The $2-billion offshore trail that leads to Vladimir Putin
Putin’s best friend figures prominently in a secret network of offshore companies hiding vast wealth. Could he hold the key in tying Russia’s president to the money?
Vladimir Putin and Sergey Roldugin forged a bond as young men. Fast friends, almost like brothers, they cruised the streets of Leningrad.
As Putin rose to power as Russia’s supreme leader and Roldugin made a name for himself as a classical cellist and conductor, the two remained close. Roldugin has performed for Putin and high-profile guests at the president’s official residence, introduced Putin to Lyudmila, his future wife, and is the godfather of Putin’s eldest child, Maria. He has also given media interviews that softened Putin’s fearsome image.
Now a leak of secret documents reveals a hidden side of their friendship.
The records show Roldugin is a behind-the-scenes player in a clandestine network operated by Putin associates that has shuffled at least $2 billion through banks and offshore companies, an investigation by the International Consortium of Investigative Journalists, German daily Süddeutsche Zeitung and other media partners has found.
In the documents, Roldugin is listed as the owner of offshore companies that have obtained payments from other companies worth tens of millions of dollars. It is possible Roldugin, who has publicly claimed not to be a businessman, is not the true beneficiary. Instead, the evidence in the files suggests Roldugin is acting as a front man for a network of Putin loyalists — and perhaps for Putin himself.
Roldugin did not respond to detailed questions. Reporters from the Organized Crime and Corruption Reporting Project, an ICIJ partner, met briefly with the musician following a concert in Moscow in late March. Roldugin told them he needed more time to review their questions and determine what he could say.
About 100 financial deals related to the network are described in the leaked documents. They are complex. Payments are disguised in various ways. On paper, shares in companies are swapped back and forth in a day. Documents are backdated. Questionable financial penalties are assessed. The rights to multimilliondollar loans are sold between offshore companies for $1.
In almost every instance, the result is the same: money and power moves in the direction of the network, to companies and people allied to Putin.
The leaked documents come from the files of Mossack Fonseca, a Panama-based law firm that registered some of the Roldugin companies and helped administer the network’s holdings in the British Virgin Islands and other offshore havens.
For years there have been reports — mainly from whistleblowers — about Putin’s secret wealth. A few offshore companies, a palace and a mega yacht have all been said to belong to the Russian leader. Various news organizations have noted how the people around Putin have become rich. Yet a detailed picture of the hidden financial affairs of Putin’s circle has remained elusive.
The law firm’s internal files show how minions and proxies created structures to hide and move the wealth. The records include email correspondence, bank account forms, loan agreements, share transactions and passport scans. Dates, cash amounts and contract terms are detailed.
Loyalty and long-held relationships help bind the network. It’s a fraternity of Putin confidants. Many of the men are Putin comrades whose history with him traces back decades.
There is Roldugin. Then there is Yury Kovalchuk, a banker who forged links with the future president when Putin was a municipal official, and Arkady Rotenberg, a childhood chum who has become a billionaire through statesponsored construction projects, oil pipelines and other ventures.
Many of the men are also connected to the St. Petersburg-based Bank Rossiya, which the U.S. government has identified as Putin’s personal cash box.
The files make clear that Bank Rossiya built the network. Its employees tended to it, working to create the offshore companies, assigning ownership to Roldugin and others and shepherding the transactions through banks in Russia, Cyprus and Switzerland. Bank Rossiya did not respond to detailed questions from ICIJ’s partners regarding this investigation.
Nowhere in the Mossack Fonseca files is the name of the Russian president, a former KGB spymaster, mentioned. Audio recordings and witness accounts show that even when Putin’s closest confidants privately discuss his financial dealings, they use pseudonyms for him or gesture to the heavens rather than utter his name.
It’s inconceivable, though, that the network could have existed without the knowledge and support of Putin, said Karen Dawisha, a U.S. political scientist who has written extensively about Putin and his regime.
