Owner of struggling Latvian shipyard opens swish Mayfair casino

By bne IntelliNews February 25, 2015

Graham Stack in Berlin -

 

Latvian Vassilijs Melniks is the first Eastern European businessman to own a major casino in the United Kingdom, bne IntelliNews can reveal. The casino opened in November in London's leading hotel, the Park Lane Hilton, at the heart of Mayfair, with a view across Hyde Park, and a stone's throw from Buckingham Palace.

Melniks' coup was to snatch the only casino license in London still available, according to casino manager Bob Walker. London's exclusive Mayfair district is already home to a cluster of exclusive casinos frequented by the rich and famous such as Les Ambassadeuers and Crockfords, both within walking distance of Park Lane Casino.

The casino occupies the entire lower floors of the Park Lane Hilton, but has a separate entrance and is not associated with the hotel, a spokesperson for the casino said. The premises are rented from the owners of the entire building, according to a bne IntelliNews source.

Melniks has invested a whopping £15m pounds into the premises, according to contractors CLA Urban, who oversaw the refurbishment over a tight time frame of only six months, through to the casino’s opening in November 2014.

The results, by all accounts are impressive. A stately entrance opens on to a marble staircase rising to the gaming rooms, the “Dream Bar” and “Jewel of Mayfair” restaurant – and wait until you get to the gold-plated bathrooms. “In keeping with the property’s exuberant style, the bathrooms have been fitted with a selection of luxurious gold-plated products,” according to bespoke bathroom fitters Bagnodesign, who say they supplied gold-plated bidets, basins and even whole gold-plated WCs to the casino.

Casino

The “request for all products to be plated in gold was a challenge of course but one that we felt more than confident to undertake”, Bagno's press service said.

But despite the prime location, extravagant fittings, and a staff of 250, the casino has kept a low profile – its opening in November was off the public radar, it has a rudimentary website, and the casino remains a dark horse to gaming experts in the capital.

Underscoring how publicity-shy the new casino is, Melniks did not answer calls to his mobile phone or emails, and managers at the casino did not return calls.

A low profile and air of discretion may in fact be ideal to attract the size of wallets needed to make a high-end casino tick, say gaming industry insiders. Moreover, Melnik is personally well-connected among what is known as 'Londongrad' – London's wealthy Russian-speaking community - and may look in this direction for clients, according to a bne IntelliNews source who attended a Melniks presentation in the casino. Melniks claims to be related to top Ukrainian officials, according to the source, while it is a matter of public record that in May 2014 Russian President Vladimir Putin awarded him the Russian 'Order of Friendship'.

The Hilton itself is a beloved place for rich Russians to stay while in London: Melniks himself is reported to be a frequent guest, and his friend, Russian billionaire Peter Aven, president of Alfa Bank, is also well-known to the Hilton staff.

Melniks may be the first Eastern European to own a West End casino, but he is not the first foreign multimillionaire to set himself up in London in this way. According to London author Mark Hollingway, who has written extensively on both the British capital's plutocratic Russian-speakers, as well as Mayfair's elite casinos, West End casinos may follow English football clubs as the new must-have for the global nouveau riche.

Like football clubs, casinos are more often a trophy than a profitable business: casino margins are declining because of tougher anti-money laundering (AML) laws, meaning expensive compliance hires and computer technology. In January, 2015, as part of a crackdown on money laundering via casinos, US government anti-money laundering agency FinCen imposed its biggest ever fine on a casino, fining the Trump Taj Mahal casino in New Jersey $10mn for failing to properly identify clients, according to the Wall Street Journal.

Shipping losses

Melniks owns the casino via his Latvian structure Eiroholdings Invest, which in turn owns the UK holding company Silverbond Enterprises, according to its last corporate filings.  Eiroholding told bne IntelliNews that Melniks was on vacation and would not be able to respond to questions.

Melniks, 47, is a prominent figure in Latvia, where he was even finance minister for four days in 1997, and has interests ranging from knitwear to banks. But his London casino business is unknown in his native country, where the talk is of Melnik's recent apparent shortage of funds. His main asset, Latvia's largest industrial company Riga Shipyards, with a workforce of around 600, narrowly escaped bankruptcy in 2014, after making €1.6m losses in 2013 and an estimated €1.5mn losses for 2014.

The losses are not just puzzling, juxtaposed with the flamboyant casino investment in London. They are also puzzling after in 2011 Riga Shipyard won a massive $400mn Ukrainian state tender, to supply an offshore drilling rig, which at the time billled as a turnaround in the shipyard's fortune.

The deal was controversial because Riga Shipyard, an intermediary in the deal, sourced the rig from a Norwegian leasing firm for only $225m. According to Riga Shipyard, the costs for transport of the rig from the shipyard in Singapore to Ukraine, engineering work needed to transit under the Bosphorus bridges, and extras bumped up the total order volume to just under the $400mn received from Ukraine's energy company Naftogaz.

The rig was delivered to Ukraine in the last days of 2012. In the first three months of 2013, Riga Shipyard's UK subsidiary transferred $47.5mn to an obscure Turkish some-time ship repairer, ostensibly for work performed on the rig. In an interview with bne in 2014, the ship repairer acknowledged that he did not even have his own workshop. Both he and Riga Shipyard say there was nothing unusual about the transaction.

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