Panama Papers’ Russian Mob Connection
The trove of leaked documents has already revealed the billions swirling around Putin. Now a Swiss firm named in the papers appears to have links to Russian organized crime.
By Michael Weiss
The Daily Beast
April 12, 2016
A Swiss law firm implicated in the Panama Papers also has links to an alleged Russian mafia, The Daily Beast has discovered.
As reported last week in the disclosure of leaked documents from the Panamanian law firm Mossack Fonseca, the Zurich-based firm Dietrich, Baumgartner & Partner played an integral role in the transfer of some $2 billion from a close circle of friends and associates of Vladimir Putin—money widely thought to belong at least in part to the Russian president.
Dietrich, Baumgartner is known in Switzerland for its influential Russian client base. It even keeps code names for the ones whose notoriety demands a commensurate lack of transparency. The firm’s founding partner Andres Baumgartner is quite ostentatious about his Eastern connections. He’s quoted in the Guardian as having told his colleagues: “I have relationships with people from the KGB. Right up to Vladimir Putin.”
There are also two known connections between Baumgartner’s firm and the so-called Klyuev Group, which U.S. Sen. John McCain has called a “dangerous transnational criminal organization” that has “colluded with senior Russian officials to engage in bribery, fraud, embezzlement, company thefts, and other serious financial crimes.”
Members of the Klyuev Group have been sanctioned by the U.S. government under a law named for its most high-profile victim: Russian tax lawyer Sergei Magnitsky. In 2007 and 2008, Magnitsky uncovered a $230 million tax fraud allegedly perpetrated by ex-convict Dmitry Klyuev and his confederates, which included state tax officials and Interior Ministry investigators. Magnitsky was then framed by the very men he exposed; he was beaten to death in a Moscow prison hospital in 2009.
Documents seen by The Daily Beast show that on April 13, 2011, Altem Invest Ltd., a Cyprus-registered company controlled by Dmitry Klyuev, transferred $4,499 into a Swiss bank account belonging to Dietrich, Baumgartner & Partner. The law firm has also represented Vladlen Stepanov in a money laundering case opened in 2011 by the Swiss attorney general in relation to the Magnitsky affair. Stepanov, said to be a member of the Klyuev Group, is the ex-husband of Olga Stepanova, who formerly headed Moscow Tax Office No. 28, which processed part of the fraudulent $230 million refund.
Leaked documents available at the website Russian Untouchables show that, prior to the Stepanovs’ divorce in 2010, they jointly controlled nearly $39 million in assets, including multiple offshore companies, an award-winning Moscow dacha, a seaside villa in Montenegro, and a six-bedroom, seven-bathroom “signature villa” in Dubai’s artificial archipelago Palm Jumeirah, as well as two luxury apartments in the Kempinski Resort on the same Gulf island chain. This, despite the couple’s official combined salary at the time equaling $38,381.
Dietrich, Baumgartner featured in the Panama Papers scandal as the main law firm used by the controlling interests of Bank Rossiya, the central Russian financial institution that moved huge sums of money to offshore companies owned by Dmitry Roldugin, Putin’s best friend and a concert cellist. Bank Rossiya was sanctioned in March 2014 after Russia’s invasion and annexation of Crimea because, as the U.S. government stated, it is “the personal bank for senior officials of the Russian Federation.”
One White House official named Yuri Kovalchuk, single largest shareholder of Bank Rossiya, as the “personal banker” for many of these same officials, including Putin. Kovalchuk was part of the Ozero Cooperative, a lakeshore district in St. Petersburg where a coterie of Putin’s associates from the 1990s once lived and, apparently, pooled their collective fortunes. All members of the cooperative are today on-paper billionaires. Roldugin was not one of them, and the musician’s true portfolio as seven-figure bagman for the president was mostly speculative, until the Panama Papers came to light.
Vladimir Khotimsky, an investment manager at Bank Rossiya, would email Andres Baumgartner instructions at the latter’s Zurich office. Baumgartner “would pass on Khotimsky’s orders—to enact loans or make share deals—to Mossack Fonseca’s branch office in the same town,” as the Guardian reported last week. “The Panamanian firm then used its own network of offices in far-flung jurisdictions to operate anonymous shell companies, in the [British Virgin Islands], Panama itself, or Belize.”
Roldugin was also one of the few members of Putin’s inner circle to evade U.S. sanctions in 2014; as such, his prominence in Bank Rossiya’s offshore network only grew in the last two years. Dietrich, Baumgartner registered a new Swiss bank account in his name.
The “linchpin of the entire Putin-linked network,” according to to the International Consortium of Investigative Journalists (ICIJ), is a Roldugin-owned company called Sandalwood Continental Limited. It borrowed huge sums from Russian Commercial Bank, the Cyprus-based subsidiary of the Russian state bank VTB.
From 2009 to 2012, Sandalwood had $800 million in credit lines; it lent $600 million in 2009 and $350 million in 2010 “to a borrower who had no discernible business model that would allow it to pay back the money,” ICIJ found. “The loans carried no security. Most did not require installment payments but instead relied on a promise that the entire amount would be returned after a certain time span.”
In one particularly dubious loan, Sandalwood borrowed $103 million from RCB at a 4.7 percent interest rate and transferred it immediately to Horwich Trading, a Cypriot company, at a 7.8 percent rate. Jurgen Mossack, a founding partner of Mossack Fonseca, wrote: “I believe this is delicate…we could be witnessing payments of questionable origin and purpose.”
Dietrich, Baumgartner & Partner processed some of the loan’s paperwork, as its reputation was enlisted the Panamanian firm to legitimate the transaction. “As we are working with this client from a reputable Russian bank for some years now, and our legal client of reference is a well-known Swiss law office, I think we can accept the explanations and go ahead,” one attorney at Mossack’s Lichtenstein office wrote.
The Russian Commercial Bank denies being a clearinghouse for any high-ranking Russian officials. Putin has blamed the Panama Papers revelations on a U.S. disinformation campaign designed to destabilize Russia, citing a conspiratorial tweet published by WikiLeaks founders Julian Assange. As for Roldugin, Putin insists that his lifelong friend has spent “almost all the money he earned on acquiring musical instruments from abroad and bringing them to Russia.”
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