“He takes what he wants,” said Dawisha. “When you are the president of Russia you don’t need a written contract. You are the law.”
After receiving detailed questions from ICIJ and its media partners, Kremlin spokesman Dmitry Peskov denounced the forthcoming articles in a press conference as “an attack” and “a series of fibs,” according to Russian news services. Peskov reportedly said that the questions concerned offshore companies and “a large number of businessmen Putin had never seen in his life.” “Denying something numerous times or commenting on something that has no relation to us is just silly,” Peskov told reporters.
There is a video on YouTube of Arkady Rotenberg, a former judo instructor. He is standing with a group of men. Putin walks past, flanked by his security detail. Rotenberg doesn’t see him coming. Without breaking stride, Putin rubs Rotenberg’s head, mussing his hair, like one would a dog or a child.
Of all those in his inner circle, Arkady and his brother Boris have known Putin the longest. Their friendship dates to the 1960s, when as boys they sparred in a martial arts club. The ties of friendship grew to encompass business as well.
The European Union, the U.S. and Canadian governments issued sanctions against Arkady Rotenberg in 2014, in retaliation for Putin’s invasion of Ukraine. Canada and the U.S. also sanctioned his brother Boris and Yury Kovalchuk.
The U.S. Treasury noted the Rotenbergs had “amassed enormous amounts of wealth during the years of Putin’s rule” from government contracts, including about $7 billion for the Sochi Olympic Games. The American sanctions document coyly described the reason for the designation as “acting for or on behalf of . . . a senior official” of the Russian Federation.
Arkady Rotenberg did not respond to a request for comment.
The Rotenbergs and other billionaires who have flourished under Putin’s protection are having an impact on the Russian economy. The top 10 per cent of wealth holders in Russia own 85 per cent of all household wealth in the country, according to a 2014 Credit Suisse report. Meanwhile, 83 per cent of the population has less than $10,000 in personal wealth. Inequality in Russia is so bad it deserves its own separate category, the report stated. And when it comes to the man some publications have called Putin’s best friend, Roldugin, documents in the files falsely state that he is not politically connected, obscuring the musician’s role in the scheme.
Mossack Fonseca and bankers in Switzerland appear to have ignored easily obtainable evidence of Putin and Roldugin’s bonds. Banks are required by Swiss law to determine if account holders are connected to politicians to safeguard against improper use of the account. The industry term for this is “politically exposed persons,” or PEPs.
The Mossack Fonseca files contain an application by Gazprombank Switzerland in 2014 to open a bank account for a company in Roldugin’s name. The form explicitly asked whether the owner of the company had “any relation to PEPs or VIPs.” The answer: “no.” “The bank had a legal obligation to check these declarations,” said Mark Pieth, former head of the organized crime section of the Swiss justice ministry. “Roldugin is, by his proximity to a serving head of state, clearly an exposed person.” Gazprombank declined to comment. In a letter to ICIJ, Mossack Fonseca said the firm has “duly established policies and procedures” to identify and handle cases involving politicians or people associated with them. It said the company considered those cases to be “high risk” and conducts more intense checks and periodic follow ups. “We conduct thorough due diligence on all new and prospective clients that often exceeds in stringency the existing rules and standards to which we and others are bound.”
Yury Kovalchuk and Putin turned their attention to Bank Rossiya in1991, when its largest shareholder was still the Leningrad Communist Party. Putin was Leningrad’s deputy mayor and responsible for attracting foreign investors and forming public-private partnerships.
After the fall of the Soviet Union in December1991, Putin signed the documents bestowing ownership of the bank on a newly formed joint venture created by Kovalchuk and others, according to Dawisha, author of Putin’s Kleptocracy: Who Owns Russia?
“Putin’s function was to make legal what would otherwise have been illegal,” Dawisha said.
Kovalchuk became majority shareholder and board chair. When the U.S. government sanctioned him in 2014, it described Kovalchuk as one of Putin’s “cashiers.” Canada also imposed sanctions against Bank Rossiya in March 2014.
