Instigator of claims against Usmanov accused of intimidating lawyers

Instigator of claims against Usmanov accused of intimidating lawyers
A long-running shareholders dispute between minority shareholders and Metalloinvest has flared up again. / bne IntelliNews
By Ben Aris in Berlin May 18, 2024

The shadow leader of a group of former shareholders who was at the centre of a years-long campaign against the Russian metallurgical company Metalloinvest and its sanctioned shareholder Alisher Usmanov has been accused of putting pressure on lawyers and attempting to defraud them on two separate occasions, bne IntelliNews has learned.

Joachim Steinhöfel, a prominent German media rights attorney who represents Usmanov, told bne IntelliNews that he had received a letter from Andrei Ivanov, the leader of a group of former minority shareholders of the Lebedinsky Mining and Processing Plant (LGOK) in Russia, that contained “thinly veiled threats,” according to Steinhöfel.

Ivanov threatened to disseminate documents that allegedly showed tax violations on the part of Metalloinvest and companies associated with Usmanov, and defamatory statements about the billionaire, if the two sides failed to reach an “amicable settlement,” according to Steinhöfel.

“This unethical, if not straightforward criminal, behaviour, is yet another example of several violations of the law that have accompanied the fanciful accusations against my client from the outset,” Steinhöfel said. “The threats voiced in the letter mark a clear departure from acceptable practice and expose the sender to civil and criminal proceedings in Germany and in other EU countries.” German law carries a penalty of a fine or up to five years in prison for acts of coertion or extortion. 

Ivanov denies any wrongdoing and claims that he is simply seeking a “compromise solution,” he said in a phone conversation with bne IntelliNews.

“To the lawyers it looks greenmail or blackmail. It’s nothing like that. If you go to German court with a Russian passport they do not care for us as none of us has German citizenship. Therefore there is no legal protection, unless you can give some special information that is of interest [to German investigators],” Ivanov said.

As bne IntelliNews reported earlier, the former LGOK minority shareholders under Ivanov’s leadership had been carrying out a more than 15-year campaign of demanding payment from Metalloinvest, a top Russian iron ore producer and part of a holding company tied to Usmanov.

The former shareholders claimed that Metalloinvest had allegedly paid them an undervalued price for their 0.53% stake in LGOK – which was just one of the steel giant’s four plants – during a mandatory buyout in 2007. Out of the more than 11,000 former shareholders who received payment as part of the buyout, only several individuals decided to contest the payment. In so doing, they hoped to retroactively cash in on an attempt to have the buyout declared illegal.

At the time of the deal, the minority shareholders were paid a price that exceeded independent valuations by more than 50%. Russian business media noted at the time that the terms of the buyout were “highly attractive for minority shareholders,” given that their payment exceeded the fair price by a factor of nearly 2.5.

However, after the buyback was completed, the former shareholders worked with Ivanov to produce their own valuation, in which the price of one LGOK share would have been almost triple the price that figured in the buyout. According to Russian media, the minority shareholder’s valuation was abnormally high, as it would have valued the LGOK plant alone at $17bn, exceeding the value of the leading Russian metallurgical giant Severstal, several times LGOK’s size. Nevertheless, the former shareholders launched a legal offensive to revisit the terms of the buyout that dragged on for years without a single ruling by Russian courts in their favour. By 2013, they had lost a total of 16 court cases against Metalloinvest, with the courts ruling that the buyout had been done by the book. At present, their demands have not only been dismissed by Russian courts but also refuted by international independent assessors.

After nearly a decade of silence, the group renewed its offensive in 2021, when rumours emerged that Metalloinvest was planning an IPO. This time, they bypassed the courts and started a smear campaign against the company in the media, as well as sending letters directly to company representatives. Their campaign against Metalloinvest intensified after the US and UK imposed sanctions against it and a number of other Russian metals companies in 2023.

Metalloinvest has maintained that the buyout took place in line with market regulations, a position that has been upheld by multiple court decisions. The company filed and won a claim against the former shareholders’ accusations, describing their activity as the systematic spreading of “defamatory publications and false denunciations” about Metalloinvest.

The defamation campaign even spilled over onto Germany’s largest bank, Deutsche Bank, which, as Ivanov repeatedly claimed, had carried out an alternate valuation of LGOK with a “fair” estimate in advance of the mooted IPO of the entire Metalloinvest holdings on the London Stock Exchange. However, this alternate valuation never materialized.

In their arguments, the ex-shareholders mainly cited a prospectus for a Eurobond issue, which had no relation to potential IPO procedures and contained no data on LGOK’s valuation, according to a representative of Metalloinvest. In late 2022, the former shareholders demanded that Deutsche Bank show them its “unpublished” valuation and hinted at the possibility of filing criminal charges against the bank. According to Steinhöfel, the bank, unsurprisingly, strongly denied the accusations and left their request unfulfilled.

