Russian businessman Ziyavudin Magomedov has scored a legal victory against Russian individuals and corporate entities whom he accuses of attempting to dismantle and appropriate his estimated $15 billion business empire.
A newly-revealed ruling by the London Court of International Arbitration (LCIA) shows that Mr Magomedov’s former joint venture partner, Texas Pacific Group (TPG), exploited his incarceration and struck a secret deal to sell its interest in FESCO, which owns the port of Vladivostok and other important transport assets in Russia.
The ruling affirms TPG’s obligation to have offered its FESCO stake to Mr Magomedov and raises serious questions about the conduct of the US private equity giant and its leadership.
Mr Magomedov, owner of the Summa Group conglomerate, was arrested and jailed in Moscow in March 2018, pending a trial on unevidenced charges of embezzlement. As the Russian prosecutor’s judicial campaign against Mr Magomedov subsequently gathered pace, TPG’s Chairman David Bonderman reneged on personal assurances given to Mr Magomedov and instead aligned himself with Mr Magomedov’s enemies in agreeing to sell the FESCO stake to businessman Mikhail Rabinovich.
The finding of wrongdoing by the LCIA Tribunal is welcomed by Mr Magomedov.
Rabinovich is alleged in court documents filed by Mr Magomedov to have been acting as a proxy for ROSATOM, the state atomic agency. Numerous local and international media have reported that FESCO will ultimately be transferred into the ownership of ROSATOM.
The LCIA’s ruling required TPG’s 17 per cent FESCO stake to be re-sold to Mr Magomedov at a huge discount to its true value. However, the Russian courts immediately responded with far-reaching confiscation orders. The ownership structures via which Mr Magomedov holds his vast stake in FESCO have now had their underlying shares registered in Russia purportedly confiscated. If those confiscations (along with others) are upheld in Russia, Mr Magomedov’s losses will run into tens of billions of dollars. He intends to pursue further legal action to seek compensation for those losses.
LCIA Tribunal awards are usually confidential, but this award has been placed into the public domain by the Russian prosecutor, who submitted it as evidence in public hearings during the confiscation proceedings in Moscow.
Mr Magomedov was arrested on charges of embezzlement which he and his legal team argue are false and incoherent. He spent nearly five years awaiting trial, incarcerated in an austere Moscow prison run by the FSB, Russia’s secret intelligence service. In December 2022, he was handed a 19-year jail sentence by a Moscow judge whose verdict appeared to uncritically parrot the prosecution’s case.
Mr Magomedov strongly denies any wrongdoing. The investigation into his alleged crimes was conducted by Nikolai Budilo, who oversaw the notorious investigation into Hermitage Capital, which led to the death in custody of lawyer Sergey Magnitsky. Budilo now occupies a senior management position at Russian state-owned company Transneft. Transneft itself is accused by Mr Magomedov of orchestrating the confiscation of significant assets owned by him and his brother
Both his conviction and the confiscations are being appealed.
Ziyavudin Magomedov said:
“I am deeply disappointed by the actions of those, including TPG’s founder David Bonderman, whom I believe misled me, betrayed me, and supported an unlawful raid against me. I will continue to address these wrongs committed against me, both through the English courts and elsewhere outside Russia – where I will obtain a fair hearing and the actions of my adversaries will be properly scrutinised.
“With the help of my lawyers and the support of my family, my aim is to restore justice and recover my rightful possessions.”
London-headquartered law firm Seladore Legal is advising Mr Magomedov.