Russia Starts Embezzlement Trial of U.S. Investor Calvey

(Bloomberg) -- A Moscow court began the criminal embezzlement trial of prominent U.S. investor Michael Calvey Tuesday, even after a related corporate dispute was settled, in a case that's rattled foreign businesses in Russia.

Calvey and several colleagues at Baring Vostok Capital Partners face as much as 10 years in prison if convicted on charges they defrauded a bank that the private equity group's funds used to control. Calvey maintains his innocence, according to his opening statement.

While Russia's conviction rate is higher than 99%, the resolution of a corporate dispute over the financing of a banking venture and his release from house arrest in November have raised hopes among his allies that he may escape further punishment.

“I was charged with a serious crime and put on trial for a crime thought up by the investigators,” Calvey said, according to a transcript provided by Baring Vostok. “Under these circumstances, the charge against me is not only unreasonable and unfair, but also illegal.”

One of the most successful foreign private equity investors in Russia, Calvey was detained in February 2019 in a case that shocked the investment community and prompted many top Russian business executives and officials to speak out in his support. Following the outcry, he was released to house arrest, but the case added to concerns about Russia's already chilly climate for foreign investors.

The market has shown some signs of life after Calvey's release. Elbrus Capital in January raised $260 million for a Russia-focused private equity fund, the biggest new fund without state backing since President Vladimir Putin annexed Crimea in 2014.

Criminal Charges

Calvey and his colleagues are accused of overvaluing a company that his funds contributed to the capital of Vostochny Bank, a lender then controlled by a Baring Vostok subsidiary. Calvey previously claimed the criminal charges were used by the bank's minority owner Finvision Holdings to wrest control over the bank.

Finvision, which now controls Vostochny, and Baring Vostok reached a settlement in October to end their conflict. As part of the deal, Baring Vostok agreed to pay Vostochny Bank 2.5 billion rubles ($33 million) to settle their dispute without admitting wrongdoing. The bank also dropped a civil suit against the private equity firm.

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