London - A senior American banker once
secretly awarded a shareholding in powerful Moscow investment
bank Renaissance Capital to one of Vladimir Putin's closest
friends and brokered meetings for the friend with top US foreign policy officials a decade ago, emails show.
The American banker, Robert Foresman, currently vice
chairman at UBS investment bank in New York, held a series of
prominent roles in Moscow's financial world. He headed Dresdner
Bank's investment banking operations in Russia in the early
2000s, served as Renaissance Capital's vice chairman from 2006
to 2009, and then led Barclays Capital's Russia operation until
2016. Putin's friend, Matthias Warnig, sits on the boards of
several Russian state-controlled firms.
A deeply religious conservative, the blue-eyed, curly-haired
U.S. banker, has said it has always been his calling to be a
peacemaker between the two nuclear superpowers.
Now, a cache of Renaissance Capital emails from 2007 to 2011
reveal new details about the close relationship Foresman
cultivated within Putin's circle over the years and how he
leveraged these ties to win deals. The emails, which were
reviewed by Reuters, also shine a light on the part played by
Western bankers in the heady days of Moscow's 2007 economic
boom, when the Kremlin was moving to take over ever greater
swathes of the Russian economy.
The emails were exchanged among Renaissance Capital's top
executives and between the bank and its clients and business
associates before ownership of the bank changed hands in 2012.
They have figured in a long-running legal battle over the
controversial takeover by the Russian state of Mikhail
Khodorkovsky's Yukos oil firm in the mid 2000s, and are reported
here for the first time.
Matthias Warnig, Chief Executive Officer of Nord Stream 2 AG, attends a meeting with Russia's President Vladimir Putin and Kazakhstan's President Nursultan Nazarbayev in Sochi. File picture: Maxim Shemetov/Reuters
Foresman's relationship with the Kremlin was more
complicated – and more mercantile - than that of peacemaker,
these emails show. They offer insight into how Foresman and his
colleagues sought to help the Kremlin pull off, and profit from,
its dismantlement of Yukos at a time when analysts say Moscow
was seeking international legitimacy for the politically-charged
process. They also show how the American banker guided Warnig
around Washington foreign policy circles during the Bush and
Obama administrations.
In a statement to Reuters, Foresman said he considered it
inappropriate to comment on matters that may relate to
proceedings before the English court - a reference to a civil
lawsuit in the UK - but he refuted any suggestion of wrongdoing.
Renaissance Capital's new management declined to comment.
Foresman's Moscow connections gained fresh attention
recently when the banker was named in special counsel Robert
Mueller's report on Russian interference in the 2016 election.
According to the report, Foresman was among the many influential
people who reached out to Donald Trump when the future American
leader's campaign was building momentum.
In March 2016, Foresman emailed Trump's assistant inviting
the presidential candidate to an international business forum in
St Petersburg, saying he'd had "an approach" from "senior
Kremlin officials" about the candidate, according to the report.
Foresman asked for a meeting with Trump, or with campaign
manager Corey Lewandowski or "another relevant person," saying
he had other issues to discuss that he felt uncomfortable
discussing over "unsecure email."
In a later email, Foresman sought a meeting with one of
Trump's sons, Don Jr or Eric, to pass on information that should
be "conveyed to [the candidate] personally or someone [the
candidate] absolutely trusts."
The Mueller report says there wasn't any evidence that
Trump's campaign team followed up on these approaches. When
questioned by Mueller about these contacts, Foresman played down
his ties to the Kremlin. He suggested he was merely seeking to
"burnish his credentials" with the Trump team, the Mueller
report says. No charges were made against Foresman.
A SECRET AGREEMENT
Back in 2007, Foresman was part of a small group of
Renaissance Capital executives involved in drawing up a secret
agreement to award an unspecified stake in Renaissance Capital,
the privately owned investment bank where he was vice chairman,
to close Putin associate Warnig, according to a series of emails
related to the deal. The shares were awarded for "nil
consideration," or without any money changing hands, the
agreement showed. The emails reviewed by Reuters didn't reveal
the percentage or value of the stake.
Contacted by Reuters, Foresman and Warnig declined to
discuss the transaction.
Warnig served as an officer in East Germany's Stasi secret
police at the same time as Putin was a KGB officer in Dresden in
the late 1980s. Warnig has said they first met in the early
1990s in St Petersburg, when Putin was that city's deputy mayor.
Today Warnig is chief executive of Russia's Nord Stream 2 gas
pipeline to Europe. He also sits on the boards of several
Russian state-controlled firms, including oil giant Rosneft. He
served for 12 years on the board of Bank Rossiya, sanctioned by
the U.S. Treasury as the "personal bank" for senior Russian
officials.
From 2001 to 2006, Foresman worked side by side with Warnig
as head of Dresdner's investment banking arm in Moscow, while
Warnig was Dresdner Bank's president for Russia.
In the months before and after he received the Renaissance
Capital stake, Warnig sought to funnel at least three
Kremlin-linked deals the bank's way, Renaissance Capital emails
dated between 2007 and 2009 show. In one instance, in 2007,
Warnig helped broker crucial backing from Rosneft for a
consortium including Renaissance Capital that was bidding for
Yukos' Dutch assets in an auction.
