Wednesday 5 October 2011

Roman Abramovich paid oligarch to be his political godfather

The Russian billionaire also bought valuable paintings and jewellery for Mr Berozovsky’s girlfriend in a string of “exuberant” expenses to gain his influence in Russia.


The court was told businessmen like Mr Abramovich needed access to someone with political influence because they were perating in a Russian state where the “rule of law” had disappeared, police were corrupt and the courts were “open to manipulation”.
Jonathan Sumption QC, representing Mr Abramovich, said that between 1995 and 2002 Mr Berezovsky also received £2.3 billion from businesses controlled by his client to act as a “power broker”.
Mr Berezovsky is suing Mr Abramovich, the owner of Chelsea football club, for more than £3 billion amid claims he was "intimidated" into selling shares in Russian oil company Sibneft at a fraction of their value – and alleging breach of trust and breach of contract. Mr Abramovich denies the allegations.
But on only the second day of what is expected to be a two month case involving two of the richest men in Britain, the Commercial Court in London was again provided with an extraordinary insight in to the life of the super-rich in post-Communist Russia.


r Sumption told Mrs Justice Gloster that "quite extraordinary conditions" prevailed following the collapse of communism in 1992.
"There was no rule of law," he said. "The police were corrupt. The courts were unpredictable at best – at worst open to manipulation by major political or economic interest groups.
"Nobody could go into business without access to political power. If you didn't have political power yourself you needed access to a godfather who did.”
"Mr Berezovsky was a highly controversial figure in Russian politics in the 1990s," he added. "Boris Berezovsky was a power broker."
He said between 1995 and 2002 Mr Berezovsky had received "two billion dollars" from "businesses controlled by Mr Abramovich".
Mr Sumption also said that by the late 1990s Mr Berezovsky's personal expenses were met by Mr Abramovich's companies.
He said they were on an "exuberant scale" – funding "palaces in France", "private aircraft", "jewellery for his girlfriend" and "valuable paintings".
On Monday, Laurence Rabinowitz QC, for Mr Berezovsky, said he had been "betrayed" by Mr Abramovich after falling out with Russian political leaders and leaving Russia in 2000 – after Vladimir Putin became president following the resignation of Boris Yeltsin.
Mr Sumption said yesterday that Mr Berezovsky's contribution had been "almost entirely political".
He said Mr Berezovsky, who controlled a "powerful media empire", in Russia had a "close relationship" with people in the "immediate circle" of President Yeltsin.
And he said Mr Berezovsky had "persuaded" the Yeltsin government to create Sibneft out of state-owned businesses in return for the support of his media. There had then been a "rigged auction" – "rigged by Mr Berezovsky himself".


The tale told by Mr Sumption yesterday was markedly different. He said Mr Berezovsky was paid millions of pounds by businesses controlled by Mr Abramovich for his services as a "political godfather".


"Mr Berezovsky was a highly controversial figure in Russian politics in the 1990s," he said. "Boris Berezovsky was a power broker."


Mr Berezovsky's lawyers shook their heads as Mr Sumption described him as a man with no knowledge or interest in the oil business – his only significant contribution to Sibneft being securing for Mr Abramovich valuable political introductions and his influence over then President Boris Yeltsin via his daughter Tatyana Yumasheva and her husband, Mr Yeltsin's chief of staff.


"He didn't contribute a single cent to the acquiring or the building up of the business," said Mr Sumption. "Nor did he contribute to its managerial success."


Mr Abramovich's acquiring of the controlling interest in Sibneft at a relatively modest price came in return, he claimed, for support for President Yeltsin from Mr Berezovsky's television station, ORT, in the 1996 Presidential elections. Mr Abramovich in turn acknowledged the "debt of honour" he owed Mr Berezovsky, and made regular payments to him totalling millons of pounds. These payments, known as "krysha", or "roof", we might recognise as "refuge, or protection" said Mr Sumption, a service Mr Berezovsky provided along with his associate, the Georgian billionaire Badri Patarkatsishvili, who died suddenly and unexectedly at his Surrey mansion in 2008.


Mr Berezovsky "demanded more and more," Mr Sumption said. "Expenses on an exuberant scale - palaces in France, private aircraft, jewels for his girlfriends, valuable painting at Sotheby's."


After Mr Berezovksy fell out with President Putin and was forced into political exile in 2000, Mr Abramovich at made a payment of £1.3bn to Mr Berezovsky, which he claims was his "debt of honour", and bore no relation to Sibneft's prosperity. Mr Berezovsky claims the money represented a forced sale of his share in Sibneft at a knockdown price. In 2005, Mr Abramovich sold his share in SIbneft for £7.4bn, at the time the largest transaction in Russian history.


The most significant problem for Mrs Justice Gloster over the coming 12 weeks will be that there is little proper documentation to support either party's claims.


As Mr Sumption pointed out: "The agreement to sell television support to the President of Russia in return for the sale of state assets could never be recorded in writing. Of course not."


Quite. Mr Berezovsky will give evidence tomorrow. Mr Abramovich is expected to do so in early November.

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