KEY POINTS:
A $US10 million rogue trader scandal has erupted in the Russian banking empire set up by Kiwi expat billionaire Stephen Jennings.
The Bloomberg news agency says rogue trader Anton Stenin has taken Renaissasnce Capital for US$10m in unauthorised trades before disappearing when he was on the verge of
being discovered.
His actions are being described in Russia as "the country's biggest market rout in a decade".
Stenin, 28, had built up about US$130 million in unauthorised positions using borrowed money in a client's account, a Russian newspaper reported.
"The bank's risk controls quickly uncovered the incident, and we took immediate action to mitigate the risk to the firm," Renaissance spokesman Quinn Martin told Bloomberg.
The client, an industrial company, encouraged Stenin to violate risk rules starting in early September and then couldn't meet margin calls, according to a senior trader.
Renaissance founder, Taranaki-born Stephen Jennings, whose wealth was once estimated by Forbes magazine at $5.2 billion, was earlier this year invited by free-market lobbyists the Business Roundtable to give the annual Sir Ronald Trotter lecture.
He was forced to postpone this talk, in light of the collapsing world banking system.
In an interview with the New Zealand Herald last month he said New Zealand needed to become more open, with a more entrepreneurial culture and approach to life.
It needed to embrace the opportunities in emerging economies, like he had. It also needed to look at the way they are non-ideological and "wide-awake, wide-awake".
Shortly after that interview, Jennings sold half of Renaissance Capital to Russian metals oligarch Mikhail Prokhorov for a fraction of the business' estimated value before the credit crunch.
Prokhorov was reported to be paying US$500 million ($725 million) for new shares in the company, giving him a stake of 50 per cent minus one share.
The deal came less than a week after Russia's benchmark Micex Index dropped 25 per cent over three days, prompting regulators to shut down the sharemarket to help stem the worst rout in a decade.
Jennings reportedly rejected a US$4 billion offer for Renaissance Capital in January last year. Four months later, a group of Western investment banks, including Goldman Sachs, Morgan Stanley and UBS, valued the company at US$8 billion to US$10 billion.
"The rules of the game for investment banking globally have been totally rewritten in the last two months," Jennings said after the buyout.
But he denied suggestions he had been forced into the sale by an urgent need for capital.
"We have no losses, no write-downs, no toxic debt. Rather than get into a situation where we have to react, we have decided to act proactively," he said after a news conference where the deal was announced.
"Would it have been better to do the deal six months ago? Obviously."
Jennings, 48, who grew up in New Plymouth, is chairman and chief executive of Renaissance Group, of which Renaissance Capital is a division.
He founded the group in 1995 as communism gave way to capitalism and his wealth was estimated at $5.2 billion by Forbes magazine last month.
The company has a consumer finance division with 12,000 employees, investments including the biggest land-holding in Ukraine and the largest forest estate in Russia, and is expanding into Africa.
Jennings said the world's developing economies were growing at an unprecedented rate, and New Zealand needed a more entrepreneurial economy to keep up.
He advocated reducing the size of government, changing the welfare system, reducing taxes and debating "sacred cows" such as the health system.
Jennings, who employs former All Black captain Sean Fitzpatrick in London, said the All Blacks were one area in which "we have consistently achieved, are recognised, have a global brand, and where there are high levels of professionalism".
STEPHEN JENNINGS
* Has been described as "the only foreign oligarch in Russia".
* Went to Russia in 1992 with Credit Suisse First Boston on a six-week assignment to work on the country's first privatisation.
*Founded Renaissance Group in 1995.
* Two months ago Forbes magazine valued his stake in Renaissance Group at US$5.2 billion.
* Late last month he agreed to sell half of investment banking arm Renaissance Capital for US$500 million.
* Before the credit crunch Renaissance Capital was valued at US$8 billion to US$10 billion.
-HERALD ONLINE