Sergei Guriev: Bank of St. Petersburg Tried to Deceive Regulator, Shareholders and Market

Justice Hildyard of the High Court of England and Wales continues proceedings on suit of Bank St. Petersburg vs Russian businessman Vitaly Arkhangelsky and Arkhangelsky's counterclaim against the bank.

On Monday, April 11, the banking expert for Arkhangelsky, Professor of economics Sergei Guriev, was cross-examined.

In 2008-14, he was a member of the boards in a number of Russian financial institutions including Sberbank, Russian Agricultural Bank and Russia Venture Company. He was also an economic advisor for Russia's government.

In 2011, Guriev was one of the experts who had to evaluate the 2010 verdict on the case of Mikhail Khodorkovsky and Platon Lebedev (so called “second Yukos case”). He, like the other eight experts, concluded that the court failed to establish the guilt of Khodorkovsky and Lebedev. That resulted in the Russian Investigative Committee launching the campaign of harassment against those experts. The pressure forced Guriev to leave Russia. In September 2016, he will start working as the chief economist for the European Bank for Reconstruction and Development.

In the course of the cross-examination, Guriev told the court that he found a number of irregularities in the Bank of St. Petersburg behaviour with regards of the OMG case. He stressed that some features of December 2008 arrangement between the Bank and OMG "made it not only irregular, but clearly improper".

The agreement between the Bank and OMG was the "highly unusual memorandum" rather than a written contract. With the loans secured by registered pledges of real estate the reason for requiring a transfer of OMG companies' shares as an additional security seems "unclear", Guriev pointed out.

In the repo transaction the assets were transferred not to the Bank or its subsidiary, but to a number of companies which were not directly controlled by the Bank, the Original or Subsequent Purchasers that were mostly subsidiaries of Renord-Invest. The co-founder of that group was Vladimir Malyshev, the husband of BSP deputy chair Irina Malysheva. Guriev noted that no usual safeguards for transactions with affiliated parties were applied. He described the arrangement between the Bank and Renord-Invest as “intentionally non-transparent”. The Bank present and former managers' evidence suggests that such tactics were used to "deceive the regulator, the shareholders and the market", Guriev said.

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The bank claims that Arkhangelsky, who, together with his family, left Russia in 2009 and was granted political asylum in France, did not settle with creditors and tries to recover a debt.

Archangelsky in his statement of claim says that during the global financial crisis the bank agreed to defer payment on loans for six months. As a collateral, the bank demanded Archangelsky to transfer the shares of companies that were a part of his Oslo Marine Group - West Terminal port complex and Scandinavia insurance company, the owner of a half of Onega terminal. Before the stipulated term expired, the bank demanded loan repayment and later used its political contacts including top law enforcement officers and St. Petersburg Governor Valentina Matvienko, sold the shares to a sister firm at a lower price and changed the executive of Arkhangelsky's companies. He estimates the damages at $500 million.