Kiwi link in Russian tax fraud allegations

Stephen Jennings. Photo / Supplied

A mega-wealthy ex-pat Kiwi has been unwittingly caught up in an alleged $500-million-plus fraud with claims top Russian government ministers were involved.

British hedge fund Hermitage Capital Management Limited has filed a number of civil and criminal court proceedings in Russia and abroad over allegations of major tax fraud and subsequent cover-ups.

Hermitage founder and CEO William Browder alleges in court documents that Renaissance Capital, a leading investment bank in Russia, may have had involvement with the fraudsters named in court documents and in letters given to the St Petersburg Times.

Renaissance Capital's parent company, Renaissance Group, is led by Kiwi multi-millionaire Stephen Jennings. The company denies any allegations of wrongdoing, saying it too has been hit by the fraudsters.

Jennings, dubbed the "Kiwi oligarch", was worth an estimated $1.4 billion last year but the economic fallout has reportedly seen his wealth decrease to an about $800 million.

He has kept a relatively low profile in New Zealand since basing himself overseas more than a decade ago. He has a luxury bach in Golden Bay, and in 2004 gave the National Party $20,000.

A Hermitage spokesman said the company could not comment while litigation was underway.

Court documents, which have been filed in New York's southern district court and obtained by the Herald on Sunday, say Hermitage has taken legal action asking for bank documents to be handed over to show the identities of individuals caught up in the alleged "major criminal conspiracy".

Hermitage used to be Russia's largest foreign portfolio investor. Founded in April 1996, it gave Western investors the ability to trade on the Russian stock market.

According to court documents submitted by Hermitage's solicitor Neil Micklethwaite, Browder became dissatisfied with Russian business practices and became an "anti-corruption shareholder-rights activist".

After sharing findings with the media, Micklethwaite claims "high-level enemies" hit back.

Returning from a business trip, Browder was denied access back into Russia, with government officials saying he was a threat to national security.

Hermitage claims to have evidence the Russian Interior Ministry and Moscow Tax Authority, along with judges, lawyers and major companies, are part of the fraud.

Micklethwaite, in the court documents, also alleged two investment companies, which were owned by Renaissance Capital but had been sold by the time of the alleged fraud, were "in some way connected" to a number of individuals "who were involved in orchestrating the fraud".

"President Putin held regular meetings to receive updates."

But Renaissance denies Browder's allegations that it, or any associated company, knew who the fraudsters were. The allegations come from when Renaissance liquidated three of its investment firms. It appears the same fraudsters then used those liquidated companies to apply for tax rebates.

"Any suggestion that Renaissance was involved in a 2006 tax fraud is wholly false," the company said. It said it learned of the fraud through the media.