VOL. 42 | NO. 27 | Friday, July 6, 2018
Sanctioned Russian oligarch linked to Cohen has vast US ties
WASHINGTON (AP) — Long before Viktor Vekselberg was tied to a scandal over the president and a porn star, the Russian oligarch had been positioning himself to extend his influence in the United States.
Working closely with an American cousin who heads the New York investment management firm Columbus Nova, Vekselberg backed a $1.6 million lobbying campaign to aid Russian interests in Washington. His cousin Andrew Intrater served as CEO of a Vekselberg company on that project, and the two men have collaborated on numerous other investments involving Vekselberg's extensive holdings.
In early 2017, shortly before Donald Trump's presidential inauguration, Intrater hired Trump's personal attorney, Michael Cohen, as a consultant.
Now, Intrater's investment firm is wrestling with the fallout from financial sanctions the U.S. Treasury Department lodged in April against Vekselberg, one of a group of oligarchs tied to Russian President Vladimir Putin.
Columbus Nova has insisted it only managed Vekselberg's vast assets. But an Associated Press review of legal and securities filings shows that the cousins sometimes collaborated in a more deeply entwined business relationship than was previously known.
Spokesmen for Columbus Nova have told the AP that the firm's business relationship with Vekselberg has been indefinitely halted by the sanctions, which targeted Russian oligarchs accused by Treasury of playing "a key role in advancing Russia's malign activities."
All Vekselberg assets in the U.S. are frozen and U.S. companies forbidden from doing business with him and his entities. The deadline to sever those relationships was June 4, but talks between Columbus Nova and the government are continuing, the firm's spokesmen said. A Treasury Department spokesman declined to comment.
The Columbus Nova spokesmen said the firm is also seeking permission from Treasury to retrieve any assets entwined with Vekselberg's Renova Group, which the U.S. firm has called "its biggest client."
Extricating Columbus Nova's holdings from Vekselberg's is not so simple. The sanctions apply to all assets in which Vekselberg has more than a 50 percent stake — including some investment funds managed by Columbus Nova in which the firm has an ownership interest, the spokesmen said. They discussed the matter on condition of anonymity because of the sensitivity of the ongoing discussions.
A Russian citizen who has had a U.S. green card and homes in New York and Connecticut, Vekselberg once told an American diplomat he felt "half-American." Vekselberg heads the Renova Group, a global conglomerate encompassing metals, mining, tech and other assets that is based in Moscow.
He wields an estimated $13 billion fortune that supports Silicon Valley startups, programs at a California state park, a Western-themed resort amid the Joshua trees near Scottsdale, Arizona — and a loan to a Baptist church in Savannah, Georgia.
"I think all along Vekselberg thought a big chunk of his life was going to be anchored here in the United States and he, like other Russia businessmen, has made strategic investments in his philanthropic work to be in better standing here," said former U.S. Ambassador to Russia Michael McFaul.
Vekselberg also has cemented tech deals using a Kremlin-funded foundation — raising national security concerns years before special counsel Robert Mueller began probing contacts between Donald Trump's presidential campaign and Russian intermediaries. His opaque corporate structure, which includes an array of hard-to-trace shell companies, has fallen under Mueller's scrutiny, according to several media reports.
Vekselberg's cousin hired Trump's lawyer Michael Cohen as a consultant in January 2017, just months after Cohen paid off the adult film actress known as Stormy Daniels, who has alleged she had an affair with Trump.
But some experts familiar with Vekselberg's financial holdings wonder if the government is adequately tracking his U.S. assets, let alone the companies or foundations managing his money under other names.
"Given how hidden these companies are in a network of shell companies, it is entirely possible that Vekselberg has a majority stake in businesses that are still functioning in the United States that the government doesn't even know about," said Peter Harrell, a sanctions expert and former deputy assistant secretary at the State Department.
Vekselberg's spokesman, Andrey Shtorkh, did not detail how the billionaire was addressing the sanctions. Shtorkh stressed that the oligarch did not create or control Columbus Nova and gave up his green card more than a decade ago.
"It quickly became obvious that he had little time for more than brief visits to the United States," Shtorkh said.
MAKING WESTERN INROADS
Vekselberg was born in what is the modern-day Ukraine, and built his fortune investing in aluminum and oil, taking advantage of the privatization of state companies after the Soviet Union's collapse in 1991.
