Russia Court Leaves U.S. Investor Calvey in Jail on Fraud Charge

(Bloomberg) -- The Moscow City Court ordered U.S. investment fund chief Michael Calvey to remain in pretrial detention in a fraud case that’s shocked foreign investors in Russia.

The court on Thursday rejected Calvey’s plea via video link from his prison cell to be released to house arrest as lawyers for his Baring Vostok Capital Partners denied the charges against one of Russia’s longest-standing private-equity investors. Calvey and several other BVCP employees were ordered held on Feb. 16 for two months.

“This is a purely commercial dispute and should be decided in a civil court, not a criminal one,” Calvey, 51, told the court before the ruling. He will remain in Moscow’s Matrosskaya Tishina jail, where he’s been for the last two weeks. The veteran investor is accused of defrauding a bank where his fund was a major shareholder of 2.5 billion rubles ($38 million), a crime punishable by up to 10 years in prison under the Russian criminal code. 

Calvey’s arrest has shaken already-fragile investor confidence in Russia and prompted an outpouring of support for him from top Russian bankers and executives, as well as the Kremlin’s own business ombudsman. President Vladimir Putin last week defended the prosecution in a closed-door meeting, saying that investigators had evidence that Calvey’s fund had committed large-scale fraud, according to people familiar with the talks.

Kremlin spokesman Dmitry Peskov said Monday that Putin was just stating facts, not expressing any personal position, according to the Interfax news service. The case shouldn’t damage the confidence of foreign investors in Russia, according to Peskov.

Calvey, an Oklahoma native, helped start Baring Vostok in 1994 and the fund has raised $3.7 billion in total capital since then. It’s been one of the few western funds to remain committed to Russia throughout the crises that have marked the country’s development since the 1990s.

London Court

He and his associates have said the case is part of a commercial dispute with the other shareholders at Vostochny Express Bank that their fund owns a large stake in. Calvey told the court Thursday his fund has filed a 17 billion-ruble claim in London against the other shareholders and that the jailing of Baring Vostok’s top executives would complicate their testifying in that case.

Lawyers for Sherzod Yusupov, the minority shareholder who filed the complaint that led to the arrests, denied the Russian criminal case is related to the shareholder dispute.

The court on Wednesday rejected an appeal against pretrial detention from Baring Vostok’s investment director, Ivan Zyuzin, the company said in a statement. Two other suspects were refused bail on Tuesday. An appeal by Philippe Delpal, a partner at Baring Vostok, was rescheduled to March 1, it said.

“We are convinced that our employees have acted properly and will defend their rights,” the company said in its statement. “We do not agree with the charges that have been brought against them.”

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