How oligarch invested in the U.S.
Abramovich used shell companies and Wall Street
In July 2012, a shell company registered in the British Virgin Islands wired $20 million to an investment vehicle in the Cayman Islands that was controlled by a large American hedge fund firm.
The wire transfer was the culmination of months of work by a small army of handlers and enablers in the United States, Europe and the Caribbean. It was a stealth operation intended, at least in part, to mask the source of the funds: Roman Abramovich.
For two decades, the Russian oligarch has relied on this circuitous investment strategy — deploying a string of shell companies, routing money through a small Austrian bank and tapping the connections of leading Wall Street firms — to quietly place billions of dollars with prominent U.S. hedge funds and private equity firms, according to people with knowledge of the transactions.
The key was that every lawyer, corporate director, hedge fund manager and investment adviser involved in the process could honestly say that they weren’t working directly for Abramovich. In some cases, participants weren’t even aware of whose money they were helping to manage.
Wealthy foreign investors like Abramovich have long been able to move money into U.S. funds using such secretive, roundabout setups, taking advantage of a lightly regulated investment industry and Wall Street’s willingness to ask few questions about the origins of the money.
Now, as the United States and other countries impose sanctions on those close to President Vladimir Putin of Russia, hunting down these fortunes could pose significant challenges.
Last week, the IRS asked Congress for more resources as it helps to oversee the Biden administration’s sanctions program along with a new Justice Department kleptocracy task force.
And on Capitol Hill, lawmakers are pushing a bill, known as the Enablers Act, that would require investment advisers to identify and more carefully vet their customers.
Abramovich has an estimated fortune of $13 billion, derived in large part from his well-timed purchase of an oil company owned by the Russian government that he sold back to the state at a massive profit. This month, European and Canadian authorities imposed sanctions on him and froze his assets, which include the famed Chelsea Football Club in London. The United States has not sanctioned him.
Abramovich’s assets in the United States include many millions of dollars of real estate, such
as a pair of luxury residences near Snowmass. But he also invested large sums of money with financial institutions. His ties to Putin and the source of his wealth have long made him a controversial figure.
Many of Abramovich’s U.S. investments were facilitated by a small firm called Concord Management LLC, which is led by Michael Matlin, according to people with knowledge of the transactions who were not authorized to speak publicly.
Matlin declined to comment beyond issuing a statement that described Concord as “a consulting firm that provides independent third party research, due diligence and monitoring of investments.”
A spokeswoman for Abramovich didn’t respond to emails and text messages requesting comment.
Concord, founded in 1999, didn’t directly manage any of Abramovich’s money. It acted more like an investment adviser and due diligence firm, making recommendations to the directors of shell companies in Caribbean tax havens about potential investments in marquee American investment firms, according to people briefed on the matter.
Big Wall Street banks like Credit Suisse, Goldman Sachs and Morgan Stanley often introduced Concord executives to hedge funds, according to people with knowledge of those meetings.
Over the years, Concord arranged more than 100 investments in different hedge funds and private equity firms, mostly for Abramovich, according to an internal document prepared by one Wall Street firm. They included funds managed by Millennium Management, Blackrock, Sarissa Capital Management, Carlyle Group, D.E. Shaw and Bear Stearns, according to people briefed on the matter and the document.
Concord kept a low profile. It didn’t have a website. It is not registered with U.S. regulators. One of the few times it surfaced in public was in 2020, when Concord applied for and received a Paycheck Protection Program loan worth $265,000 during the pandemic. (Concord repaid the loan, a spokesman said.)
Concord’s secrecy made some on Wall Street wary.
In 2015 and 2016, investigators at State Street, a financial services firm, filed “suspicious activity reports” alerting the U.S. government to transactions that Concord arranged involving some of Abramovich’s Caribbean shell companies, Buzzfeed News reported. State Street declined to comment.
American financial institutions are required to file such reports to help the U.S. government combat money laundering and other financial crimes, though the reports are not themselves evidence of any wrongdoing having been committed.
But for the most part, American financiers had no inkling about — or interest in discovering — the source of the money that Concord was directing. As long as routine background checks didn’t turn up red flags, it was fine.
Paulson & Co., the hedge fund run by John Paulson, received investments from a company that Concord represented, according to a person with knowledge of the investment. Paulson said in an email that he had “no knowledge” of Concord’s investors.
Concord also steered tens of millions of dollars from two shell companies to Highland Capital, a Texas hedge fund. Highland hired a unit of JPMORgan Chase, the nation’s largest bank, to ensure that the companies were legitimate and that the investments complied with antimoney laundering rules, according to federal court records in an unrelated bankruptcy case.
Jpmorgan cleared the investment. Highland never learned the ultimate source of the money, the court records show.
Big hedge funds might have accepted the money even if they realized it belonged to Abramovich. At the time, the oligarch hadn’t been sanctioned.
The manner in which one hedge fund received Abramovich’s money in the summer of 2012 shows the challenges facing American and European authorities who hope to track down the assets of Abramovich and other oligarchs.
The manager of the fund, which oversaw billions of dollars but wasn’t a big name on Wall Street, provided a detailed accounting of his involvement on the condition that neither he nor his firm be named.
In 2012, a New Yorkbased wealth manager at Credit Suisse, Gerald Mcginley, contacted the fund manager on behalf of what he said was a wealthy family. Mcginley said Concord was representing the family and was interested in investing tens of millions of dollars with the hedge fund.
The fund manager said Credit Suisse told him that in order to receive the investment, he would have to set up a special financial vehicle in an offshore jurisdiction, so that the investment wouldn’t incur U.S. taxes. The hedge fund would receive a small percentage of the total investment as a fee, and Credit Suisse would get 20% of that fee.
Accompanied by one of Mcginley’s colleagues at Credit Suisse, the fund manager traveled to Concord’s offices in a drab building in the New York City suburb of Tarrytown. Thick metal doors hid its offices from other occupants of the building. Inside, the walls were devoid of artwork or decorations.
The fund manager didn’t know who Concord’s client was, and he didn’t ask.
Mcginley, who now works at Swiss bank UBS, didn’t respond to questions about his work with Concord. A Credit Suisse spokeswoman declined to comment.
After initially meeting with the fund manager, Concord executives referred him to Highwater, a firm based in Grand Cayman that specialized in providing “corporate governance services” to investment managers.
For $15,000 a year, plus other fees, Highwater would provide an employee to sit on the board of the financial vehicle that the fund manager was expected to launch to accept the wealthy family’s money, according to emails between the fund manager and a Highwater executive reviewed by The New York Times.
The fund manager also brought on Boris Onefater, who ran a small U.S. consulting firm, Constellation, as another board member. Onefater said in an interview that he couldn’t remember whose money the Cayman vehicle was managing. “You’re asking for ancient history,” he said. “I don’t recall Mr. Abramovich’s name coming up.”
The fund manager hired Mourant, an offshore law firm, to get the paperwork in order for the Cayman vehicle. The managing partner of Mourant did not respond to requests for comment.
He also hired Globeop Financial Services, which provides administration services to hedge funds, to ensure that the Cayman entity was complying with anti- money- laundering laws and wasn’t doing business with anyone who had been sanctioned by the U.S. government, according to a copy of the contract.
“We abide by all laws in all jurisdictions in which we do business,” said Emma Lowrey, a spokeswoman for Globeop, which is now part of SS&C Technologies, a financial technology company based in Windsor, Conn.