The 61-year-old billionaire burnished his reputation in the West in 2010 when he was appointed president of the Skolkovo Foundation, a nonprofit initiative funded by the Russian government and private investors to build a high-technology research hub aimed at luring digital entrepreneurs to Russia.
While Putin and Vekselberg have not always been strongly allied, the project now appears to have the Russian president's backing. In January, Putin highlighted a Skolkovo effort as the type of "forward-looking projects" that would receive government support. In a June 2017 meeting at the Kremlin, Putin praised Skolkovo's work.
In June 2010, Vekselberg traveled to Silicon Valley with then-Russian President Dmitry Medvedev to try to gain a foothold for the Skolkovo Foundation. He signed a deal with Cisco CEO John Chambers for Cisco to invest $1 billion over 10 years in Skolkovo projects and met with Russian expatriates who urged him to set up a Skolkovo office nearby.
Skolkovo appeared to be a family concern. When members of the same expatriate association gathered in Manhattan to promote U.S. venture capital investment in Russia, the featured speakers included Intrater. And in a presentation dated June 2013 on Skolkovo's website, Columbus Nova was described as one of several corporate venture funds financing Skolkovo participants. The foundation declined to comment, deferring to Shtorkh, who said that Vekselberg did not have control over the foundation's decisions.
In 2011, an office near Stanford University was established for the Skolkovo Foundation and two sister funds, amid President Barack Obama's call for a "reset" in Russia relations.
Vekselberg also spawned another foundation to benefit Fort Ross, a California state park that was once a Russian settlement. The foundation and affiliates donated at least $3.2 million to the park's programs and activities between 2010 and 2017, according to the foundation's website.
As Obama's effort to reboot diplomatic relations sputtered, federal officials began raising alarms about the Skolkovo Foundation's ties to Putin.
The FBI's Boston division gave tech startups a frank warning in an April 2014 column published in a trade journal.
"The foundation may be a means for the Russian government to access our nation's sensitive or classified research, development facilities and dual-use technologies," wrote Lucia Ziobro, assistant special agent in charge of the FBI's Boston office.
Media attention zeroed in on Vekselberg and Intrater in May when Michael Avenatti, the attorney for porn actress Stormy Daniels, released a memo claiming the cousins routed about $500,000 through Columbus Nova to a shell company set up by Trump attorney Cohen.
Avenatti claimed that just before the 2016 presidential election, Cohen used the same shell company, Essential Consultants LLC, to pay the adult film star $130,000 to keep silent about her allegation of a one-night stand with Trump a decade earlier.
Eleven days before Trump's inauguration, Vekselberg and Intrater jointly met with Cohen, one of several meetings between Trump intimates and high-level Russians during the 2016 campaign and transition. During the meeting in Cohen's office in Trump Tower, Vekselberg and Cohen discussed U.S.-Russia affairs, said a person familiar with the meeting who spoke anonymously because he was not authorized to discuss the session.
According to financial records reviewed by the AP, the meeting occurred the same month that Intrater's firm began making payments to Cohen's LLC that totaled $500,000, delivered in eight installments ending in August 2017.
In a statement on its website, Columbus Nova denied that Vekselberg played any role in its payments to Cohen.
Intrater's firm, which described itself in a company website entry as "a multi-strategy investment firm managing over $15 billion of assets," has handled Vekselberg's financial holdings for nearly two decades, company spokesmen say.
But as far back as 2000— during Columbus Nova's start up — Intrater also worked for Vekselberg as CEO of a subsidiary of the Russian's Renova Group conglomerate. Between 2000 and 2004, the New York-based subsidiary, Renova Inc., commissioned a Washington lobbying firm to work for both Vekselberg and Russian interests.
Shtorkh acknowledged Renova Inc. is owned by the billionaire. According to a lobbying contract reviewed by AP and validated by spokesmen for Columbus Nova, Intrater served as Renova Inc.'s CEO for at least three years even as he built up his own investment firm.
The Columbus Nova spokesmen described Renova Inc. as a "rep firm," a marketing company that represented Vekselberg's conglomerate in the U.S. They added that Intrater took on his Renova Inc. role as a client service to Vekselberg as part of his asset management role for the Russian.
