How Western Firms Quietly Enabled Russian Oligarchs

Behind a set of imposing metal doors in an easy-to-miss office building in a New York City suburb, a small team manages billions of dollars for a Russian oligarch.

For years, a group of wealthy Russians have used Concord Management, a financial-advisory company in Tarrytown, N.Y., to secretly invest money in large U.S. hedge funds and private equity firms, according to people familiar with the matter.

A web of offshore shell companies makes it hard to know for sure whose money Concord manages. But several of the people said the bulk of the funds belonged to Roman Abramovich, a close ally of President Vladimir V. Putin of Russia.

Concord is part of a constellation of American and European advisers — including some of the world’s largest law firms — that have long helped Russian oligarchs navigate the Western financial, legal, political and media landscapes.

both said they were leaving Russia. A spokeswoman for another large firm, Debevoise & Plimpton, said it was terminating several client relationships and would not take any new clients in Moscow. Ashurst, a large London-based law firm, said it would not “act for any new or existing Russian clients, whether or not they are subject to sanctions.”

The accounting giants PwC, KPMG, Deloitte and EY — which have provided extensive services to oligarchs and their networks of offshore shell companies — also said they were leaving Russia or severing ties with their local affiliates.

wrote a letter to the White House arguing that Russia’s Sovcombank shouldn’t face sanctions, citing the bank’s commitment to gender equity, environmental and social responsibility.

Sovcombank had agreed to pay the lobbyist’s firm, Mercury Public Affairs, $90,000 a month for its work.

The Biden administration recently imposed sanctions on Sovcombank. Within hours of the announcement, Mercury filed paperwork with the Justice Department indicating that it was terminating its contract with Sovcombank.

As recently as mid-February, the British law firm Schillings represented the Russian oligarch Alisher Usmanov, a longtime ally of Mr. Putin.

Two weeks later, the European Union and the U.S. Treasury placed sanctions on Mr. Usmanov. Nigel Higgins, a spokesman for Schillings, said the firm is “not acting for any sanctioned individuals or entities.”

say on its website that it represents “some of Russia’s largest companies,” including Gazprom and VTB. The firm said it was “reviewing and adjusting our Russia-related operations and client work” to comply with sanctions.

In Washington, Erich Ferrari, a leading sanctions lawyer, is suing the Treasury on behalf of Mr. Deripaska, who is seeking to overturn sanctions imposed on him in 2018 that he claims have cost him billions of dollars and made him “radioactive” in international business circles.

And the lobbyist Robert Stryk said he had recently had conversations about representing several Russian oligarchs and companies currently under sanctions. He previously represented clients targeted by sanctions, including the administrations of President Nicolás Maduro of Venezuela and former President Joseph Kabila of the Democratic Republic of Congo.

Mr. Stryk said he would consider taking the work if the Treasury Department provided him with the necessary licenses, and if the prospective clients opposed Russia’s aggression in Ukraine.

online profiles of current and former Concord employees.

Wall Street bankers and hedge fund managers who have interacted with Concord and its founder, Michael Matlin, said it oversaw between $4 billion and $8 billion.

It isn’t clear how much of that belongs to Mr. Abramovich, whose fortune is estimated at $13 billion.

Mr. Abramovich has not been placed under sanctions. His spokeswoman, Rola Brentlin, declined to comment on Concord.

Over the years, Concord has steered its clients’ money into marquee financial institutions: the global money manager BlackRock, the private equity firm Carlyle Group and a fund run by John Paulson, who famously anticipated the collapse of the U.S. housing market. Concord also invested with Bernard Madoff, who died in prison after being convicted of a vast Ponzi scheme.

panel focused on European security, requested that the U.S. government impose sanctions on Mr. Abramovich and seize the assets at Concord, “as this blood money presents a flight risk.”

The work performed by law, lobbying and public relations firms often plays out in public or is disclosed in legal or foreign agent filings, but that is rarely the case in the financial arena.

While Russian oligarchs make tabloid headlines for shelling out for extravagant superyachts and palatial homes, their bigger investments often occur out of public view, thanks to a largely invisible network of financial advisory firms like Concord.

Hedge fund managers and their advisers said they were starting to examine their investor lists to see if any clients were under sanctions. If so, their money needs to be segregated and disclosed to the Treasury Department.

Some hedge funds are also considering returning money to oligarchs who aren’t under sanctions, fearful that Russians might soon be targeted by U.S. and European authorities.

Paradise Papers project, involved the files of the Appleby law firm in Bermuda. At least four clients owned private jets through shell companies managed by Appleby.

When sanctions were imposed on companies and individuals linked to Mr. Putin in 2014, Appleby jettisoned clients it believed were affected.

The Russians found other Western firms, including Credit Suisse, to help fill the void.

Ben Freeman, who tracks foreign influence for the Quincy Institute for Responsible Statecraft, said Russians were likely to find new firms this time, too.

