UK Subsidiary of Russian State Bank VTB Reported to Serious Fraud Office Over Vivacom Sale

LONDON, Feb. 09, 2016 -- Empreno Ventures, the owner of the largest Bulgarian telecommunications company Vivacom has reported VTB Capital, the UK arm of the state owned Russian bank, to the Serious Fraud Office for the alleged illegal seizure and sale of the company to a connected party.

The criminal complaint was filed with the Serious Fraud Office last week by lawyers representing InterV and its owner Dmitry Kosarev, who is the principle shareholder in Vivacom.

In a separate legal action Mr Kosarev is suing VTB Capital in London for damages in excess of 143m euros for allegedly selling Vivacom for a price that significantly under represented the true value of the company.

According to the SFO complaint, VTB Capital dishonestly seized InterV’s shareholding in Vivacom by conspiring with a third party to block the owners’ access to the company. Individuals named in the SFO complaint include Mr Nick Hutt (CEO of VTB Capital plc), Mr Alexei Yakovitsky (Global CEO of VTB Capital and CEO of VTB Capital Holding (Russia)) and Mr Yuri Soloviev (Deputy Chairman of the Management Board of JSC VTB Bank and Chairman of the Board of Directors of VTB Capital Holding (Russia)).

According to the complaint, after effectively taking control of the company, VTB has quickly started the process of selling it to an affiliated party at a grossly undervalued price, thereby resulting in substantial financial detriment to the rightful owners.

Vivacom is the largest telecommunications company in Bulgaria and a former state-owned monopoly. It employs over 3500 people and offers various telecommunication services, including fixed-line, mobile, internet, radio and TV broadcasting, and data transmission services. The company is headquartered in Sofia, Bulgaria.

The SFO complaint alleges that VTB Capital deliberately prevented InterV from refinancing a 150m euro loan with the investment bank. It then allegedly sold InterV’s shares in Vivacom, which had been used as security on the loan, at a knock down price to a connected party – and in doing so breached a stand-still agreement reached by the parties.

VTB Capital made an attempt to sell the share of the company to an affiliated individual, Spas Rusev, a prominent London-based Bulgarian businessman. InterV and Mr Kosarev believe that the sale is being conducted via a sham auction process without proper notification and in an effort to conceal the sale.

According to the filing with the Serious Fraud office:

- No proper or sufficient attempts were made to publicise the purported auction so as to attract a reasonable number of interested bidders

- VTB Capital specifically and persistently refused to provide InterV with information to enable it to refinance their loans with VTB Capital and to participate in a bid for the InterV shares.

- No proper or sufficient period of notice was allowed before the purported auction to enable interested bidders to prepare and carry out reasonable due diligence.

- The winning bidder, Spas Rusev, is a connected party and a long-standing associate of VTB Capital.

- The ultimate sale price of €330 million agreed for the InterV shares grossly undervalued the shares and represented a substantial reduction of €143 million to the competing bid by CVC Capital Partners Limited.

- VTBC has obstructed the steps taken by InterV to investigate its misconduct by persistently refusing to disclose relevant information and documents.

Authorities in Russia are also looking into starting a criminal investigation against unidentified subjects in connection with the sale of Vivacom. However the case falls under the UK jurisdiction as the alleged crime took place in the UK.

Russian state-controlled bank VTV, the parent company of VTB Capital Plc, has been under EU sanctions since 2014, but these measures exclude EU and UK-based subsidiaries that effectively serve as major financial pipelines for the Russian economy. VTB has been embroiled in the numerous corruption scandals in Russia, most notably brought by the Russian anti-corruption activist Alexey Navalny.

About Vivacom:

VIVACOM is the brand name of the Bulgarian Telecommunications Company EAD (BTC), the largest telecommunications company in Bulgaria and a former state-owned monopoly. It was founded as a joint stock company in 1992 as part of the split of Bulgaria's post and telecommunication services into separate companies. Currently, VIVACOM is leading the market in providing various telecommunication services, including fixed-line, mobile, Internet, radio and TV broadcasting, and data transmission services. The company is headquartered in Sofia, Bulgaria, employs around 3,500 people, and owns a mature distribution network with over 230 retail outlets. VIVACOM’s customer base includes both business and residential subscribers. It serves 2.6 million fixed phones and provides broadband Internet access to 400,000 households and free Internet access at more than 3,000 public locations in Bulgaria.  VIVACOM’s 3G network coverage expands to 99.41% of the population and 99.95% of the territory of Bulgaria.

Andrew Watson
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+44-203-289-9344