Documents seen by bne IntelliNews reveal that German prosecutors are divided on the validity of evidence used to justify the criminal investigation of sanctioned tycoon Alisher Usmanov in Germany. The Cologne prosecutors office rejected allegations of money laundering after a careful review of allegations made by Russian national Andrei Ivanov, whereas the Frankfurt prosecutor’s office decided to launch an investigation based on the same allegations, raising new questions about the investigation’s legitimacy.

German courts have ruled recently on several occasions the evidence used to launch investigations and issue search warrants was too flimsy to justify these actions. As Politico reported, much of the evidence used in the European decision to sanction Russia’s oligarchs is slipshod and based on little more than hearsay or unsubstantiated allegations made in the press.

“No Putin is worth undermining property rights [for],” former Russian oligarch turned dissident opposition activist Mikhail Khodorkovsky told bne IntelliNews in an interview in Berlin last year. “I’m for it but only if it is done via a court of law. I’m for giving people an exit. If they clearly denounce the war then it should be possible to be redeemed. What that should cost is a different question. Confiscation must be done by the courts.”

And increasingly the sanctioned businessmen are turning to the courts to clear their names. Russian-Uzbek billionaire Usmanov recently made headlines with the announcement that he has filed a lawsuit against UBS bank, accusing it of submitting a series of “unsubstantiated reports” about allegedly suspicious transactions, which triggered a high-profile money laundering investigation against him in Germany.

Against this backdrop, bne IntelliNews has learned that the investigation, which has been under way by Frankfurt law enforcement officials for the past two years, is based on the same allegations that were found insufficient for opening criminal proceedings by their colleagues in the enforcement agency in Cologne.

According to exclusive documents obtained by bne IntelliNews, the Cologne Public Prosecutor’s Office in August 2022 turned down a complaint asking authorities to investigate Usmanov on the grounds that “offshore entities” affiliated with the billionaire, “are involved in money laundering…and financing secret operations in the EU [and] Middle East in favour of Russian top officials.”

Usmanov, 70, owns a non-controlling stake in USM, a holding company whose assets include one of Russia’s largest metals producers, Metalloinvest. He was hit with western sanctions shortly after Russia’s invasion of Ukraine over alleged ties to the Kremlin.

The Cologne authorities found no evidence of political or economic crime that could be prosecuted in Germany and rejected the complaint following an extensive review by at least three senior prosecutors from different departments, the documents show.

By contrast, the same complaint became part of a widely publicised money laundering investigation against Usmanov by the Frankfurt Public Prosecutor’s Office at around the same time in 2022, according to materials seen by bne IntelliNews.

The Frankfurt investigation has since encountered problems, including the annulment of search warrants that local courts found to be unlawful. As German media reported at the time, the court was outraged by the quality of the prosecutors’ evidence, with Süddeutsche Zeitung calling the court decision a “disgrace for the investigators.”

In another embarrassing episode, Frankfurt prosecutors searched the headquarters of FC Bayern Munich last year as part of the Usmanov investigation, to widespread media coverage. They quietly returned the materials they seized the following year after giving the club the all clear.

“The documents obtained as a result of this criminal investigation-related procedure have now, at the beginning of February 2024, been returned after review, verification and evaluation,” the head of the Frankfurt public prosecutor’s press office sheepishly told Bild.

In March 2024, following complaints brought by two people, one of whom is believed to be Usmanov himself, the Frankfurt prosecutor's office launched a probe into two of the high-ranking prosecutors who are handling the billionaire’s case and could face charges of obstruction of justice and persecution of innocent individuals if the investigation goes against them.

In parallel with these revelations, the sources of the complaints against Usmanov have themselves become the subject of legal investigation, as bne IntelliNews has reported. Most recently, this publication has learned that a petition suspectedly launched as part of the efforts of the prosecutors’ so-called informants to put pressure on the pending investigation against them was taken down by the influential online platform Change.org on the grounds that it violated the platform’s rules.

