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Michael Calvey arrested in Russia for embezzlement

Update

Alleged accomplice in Baring Vostok case confesses guilt, testifies against other defendants
RIA Novosti, April 11 2019

As the American investor Michael Calvey was transferred today from jail to house arrest, news broke that another defendant in the case against Calvey has confessed to the charges against him. Alexey Kordichev, the former head of Vostochny Bank, also gave testimony against those charged with him in the Baring Vostok case, RIA Novosti reported. Kordichev`s admission of guilt came to light when he petitioned to be transferred to house arrest. Moscow`s Basmanny Court approved his petition.

US PE veteran Michael Calvey arrested in Russia (embezzlement)

Pitchbook February 19, 2019
Adam Lewis

Michael Calvey, the American founder of Russia-focused private equity firm Baring Vostok Capital Partners, is reportedly one of six men who have been arrested in Russia on suspicion of embezzling 2.5 billion rubles (about $38 million) in a transaction involving Vostochny Bank, a BVCP portfolio company. BVCP has denied the allegations against its employees, describing the disagreement as "a conflict with shareholders" rather than a matter for criminal prosecution.

A Moscow court reportedly ruled over the weekend that Calvey will be held for the next two months in pre-trial detention. He and his potential co-defendants are said to face up to 10 years in prison.

Calvey is an Oklahoma-born US citizen who worked at Salomon Brothers before founding BVCP in Moscow in 1994. Since then, the firm claims to have invested more than $2.8 billion in Russia and other countries that were once part of the Soviet Union, targeting middle-market private equity deals with companies related to the internet, media, natural resources, financial services and consumer goods. BVCP raised almost $1.5 billion for its latest flagship fund and a related supplemental vehicle in 2012; the firm's portfolio of past investments includes Russian internet search powerhouse Yandex.

The complicated allegations include charges that Calvey and BVCP grossly inflated the value of a separate company that was transferred to Vostochny Bank in order to pay down debt. BVCP senior partner and interim co-head Elena Ivashentseva lobbied for Calvey in a press release on Tuesday, seemingly going on the offensive to question the legitimacy of the arrests.

"We have always acted in full compliance with the law and firmly believe the courts will uphold this," Ivashentseva said. "At the same time, given that this is a commercial dispute, we believe that it is essential to investigate the legality of the criminal investigation that has been launched and to amend the detention measures."

The arrests will likely be the latest point of evidence used to make the case against a Russian economic climate often described as unfriendly to outside investment. Former Russian finance minister Alexei Kudrin tweeted earlier this week that the situation was "an emergency" for the country.

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