“There is that initial backlash, where these clients are too toxic,” Mr. Freeman said. “But when these lucrative contracts are out there, it gets to be too much for some people, and they can turn a blind eye to any atrocity.”

David Segal contributed reporting. Susan Beachy contributed research.

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Your Inflation Questions, Answered

Inflation is high and has been for months. It’s weighing on consumer confidence, making policymakers nervous and threatening to eat away at household paychecks well into 2022.

This is the first time many adults have experienced meaningful inflation: Price gains had been largely quiescent since the late 1980s. When the Consumer Price Index climbed 7 percent in the year through December, it was the fastest pace since 1982.

Naturally, people have questions about what this will mean for their pocketbooks, their finances and their economic futures.

Closely intertwined with price worries are concerns about interest rates: The Federal Reserve is poised to raise borrowing costs to try to slow down demand and keep the situation under control.

furniture and camping gear.

That rapid consumption is running up against constrained supply. Factories shut down early in the pandemic, and in parts of Asia, they continue to do so as Omicron cases surge. There aren’t enough containers to ship all of the goods people want to buy, and ports have become clogged trying to process so many imports.

expanding their profits.

In theory, competition should eat away at extra earnings over time. New firms should jump into the market to sell that same products for less and steal away the customer. Existing competitors should ramp up production to meet demand.

But this may be a unappealing time for new firms to enter the market. Established companies may be hesitant to expand production if doing so involved a lot of investment, because it is not clear how long today’s strong demand will last.

“It is a very uncertain environment,” said Matthew Luzzetti, chief U.S. economist at Deutsche Bank. “A new firm stepping in is a lot of investment, with a lot of financial risk.”

Until companies can produce and transport enough of a given product to go around — as long as shortages remain — companies will be able to raise prices without running much risk of losing customers to a competitor.

In past periods of inflation, do employers typically increase wages or award higher-than-average yearly increases to help employees offset inflation? If so, in what industries is this practice most common? — Annmarie Kutz, Erie, Pa.

There is no standard historical experience with wages and inflation, Mary C. Daly, president of the Federal Reserve Bank of San Francisco, said during an interview with The New York Times on Twitter Spaces last week.

lower-wage service industries have been competing mightily for workers in recent months, and pay is climbing faster there.

“The history isn’t so clear that cost of living translates into higher wages, but that’s largely because inflation has been low and stable for a very long time,” Ms. Daly said.

in December projected that price gains will drop back below 3 percent by the end of the year, and will level off to normal levels over the longer term.

are adjusted for inflation, so those should keep pace with price gains. Bonds that pay back fixed rates do less well during periods of inflation, while stock investments — though riskier — tend to rise more quickly than consumer prices. Ms. Benz recommends holding assets across an array of securities, potentially including inflation-protected securities such as some exchange-traded funds or Treasury Inflation Protected Securities, commonly called TIPS.

“It argues against having too much in cash,” Ms. Benz said. “That’s too much dead money.”

We currently have low unemployment, strong wage growth (largely through attrition / voluntary retirements), easy monetary policy and now rising inflation. What are other periods of time when the United States had these conditions? How did things work out then? — Harshal Patel, Moorestown, N.J.

Jared Bernstein, a member of the White House Council of Economic Advisers, pointed to the post-World War II period as a reference point for the present moment.

“Demand was strong, and supply was constrained,” he said in an interview. “That’s a very instructive path for us.”

The good news about that example is that supply eventually caught up, and prices came down without spurring any greater crisis.

Other, more worried commentators have drawn parallels between now and the 1970s, when the Fed was slow to raise rates as unemployment fell and prices rose — and inflation jumped out of control. But many economists have argued that important differences separate that period from this one: Workers were more heavily unionized and may have had more bargaining power to push for higher wages back then, and the Fed was slow to react for years on end. This time, it’s already gearing up to respond.

about price controls in a recent article, and vocal minority think the 1970s experience unfairly tarnished the idea and that it might be worthwhile to reopen the debate.

“This is a great suppressed topic,” said James K. Galbraith, an economist at the University of Texas. “It was absolutely mainstream from the start of World War II until the Reagan administration.”

If inflation is being caused by supply chain problems, how will raising interest rates help? — Larry Harris, Ventura, Calif.

Kristin J. Forbes, an economist at the Massachusetts Institute of Technology, said that a big part of today’s inflation ties to roiled supply chains, which monetary policy can’t do much to fix.

But trade is actually happening at elevated levels even amid the disruptions. Factories are producing, ships are shipping, and consumers are buying at a rapid clip. It is just that supply is not keeping up with that booming demand. Higher interest rates can relieve pressure on demand, making it more expensive to buy a boat or a car, cooling off the housing market and slowing business investment.

“A good part of the supply chain problems, you can’t do anything about,” Ms. Forbes said. “But you can affect demand. And it is the combination of the two which determines inflation.”

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