PPF Management LLC, a Delaware-based company, has filed a lawsuit in a US court accusing Russia’s largest lender Sberbank and its chief executive Herman Gref of criminal collusion to seize a granite company.

The 245-page suit, which was obtained by bne IntelliNews, was filed on behalf of Sergey Poymanov and Irina Podgornaya, who were the controlling shareholders of Pavlovskgranit, a company specialising in the extraction of crushed stone and Europe’s largest enterprise in this field.

They accuse Sberbank, Gref and a cast of other individuals and companies of entering into a secret deal to carry out an illegal seizure of Pavlovskgranit and eliminate the company as a rival. The pair are seeking $500mn in compensation and $250mn in moral damages for the loss of control of the company.

Poymanov’s representatives did not respond to queries about whose interests are represented by PPF. In Russia, PPF Group controls Home Credit Bank and is owned by Czech businessman Petr Kellner, but it said its group is unrelated. 

The conspiracy to defraud Poymanov was allegedly masterminded by Yuri Zhukov, the founder of real estate developer PIK, with “the participation and protection of Gref”, according to the lawsuit. “Although Gref was a former Minister for Economy and Trade and one of the few Russian politicians with a moderate reputation in both the East and the West, he used his reputation and influence to shield defendants’ actions from the investigations and reviews of the Federal Anti-Monopoly Service and regional and federal law enforcement.” 

The suit claims the defendants used American banks to further the conspiracy and further invest “the proceeds of the crime” in the US. 

The first court hearing in the US is scheduled for April 20. A Sberbank representative declined to directly address the charges of collusion levelled against Gref and the lender. “The bank possesses information that Mr Poymanov is continuing to avoid responsibility, including criminal responsibility,” Sberbank’s press service said in an emailed statement to bne IntelliNews. “In all cases the bank’s lawyers act in accordance with the law.”

Under Gref, Sberbank has become the proxy stock for foreign investors and is lauded for its high level of corporate governance standards and social responsibility vis-a-vis its peers. The state-owned lender controls about 46% of the nation’s deposits and a third of all loans.

Poymanov, the former billionaire owner of the largest producer of granite in Europe, claims he has been crushed by a system he once belonged to. His representatives had supplied bne IntelliNews in December with a stack of files outlining how senior Kremlin aides, bankers and business tycoons had collaborated against him.

A former Duma politician for the ruling United Russia party, Poymanov claims that an alliance of Gref, his son Oleg Gref, Andrei Belousov, a key assistant to Russian President Vladimir Putin and Zhukov conspired to rip his business from him.

Rock solid to rock bottom

Pavlovskgranit had been highly successful, catering to the booming construction industry in the years prior to the 2008 financial crisis. It was set up in Voronezh in 1976 on the basis of Shkurlatovskoye, the largest granite deposit in Europe.

Cash rich and profitable, the business was seeking to capitalise on its lead by investing in German equipment that would allow it to bid for an order from state-owned Russian Railways (RZD), which needed specialist gravel for a large project. Poymanov was also seeking to buy 48% of the shares from his business partner Sergey Mamedov to consolidate more than 70% of the company’s stock.

Like many Russian businessmen, Poymanov turned to Sberbank at the start of 2008 to take out a loan of RUB5.1bn, worth €142mn at the time. Then the crisis hit and RZD cancelled its contract.

Sberbank commissioned a valuation from NEO-Center, a financial services valuation company which is partly-owned by Oleg Gref, a son from Herman Gref’s first marriage. That’s where the trouble allegedly started, as NEO-Center estimated the value of the pledged stake had dropped to RUB1.14bn. Sberbank turned around and insisted that Poymanov sign over control of the company to reflect the lower valuation of his collateral, Poymanov claims.

Poymanov refused Sberbank’s demands, but he continued to pay the installments. He even commissioned an independent valuation from a small firm in his native Voronezh, where he had been a regional deputy. This found the stake to be still worth RUB4.6bn, or three-times the valuation made by Oleg Gref’s NEO-Center.

By the spring of 2009, Pavlovskgranit was hurting and Poymanov went back to Sberbank to see if he could renegotiate the terms of the loan, as his firm was bleeding cash to pay off the high interest rates of 15.2% to 17.8%. The company had been in profit from 2007 through to 2009, but reported its first loss of RUB125mn in 2010.

