Well-known U.S. Investor Detained in Moscow on Suspicion of Fraud

One of the most prominent U.S. business executives based in Russia, Michael Calvey, was detained on suspicion of fraud, a Moscow court said Friday, according to CNBC.

Calvey’s private equity firm, Baring Vostok Capital Partners, said that Russian authorities had detained him and three other employees as a result of a commercial dispute relating to Vostochny Bank, in which the firm holds a stake. A Moscow court notice showed Calvey had been detained on suspicion of “fraud carried out by an organized group or on an especially large scale.”

Such a crime is punishable by up to 10 years in prison, according to the Russian criminal code.

Before starting at Baring Vostok, Calvey worked for the European Bank for Reconstruction and Development (EBRD) and Salomon Brothers. Calvey, who is 51, grew up in Oklahoma and founded Baring Vostok in Moscow in 1994. The company says it has invested $2.8 billion from North American pension funds and others into companies across the former Soviet Union.

Calvey is suspected of embezzling 2.5 million rubles ($37,484) from Vostochny Bank via a fraudulent scheme, according to an investigating officer, as quoted by Russian media.

“The investigators established that Calvey knew about the 2.5 million debt of the First Collection Bureau, controlled by him,” the officer told the court. “However, the suspect arranged the sale of shares of the enterprise to Vostochny Express Bank, that is seen as embezzlement.”

The Moscow court will decide later on Friday whether to hold a partner in the fund, Vagan Abgaryan, in custody, Interfax cited the same court spokeswoman as saying.

Baring Vostok was cited by Interfax as saying that Calvey had been detained in connection to a dispute over Russia’s Vostochny Bank, in which the fund is a controlling shareholder.

Calvey kept investing in Russia even as sanctions, official corruption, and the sputtering economy scared away many Western companies. In 2011, he told The Washington Post that his firm was prepared to handle the vagaries of doing business in Russia. 

“International firms aren’t equipped for Russia,” Calvey said at the time. “And they usually have a low tolerance threshold for uncertainty and no sense of humor for Russian surprises.” 

Calvey is at least the third Westerner to face an adverse action by Russia’s justice system in the last two months, after American Paul Whelan, who was charged with espionage and Danish citizen Dennis Christensen, who was sentenced last week to six years in prison for extremism for practicing as a Jehovah’s Witness.