Russia seizes oligarch's chateau

By bne IntelliNews February 2, 2012

bne -

Russia's Deposit Insurance Agency has obtained a French court order to seize a chateau near Nice owned by bankrupt oligarch Sergei Pugachev, French paper Le Monde reported on February 2.

The Russian regulator has placed a lien on Chateau de Gairaut as part of its efforts to recover investor losses on deposits at Pugachev's failed Mezhdunarodnyi Promyshlennyi Bank (Mezhprombank). According to the French newspaper however, the chateau is something of a fake. It was built by a nouveau-riche French plutocrat at the beginning of the 20th century on the outskirts of Nice, and is valued at no more than €13.6m. Sources also suggest to the paper that Pugachev owns a number of other properties near Nice worth a total of €8m.

Mezhprombank was Russia's most high profile victim of the 2008-2009 financial crisis, and was declared bankrupt in November 2010 owing creditors more than $2.6bn, according to data from the Central Bank of Russia. The bank defaulted on €200m of Eurobonds in July 2010, leading to a cross-default on another €200m Eurobond issue which matures in 2013, reports RIA Novosti.

The fall of Pugachev has been rapid, and could prove instructive for current business leaders. The Mezhprombank owners was for a brief time around 2003/04 regarded in the press as the "power behind Putin" following then-President Vladimir Putin's break with the Yeltsin-era oligarchs who had promoted him to power in 2000, in particular Boris Berezovsky and Roman Abramovich. Pugachev was even thought to have replaced Abramovich as the "Kremlin's banker", and was also believed to enjoy special favour due to his proclaimed allegiance to the Russian Orthodox church.

Pugachev's fate is a reminder then that Putin has largely avoided capture by any of the oligarch clans, although he is under pressure to put distance between himself and his fellow members of a 1990s group known as the "Ozero dacha collective". Members such as Gennady Tymchenko and Arkady Rotenberg have transformed themselves into some of Russian's leading oligarchs on the back of the state-owned oil and gas businesses during Putin's time in power.

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