Usmanov, a metals and media tycoon of Uzbek descent, was sanctioned by the EU in 2022 on the claims that he was a close confidante of Russian President Vladimir Putin and “solved his business problems” on various occasions. The latter claim, originally published by Forbes magazine, was struck down as false by a German court earlier this year after Forbes failed to provide evidence to back the accusation up.

Usmanov is also the target of an investigation in Germany that was launched after Russia’s invasion of Ukraine, on accusations involving money laundering and tax evasion that his lawyers say are politically motivated. A number of search warrants tied to this investigation were subsequently found to be unlawful by domestic courts. Moreover, the search warrants were reportedly obtained by German prosecutors on second attempt, after the initial judge in Frankfurt questioned whether there was enough evidence for the allegations against Usmanov to justify a property search and refused to sign off on the warrant.

According to Berliner Zeitung, during this time Ivanov and the former LGOK shareholders had sent accusations of tax fraud by companies associated with Usmanov to officials in Germany, the US and other countries, as part of their running campaign.

In Germany, after domestic law enforcement agencies started their investigation of Usmanov, Ivanov reportedly approached the Prosecutor General of the Supreme Court, the Public Prosecutor's Office and the Criminal Police Office in Cologne, and the Federal Ministry for Economic Affairs and Climate Protection, but he was turned away each time, sources say. In 2022, for example, prosecutors in Cologne firmly and unequivocally turned down a request by the former shareholders to launch criminal proceedings. In his response, the senior public prosecutor of Cologne noted that he found no violations of German criminal law and saw no grounds for launching an investigation.

Nevertheless, as bne IntelliNews has learned, claims by Ivanov – who is believed to reside in Germany – became part of the evidence used in the money laundering investigation against Usmanov. Usmanov’s lawyer, however, believes the claims by Ivanov have no significance for the investigation.

“Ivanov’s materials are irrelevant to the suspicion of money laundering, since the activities of which he wrongfully accuses my client are not recognized as predicate offences for the purposes of money laundering,” Steinhöfel said.

The dispute seemed to finally come to an end in 2023, when Ivanov publicly stated that the minority shareholders’ claims against the company were groundless and said he had stopped representing them in their claims. In a separate instance, bne IntelliNews learned that the former LGOK shareholders had published accusations against a Berlin-based law firm, Anwalt4U, in an online smear campaign, according to the firm’s lawyers. The accusations implied that the law firm was working in the Kremlin’s interests.

The Anwalt4U attorneys accuse Ivanov of carrying out a fraudulent scheme that they were representing 16 former LGOK shareholders in a claim against Metalloinvest, with Ivanov acting as their intermediary. However, the attorneys grew suspicious after Ivanov refused to be named as their client or become a formal party to the claim. At the same time, Ivanov demanded at least 50% of the compensation that would have been paid out to each claimant by Metalloinvest, with this money to be credited to bank accounts that were not under the purported claimants’ names, Anwalt4U lawyers claim.

“The final straw came when we raised our concerns with Ivanov and questioned whether the other former shareholders had in fact consented to hiring our law firm,” said Vladislav Pinsky, one of the attorneys from Anwalt4U. “In response, we were accused of ‘repeated deception’, and almost simultaneously an article full of false statements about our firm appeared on a Russian kompromat website.” Anwalt4U has filed a fraud complaint against Ivanov and an accomplice with the Berlin prosecutor’s office.

Ivanov says an agreement was signed between Anwalt4U and all of those former minority shareholders, but didn’t comment on if he had also signed the agreement. He also admits to telling Pinsky that he expected to be paid 50% of any compensation made by Metalloinvest to the minority shareholders. However, he claims that he had agreed this provision with the other minority shareholders and has a signed agreement with them.

“The agreement with Anwalt4U was signed in 2018 (Pinsky says it was in 2023 – bne IntelliNews) and it was agreed they would help reach a legal and fair price for compensation. The group agreed they would cover expenses and that I would be paid something for my work,” says Ivanov. “The group signed a contract with Anwalkt4U and I agreed with them that I would be paid 50% of any compensation.”

According to Steinhöfel, the latest developments reflect an effort by some former minority shareholders to take advantage of a convenient moment.

“We are talking about blatantly opportunistic attempts to reap material benefits from the politically motivated persecution of my client in Germany,” Steinhöfel said. “I am confident that these actions will be judged accordingly by the law.”

“The oligarchs come after you with lawyers, but I answer them with God Almighty and the offices of heavenly justice,” Ivanov said.