Sanctioned Oligarch Mordashov Has Careful Plans Ripped Apart

(Bloomberg) -- Alexey Mordashov spent years meticulously mapping the handover of his multibillion dollar empire to his children.

In the span of a bloody week, those plans have gone out the window.

Mordashov -- who made a fortune in steel in newly post-Soviet Russia -- was sanctioned Monday by the European Union in the wake of his country's invasion of Ukraine. Filings in the U.K. this week showed that he had shifted control of a roughly $1.1 billion stake in mining company Nordgold, to his wife, Marina Mordashova.

That wasn't all. He was also forced to step down as a Nordgold director and resigned from the board of TUI AG, the travel giant he rescued in 2020.

Mordashov declined to comment through a spokesperson.

Russia's richest people are scrambling to shelter or divest assets in the face of real and threatened sanctions as regulators around the world zero in on businesspeople perceived as close to Putin. Roman Abramovich announced he's selling Chelsea Football Club, while sanctioned oligarchs Petr Aven and Mikhail Fridman have resigned from the board of their shared investment firm, LetterOne, which owns billions of dollars in energy, telecom and retail assets.

LetterOne's chairman and chief executive officer said in a statement Thursday that the billionaires' assets in the Luxembourg-based business were “effectively frozen” and the pair wouldn't receive any dividends, funds or communications going forward.

The U.S. Justice Department ratcheted up the pressure Wednesday with the creation of a “KleptoCapture” unit tasked with enforcing sanctions and seizing luxury assets that belong to Russia's wealthiest citizens.

Disassociating from companies or handing control of them to family members aren't guaranteed ways to shelter assets, according to Justine Walker, global head of sanctions, compliance and risk at ACAMS, a trade organization for specialists in detecting financial crimes.

“The concept of control is really important when looking at the accounts of wives, brothers, sisters and other close relatives,” she said. “Is that money really independent money?”

For the authorities, “it's very much a judgment call,” she added.

It's unclear whether Mordashov's transfer to his wife was related to the war. The shift in control would have been initiated before the billionaire was sanctioned.

It was the second major intra-family stake shuffling in recent months. Mordashov's sons, Nikita, 21, and Kirill, 22, ceded their control of Nordgold in December. That reversed his transfer of a combined 65% stake to them in 2019, in what was the beginning of a lengthy succession plan.

The billionaire also took control of his sons' TUI holdings in December, revoking another 2019 share transfer that aimed to give his children asset management and business experience.

Mordashov had no real road map to follow when he began deliberating how to pass down his fortune, now valued at $22 billion, according to the Bloomberg Billionaires Index. An economist by training, he made the bulk of his money buying up shares of Severstal PJSC, one of Russia's biggest steelmakers, in the early 1990s.

He became Severstal's chief executive officer in 1996 at the age of 31. He later diversified to gold, power equipment and also acquired stakes in media, a mobile carrier, tourist companies and a supermarket chain.

The relative youthfulness of Russia's oligarchs means there's scant precedence in the modern era for transferring massive fortunes. Nikita and Kirill Mordashov and their siblings stood to be the first generation to gain money and power through inheritance since the collapse of the communist regime.