The consortium went on to win the auction. But the
transaction became mired in lawsuits and was blocked. Yukos
executives successfully argued in a Dutch court that the Russian
state had no right to sell a Dutch-incorporated company. The
Dutch Supreme Court ruled earlier this year the sale was
illegal.
The emails were submitted as evidence as part of that case.
They have also been submitted as part of a civil fraud lawsuit
filed by Yukos' former management that is due to come to trial
on June 10 in the UK High Court. The suit alleges Foresman, as
vice-chairman of Renaissance Capital, played a key role in
paving the way for the consortium to knowingly participate in a
rigged auction for the Yukos subsidiary. It alleges the foreign
investors who formed the consortium stood to make enormous
personal gain, and seeks tens of millions of dollars in damages.
In his statement to Reuters, Foresman said he is contesting
the lawsuit vigorously.
Among the foreign bankers that joined the investor
consortium with Foresman was Stephen Jennings, a tall and lanky
New Zealander. Jennings founded Renaissance Capital in 1995, and
the bank became a symbol of Russia's transition to a market
economy. In an interview in 2005 with the Financial Times,
Jennings professed hopes that Russia's economic growth under
Putin would one day produce a middle class strong enough to
counter any authoritarian turn.
Instead, the lawsuit alleges, Foresman and Jennings sought
to benefit from Kremlin abuses of the market system and the rule
of law. They acted, the suit claims, together with the two other
main Western investors in the consortium: Stephen Lynch, a
former U.S. Peace Corps volunteer, and Richard Deitz, the wiry
founder of hedge fund VR Capital, which has offices in New York,
London and Moscow.
Deitz and Jennings declined to comment for this article.
Lynch didn't respond to emailed questions. A person familiar
with the consortium rejected any suggestion that the auction was
rigged.
A PRIZE ASSET
The auction of Yukos Finance BV, a Dutch subsidiary of
Khodorkovsky's oil company. was the last in a series of Yukos
bankruptcy sales by the Kremlin. These sales were to pay off
more than $33 billion in back-tax bills levied against Yukos by
Moscow after Khodorkovsky posed a political challenge to the
Kremlin and was jailed for fraud. The Yukos bankruptcy
transformed Rosneft from a state-owned minnow to Russia's
biggest oil company after it snapped up most of the assets. The
Dutch unit was a prize: It held up to $1.5 billion in cash
reserves, of which up to $650 million was net of debt. It also
had a 49% stake in a strategically important Slovakian pipeline
operator, Transpetrol, which later sold in 2009 for $240
million.
The bankruptcy auction took place on Aug. 15, 2007. The
foreign investor consortium, acting through a Russian bidding
vehicle, named Promneftstroy, won the auction for less than $310
million - well below the roughly $890 million combined value of
the Yukos unit's net cash reserves and its Transpetrol stake.
The consortium won after making just three bids against a rival
company, Versar, which, according to Yukos, never participated
in any business apart from unsuccessfully bidding in Yukos
auctions. Versar ceased to exist in 2010 when it was merged into
another company, Russian corporate records show.
Foresman had begun urging executives at Renaissance Capital
to take part in the Yukos bankruptcy auctions earlier that year,
the emails show.
In an email dated Feb. 21, 2007, Foresman wrote to three
senior executives at "RC" - Renaissance Capital - pointing to
the Kremlin-run Yukos asset auctions as an opportunity.
"I have reason to believe that RC, and only RC, can pull off
the trade of our lives," Foresman wrote. "We could pull off
something that makes us huge profit, makes top global investors
very happy, materially mitigates Rosneft's litigation risk. And
allows the Kremlin to show that the auction of Y assets is not
rigged but rather is competitive." Rosneft's success in the
auctions had raised the possibility of a legal challenge and the
Kremlin was under international scrutiny over the process.
A memo drawn up by Renaissance Capital the day before the
auction named the deal "Project Surplus" and said it could net
the consortium a profit of up to $340 million. The memo, seen by
Reuters, indicated the Western bankers believed the auction
would go in their favour.
"The opportunity to participate and be the likely winner has
largely arisen due to very close relationships that certain
Renaissance individuals enjoy with the Kremlin," the memo said.
The Kremlin declined to comment.
The U.S. government was watching proceedings closely because
of the strategic importance of the pipeline network Transpetrol
operated. Foresman told an unidentified U.S. embassy official in
Moscow in October that year that the consortium "had not been
acting as a proxy for Rosneft" in the auction and said there was
no prearranged deal with Rosneft over the Transpetrol stake,
according to a diplomatic cable about the conversation later
leaked by Wikileaks. Foresman didn't dispute the contents of the
cable in a deposition for the UK civil lawsuit.
But documents in the email cache and depositions of
consortium members indicate that Rosneft was closely involved
with the consortium in the deal. Foresman described in his
deposition in November 2018 how Warnig channeled the
consortium's proposal for participating in the auction to the
top of Rosneft.
In the hours before the sale of the Yukos unit, the
consortium reached two legal agreements with Rosneft.
