Baring Vostok installs replacement heads as Calvey remains in jail

The firm has temporarily suspended the four detained employees amid a dispute over the transfer of shares from one of its portfolio companies.

Baring Vostok Capital Partners has appointed temporary leadership to stand in for US founder Michael Calvey while he remains detained by Russian authorities.

Co-founder Alexei Kalinin and senior partner Elena Ivashentseva have taken on joint responsibility for leading BVCP, the firm said on Monday. Calvey and three other detained employees – partners Vagan Abgaryan and Phillipe Delpal, and investment director Ivan Zyuzin – have been suspended temporarily “to ensure efficiency and operational continuity”.

BVCP investment decisions will continue to be taken by its funds’ independent investment committee, which has always featured only one representative of the firm.

“We have always acted in full compliance with the law and believe that truth is on our side,” Kalinin and Ivashentseva said in a joint statement.

“Your [colleagues’, partners’ and friends’] support has given us additional strength and inspired us to fight for what we know to be right. The claims that have been brought against our colleagues are baseless and simply untrue, and we are convinced that this will be established in court.”

What happened?

The four suspended employees were detained on Thursday on suspicion of embezzling 2.5 billion roubles ($37.5 million; €33.3 million), Russian news agency Interfax reported on Friday, citing an investigator at court.

The allegations relate to the transfer of shares in the International Financial Technology Group, owned by Baring Vostok portfolio company First Collection Bureau, to Vostochniy Bank, another portfolio company. The transfer was intended to repay a loan from Vostochniy to First Collectors Bureau. Russian businessman Shevzod Yusupov, a shareholder in Vostochniy Bank, filed claims last week disputing whether IFTG had been valued correctly, Bloomberg reported.

Calvey pleaded innocent in court, according to a BVCP statement on Saturday.

“The claims being made against the management of Baring Vostok by Mr Yusupov regarding Vostochniy Bank and IFTG have no merit and we believe that they are simply meant to pressure Baring Vostok to drop its arbitration claims in London or to obstruct the new share emission of Vostochniy Bank,” Calvey said.

“IFTG is a profitable, growing business that has clear synergy with Vostochniy Bank. Mr Yusupov was personally involved in the negotiations and approval of the acquisition of IFTG.”

What next?

Moscow’s Basmanny Court has ordered Calvey to be held in custody until 13 April, though Private Equity International understands an appeal has been lodged seeking his release on bail.

It is unclear what the ordeal means for BVCP’s investors. The firm itself was keen to clear up what it said were “inaccurate reports” on Sunday about ownership of its Vostochniy Bank and First Collectors Bureau.

“Both of these companies are portfolio investments by Baring Vostok funds, and Michael Calvey has never directly or indirectly owned their shares,” the firm said. “The beneficial owners of the stakes held by Baring Vostok in its portfolio companies are de facto investors in Baring Vostok funds; the vast majority of them are well-known international investors.”

HarbourVest Partners, New York State Common Retirement Fund and University of Chicago committed to the firm’s last flagship, Baring Vostok Private Equity Fund V, a $1.27 billion 2012-vintage, according to PEI data.

The Russian Venture Capital Association is formulating its response to Calvey’s detention, a spokeswoman for the VC and private equity industry body confirmed to Private Equity International.

Kirill Dmitriev, chief executive of the $10 billion Russian Direct Investment Fund, has already come out in support of Calvey.

“It is very difficult to comment on the situation around Michael Calvey’s detention not knowing the details of the charges,” Dmitriev said.

“However, here at the Russian Direct Investment Fund we know Michael Calvey and the team of Baring Vostok as highly professional investors, committed to the highest ethical standards accepted in the investment community. I am ready to provide a personal guarantee for Michael Calvey in order to soften the measure of restraint. I believe that he has done a lot to attract foreign investment in Russia and helped many Russian companies to grow and mature.”