Hunt the luxury apartments of Russian oligarchs
Photo-Illustration: Intelligencer; Photos: Sasha Mordovets/Getty Images; Google Maps
Unit 56D at Three Lincoln Center, a residential tower just steps from the Metropolitan Opera House, is a luxurious three-bedroom condo valued at over $3.2 million. It wraps around one of the tower’s corners, offering sweeping views of Central Park, the Hudson River, and the lower half of Manhattan. It’s empty now, but since 2004 the property has belonged to one of Vladimir Putin’s most prominent defenders, Valery Gergiev, the director of Russia’s state-owned Mariinsky Theatre.
Gergiev doesn’t quite fit our idea of a Russian oligarch, those titans of industry who control the country’s vast reservoir of natural resources. “Despite being a pretty famous conductor, he’s a small potato in the world of oligarchy,” said Gergiev’s former agent, R. Douglas Sheldon, who confirmed that Gergiev had bought the apartment and signed a partial power of attorney to maintain it. But Gergiev’s case highlights the difficulties US authorities have had in identifying and seizing Russian assets as the Biden administration seeks to put pressure on Putin’s regime.
Gergiev has been friends with Putin since beginnings of post-Soviet Russia. As director of one of the world’s most legendary opera and ballet houses – a venue that debuted works by Tchaikovsky and featured Mikhail Baryshnikov – he helped soften Russia’s reputation in the United States and throughout Europe. His role in establishing Russia as the engine of Western culture was going well until recently, when Gergiev lost his posts in Munich, Vienna and Carnegie Hall in New York after refusing to speak out against the Putin’s invasion of Ukraine.
“He plays this propaganda role,” said Dmitry Valuev, who for a year has been quietly hunting Russian oligarchs’ money in the United States with a group of about 25 volunteers. vValue — who discovered Gergiev’s apartment in public documents — focused on the flow of Russian money in 2009, when the global economy was still recovering from the explosion of subprime mortgages in the United States. A spike in energy prices was filling state coffers – or, at least, that was where the revenue was supposed to go. “The economy was growing very fast in Russia at the time because of oil prices, but in the meantime we haven’t seen any social change, we haven’t seen any investment in infrastructure, we haven’t as the government makes attempts to improve people’s lives,” he said.
The mystery of what happened to all that money drove him to pursue a career in corruption in his home country, to work on the Magnitsky Act initiative to punish foreign government officials, and to organize groups of emigrated to the United States for the Free Russia Foundation in Washington, DC. Russia’s invasion of Ukraine has intensified its efforts to find where Russian elites have parked their money. Valuev said Gergiev’s assets in New York were never made public prior to his group’s discovery, even though Russian law requires government employees to disclose their foreign assets.
Russia and its companies, agents and citizens have already been subjected to an unprecedented round of global sanctions, but Valuev is pushing not only to freeze Russia’s assets – he wants to expose the vast amounts of wealth hidden in the American economy just as prosecutors seek to take control of it. Since the invasion began on February 24, the French and German governments have seized superyachts, while President Joe Biden and British Prime Minister Boris Johnson have threatened to take ownership from the oligarchs. These efforts have barely made a dent. Estimates of Russia’s offshore wealth exceed $1 trillion worldwide, but accessing it requires navigating networks of limited liability companies, many of which are headquartered in tax haven states like the Cayman Islands.
Valuev and his “militia,” as he calls his volunteers, found more than $450 million in assets belonging to Russian business and cultural leaders by scouring public databases, deleting Russian news articles and other public sources of information that may give clues to where Putin’s closest confidants have hidden their money. They still have a long way to go: according to International Transparency, current and former Russian officials owned 28,000 properties in 85 countries between 2008 and 2020. “We haven’t found it all here in the United States,” Valuev said. “We just found what was on the surface.”
It’s no secret that the richest people in the world hide their money. Since George W. Bush signed the Patriot Act in 2001, the US Treasury has exempted the real estate industry from the kind of strict money laundering controls that apply, for example, to stock market transactions, which means that the Buying a multi-million dollar apartment on Wall Street is less scrutinized than buying stocks on the New York Stock Exchange. While the Treasury has slowly required certain disclosures for certain real estate purchases in major cities like New York and Miami, they only apply to cash transactions over $300,000 made through shell and n ‘requiring these disclosures from title companies – not the agents who actually negotiate the transactions.
“Real estate agents were specifically exempted from AML program requirements for unknown reasons a few years ago,” said Ross Delston, an attorney who has worked extensively on AML issues. money. “The National Association of Realtors has one of the best lobbying arms in Washington.”
Since the publication of the Panama Papers in 2016, what has become clearer is how black money has been used to reward those in power, including people like Sergei Roldugin, one of Putin’s closest friends. Economists Gabriel Zucman, Filip Novokmet and Thomas Piketty estimated in a paper that in 2015, Russia’s offshore wealth was roughly equal to what it was inside the country, a direct cause of worsening inequality in the country. “Corruption fuels instability,” said Shruti Shah, CEO of the Integrity Coalition, which tracks international corruption. “What’s also happened is a significant amount of reputation laundering that allows these oligarchs to have this veneer of respectability and allows them to infect democracies.”
While the assets of the oligarchs are difficult to find, freeing up the federal government to take control of potentially thousands of properties across the country would require the kind of resources and interagency coordination that was not seen at the start of the war on terrorism. Already, this plan has begun. The day after President Biden threatened to hunt down the luxury apartments, yachts and private jets of the oligarchs, Attorney General Merrick Garland announced the formation of Task Force KleptoCapture, a joint operation between the Department of Justice , the Manhattan US Attorney’s Office and the criminal elite. -investigative unit of the IRS to find and take control of the assets of the oligarchy.
Barring a declaration of war, federal authorities cannot simply take possession of assets without going through a criminal or civil process, called civil forfeiture, which proves that the funds used to purchase them were laundered or originated from an illegal source, Delston said — an expensive and laborious process that can take years. Instead, what they can do is just take it and hope the oligarchs don’t stage a court battle, which could give the government ownership in as little as six to nine months. “To seize, they just need a seizure warrant, which is virtually the same as getting a search warrant,” said Arnold A. Spencer, a former assistant U.S. attorney. Essentially, any prosecutor who has a modicum of evidence that an oligarch’s money is coming from an unsavory source can take over a condo or a yacht and force him into a year-long legal process.
The Treasury Department has reported that in the future this could require brokers to do their due diligence as to where property buyers’ money is coming from – a change the estate agent lobby is currently making fight. “At this time, the real estate industry is under no obligation to do anything,” Delston said. “Everyone from corrupt dictators to Chinese industrialists to Russian oligarchs invests their money in the United States through real estate.”
Valuev hopes his work will point prosecutors and treasury officials in the right direction. What this means for Gergiev’s Lincoln Center apartment is still unclear. “It’s just sitting there. He sometimes tried to sell it and never pulled the trigger,” Sheldon said. “Whether there is a future depends on what happens to Russian-American relations politically and economically in the future, and the more disastrous the war, the less future there is – period.”