A prominent Russian businessman has accused Edmond de Rothschild, the Swiss private bank, of engaging in a kickback scheme that pilfered millions of dollars from his investment fund and ultimately cost him more than $100m.
The lawsuit was filed by Sergei Bogdanchikov, the former head of Rosneft, the Russian oil company. Mr Bogdanchikov alleges that a senior Rothschild executive with close ties to Baroness Ariane de Rothschild, the bank’s chairwoman, conspired with eastern Europeans living in Brooklyn, New York, to dupe him.
The case, filed in New York state court late on Wednesday, seeks more than $100m in damages. It also claimed that the alleged scheme was carried out with the assistance of Mossack Fonseca, the now defunct law firm whose work setting up secretive offshore companies was exposed with the release of the Panama Papers.
“Rothschild, one of the most rarefied names in all of western banking, went rogue — in New York,” said Tibor Nagy, a lawyer representing Mr Bogdanchikov, accusing the firm of using “sham brokers and shady investment managers” to embezzle money from his client.
Edmond de Rothschild declined to comment.
Mr Bogdanchikov had previously sued the bank in Luxembourg and Switzerland but only recently learned of the alleged involvement of the New York parties, paving the way to sue in the US.
Mr Bogdanchikov was appointed president of Rosneft, the Russian oil group, in 1998, and helped to stabilise it after the tumultuous post-Soviet era. He was later pushed aside after Igor Sechin, a close ally of President Vladimir Putin, took control of Rosneft.
The complaint said Carlo Thewes, a former senior Rothschild executive, sold himself to Mr Bogdanchikov as being a close confidante of the baroness — her “eyes and ears” at the bank — as he sought to win his trust. Mr Thewes even invited the Russian — an engineer who was supposedly naive about investing — to the baroness’s opulent Chateau de Rothschild palace on the outskirts of Geneva.
“The fraud thus began with a simple illusion: use the 250-year-old lustre of the Rothschild name to inspire trust — and then abuse that trust through a kickback scheme,” the lawsuit said.
Beginning in 2001, Mr Bogdanchikov entrusted more than $150m to Rothschild through a vehicle named Fortinvest. He ordered Mr Thewes to invest the money conservatively, according to the lawsuit.
Instead, the complaint said, Mr Thewes found intermediaries in New York who charged inflated fees to handle Fortinvest’s funds. Some of those fees were then kicked back to him and Rothschild.
One of the alleged intermediaries was Fontanelle Capital, run by Vladimir Oblonsky and his wife Olga from an office in Brooklyn.
According to the complaint, Fontanelle steered some of the Fortinvest money to another New York investment firm, OIM, that was run by a man named Mikhail Filimonov. It ended up losing $10m of Mr Bogdanchikov’s money after buying convertible bonds issued by what turned out to be a fraudulent Indian satellite company.
The Oblonskys and Mr Filimonov did not return calls seeking comment.
Mr Bogdanchikov did not learn of the alleged fraud until 2016, according to the complaint, because Rothschild was maintaining two sets of books to conceal his losses. The bank had also enlisted Mossack Fonseca, according to the lawsuit, to set up sham companies that allowed it to push through Fortinvest transactions without his knowledge.
In addition to the millions of dollars spent on excess fees, Mr Bogdanchikov claims to have lost $86m on reckless investments of which he was unaware. The complaint claimed that Mr Thewes, who left Rothschild in 2016, and Fontanelle deliberately sought out investment managers not based on their skill or record but on their willingness to participate in the kickback scheme.
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