Corporate "Raiderstvo" in Russia! A new wave or sophisticated crime.

A new intern has joined ABA recently. Tonya is also a Russian-American and will be entering her 3rd year at University of San Diego School of Law.  She hasn't been back to Russia in 23 years! But, she is very sharp and her Russian is improving day by day. It's been nice to have another person around with a similar background and legal interests. Yesterday she and I attended a lecture on corporate raiding at the US Embassy and today we attended a real criminal trial.

All of this was made possible because of an incredible contact we made at the round table we attended at the Moscow Regional Chamber of Advocates.  Tom, who was one of the speakers, is the US Embassy Resident Legal Advisor from the DOJ.  Tom invited us to a talk he held for visiting law student from the US, Philippines, and Germany.  It was held at the US Embassy, which is an incredible place to visit. Located right next to the White House, it reminds one of a very nice looking prison!  The security is very strict (even for those holding a blue passport).  The building is brand new and inside it's very bright, clean, and pleasant.  I was surprised to learn that they have the following amenities: large grocery store, souvenir store, pool, gym, dry cleaning, hair/nail salon, clinic, playground, barbeque area, etc. Basically everything you need so that you never have to leave the building. I certainly hope that some people still do (unlike in the book "The Ugly American").

Anyway, Tom has been following corporate raiding in Russia and recently published an article on the topic titled "Criminal Corporate Raiding in Russia." His talk outlined some very interesting points on this prevailing problem.  Corporate raiding or "raiderstvo" is an illegal takeover of a business. For example, if you own a grocery store in Russia, you may arrive at the doors one day to find them locked and the building seized by private security.  According to Tom, "raiderstvo" happens in many other ways of course, including bankruptcy schemes, corporate schemes, litigation schemes, land schemes, and other tactics.  Raiders falsify powers of attorney and illegally transfer company assets, start frivolous lawsuits and pay off judges to award the plaintiff millions of dollars in damages (which true owners cannot afford), and falsify title to pieces of real property.

Highly publicized recent cases of "raiderstvo" involve Hermitage Capital Management and British Petroleum.  According to Tom's article: "William Browder, manager of Hermitage Capital Management hedge fund, one of Russia's largest foreign investors, recently claimed that raiders stole several of Hermitage's investment vehicles by falsifying corporate documents and filing frivolous lawsuits as part of a $230 million fraud scheme. British Petroleum (BP) Chairman Peter Sutherland claimed that the BP half of a joint venture with the Russian oil company TNK has also been the victim of a corporate raid."

This is a real problem in Russia and Tom said that an important step to resolving it would be to pass a bill categorizing "corporate raiding" as a crime, because at this time there is no such crime.  Raiding cases are usually litigated (unsuccessfully) based on organized criminal activity, fraud, extortion and other similar types of charges. Also, it may prove beneficial for these legal entities, who fall victim to raiders, to apply to the European Court of Human Rights.  How successful something like this would be is one of my possible research topics.

Vse poka (that's it for now),



P.S. I'll discuss the criminal trial in my next blog.