Russian court jails US investor pending fraud trial

US investor Michael Calvey, the head of investment company Baring Vostok, detained on fraud charges, attends a court hearing in Moscow's Basmanny Court on February 15, 2019. (AFP / Vasily Maximov)
Updated 17 February 2019
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Russian court jails US investor pending fraud trial

  • Michael Calvey, founder of the multi-billion-dollar investment fund Baring Vostok Capital Partners (BVCP), was placed under arrest until April 13
  • He and five others await trial on charges they embezzled $37.7 million, a charge he claimed was fabricated

MOSCOW: A Russian court on Saturday jailed the US founder of a major investment firm for two months over fraud charges he says were fabricated for use in a shareholder battle.
Michael Calvey, founder of the multi-billion-dollar investment fund Baring Vostok Capital Partners (BVCP), was placed under arrest until April 13 as he and five others await trial on charges they embezzled 2.5 billion rubles ($37.7 million).
Authorities detained four BVCP employees on Friday, including French national Phillipe Delpal.
Two other suspects include a former fund employee and someone at another firm mentioned in the probe. All six are now under pre-trial arrest.
In a statement Saturday, Baring Vostok said the claims made against its employees “have no merit.”
The case has already drawn comparisons to other high-profile probes against foreign investors in Russia, notably one against Bill Browder and the Hermitage Capital fund.
Ironically, it comes as Russia hosts a high-profile investment forum in its Black Sea city Sochi.
Calvey says he is innocent and argued in court that the probe is a bid to exert pressure on him amid a shareholder conflict within Vostochniy Bank, which he is trying to resolve in a London arbitration court.
The charges against him are intended to “pressure Baring Vostok to drop its arbitration claims in London or to obstruct the new share emission of Vostochniy Bank,” Calvey alleged according to a statement by Baring Vostok on Saturday.
Investigators say that a firm controlled by Calvey in 2017 owed 2.5 billion rubles to Vostochniy bank and paid the debt with a 59.9 percent stake in the Luxembourg company International Financial Technology Group (IFTG), which was valued at three billion rubles.
The investigators claim that IFTG’s real value was only 600,000 rubles.
The fraud claim against Calvey was filed with the FSB security service this month by Sherzod Yusupov, a minority shareholder in Vostochniy Bank, Russian agencies reported.
Baring Vostok controls more than 52 percent of Vostochniy Bank, while 32 percent is owned by Artyom Avetisyan, Russian reports said.
Calvey said in court that he and Avetisyan are tangled in a shareholder dispute, and that by filing the claim Yusupov was in fact acting on Avetisyan’s behalf.
BVCP is a veteran investor in Russia, with current and past projects that include the Internet company Yandex, online retailer Ozon.ru, several drugstore and food store chains, and Russia’s leading online classifieds service Avito.
Some Russian officials have supported Calvey, with Rosnano board chairman Anatoly Chubais calling him “one of the most respected investors” whose efforts “attracted about four billion dollars in foreign direct investment to Russia.”


Pakistani central bank lifts interest rate as inflation bites

Updated 20 May 2019
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Pakistani central bank lifts interest rate as inflation bites

ISLAMABAD: Pakistan’s central bank raised its key interest rate to 12.25% on Monday, warning that already soaring inflation risked further rises on the back of higher oil prices and reforms required for a bailout from the International Monetary Fund.
The 150 basis points increase follows a preliminary agreement last week with the IMF for a $6 billion loan that is expected to come with tough conditions, including raising more tax revenues and putting up gas and power prices. It was the eighth time the central bank has increased its main policy rate since the start of last year.
With economic growth set to slow to 2.9% this year from 5.2% last year, according to IMF forecasts, the rate rise adds to pressure on Prime Minister Imran Khan, who came to power last year facing a balance of payments crisis that has now forced his government to turn to the IMF.
Higher prices for basic essentials including food and energy has already stirred public anger but the central bank suggested there was little prospect of any immediate improvement.
Noting average headline inflation rose to 7% in the July-April period from 3.8 percent a year earlier, the central bank said recent rises in domestic oil prices and the cost of food suggested that “inflationary pressures are likely to continue for some time.”

 

It said it expected headline inflation to average between 6.5% and 7.5% for the financial year to the end of June and was expected to be “considerably higher” in the coming year. Expected tax measures in next month’s budget as well as higher gas and power prices and volatility in international oil prices could push inflation up further, it said.
It said the fiscal deficit, which the IMF expects to reach 7.2% of gross domestic product (GDP) this year, was likely to have been “considerably higher” during the July-March period than in the same period a year earlier due to shortfalls in revenue collection, higher interest payments and security costs.
Despite some improvements, financing the current account deficit remained “challenging” and foreign exchange reserves of $8.8 billion were below standard adequacy levels at less than the equivalent of three months of imports.
The central bank said it was watching foreign exchange markets closely and was prepared to take action to curb “unwarranted” volatility, after the sharp fall in the rupee over recent days that saw the currency touch a record low of 150 against the US dollar.
Details of what Pakistan will be required to do under the IMF agreement, which must still be approved by the Fund’s board, have not been announced but already opposition parties are planning protests.
As well as higher energy prices that will hit households hard, there are also expectations of new taxes and spending cuts in next month’s budget to reach a primary budget deficit — excluding interest payments — of 0.6% of GDP.
With the IMF forecasting a primary deficit of 2.2% for the coming financial year, that implies squeezing roughly $5 billion in extra revenues from Pakistan’s $315 billion economy, which has long suffered from problems raising tax revenue.

FACTOID

Pakistan’s economic growth is set to slow to 2.9% this year.