The Observer: The acceptable face of Russian capitalism? (ShellNews.net)
Against the odds, a Danish lawyer has challenged the oligarchs and is now ranked among the country's most successful investors, reports Conal Walsh
Sunday September 5, 2004
Meet the newest conqueror of the Wild East. You wouldn't expect an obscure lawyer from Copenhagen to be perhaps the single most successful investor in Russia since the collapse of the Berlin Wall. But BP, Shell and all those seeking fortunes in Russia's bracing business environment could learn a thing or two, apparently, from Jeffrey Galmond.
Galmond, it transpires, is the owner of Ipoc, which hit the headlines 10 days ago after scoring a significant victory in its long-running legal battle with Alfa Group, the oil and banking conglomerate run by controversial Russian oligarch Mikhail Fridman.
The dispute is over who owns a major stake in one of the country's leading mobile phone companies, and contains enough of those familiar Russian allegations of double-dealing and financial chicanery to make even the most hardened Western investor quail.
So it's doubly surprising to survey the charmed life Galmond has enjoyed in 15 years of doing business there.
The 54-year-old built a modestly successful legal practice in Denmark before starting to advise numerous European clients on Russian investments in the early Nineties. Details of his subsequent career are not widely known but he seems quickly to have become a serial investor himself, making canny plunges into Russia's property and telecoms markets.
Galmond's involvement in TCI, a leading Russian telephony firm, netted him a fortune and was apparently only one of several business coups.
So far, he's also proved himself more than capable of holding his own in a knockabout court fight with Fridman, one of Russia's richest men. Galmond's story is all the more remarkable for being so little recognised until now.
Ipoc has stakes in numerous telecoms, media and IT firms - enough, it is speculated, to propel Galmond into the billionaire league - yet his status as the company's owner, rather than merely its boss, was only revealed during the court proceedings. Ipoc is based in Bermuda, an offshore haven with minimal disclosure requirements, and had previously described itself as an international investment fund serving a number of (unnamed) Russian and Western investors.
Ipoc and Fridman's Alfa are fighting over a 25 per cent shareholding in MegaFon, the third-largest mobile phone company in Russia. The complex case is being fought in half a dozen legal jurisdictions; with so much at stake, that may not be surprising.
MegaFon, part-owned by Norwegian telecoms giant TeliaSonera, among others, has long been earmarked for a possible £1 billion flotation in London and could prove a fantastically valuable asset.
Ipoc says it agreed to buy the 25 per cent from Russian-based investor LV Finance in 2001, and handed over about $74 million in transfers and loans towards the purchase. But Alfa, it is alleged, bought LV Finance in August 2003 and unlawfully transferred the stake into its own portfolio.
Alfa, which is keen to foster closer links with Western businesses, challenges this version of events, insisting the MegaFon shareholding is its property and that this was a 'genuine and proper commercial transaction'.
Fridman's company was recently dealt a blow, however, by the International Chamber of Commerce arbitration tribunal in Geneva, which ruled that Ipoc is the rightful owner of the stake.
Although Alfa was not directly involved in the Geneva proceedings, which Ipoc had brought instead against LV Finance, the tribunal came to some damaging conclusions about Alfa's role. These included the observation that Fridman's firm tried to take control of the MegaFon stake even though it knew that Ipoc had a prior legal claim to it.
Alfa furiously denies this, and the Geneva ruling, though a setback for Fridman, is not the end of the matter. Technically, the ruling governs only a fraction of the 25 per cent MegaFon stake under dispute. To get its hands on the rest, Ipoc will have to secure a similar judgment from an arbitration court in Zurich this autumn. Even then, it would have to go to court in the British Virgin Islands to get the judgment enforced.
In the meantime, there has been plenty of mud-slinging. Last year Ipoc was embarrassed by the revelation that Vidya Sharma, its former president, had a conviction for fraud.
Ipoc said it had been unaware of the conviction and that Sharma left the firm on the day it emerged. The firm has also been forced to deny that it is a front organisation for Leonid Reiman, Russia's communications minister and a former business associate of Galmond's.
On the other side, timely reminders have surfaced of an old and embarrassing row between Fridman and BP over the ownership of Russian oil firm Sidanco, although relations were patched up and Fridman is now a major strategic partner of the British oil giant.
And in a separate sign of the murkiness threatening to envelop proceedings, Alfa and Ipoc have both denied spying on the chairman of the Geneva panel after it was found that Kroll, the private investigator, had put him under surveil lance. Swiss police are currently investigating the matter.
The Kroll issue is typical of the many blind alleys into which this labyrinthine dispute appears to have turned. Delayed hearings, asset freezes and debates over jurisdiction have all held things up. And all the while a cloud of uncertainty hangs over MegaFon itself, with key strategic decisions inevitably delayed until its future ownership is sorted out - hardly an ideal situation in the fast-moving world of mobile telecoms.
Galmond is unmistakably the victor in round one of his legal fight with Fridman. But in such a long and bruising bout, can either truly emerge as the winner?
http://observer.guardian.co.uk/business/story/0,,1297352,00.html