Former Rosneft President Files Lawsuit Against Rothschild Company

The company of the former (until 2010) president of Rosneft, Sergei Bogdanchikov, filed a lawsuit against the investment company of the Rothschild descendants for damages of more than $100 million. The withdrawal of funds was carried out through the intermediary of the company Mossack Fonseca, which became the source of the legendary "Panama Papers" .

How the scheme worked

According to the Financial Times, the lawsuit by Bogdanchikov's Luxembourg Fortinvest Investments Holding was filed in New York on Wednesday, October 14, against the Swiss company Edmond de Rothschild (EDR), which manages assets worth 170 billion Swiss francs. The American jurisdiction was chosen on the basis that EDR and its co-defendants conduct business there.

The plaintiff (as reported by the FT) alleges that former EDR executive Carlo Toews ingratiated himself with Bogdanchikov, “an engineer with allegedly no investment background”, “using the 250-year-old lustre of the Rothschild name, then exploiting that trust in a kickback scheme”. According to the FT, Toews convinced Bogdanchikov that he was a trusted confidant of Baroness Ariane de Rothschild, the chairwoman of EDR, and even invited him to her palace outside Geneva.

Since 2001, Bogdanchikov has invested more than $150 million in EDR through Fortinvest, with a mandate for conservative investments.

But in reality, the lawsuit claims, Tews handed over the management of Bogdanchikov's money to third-party investment companies and received kickbacks from their inflated commissions for himself and Rothschild. The main such company, Brooklyn-based Fontanelle Capital, belonged to a certain Vladimir and Olga Oblonsky. Fontanelle moved part of the money through Manhattan-based OIM Capital and its CFO Mikhail Filimonov.

The quality of asset management was poor, the strategies were risky, and Tews and his accomplices selected managers not based on their professional qualities, but on their willingness to participate in kickback schemes, the plaintiff claims. OIM, for example, lost $10 million of a client’s money on the Indian telecom scam Geodesic , and its total losses on high-risk investments amounted to $86 million. The rest of the damages consisted of inflated commissions and lost profits.

According to Bogdanchikov's side, he was unaware of the fraud until 2016 (the same year Tews left EDR), including because the transactions were specifically conducted through Mossack Fonseca to conceal their nature. Bogdanchikov's company has already filed lawsuits in Switzerland and Luxembourg on this matter, but their materials did not include American companies, whose involvement became known only recently, the FT writes.

All companies and individuals listed in the lawsuit did not provide their comments to the media.

What you need to know about Bogdanchikov

Sergei Bogdanchikov headed Rosneft from 1998 to 2010. Under his leadership, the state company returned a number of withdrawn assets and also put Yuganskneftegaz, the largest production subsidiary of YUKOS, into its piggy bank. Bogdanchikov had no intention of retiring, but in 2010, the country's main oil company was headed by Eduard Khudainatov, an associate of the current head Igor Sechin, and since 2012, by Sechin himself.

Bogdanchikov's entire career has been linked to Rosneft: at the age of 24 in the early 1980s, he became an operator for underground well repairs at Okhaneftegazdobycha (a future division of the state company); in 1993, he became the head of Sakhalinmorneftegaz; and in 1998, Prime Minister Yevgeny Primakov appointed him the head of Rosneft. You can read more about Bogdanchikov's role in Rosneft eventually becoming the country's largest oil company here .

It is believed that Sechin personally initiated Bogdanchikov’s resignation, and he did not allow either him or his associates to subsequently occupy a significant position in government and business.

The money Bogdanchikov lost on the Rothschilds' companies must have made up a significant portion of his fortune. There are no recent estimates, but in 2005 Bogdanchikov's fortune was estimated at $700 million.