INVESTIGATION – The Russian billionaire used to be the owner of shipyards, coal mines and of Hédiard. Fallen from grace, tracked by the Russian justice, and also by the British, he contends that he was expropriated. We have met the “Tsar”’s former advisor, who is now seeking remedy before a tribunal in Paris.
For a long time he used to be known as “Putin’s banker”. Today, the banker has turned against his “client”, and demands nothing less than 12 billion dollars from the latter. This stupendous amount is being claimed from the Russian Federation and, thus, from Vladimir Putin, because according to the Claimant, “Putin is the State”. The man who dares to defy the almighty Russian president is Sergey Pugachev, a fallen oligarch and a longtime citizen of France. It is in his capacity as a French citizen that he shall fight the next round of this power struggle on Tuesday 12 November in Paris — the struggle that aims to recover his expropriated assets’ value.
In the busy crowd of Russian oligarchs there are those who are still at the sovereign’s court, those fallen from grace and those who disappeared under more or less mysterious circumstances. Sergei Viktorovich Pugachev used to be the owner of the delicatessen brand Hédiard and, through his son Alexander, of the daily newspaper France Soir. He is now preparing to take part in a hearing of the International Arbitration Court of The Hague, commencing this Tuesday. Four days of judicial confrontation, taking place in Paris rather than in the Netherlands. “This was done to ensure the safety of a French citizen”, says Sergei Pugachev.
The former banker has arrived by plane from Nice, where he lives, and has offered to meet Le Figaro’s journalists in a cosy salon of a luxury hotel in Paris. The man is tall and slender, casually dressed in a leather jacket, a dark jumper and jeans. His beard and moustache are trimmed shorter than in the 2000s, when his face invariably reminded one of Nicholas II. He comes accompanied by his body guard, who is sporting a conspicuous earpiece and sits down a few meters away. “I have been receiving death threats for years”, Pugachev explains.
In 2015, when he was still living in London with Alexandra Tolstoy, the mother of his three younger children, strange boxes were discovered under his car. He believes them to be explosive devices; they might have been beacons. The case was referred to Scotland Yard, then brought before a French court. The investigation is still ongoing. “My lawyers here, Pugachev says in a bantering manner, have figured out they were being followed. As to me, I’m already used to it, you know.” Unrelenting intimidation? Genuine desire to have Pugachev killed? When you are up against the Kremlin, no hypothesis can be excluded.
But how did the former owner of Hédiard get himself in this most uncomfortable situation? We ask him, and he tells us, his speech somewhat harried. Sergei Viktorovich, 56 years old, has several lives behind him. He understands French, is fluent in English, but he prefers to use the language of Pushkin when pleading his case. “I was close to Patriarch Alexis (head of the Russian Orthodox Church from 1990 to his passing in 2008), he knew my father”, Pugachev begins. “It is through him that I came to be Boris Yeltsin’s adviser”. Pugachev had not yet turned thirty, when he founded “the first private bank” in post-Soviet Russia: the International Industrial Bank a.k.a. Mezhprombank. The financier denies having been the Patriarchate’s banker, leave alone having laundered the Church’s money. This, according to him, is a “fake story”, that is being spread around.
Having become part of the “Family”, that is President Yeltsin’s inner circle, Sergey Pugachev moved to a dacha, one of those lavish villas built in the suburbs of Moscow for the Soviet establishment. There, in the Gorki residential area, the young banker and councillor to the reigning sovereign had a neighbour: one Vladimir Putin, the new head of FSB. The two men got acquainted. For whoever would be inclined to doubt his close relationship with “Volodia”, Pugachev has posted on his personal website photographs of a birthday party and a snooker game at Brezhnev’s former country house. The picture shows Pugachev’s two elder sons, born from his marriage with Galina, still in their teens, keeping company to Masha and Katia, Putin’s daughters. The latter are a taboo subject in Russia.
He may be ten years younger than Putin, but Sergey Pugachev claims to have brought the king to power. He insists that he was the one to mention the FSB chief to the Yeltsin clan, as a potential prime minister and successor to the declining president. Against the widespread clichés, Pugachev depicts Putin as a weakly character, “incapable of saying no” — one who would always side with the most powerful clan at a given moment. A description at odds with his own assertion that “today all the high-ranking officials, governors, former KGB men — they have all been appointed by Putin; I was one who owed nothing to him”.