In April 2001, Intrater signed a contract with Washington lobbying firm Carmen Group Inc., representing the Vekselberg company. The lobbying firm said in congressional filings that it had been hired to "encourage trade and cultural exchanges between the United States and Russia."
The contract also said the Carmen Group was hired to "organize congressional and other high-level U.S. government delegations to meet with foreign government and business leaders abroad and in the U.S." Columbus Nova spokesmen said no U.S. delegations were brought to Russia.
Carmen Group was paid $1.58 million; a spokeswoman for the lobbying firm declined to detail its work.
While the Columbus Nova spokesmen acknowledged Intrater has served on advisory boards of several companies where Vekselberg owed majority stakes, they said Intrater took those positions because of his role managing assets for Columbus Nova.
Intrater joined the board of one such firm in the mid-2000s, becoming a director — and briefly, chairman — of an American cable company that transformed into a Moscow-based firm after a Vekselberg-financed takeover. Between 2004 and 2007, the cousins teamed up in the acquisition of Moscow CableCom Corp., a U.S.-based cable company once known as the Andersen Group that now serves several Russian cities.
Intrater joined the board after Columbus Nova routed $51 million from the New York firm's investors to Moscow Cablecom the cable firm in 2004. That same year, Vekselberg's Renova Group took a stake. By July 2007, Vekselberg's company had financed the cable firm's acquisition in an estimated $152 million deal.
Documents filed with the Securities and Exchange Commission list both Vekselberg and Intrater as key figures in the cable firm acquisition. But Columbus Nova representatives said that some filings made by the now-defunct Moscow CableCom Corp contained errors, including overstating the role of a Columbus Nova corporate entity in one round of investments.
WINDING DOWN ASSETS
Vekselberg's unfettered access to the U.S. withered when his assets in America were frozen under sanctions April 6, causing him nearly $1 billion in losses, Forbes estimated.
The Treasury Department included a Russia-based corporate entity owned or controlled by Vekselberg in its sanctions, but warned that the list shouldn't be viewed as a complete inventory of companies linked to the oligarch.
Two of Vekselberg's largest companies — Renova Management AG and the engineering firm Sulzer, both based in Switzerland — swiftly and publicly corrected course to lessen his control or financial interests.
Some entities associated with the oligarch in the United States have been less forthcoming.
Shtorkh said Vekselberg is an investor in a venture fund called Maxfield Capital, which lists a San Francisco office on its website. A Maxfield Capital representative in Russia said the fund was taking steps to fully comply with sanctions requirements, but offered no specifics.
"Vekselberg's money directly or indirectly represents quite a hefty chunk of all assets under management," said Michael Minkevich, who managed deals for the fund in Silicon Valley until January. "They definitely need to find some way to cut any ties."
Shtorkh said Vekselberg had a limited partnership interest in the Cayman Islands-based fund and did not have control over Maxfield Capital.
As for Vekselberg's park foundation, its director did not respond to emails or voicemails.
Sarah Sweedler, president of another nonprofit that received funding from Vekselberg's foundation to run programming at Fort Ross, said her group has no outstanding business with the foundation and has not communicated with its staff since the sanctions hit.
Vekselberg also has ties to two other foundations operating in the U.S. The Link of Times Foundation USA Inc. did not respond to voicemails or emails seeking comment, and the administrator of the Mariinsky Foundation of America Inc. said Vekselberg was removed from the board of directors last year.
The Skolkovo Foundation's activities have not been disrupted by U.S. sanctions, Shtorkh added.
Sean Kane, a former senior official with the Treasury Department's Office of Foreign Assets Control, said it was unusual but not unprecedented for a sanctioned person to have such extensive personal and business relationships inside the United States.
OFAC regulations require companies to do their own checking to ensure they aren't doing business with sanctioned entities. But Kane said that problems sometimes surface years later because it is so difficult to unravel complex corporate structures.
Kane, who now is in private practice in Washington, said that "nobody has the time or resources to be tracking how these people are moving their money 24/7. Any entanglements that U.S. foundations and companies have with sanctioned individuals such as Vekselberg will need to be looked at very carefully."
Burke reported from Menlo Park, California. Associated Press writers Nataliya Vasilyeva in Moscow and Raphael Satter in London contributed to this report.
This story has been corrected to reflect that Andrew Intrater, and not his cousin, Viktor Vekselberg, hired Michael Cohen as a consultant.