Shareholders dispute

The complaint to German prosecutors was filed by Andrei Ivanov, the leader of a group of former minority shareholders of Lebedinsky Mining and Processing Plant (LGOK), a Russian mining company that was consolidated by Metalloinvest in 2007.

As followed by bne IntelliNews, the ex-shareholders of LGOK have been carrying out a 15-year-long campaign, of what has been described by Metalloinvest’s lawyer as “extortion”, seeking to gain additional compensation following a mandatory buyout of LGOK shares which they claim was unfair. At issue was the price paid for the minority shares, which the group claimed was devalued but which observers at the time deemed to be significantly higher than the market price, as reported by bne IntelliNews.

After losing over a dozen cases in Russian courts – during the boom years in the noughties and well before the sanctions regime was introduced following the annexation of the Crimean peninsula in 2014 – the courts all ruled that the buyout had been done by the book, the group went silent for almost a decade.

The dispute flared up again in 2021, when rumours emerged that Metalloinvest was planning an IPO. This time the group turned to publishing what Metalloinvest says were “slanderous accusations” on anonymous Telegram channels and Russian kompromat websites specialising in false and damaging information. Managers and shareholders of LGOK also received letters with threats and demands for compensation, Metalloinvest lawyers say.

The campaign heated up in 2022, when the West imposed sweeping sanctions against Russian businessmen and companies over the invasion of Ukraine. The former shareholders were sending complaints to state agencies in Germany, the UK, Switzerland and others, asking them to launch criminal investigations against Metalloinvest’s shareholders on accusations of tax fraud, according to bne IntelliNews’ sources.

The recipients included German agencies ranging from the Federal Public Prosecutor General at the German Federal Court of Justice in Karlsruhe to the Federal Ministry for Economic Affairs and Climate Action, as well as the Cologne Public Prosecutor's Office, where Ivanov sent an appeal from his address in Cologne in June 2022.

Cologne prosecutors assessment

The Cologne prosecutor’s office appears to have taken Ivanov’s materials under serious consideration. As bne IntelliNews has learned, the office studied them sequentially across three structural divisions with the involvement of key prosecutors. The materials were studied twice, as they were first delivered as a printed letter from Ivanov in English, followed by an emailed copy in German, bne IntelliNews has learned.

Based on the prosecutors’ correspondence, whose names are not disclosed due to the confidential nature of the documents, the complaint was first reviewed by the Cologne office’s so-called “structural unit 121.” This unit is part of Division XII, which deals with crimes against the state.

“The competency of Division XII is not observed,” a senior prosecutor in the unit overseeing political crimes and crimes against the state wrote after reviewing Ivanov’s letter received by regular mail. Upon further review of the materials, he added: “This is not a political crime.”

On the recommendation of the political crimes unit, the materials were transferred to specialists in the economic crime unit. In just two days, a senior prosecutor there determined that the case should be transferred again to the general register.

“As a rule, the general register includes complaints in which there is not even an initial suspicion [of a crime],” said retired lead senior prosecutor Heiko Manteuffel, who represents Usmanov. “This means that the officers found absolutely no grounds for initiating criminal proceedings.”

Nevertheless, a senior prosecutor heading the office’s organised economic crime unit decided to conduct a more thorough review, given Usmanov’s high profile, to determine whether Ivanov's statement could fall under Articles 261 (“Money Laundering”) or 263 (“Fraud”) of the German Criminal Code.

After a nearly two-month review period, the senior prosecutor sent a formal rejection letter addressed to Ivanov in August 2022. “The claim for initiating criminal proceedings that you have sent does not contain any grounds for initiating an investigation,” the letter marked with the official letterhead of the Cologne prosecutor's office said.

“German criminal law is not applicable to the circumstances of the case you described, which consequently makes prosecution by German authorities impossible,” the letter added.

Questionable claims

In his statement to Cologne prosecutors, Ivanov said that Metalloinvest had carried out “large-scale fraud” by conducting what he called a forced buyout of LGOK minority shareholders in 2007 at a valuation that was fundamentally flawed – the substance of the minority shareholders’ claims to the Russian courts that were all dismissed.

