Coal magnate and Forbes list member Alexander Shchukin decided to conduct family affairs in London. How did a businessman become a victim of a fraudster?

In 2012, co-owner of the Polosukhinskaya coal mine and ex-partner of Andrei Melnichenko , Alexander Shchukin (No. 189 on the Forbes list, net worth: $500 million) decided to open a family-office in London - a private independent organization providing services to families in connection with the management of family property and other assets . The businessman entrusted this task to the husband of his only daughter Elena, Ildar Uzbekov, the son of Fuad Uzbekov, who until 2002 was a senior adviser at Gazprom Export, as well as deputy general director of KazRosGaz (a joint venture of Gazprom and KazMunayGas), it follows from materials of the case in the High Court of London (available to Forbes).

To solve the problem, in England Uzbekov found what he thought was a reliable partner, Adrian Burford. Shchukin’s son-in-law considered the latter “a very smart man.” Burford, at first glance, looked presentable: he graduated from Cambridge, worked at McKinsey & Co and the British Foreign Office, and ran his own business.

After Uzbekov told Burford about his goal, he got excited and in 2012 convinced the Russian partner of the need to create a family-office in London on the basis of a joint company with him, Fern Advisers Limited (Fern). It would make it possible to invest funds and support the life style of the Shchukin family abroad. For example, Elena Shchukina has an art gallery in a prestigious area of London. Burford expected that up to $1 billion would be invested in family-office.

The English manager proposed creating a family-office using the example of the Oppenheimer family (former owners of De Beers with a fortune of $6.6 billion), with whom, as he told Uzbekov, he had close contacts. Which finally convinced the Shchukin family that it was possible to work with Burford.

Cars and restaurants

In April 2012, £1 million towards the costs of setting up the family-office was sent to Fern accounts from Cypriot funds in which the Shchukin family's money was kept. Two days after the money was transferred, Burford, as director of the company, transferred about half of the funds into his bank accounts through a loan. Why did he do this? Unfortunately, Uzbekov did not know that Burford was experiencing serious financial difficulties and was mired in debt. His wife's medical business was doing very poorly, and the respectable Sushinho restaurant of Brazilian-Japanese cuisine on King's Road in London (Burford was its co-owner) was generating a loss of £1 million a year. Things got so bad that Burford's mother's lawyer says he forged her signature to mortgage her £250,000 house.

But half a million pounds was not enough, and in June 2012 Burford decided to persuade Uzbekov to transfer another £2.5 million to Fern's account for joint investments with another family-office called Red Star. The companies were required to invest equal amounts in exchange for shares in the company managing the Marylebone Oil & Gas Fund. As stated in the case, Burford showed Uzbekov a document indicating Red Star's intentions to invest at least £50 million in the fund. Which became the pretext for Burford to start receiving a salary of £20,000 a month.

As it turned out later, Red Star did not transfer its first contribution of £2.5 million. Burford simply forged a document about the company's investment intentions. But Uzbekov did not know this and transferred the necessary funds to Fern’s account. Burford, in turn, deposited £850,000, which was intended for the purchase of the Broadwell Manor estate in Gloucestershire, worth a total of £8.5 million. He also leased two expensive cars - an Aston Martin Rapide and a Land Rover Discovery 4. He drove them to the office that Fern rented in the prestigious Mayfair district of London.

But the money began to run out, and already in July 2012, Burford had another investment proposal for the Shchukins - a deal with the Oppenheimer family. He said that his old colleagues close to the Oppenheimers were offering him £150 million to manage the family. But in order to begin management, Burford needs at least £10 million from the Shchukins - as proof that he has funds in his accounts. Uzbekov again trusted Burford and the funds were transferred to the temporary storage of Fern. Burford thanked Uzbekov and said that he had received a mandate to manage the Oppenheimer family's £16 million. In reality, there was no agreement with the Oppenheimers, and the funds were needed to pay the balance for the estate. In addition, Burford allocated £1.5 million to develop his restaurant business and opened a second Sushinho restaurant in Devonshire Square in London. He told his business partners that he had taken the funds on credit and showed them a fake statement.

Bankruptcy and the “private army of Siberia”

Uzbekov did not notice the thefts, since Burford personally prepared Fern reports for him, which reflected data on company accounts. When Uzbekova asked for bank statements, Burford provided him with a fake.

But in February 2013, Uzbekov received a letter from the English bank Coutts, which stated that £10 million of the company, issued for the “deal with the Oppenheimers,” had been withdrawn from the company. Uzbekov decided to talk with Fern's auditors from Smith & Williamson. Uzbekov’s assistant tried to contact Smith & Williamson employee, auditor James Butterworth, by phone, but the latter was “elusive”, he often changed plans abruptly and was sick a lot.

It later turned out that Butterworth was Burford himself, who invented this character and corresponded with Uzbekov’s assistant on his behalf.

Having failed to obtain reports from him, Uzbekov appealed to the High Court of London in March 2013.

That same month, Burford admitted to an independent lawyer that he had taken £11 million and spent it on the house and his projects. However, he then retracted his words, explaining that he had received threats “from a private army in Siberia.” Representatives of Uzbekov's side told Forbes that Burford's assets were frozen. Burford himself voiced his position only in February 2014, according to it, documents proving his innocence “disappeared in cloud email services.” The loans he took from the company for the restaurant and estate were allegedly verbally certified by Uzbekov. Uzbekov’s goal was allegedly to withdraw funds from his own family. According to Uzbekov’s lawyers, the court found Burford’s statements “ridiculous and defying commercial or any other common sense.”

The companies owned by Shchukin refused to comment for Forbes. What did the coal magnate manage to return? The court ruled that funds from the sale of the estate should return to the family-office. It was later sold for £8 million, according to property website Rightmove, with Knight Frank as the selling agent. Burford himself was declared bankrupt in early 2014. Uzbekov's lawyers say he faces criminal penalties. Burford could not be reached for comment.

Deceive a billionaire: how the family of Alexander Shchukin opened a family-office