Read Part I of the investigation here
London-based businessman Dmitriy Tsvetkov has a dispute with former partner Rustem Magdeev in British High Court of Justice. The business in question is a franchise of Graff Diamonds in Cyprus, ultimately operated by Russian investors - a former adviser to President of Tatarstan, Rustem Magdeev, managing partner Dmitriy Tsvetkov and Emil Gainulin, the owner of PTPS - the subcontractor of major Russian state corporation Gazprom. Graff boutique was closed down in 2017, after fast accelerated conflict, with all partners involved. Dmitriy Tsvetkov and Rustem Magdeev had submitted the counterclaims to London's court. First Magdeev's lawsuit was rejected in 2019. Since January 2020, the High Court of Justice keeps public hearings of the second lawsuit. It is appeared that Rustem Magdeev was a sort of "false investor" in Graff business, actually representing Russian government authorities Rustam Minnikhanov and Ramil Khabriev, who could not be officially involved in any business, due to Russian laws. The process had attracted a wide press interest.
On the last day of the cross-examination, Rustem Magdeev was depressed because of all the confessions he had made. One of the highlights of the process was connected with the $3.5 million in cash. In general terms, the case is pretty simple:
Magdeev demanded Tsvetkov to return the money provided as a loan to their joint company. It is worth mentioning that there was no loan agreement. The plaintiff insisted that he did not issue the transaction on paper, since he trusted his partner.
This deal turned out to be connected with a person named Alexander Mayorov from Hong Kong. Rustem Magdeev admitted that he had loaned him $3.5 million in cash. But the plaintiff could not name anything but the amount - neither the interest rate, nor the deadlines. He insisted that he signed an agreement with Mayorov, but then he claimed "to destroy the document as unnecessary".
Finding evidence supporting Mayorov's existence was not easy. In the database of the International Consortium of Investigative Journalists (ICIJ), we found one person with a suitable name and surname mentioned in conjunction with the special administrative region of China. It is said that Alexander Mayorov is a shareholder of Seaglide Property Limited (British Virgin Islands). He got into the ICIJ database in the lights of the world's largest offshore scandal, caused by the leak of the so-called "Panama Papers". The sources of the Versia also reported that Alexander Mayorov could have provided certain financial services to the former senator Igor Ivanov, who in 2007 became a figurant of a criminal case on the smuggling of goods from China and South Korea at 2.3 billion rubles. Some sources also claim that Ivanov was a partner of Rustem Magdeev. Magdeev's testimonies about the undocumented loan to Alexander Mayorov caused distrust of the court. Since no bank transactions were submitted on this occasion, the lawyer asked the plaintiff to tell where and how he transferred $3.5 million to Mayorov.
Magdeev: It happened in Moscow. He needed cash, real money in Russia is still needed
- And did you personally count the banknotes for $3.5 million and gave them to him?
Magdeev: No, I did not need to count every banknote, because they were packed in bundles in plastic bags.
- I do not believe you. What does a package of hundred-dollar bills for $3.5 million look like?
Magdeev: No, one such package contains 100 thousand dollars, and it weighs one kilogram. Thirty-five bags, 35 kilograms, can be easily distributed over two sport bags. Both bags are capable of being carried away by one person, even me. If you ask me about British pounds, I can't answer. But as for the US dollars cash, I am to some extent a "professor" in this matter.
The journalist of the Versia newspaper mentioned that in London Rustem Magdeev testified, using Russian language. It turned out that he could not even read in English. It was confusing, when Magdeev claimed that he was a serious international businessman with a cross-border business in Russia, Cyprus and Dubai, but then admitted: "I don't really like numbers, I don't even have a financial education ... I did not participate in current activities of the business, because I don't speak English ... So I did not have an opportunity to get much into the details, without English. All the management, including financial and operational activities, was ruled by Mr. Tsvetkov."
The Graff Diamonds franchise developed throughout two companies, one was located in Cyprus (Equix Group) and the other one was in Dubai (EK Diamonds). During the trial in London, it turned out that a citizen of Cyprus and Russia Rustem Magdeev violated several laws of the UAE, Russia and Cyprus. Those violations were related to investment income and visa regime. For several hours Magdeev was talking under oath about how he made a profit to get a work visa in the UAE. But in fact, Magdeev was receiving money under a fictitious agreement.
Rustem Magdeev and his son Ernest received interest on investments (up to 15% per annum) under the guise of wages. To execute this, the Dubai EK Diamonds made an official employment contract with both of them. At the same time, Magdeev admitted that the contracts were only a form of payment of the mentioned interest. Tsvetkov's lawyer directly asked Rustem Magdeev: "Did you realize that these agreements will be submitted to the official authorities of the UAE, and this will be the basis of your work visa." Magdeev confirmed this statement. From the point of view of the visa regulations of the UAE this action can be treated as a direct violation, and the consequences can be severe - not only a fine, but also imprisonment for several months. Not to mention the possible deportation.
This is a violation in three jurisdictions - in the Emirates this fictitious agreement became the basis for a work visa, in Cyprus and in the Russian Federation - (Magdeev is also a citizen of Cyprus) this is an undeclared income, and the amount is rather big - over $2 million, for which he had to pay tax as a resident of the Russian Federation: investment income and salary which is at least 13% of the amount. That means that Magdeev did not pay at least $280,000 of taxes to Russia, which is a criminal offense itself.
Rustem Magdeev said that after the termination of the labor contract with EK Diamonds, he tried to get a new work permission visa in the UAE, he was even formally hired by the company Global (Dubai), which was managed by his friend Rustem Mirgalimov, but Magdeev did not fulfill any duties there. "I still have permission to work in the Emirates," he said during the cross-examination. It turns out that at the time his next trip to the Emirates, he can be deported for the violation of the migration law. But before this he can spend several months in a local prison, according to UAE laws.
Work permission visa in the UAE was not the only reason. According to Versia reportage from the High Court of Justice, Rustem Magdeev might need an undeclared labor contract, because he needed to hide that income from the true owners of the money, invested in Graff's business, who were the head of Tatarstan Rustam Minnikhanov and ex-director of RUSADA Ramil Khabriev. It turns out that the Cypriot passport guaranteed Magdeev to not get caught by the Russian fiscal authorities. That's why any even possible imaginary Magdeev's employment in the UAE can make attention not only in Dubai, but also in Kazan, because he seems to have received a salary until July 2016 - more than $2.2 million in cash in total, not considering the income of Ernest Magdeev. Judging by the latest events related to the investigation of Navalny about the Minnikhanov's plane for 3 billion rubles.
The Magdeev clan may also get into trouble in Cyprus, because his son Ernest "invested" money in the Equix Group in the same way it was done in UAE. Ernest Magdeev was employed by the company that ran the Graff jewelry boutique in Limassol, and, apparently, received a part of the invested money as a salary. Everyone knows that Russian businessmen use offshore jurisdictions to "optimize taxation," but only few of them decide to "fool" the offshore administration.
In late March, Russia sent to Italy a group of epidemiologists and specialists from radiation, chemical and biological protection troops of the Defense Ministry to help disinfect medical facilities in Italy