The businessman is brimming with memories; so much so that it is sometimes hard to keep track of the precise chronology of his various personal interactions with Putin. One such crucial exchange, “dragging on until 3 am”, took place in 2009 in the President’s residence of Novo-Ogarevo. “He failed to realise that the situation in the country had changed. He kept telling me that the people needed a Tsar.” On that day the oligarch tells the Tsar that he wants to leave the country and settle in France, where he owns, among other assets, Hédiard, purchased in 2007. According to him, his Russian financial and industrial empire, employing 300 000 people, amounted to 15 billion dollars back then. “I understand that Putin did not want my assets to end up in the hands of the wrong people.” According to Pugachev, quite a number of documents analysed by his innumerable lawyers — who are Russian, British, American and French — clearly show that back then the State was still prepared to buy his assets from him. “The choice morsels were my shipyards in Petersburg, with their order book of 60 billion dollars” — the very shipyards that were to build the Mistral-class combat ships bought from France, before François Hollande repudiated the contract in response to Russia’s annexation of the Crimea. From then on, Pugachev says, Putin’s entourage, “the pack”, were set on grabbing his assets.
Problems started to pile up. Mezhprombank went bankrupt. The Russian justice allegedly established Pugachev’s subsidiary liability for nearly a billion dollars. The oligarch swears that he “had nothing to do with the bank at least for the past nine years”, and points to “a case that has been fabricated from beginning to end”. But this bank, which he had founded, and whose licence was withdrawn in 2010, was actually financing all of his other companies. He made the point in a letter addressed to Putin in 2014. In a television speech Putin threatened Pugachev, and enjoined him to “return what he has taken”. “This TV show came as a real shock to me. It marked the beginning of aggressive expropriation”, the President’s former adviser tells us. The takeover of the shipyards was followed by the freezing of assets of the world’s biggest coking coal mine, which Pugachev was developing in Siberia. Pugachev was also ousted from the prestigious real estate development project on Red Square, which was going to involve Jean-Michel Wilmotte. Hediard’s bankruptcy, too, was allegedly caused by the Kremlin’s cutting his cashflows.
Moscow succeeded in obtaining a worldwide freezing order on Pugachev’s assets from the British justice. Pugachev, who failed to comply with the orders of the London courts and left the United Kingdom, has been condemned in absentia to two years of emprisonnent for contempt of court.
The French justice, on the other hand, in a decision of the Tribunal de Grande Instance of Nice rendered in February 2019, ruled against a seizure of Pugachev’s assets in France by the Deposit Insurance Agency, acting as Mezhprombank’s liquidator. The businessman was thus able to retain ownership of the château de Gairaut — a stunning property build in 1904 on a hill above Nice, offering an unrivalled view over the Angels’ Bay and now guarded by intimidating Malinois dogs.
In 2015 Pugachev filed a claim before the International Arbitration Court at The Hague. His former partner, Countess Alexandra Tolstoy — related to the famous Russian writer — is known to have asked him to withdraw his claim in exchange for the right to see his children. “My children’s mother has been corrupted by the Russians… I have not seen my youngest six-year old daughter for three years”, the ex-oligarch breathes out, his razor-sharp green-grey eyes suddenly getting misty. As to Alexandra Tolstoy, she has complained to the British press that she has been denied any financial support by her ex-partner.
How, then, does he now manage to finance his lifestyle on the French Riviera, pay his lawyers, afford personal safety measures? Pugachev tends to stay discreet about his “business”. He is also a young grand-father: he has six grand-children, born in France to his two older sons. He launches into an enthusiastic speech about OPK Biotech, a Boston start-up working on artificial blood, in which he has had stock for years.
In Paris, the three arbitrators (a Columbian, designated by the Claimant, a Spaniard designated by the Russian side, and a Frenchman) have called high-ranking witnesses to appear, among whom Aleksei Kudrin, former minister of Finance of the Russian Federation and current Chairman of the Court of Audit, and former Prime minister Viktor Zubkov. Their actual appearance at the hearing would be a surprise. There are seven lawyers approved for each side by the Tribunal’s order, but Jean-Georges Betto, representing Sergey Pugachev, and David Goldberg from the London firm White&Case, representing the Russian Federation, have both refused to comment.
Can the oligarch win? An historical arbitration precedent was set in 2015, when the International Arbitration Court of The Hague issued an award in favour of the majority shareholders of the Yukos group, founded by Mikhail Khodorkovsky, condemning Russia to pay the gigantic amount of 50 billion US dollars. The award was subsequently set aside, and this 15-year-old case is still ongoing. Sergey Pugachev believes his own case to be sounder from the legal standpoint, because it relies on a bilateral agreement on investment protection, signed by the USSR and France on 4 July 1989.
This week’s hearing will mark an additional step in a seemingly endless judicial saga. If Pugachev wins the arbitration and Russia refuses to pay, this will mean “that the 160 bilateral agreement on investment protection signed by Russia are worth nothing”, the banker warns. This would signal disaster for such French companies as Total, Renault or Auchan, that have invested billions in Russia. According to Pugachev, Emmanuel Macron should use this legal case as a trump card to exert pressure on Russia. The former protégé of the Orthodox Patriarch has faith in his case and in the international justice. Even faced with his former neighbour and friend Volodia, he declares that “it is impossible to lose”.