In the first of those agreements, reviewed by Reuters and
dated Aug. 15, 2007, Rosneft agreed to lift any legal claims the
Russian oil giant had against the Dutch firm's assets.
In the second, also reviewed by Reuters and dated Aug. 15,
2007, the state oil champion agreed to delay repayment of a $60
million loan it had extended to Promneftstroy, the bidding
vehicle, until the consortium arranged to sell Yukos's Slovak
pipeline to a company nominated by Rosneft. A month later, the
consortium agreed to sell the pipeline stake to a
Cyprus-registered firm for $105 million - less than half the
price it fetched two years later. An email chain leading up to
the sale agreement indicates the buyer was designated by
Rosneft.
In the hours after the auction, another investor in the
consortium, Benjamin Heller, then a managing director at U.S.
fund HBK Investments, wrote to an associate saying: "Rosneft
basically controlled the auction and decided it would clear at a
certain price." Heller, who isn't named as a defendant in the
lawsuit, declined to comment. Rosneft didn't respond to Reuters'
questions about the auction. At the time of the sale, the state
oil giant denied any involvement in it.
The person familiar with the consortium said there were
mistakes in Heller's email. "Rosneft didn't set the price, and
there were two bidders," said this person. "The whole premise
that Rosneft controlled the consortium, controlled the price and
controlled the auction is not correct."
He added that at the time of the auction the consortium
didn't have access to data valuing the Transpetrol stake above
$103 million - a sale price that had been discussed a year
earlier. He said the consortium had reached out to both sides of
the Yukos divide, agreeing to pay back outstanding loans to
Yukos' former owner.
Two months later, in late 2007, the consortium's hopes of
making profits began to unravel when an Amsterdam court ruled
that the auction violated Dutch law, and therefore the
consortium owners didn't have title to any of the assets of
Yukos Finance BV.
PHANTOM SHARES
In emails dated Oct. 11, 2007, a few months after the
consortium won the auction, Foresman and his colleagues at
Renaissance Capital began discussing the drafting of a secret
"phantom share agreement" for an unnamed "prospective new
shareholder." Phantom share deals are a common arrangement under
which a company promises the holder a future cash payment that
is tied to the value of a notional share of stock. Among the
executives discussing the award of these shares was the bank's
founder, Jennings, who was the main owner at the time. He
declined to comment about the transaction.
An agreement identifying Warnig as the recipient of "40,034
phantom shares" in Renaissance Capital's parent company,
Renaissance Holdings Management Limited, was drawn up by the
investment bank's legal counsel and sent to Foresman in an email
dated Nov. 27, 2007.
An additional consultancy agreement drawn up by the legal
counsel and sent to Foresman on Dec. 17, 2007, provided for
paying $700,000 to an unnamed recipient for advice on "certain
investment banking transactions and business development
opportunities." In his November 2018 deposition for the UK civil
suit, Foresman said Renaissance Capital paid consultancy fees to
Warnig. He didn't specify the amount.
Foresman and the other Renaissance Capital executives sought
to keep these arrangements secret, the emails show. When a
RenCap employee mistakenly sent a message to Warnig's official
company email address in 2007 about the shareholding, Foresman
fired off an angry reply to three senior Renaissance Capital
executives. "This is clearly unacceptable and I cannot believe
this could happen," he said in the message, dated Dec.18, 2007.
He said Warnig had immediately destroyed the message.
In a later email to the same colleagues, dated Feb. 12,
2008, Foresman stressed how Warnig had insisted the agreements
remain absolutely confidential: They were to be known only by
the executives at Renaissance who drew up the agreements. The
email says: "Our man has signed his phantom share agreement, in
his name, and also the consultancy agreement in the name of a
legal entity." It went on, "He stressed the absolute
confidentiality of this."
Warnig's relationships with Foresman and Renaissance
Capital's founder and chairman, Jennings, were cemented over
dinners and "banya" steam-bath sessions in Moscow, the emails
show. And Foresman helped open doors for Warnig with U.S.
ambassadors to Russia and U.S. government officials in
Washington during the administrations of George W. Bush and
Barack Obama.
The email cache shows, for instance, that Foresman helped
set up meetings in 2009, early in Obama's presidency, for Warnig
with the U.S. government's then national intelligence officer
for Russia and Eurasia, Fiona Hill, as well as with Mary
Warlick, then the acting deputy assistant secretary of defense
for Russia, Ukraine and Eurasia. He also brokered meetings for
Warnig with officials in the Department of Energy and separately
in Houston with Ross Perot Jr, the U.S. billionaire. Perot
declined to comment for this article. Hill and Warlick didn't
respond to requests for comment.
The emails reviewed by Reuters didn't reveal what came of
the meetings.
After one such visit in March 2009, Foresman indicated these
meetings were to become a back channel for Putin into
Washington. In one email, he wrote, "my friend briefed his Big
friend on the meetings" – an apparent reference to Warnig
speaking with Putin. "That person was extremely satisfied with
the messages that were received and absolutely committed to
improving things. He asks for a repeat performance in Q2 for
which he will have my friend deliver specific messages,"
Foresman wrote.