On July 19, I talked about having to examine the “case file” based on media coverage as a way of defending the interests of my client, A. Borodin. I expressed a timid hope that, following completion of the Bank of Moscow audit by the Central Bank, a serious discussion would start, at last, of the situation inside and around the Bank of Moscow; about the reasons for, lessons of and consequences of this ostensibly corporate conflict.
Given that, as before, I do not have an opportunity to perform my professional duties fully, I continue to read the papers.
It seems that there is, indeed, some progress.
I see evidence of this in the Vedomosti editorial from July 20. I fully subscribe to the Editor’s position that the time has come to switch from emotional statements and groundless allegations to a specific, law-based, economically-minded conversation. This article, titled “A Black Hole”, sets up a proper context for that.
It has been aptly noted that the Bank of Moscow situation has been artificially positioned as having no alternative solutions, other than large-scale government subsidies to the VTB bank.
Of course, there are multiple solutions.
The piece describes some of them. It is gratifying that none mention the use of criminal prosecution that some tend to see as nothing short of a cure-all.
The Editor is completely right to ask this:
What are we paying this price for and where did the money go that the budget is now forced to make up for?
Unlike A. Borodin’s detractors, I will not point any fingers. My job is to defend, not to accuse. Yet I could not possibly ignore the question of “who benefits” from whipping up hysteria around A. Borodin.
With a reservation that it is the official version, the Editor reminds that:
He (Borodin) made loans single-handedly, for one’s own needs, including for buying Bank of Moscow shares that were subsequently sold to VTB at a profit.
This reservation is quite telling: in the public mind, the concepts “official” and “reliable” have long ceased to be complete synonyms. Who is the target audience of the statement that A. Borodin “made loans single-handedly” and, even, “for one’s own needs”. And, as it if was such a need, a mention is made of the purchase of shares “that were subsequently sold to VTB at a profit“. I would like to remind that Andrei Borodin did not sell shares to VTB. On the contrary, he publicly offered to buy those shares from VTB. I hope that the Editor’s caveat indicates his understanding of the unreliable nature of this “official version”.
Here is more media coverage that, in my opinion, helps understand a much more realistic version.
According to G. Melikian (Deputy Chairman of the Central Bank), the RF Central Bank has analyzed old Bank of Moscow audit reports and supervisors’ notes. “They pointed to the bank’s deficiencies, not problems”, he said. The Bank was active in lending to related entities, in particular, [those owned by] individuals with connections to the previous Moscow Government “, he said.
That is something worth noting, isn’t it?
The level and quality of supervision is also a concern for the Vedomosti editors and not them alone. The language about lending to “related entities” is actually quite comical. Could it be that, based on that criterion, criminal cases will be instituted against the management of a vast number of banks; those whose name contains words resembling Gazprom or RZhD [Russian railways - transl.] In addition, I am curious where Mr. Melikian suggests that entities with connections to the new Moscow Government turn for loans from now on?
I cannot but take note of yet another word of wisdom from the CB executive:
Hostile takeover is bad for a bank but, in this situation, an entity has purchased a stake that is bigger than yours, but why take the security off [the books]?
I have heard somewhere that adhering to Leo Tolstoi’s teachings in business is not a customary business practice and that even the UN Charter recognizes the right to self-defense.
19.07.2011 Radio Business FM:
VTB’s CFO Herbert Moss has estimated that 100% of the Bank of Moscow will cost the State-owned corporation approximately RUR 258 billion. Notably, Andrei Borodin referred to a similar amount back in February. At the time, both VTB and the Moscow Government talked about two hundred billion dollars at the most. Possibly, had agreement been reached then, things would be simpler. Now, instead of buying out one foe, a handful of allies need to be bought out. Although it may not be that bad for VTB, notes Mark Rubinstein, Director of Research at the investment financial company Metropol: «I believe VTB will be able to buy out another 25% of the Bank of Moscow stock from minority shareholders on good terms since, at this point, the latter will be very accommodating».
Now, this is right on the money.
First, accepting A. Borodin’s public offer to solve the problem at his expense – an offer to which the response was to radically ramp up his criminal prosecution – likely could have enabled vast budget funds to be used as per specified purposes. Second, here is your economic interest: the acquisition turns out to be quite profitable for VTB (for VTB alone?).
Although, as follows from a July 21, 2011 Vedomosti piece on shareholder Vasily Sidorov’s appeal to the VTB management, far from everybody is happy about the deal.
However, that is not my concern.
If the key interested parties have accomplished their agendas then perhaps it is time to wind down the criminal proceedings? Especially so that the official version of the charges against A. Borodin…
Well, for that, see above.