Sberbank refused to negotiate, Poymanov claims. He managed to get the German bank KFV Impex to offer to refinance the loan on more affordable terms in October 2010, but the Germans insisted Sberbank relinquish all claims on Pavlovskgranit, which Sberbank refused to do, thus scuppering the deal. At this point, Poymanov lost all patience and stopped making the loan repayments. “The situation amounted to corporate raiding,” claims Poymanov.

In May 2010, Sberbank transferred the loan to its subsidiary Sberbank Capital, a division that the bank uses mainly to look after distressed assets. Then in January 2011, Sberbank won several key decisions including a decision by the Odintsovo City Court that awarded the bank RUB4.6bn in damages and passed ownership of a 24.6% stake in Pavlovskgranit to Sberbank Capital. “If a company the size of Pavlovskgranit can be seized like this, then no investment in Russia – foreign or Russian – is safe,” says Poymanov.

Rival interest

In September 2011, Sberbank Capital transferred the stake to a little-known Russian company called Atlantic, which is owned in turn by offshore legal entities Nisoram Holding Ltd. registered in Cyprus and Aletarro Ltd. No one knows who the beneficial owners of these companies are.

Sberbank has been keen on the construction business and in 2009 it announced that it was going to set up its own construction company with Zhukov, one of the founders and co-owners of construction powerhouse PIK Group, except the obvious monopolistic power this sort of tie-up would have caused an outcry and the plan was cancelled.

Zhukov has been the head of Sberbank’s development subsidiary, Sberbank Development, since 2011 and is also the owner of Pavlovskgranit’s biggest rival, National Non-metallic Company (NNC). In 2010, NNC unexpectedly appeared as the only participant of the tender for development of the Gorokhovka granite pit.

The new shareholders of Pavlovskgranit accuse the company’s managers of abusing their authority and transferring both assets and cash out of the company. The Voronezh Investigation Committee has accused Pavlovskgranit’s managers of transfer pricing by selling the company’s production to “independent” trading houses at half the market value, according to Alexei Potolitsin, deputy CEO of Atlantic. “The trading houses belong to unknown persons and have no relation to the new shareholders,” Potolitsin says. According to Atlantic’s assessment, from July 2011 until January 2012, Pavlovskgranit’s old management withdrew more than RUB1bn of company profits.

The court cases have been marred by a slew of alleged dirty tricks. For example, Poymanov was unable to challenge NEO-Center’s valuation in court because it literally got lost in the post and the copy that Poymanov had was inadmissible under Russian law.

Sberbank’s revised valuation of Pavlovskgranit seems aggressively low, but there is nothing in Russia law to prevent them from valuing the company at any price it likes. On the other hand, Poymanov has reneged on his loan agreement and appears to be emptying the company of assets, according to Atlantic.

In a letter seen by bne IntelliNews, Poymanov wrote to then prime minister Vladimir Putin to ask for help, telling him how Pavlovskgranit was a backbone industry for Pavlovsk. Putin instructed his economy minister, Gref’s successor and former deputy Andrei Belousov, to deal with the case. However, Poymanov claims Belousov disguised the essential facts of the case from Putin.

The debt was assigned to structures owned by Zhukov, the founder of PIK and NNC’s owner, because Gref “was on a friendly footing” with him, Poymanov claims. “That means that Putin was reported [to] on the fact that there was no conspiracy and no crime, but just a trivial dispute between two business entities,” he claims.

bne IntelliNews was also provided with a copy of a letter where Gref officially wrote to Yury Chaika, head of the Russian Prosecutor General’s Office. Gref signs the letter and assures Chaika he will “take care” of the investigation.

Poymanov’s ordeal continues to this day. An Arbitration Court in the Moscow region banned him in September from travelling outside of Russia after he was charged with an abuse of authority for the resale of a concrete plant.

In July, he was declared bankrupt with personal debts estimated at more than RUB3bn (€47mn), while a campaign to get elected to the Duma as a candidate for the Patriots of Russia party failed.

Despite his setbacks, Poymanov has no plans to flee Russia or Pavlovsk, a town in the Voronezh region about 500 miles south of Moscow. 

"I believe that the chances of lawsuit suceeding in the US are very high because we have documents confirming all of the facts," Poynamov told bne IntelliNews. "But in the Russian Federation, Gref does what he wants because he believes he will be completely unpunished."