During the mid-1990s, Kovalchuk and a few other shareholders of the bank owned dachas on the eastern shore of the Komsomolskoye Lake. Putin found the money to buy a property. The men formed a co-operative society to benefit the eight residents of their gated community, which was called Ozero (the Lake).
The Mossack Fonseca files show that the communal principles that defined Ozero continued with Bank Rossiya and its participants more than a decade later.
About an hour’s drive from the Ozero co-operative is the Igora ski resort. According to local media reports, the high-end resort is Putin’s favourite place to ski. Bank Rossiya publicly helped finance its construction. The wedding of Putin’s youngest daughter, Katerina Tikhonova, took place amid great secrecy on the resort grounds in February 2013, according to Reuters.
Tikhonova married Kirill Shamalov, the son of Nikolai Shamalov, an Ozero co-operative member and original Rossiya shareholder. Within a year and a half of the wedding, the younger Shamalov, barely out of his twenties, managed to borrow about $1.3 billion from Gazprombank to acquire 21 per cent of Sibur, one of the biggest petrochemical companies in Russia, a stake that was worth at least $2 billion a little more than a year later, Reuters reported.
Mikhail Lesin was intimately involved in the efforts of Putin and Bank Rossiya to control Russian media. He was Putin’s first media minister, then a presidential adviser in his second term and he oversaw the regime’s propaganda push. Lesin’s government tenure paralleled the growth of the bank’s media empire.
While in government, Lesin played a key role in brokering deals that put critics in the media under ownership that was more closely aligned with the Kremlin. In the wake of these efforts, voices critical of the Russian regime
"He takes what he wants. When you are the president of Russia you don’t need a written contract. You are the law."
KAREN DAWISHA AMERICAN POLITICAL SCIENTIST AND EXPERT ON VLADIMIR PUTIN
fell silent.
After Dmitry Medvedev replaced Putin as president, Lesin joined the nation’s biggest private media group, Gazprom-Media, which Bank Rossiya managed.
Gazprom-Media was only part of the media conglomerate that Bank Rossiya built. Its sprawl has earned the bank’s chairman, Yury Kovalchuk, the nickname the Russian Rupert Murdoch. In 2005, Bank Rossiya bought a stake in a small television network, which Putin then designated as a national broadcaster, greatly expanding its reach and profit. It also took over Ren-TV, muting critical voices and investigations of the government.
The Mossack Fonseca files reveal that Lesin had a company called Gloria Market Ltd. based in the British Virgin Islands. He created it in 2011, to collect money from advertising, according to a source-of-funds form found in the Mossack Fonseca files.
In the late 1990s, Lesin had helped set up an advertising sales company called Video International that at one point controlled as much as two-thirds of the nation’s television advertising. While Bank Rossiya publicly owned 16 per cent of Video International, a Roldugin offshore company created by the bank secretly held an additional 12.5 per cent stake, the files show. According to its 2014 bank account forms, the company, International Media Overseas, had annual income of about $10 million from its holdings.
A lawyer representing Video International declined to answer detailed questions, stating the information was nonpublic in Russia.
In 2014, Lesin resigned from Gazprom-Media. Russian press reports blamed a conflict between him and Bank Rossiya’s Kovalchuk. Lesin relocated to America, where he allegedly owned millions of dollars in property, holdings that had raised the suspicions of U.S. authorities.
In November 2015, Russian media reported that Lesin died of a heart attack in a hotel in Washington, D.C. Four months later, Washington’s chief medical examiner announced that the death was anything but natural. The medical examiner said Lesin died of blunt force trauma to the head and had bruises on his neck, torso and limbs. Police are investigating.
How many secrets of the Putin-linked network Mikhail Lesin took to the grave may never be known. Additional reporting by Olesya Shmagun and Roman Anin of the Organized Crime and Corruption Reporting Project and Bastian Obermayer and Frederik Obermaier of Süddeutsche Zeitung.