Ivanov alleged, in his complaint to the German authorities, that all of LGOK’s production facilities were “estimated at the price of scrap” and the valuation was based on “limited and materially incorrect” data that did not take into account “aggressive tax avoidance strategies based on widely known and discredited transfer pricing schemes” for the sale of iron ore products.

Ivanov later backtracked on these claims, saying in a 2023 interview with the Russian newspaper Novye Izvestiya that even if transfer pricing had been taken into account in the valuation, the share price would still have been “almost less by a third” than what the minority shareholders were ultimately paid.

Transfer pricing is a technique used by many multinational corporations and is legal as long as applicable laws are observed. At that time, the transfer price margin ceiling in Russia was capped at 20%. According to documents reviewed by bne IntelliNews in 2022, a trading company affiliated with Metalloinvest reported a trading margin averaging at around 7.5%. These rules were introduced in Russia after the wild 1990s where raw material exports would regularly sell exports of metal and oil to their own international trading companies for pennies on the dollar in transfer pricing schemes designed to move their large profits offshore and avoid Russian taxes.

As a bne IntelliNews investigation previously found, the minority shares were bought out at a price that exceeded independent valuations by more than 50% at the time of the transaction in 2007. Russian business media noted that the terms of the buyout were “extremely attractive” for minority shareholders, who received the highest of three alternative prices for their shares ($320 per share) and at a rate that exceeded the price determined by industry financials by a factor of almost 2.5.

Ivanov’s statement included numerous claims of Usmanov’s political ties that were not elaborated upon in the text. The ex-shareholder called Usmanov “[Russian President] Putin’s wallet” and “Putin’s secret adviser,” without supplying any supporting evidence.

A similar widely quoted claim made in a tweet by Swedish economist Anders Åslund in 2022, claimed that Usmanov was “Putin’s favourite oligarch.” It was deleted by Åslund almost immediately after being approached by Usmanov’s lawyers.

In 2023 a court in Hamburg also ruled that virtually the same claim by Austria’s Kurier newspaper that Usmanov has “the reputation of being Putin’s favourite oligarch” was unsubstantiated and defamatory.

Ivanov’s statement also cited a YouTube video created by the team of the late Russian opposition figure Alexei Navalny as evidence of alleged transfer pricing schemes by Metalloinvest. This video, which became a key source for the accusations cited by Frankfurt prosecutors in their investigation of Usmanov, was insufficient evidence of a crime for the Frankfurt Regional Court in 2023 as the allegations were unsubstantiated. According to Der Spiegel, the court found that Frankfurt prosecutors had failed to present any other evidence besides the video and that their accusations of Usmanov’s criminal business practices were too vague.

This year a German court found that Forbes magazine failed to back up its claim – which was attributed to an anonymous expert and was cited by the EU in its sanctions reasoning – that the billionaire “repeatedly fronted for Putin and solved his business problems.” In one of his recent statements Ivanov claimed to have been that anonymous expert cited by Forbes, although Forbes did not call on Ivanov to testify during its defence during its German case.

New indications of the questionability of claims put forward by Ivanov and former shareholders emerged this spring, after Ivanov was accused of threatening one of Usmanov’s lawyers and attempting to defraud a separate law firm in Germany, as reported by bne IntelliNews.

In the latter instance, the law firm Anwalt4U reportedly filed a fraud complaint against Ivanov with the Berlin prosecutor’s office for what it says were his attempts to carry out a fraudulent scheme to make them believe they were representing 16 former LGOK shareholders in a claim against Metalloinvest. The lawyers said that after raising their concerns with Ivanov about the legitimacy of the client agreement, their firm became the target of defamatory articles posted to Russian kompromat websites.

Earlier this year another suspected frontman for the ex-shareholders, Andrei Burkin, was detained on January 31 in Russia’s Belgorod region on “suspicion of extortion carried out by a group of individuals.” The move followed reports in Russian media about a letter signed by Burkin and marked as “confidential”, which said that the former minority shareholders would agree to drop their claims against Metalloinvest in return for €2mn in compensation.

