Russian govt No.2 in firing line over family deals

* Shuvalov’s law firm names ex-colleague over leaks

* Shuvalovs did lucrative deals with Russian oligarchs

* Questions over ties between business and politics

MOSCOW, March 28 (Reuters) - The law firm acting for Russian first deputy prime minister Igor Shuvalov has accused an exiled ex-employee of seeking to inflict political damage on Shuvalov by leaking details of his family’s financial dealings to the press.

The law firm, ALM Feldmans, said the source of a series of stories, which started with an investigative report in U.S. financial weekly Barron’s in December, was Pavel Ivlev, who left Russia in 2005.

Ivlev, reached in the United States by Reuters, declined to comment.

The Barron’s story, and reports on Wednesday in the Financial Times and the Wall Street Journal, detailed a series of deals involving an offshore firm whose beneficial owner was Shuvalov’s wife, Olga, that netted in excess of $100 million.

The deals, which involved investments in British steel firm Corus and in Russian gas export monopoly Gazprom, while legal, raise questions about the close ties between business and politicians in Russia.

Artyom Dymskoy, managing partner of ALM Feldmans, told Reuters that Ivlev had done work for the Shuvalovs. He said the leak of related documents violated client confidentiality.

“Ivlev is acting to the detriment of the Shuvalov family’s interests, deliberately misinterpreting and twisting facts,” Dymskoy said in a signed statement issued to Reuters.

“We contend that Ivlev is deliberately interpreting facts and circumstances ... in a way that serves his political goals.” Shuvalov worked for ALM Feldmans before going into government in the 1990s and is still the law firm’s client.

Opposition activist Natalia Pelevine, who has petitioned Russia’s General Prosecutor to investigate the Shuvalovs’ dealings, said her submission was “not motivated by politics, but by a simple desire to make justice happen.”

The General Prosecutor’s office has not responded to a written request for comment on Pelevine’s filing.

Ivlev also did legal work for Russian oil company Yukos, but fled Russia in 2005 after the company’s lawyers became the target of investigations related to the trial of Yukos’s main owner, Mikhail Khodorkovsky.

Ivlev lives in the United States and has founded a campaign group, the Committee for Russian Economic Freedom, that regularly posts comments on its web site that are supportive of Khodorkovsky.

Khodorkovsky was jailed in 2005 for fraud and tax evasion in what was widely criticised as a punishment for posing a political challenge to then-President Vladimir Putin, who was returned to the Kremlin for a third term in a March 4 election.

He was convicted again in December 2010 on related charges. His jail term runs to 2016. Yukos, once Russia’s largest oil firm worth $40 billion, was bankrupted by back-tax claims and its main assets bought by state oil firm Rosneft.


Reuters has corroborated the original Barron’s report, seeing documents that confirm that the Bahamas-based firm, Sevenkey, received wire transfers totaling $50 million in early 2004 from a Latvian bank account held by a firm called Unicast.

Representatives for Shuvalov and Eugene Shvidler, a business associate of Roman Abramovich - the owner of London’s Chelsea soccer club - have denied to Reuters that the transfer was made on Shvidler’s instruction, as Barron’s originally reported.

Sevenkey then lent $49.5 million to Gallagher, the Cyprus-based holding company of Russia’s richest man, Alisher Usmanov, who drew on the funds to help finance a purchase of shares in steel maker Corus.

Documents also show that the loan agreement was subsequently amended to allow Sevenkey to participate in a share of Gallagher’s profits on the Corus deal. In total, Sevenkey made $119 million in proceeds on the transactions.

Representatives for Shuvalov and Usmanov have confirmed those details but said all proceeds were properly declared, and that no conflicts of interest or favours were involved.

“The transaction between Sevenkey and Gallagher was conducted in accordance with all applicable laws and promptly disclosed at the time with the Securities and Exchange Commission,” a spokesman for Usmanov said.


The Financial Times and Wall Street Journal reported on Wednesday that Sevenkey had also invested nearly $18 million in Gazprom shares in 2004 through Nafta Moskva, the investment vehicle of billionaire Suleiman Kerimov.

The shares rallied as the Russian government liberalised restrictions on foreign ownership of Gazprom stock in 2005, and would have earned a profit of more than $100 million when they were sold at the end of 2007, the FT wrote.

A source close to Shuvalov said he was not directly involved in the Gazprom investment, and that it had been handled by lawyers managing the family’s financial interests.

“There is no single illegal thing in any of these operations,” the source told Reuters, adding that the Shuvalovs had declared all of their relevant income.

“There is no conflict of interests - not involving the budget, Russian property or the national interest.”

A spokesman for Nafta Moskva said all of its financial dealings were conducted in line with Russian law. He declined to comment with regard to the Shuvalovs’ investment in Gazprom.

Shuvalov, who has overall responsibility for economic policy and spearheaded Russia’s talks on joining the World Trade Organization, has stood out in recent years as one of the most affluent ministers in the Russian government.

In their official income declaration for 2010, the Shuvalovs said they earned 387.6 million roubles ($13.35 million). The couple own multiple properties in Russia, Austria and Britain.

Shuvalov, 45, has been Russia’s first deputy prime minister since 2008 and has been viewed as a western-oriented government liberal. Previously, he was a Kremlin economic adviser and sherpa to the summits of the Group of Eight nations.