities. The settlement covers a period of alleged wrongdoing during Ackerman’s tenure.
Trump’s financial disclosures show he has borrowed as much as $364 million from Deutsche Bank for hotels in Chicago and the nation’s capital and for his Doral golf club in Miami. These loans come due by 2024. The bank may have lent Trump more than $3 billion since the 1990s.
Greg Gordon contributed to this report.