Parallels with a deleted petition

bne IntelliNews has separately learned that a number of claims from Ivanov’s statement to German prosecutors appeared in an online petition that was recently taken down by the platform Change.org for violating community guidelines.

Change.org positions itself as the “world’s largest non-profit-owned platform for social change,” where anyone can create or sign petitions in advance of various social causes. Over 500mn people have taken action on its site, according to the platform, and its reach with lawmakers and journalists has led to thousands of successful petitions worldwide.

The website’s policies list a number of “don’ts” that will lead it to remove or restrict content, including the publication of false or misleading content, defamation, and linking to fraudulent websites.

The anonymous petition, which was live for less than two months and collected fewer than 100 signatures, sought to draw up support for LGOK’s former minority shareholders.

The petition appears to have been the continuation of the ex-shareholder campaign against Metalloinvest. Based on a screenshot review, it was published on April 14 by an account called “Support Team,” with a user named “Andrei Ivanov” leaving the first comment in support of the initiative.

The text criticised Burkin’s arrest and called on law enforcement officials in the UK and Germany to investigate “lawlessness” and rights violation on the part of Metalloinvest during a shareholder buyout in 2007, citing similar claims to those put forward in Ivanov’s statement. As evidence, the petition linked to several articles on a Russian kompromat website, Rucriminal.info.

Both Ivanov’s statement and the text of the petition contained allegations that Usmanov holds British, Cypriot and Swiss citizenship, when Usmanov is widely reported to have Uzbek and Russian citizenship. The petition also wrongfully claimed that Russian VTB Bank holds a 20% stake in Metalloinvest, although the bank is not listed as a shareholder in the company’s materials.

The platform’s administrators said they “decided to remove the petition from our portal as it runs counter to our guidelines and community regulations,” according to a notification seen by bne IntelliNews.

Recycled materials

Prosecutors in Cologne did not find material evidence that Usmanov had committed a political crime or grounds to initiate criminal proceedings on suspicion of money laundering or fraud, based on the reviewed correspondence from Ivanov.

However, Ivanov's materials with statements similar to those rejected by the Cologne prosecutors became formal evidence in the investigation currently underway against the billionaire by the Frankfurt prosecutor’s office, according to bne IntelliNews’ sources.

Frankfurt prosecutors have used these statements to initiate proceedings against Usmanov on suspicion of violating Article 261 (“Money Laundering”) of the German Criminal Code, the same article that their counterparts in Cologne said was inapplicable to the case.

bne IntelliNews has also learned that there were multiple unsuccessful attempts to internationalise the Frankfurt investigations by involving law enforcement authorities in the EU and other countries.

These efforts by Frankfurt officials would indicate that their investigations may not be based on sufficient evidence, bne IntelliNews’ sources say.

The German Federal Prosecutor’s office didn’t respond to a bne IntelliNews request for clarification on these discrepancies by press time.

“The employees of the Cologne prosecutor's office are highly competent in their field. The case was handled by seasoned professionals, including senior prosecutors in charge of investigations tied to a complex cross-border tax evasion scheme known as Cum-Ex,” said Manteuffel.

The public prosecutor who sent Ivanov the formal rejection had previously been invited to attend meetings of the Bundestag Finance Committee as an expert on combating money laundering. "I know the official and assume that he took sufficient time before reaching his conclusion to ensure that the result of his examination is legally correct," said Manteuffel.

According to Manteuffel, the response of the Cologne officials highlights the shaky evidence in the case brought against Usmanov by Frankfurt prosecutors.

“It is not surprising that with this kind of an approach to the selection of evidence, the prosecutors could not even get search warrants [for properties in Germany attributed to Usmanov] the first time around,” Manteuffel said. “In May 2023, the Regional Court of Frankfurt am Main found the search warrants to be illegal and was absolutely correct in describing the justification put forward by the prosecutor’s office as ‘vague speculation’ and ‘unfounded assumptions.’”