Russian prosecutors have demanded a six-year suspended sentence for Russia’s most famous fund manager Michael Calvey, who is on trial on embezzlement and fraud charges that are widely seen as trumped up by his former business partner.
Calvey was arrested in February 2019 and charged with stealing funds from his Russian co-investor Artem Avetisyan into Vostochniy Bank. He spent nearly a year in jail but was then released to house arrest.
Russia’s investment community was shocked by the arrest, as Calvey is one of the best known, most successful and well-liked fund managers working in Russia. His fund, Baring Vostok Capital Partners, has been responsible for bringing billions of dollars into Russia and earning his investors billions of dollars too. His arrest badly hurt Russia’s already ropey investment climate and several senior Kremlin officials broke ranks and called for his release to no avail.
However, once the Federal Security Service (FSB) was involved and arrested Calvey and half a dozen other Baring Vostok employees there was no way to stop the legal gears grinding. Russian President Vladimir Putin was under pressure to intervene but threw his support behind the FSB that is at the core of his powerbase.
The prosecutor has pushed for stringent punishment throughout the case. However, the demand for a suspended sentence, as opposed to actual jail time, has been taken as sign the Kremlin is looking for a face-saving solution. Once the FSB brought charges they had to have a conviction; in Russia some 99% of cases that go to trial end in conviction. But at the same time, actually locking Calvey up would shred whatever is left of Russia’s investment climate and the cost would run into billions and last for years.
Despite Calvey’s arrest and jailing, Baring Vostok continues to work and bring in investments. Several of the big IPOs over the last year have been Baring Vostok investments, including the IPO of e-commerce player Ozon last November that went to market looking to raise $500mn and left having raised $1.2bn.
The trial has been a farce, as Baring Vostok has been able to show that the charges are groundless and no actual damage has been done, as detailed by bne IntelliNews. Moreover, as bne IntelliNews reported, the fund settled with its Russian partner and paid the money they were demanding despite the fact that Baring Vostok claimed the Russian side was not entitled to it.
The seven Baring Vostok defendants were released from house arrest two months after the settlement and Baring Vostok and Finvision, Avetisyan’s investment vehicle, sold their stakes in Vostochny to top-10 lender Sovcombank in March this year.
The prosecutor was unable to find any hard evidence of wrongdoing, but in a twist worth of Kafka, the prosecutor argued that was evidence of Calvey’s guilt.
“The fact that nobody was able to produce any evidence was merely confirmation that the Baring Vostok team was highly skilled at covering it up,” the prosecutor said to the judge in his statement.
On the street outside the court Calvey briefly talks to journalists and retorted: “It would be funny, if it wasn’t so serious.”
Calvey, who is at liberty, but still barred from leaving Russia, says that he wants to continue to work in Russia, even if the case goes against him.
Calvey and six executives from his private equity firm Baring Vostok are accused of defrauding a bank it co-owned of RUB2.5bn ($33m) which would normally carry a sentence of up to 10 years in prison. Calvey’s six co-defendants face similar suspended sentences of four to six years.
US President Joe Biden mentioned Calvey’s case, along with those of two other Americans held in Russian prisons, to Vladimir Putin at a meeting in Geneva last month, which sought to prevent a further deterioration of US-Russian relations, the Financial Times reported.
Baring Vostok has been careful to frame the case as a commercial dispute between estranged partners and has stringently avoided politicising it. It has avoided lobbying the embassy or the state department, and has not asked the US government to intervene nor put pressure on the Kremlin. That, they believe, would only back Putin into a corner and make it impossible for the Russians to back down, Baring Vostok has told bne IntelliNews.
Calvey was released from jail in April 2019 after pressure from the US, while his French colleague Philippe Delpal was released in August that year. Meanwhile, a Blagoveshchensk court in far eastern Russia awarded Finvision control of Vostochny a few months after the Baring Vostok executives’ arrest.
Since then, prosecutors have downgraded the charges against Calvey, while several figures close to the Kremlin negotiated on his behalf behind the scenes.
The judge is expected to hand down his decision within a week.