September 7, 1999

The Times (London)

Yeltsin 'family' tycoon linked to cash scandal

From James Bone In New York, David Lister And Fiona Fleck In Geneva

THE first link has emerged between the Bank of New York money-laundering scandal and a member of President Yeltsin's "family", a mysterious businessman known as a kingmaker in the Kremlin.

The Times has learnt that Roman Abramovich, a tycoon, controls the trading arm of one of Russia's largest oil companies through an Isle of Man company that has figured in the Bank of New York affair. Mr Abramovich runs the Siberian oil giant Sibneft, which sells its oil through a company called Runicom.

His name has emerged after speculation that Swiss investigators are looking into the role of Runicom as part of the widening investigation into the laundering of up to $15 billion of Russian money through American banks.

Runicom is owned by at least two offshore companies set up by the Valmet Group, a financial services concern partly owned by Menatep, a failed Russian bank that used the Bank of New York.

Menatep's former deputy chairman, Konstantin Kagalovsky, is the husband of the Bank of New York's senior vice-president, Natasha Gurfinkel, who has been placed on paid leave pending the outcome of an investigation of suspected money-laundering through her department.

Menatep and Valmet have been named in a separate lawsuit in America in connection with an alleged "tolling" system to divert profits from a Russian titanium producer. Under such schemes, raw materials are sold to an offshore company for below-market prices, which then sells the minerals on at market prices, and pockets the difference.

In that case, Valmet is said to have helped to channel diverted profits through a number of companies with accounts at Barclays Bank on the Isle of Man. A director of Valmet denied that the company was involved in money-laundering, and Barclays said it was complying with court orders.

Runicom operates as Sibneft's trading arm and is known to handle large deals including the selling of crude oil to refineries and bartering of oil products for other goods.

The link to Mr Abramovich emerges from corporate records in Gibraltar which show that Runicom, the oil trading concern, is owned by companies set up by Valmet. Fifty per cent of Runicom is owned by Valmet Nominees, an Isle of Man-registered company, and the other half is owned by Finsbury Nominees, also a Valmet company.

At about the same time as the Gibraltar company was established in 1996, Runicom also set up a subsidiary in Switzerland, taking advice from Valmet and using the group's Geneva address as its registered office, an arrangement that has since ceased.

Christopher Samuelson, president of Valmet Group, yesterday refused to disclose the beneficial owners of Valmet Nominees and Finsbury Nominees.

"All I can tell you is that Valmet itself does not own anything in Runicom," he said. "I couldn't release any information at all without the client's permission." The Times has confirmed that the man behind Runicom's owners, Valmet Nominees and Finsbury Nominees, is Mr Abramovich. Daniel Devaud, an investigating magistrate in Geneva who has been examining allegations of kickbacks paid to Kremlin officials by a company called Mabetex, said yesterday that he could not rule out a new investigation related to the Bank of New York scandal. A Swiss news weekly, L'Hebdo, reported this week that Geneva's chief prosecutor, Bernand Bertossa, had opened a new investigation last month into a company at the heart of the Bank of New York affair, but refused to identify it.

Asked whether Valmet was under investigation, Mr Devaud said yesterday: "The name of this company is not unknown to me, but at the moment it is not directly involved in the investigation concerning Mabetex."

A source close to Valmet said: "In 1994 we thought getting Menatep on the shareholder register was brilliant news. But we are very unhappy about all this Russian stuff. To be honest with you I wish we had never heard of Russia."