The criminal case against US fund manager Calvey could be over soon

The criminal case against US fund manager Calvey could be over soon
The case against US citizen and fund manager Michael Calvey and his five colleagues could end in May with a guilty verdict but a short sentence they have already completed, allowing them to walk free.
By Ben Aris in Berlin February 15, 2020

The case against US citizen and fund manager Michael Calvey and his five colleagues may be over soon, but end in convictions and short prison sentences, sources told The Bell.

The founder of Baring Vostok private equity fund, Calvey, and his colleagues were arrested exactly a year ago and charged with embezzlement in a case that is widely seen as organised by the fund manager's former partners and part of a corporate dispute.

A Russian court last week extend Calvey’s house arrest to May 13, also applying the measure to his French national colleague Philippe Delpal. The court also ruled for the release of three Russian nationals to house arrest. The fourth Russian national was already released to house arrest last year. The prosecutor had asked for a year to investigate the case, which is due to be heard in May.

In the same week the High Court in London ruled that contempt of court charges can be brought against the two Russian businessmen that ignored clauses in a shareholders agreement with Baring Vostok to hold an arbitration dispute in London and instead sued the fund in a Russian court in the middle of nowhere in one of Russia’s far-flung regions.

The UK court ruled that Baring Vostok can bring a fresh case against Artem Avetisyan and Sherzod Yusupov, both former partners in an investment in Orient Express Bank (OEB, aka Vostochniy bank) that has turned sour.

The case has been a major embarrassment for the Kremlin as Calvey has brought in billions of dollars of investment to Russia and is one of the best known investors in the Moscow business community. Indeed, several senior Russian officials, such as presidential ombudsman for business Boris Titov and head of the Russian Fund for Direct Investment (RDIF) Kirill Dmitriev, broke ranks to call for Calvey’s release.

Now The Bell reports the case looks set to be resolved in the next few months, according to its sources. “According to one scenario, it is likely that Baring Vostok founder Michael Calvey and his partners will be freed in May after being found guilty by a court and given short prison sentences,” the newswire reports.

There has been some progress in the case as the authorities attempt to wind down the tension gradually. Calvey was released to house arrest relatively quickly, but his French colleague Delpal was only released after French President Emmanuel Macron intervened on his behalf.

Baring Vostok had been calling for the courts to do the same for the Russian nationals still in pre-trial detention — Ivan Zyuzin, Maksim Vladimirov and Vagan Abgaryan — which the court ordered last week.

The Bell spoke with two people who have requested the Baring Vostok case be reviewed at the highest levels. Both said that last week’s softening of the official stance and decision to release the last of the jailed fund managers is a signal the whole affair will be sorted out in the coming months.

One source provided the Bell with a timeline: in his opinion, a court will find the defendants guilty in May, but only impose short sentences that they will have already served, meaning they can walk free. Another source confirmed this scenario, but said the decision will only be made at the end of this year. Both sources agreed that a not guilty verdict is very unlikely.

Russian President Vladimir Putin has been put in a difficult position by the case. It is widely believed that Avetisyan engineered the charges making use of his friendship with Dmitri Patrushev, the current minister of agriculture and a former banker, who also happens to be the son of the former head of the Federal Security Service (FSB).

Putin found himself caught between allowing the case to continue which would hurt Russia’s investment image and embarrassing the FSB by ordering them to back off. In these situations the golden rule of Russia-watching is the Kremlin always choses the domestic agenda over the international one. A former spy himself, Putin’s control over, and the loyalty of, the FSB is the keystone of Putin’s power.

As the FSB officially brought the charges it is highly unlikely the case will not end in conviction: in Russia over 99% of all cases brought to trial end in conviction. The only wiggle room in a case like this is the length and conditions of the sentence.

The recent change of government is also probably playing in favour of an early resolution of the case. The new government of Prime Minister Mikhail Mishustin has been tasked with boosting economic growth and increasing investment. Releasing Calvey would help that cause. Baring Vostok cancelled plans to raise a sixth fund in November that could have been worth $1.3bn and downed tools while its senior managers languished in prison.

At the same time there a visible effort by European leaders to reset relations with Russia. Just this weekend Macron said that Europe has to be “open to mutual relations with Russia based on trust” during the Munich Security summit.