Western Investors in Russia Shocked by Arrest of U.S. Businessman

The arrest of prominent U.S. investor Michael Calvey in Moscow on suspicion of fraud has sent shockwaves through Western business circles and sparked fears of cutbacks in foreign investment sorely needed for Russia’s economic growth, The Financial Times reports.

The founder of private equity firm Baring Vostok was arrested on Friday in a case brought with the help of the FSB security service. Him and five others – including Philippe Delpal, a French citizen – were placed in pre-trial detention in a Moscow jail for the next two months for alleged fraud. Prosecutors accused the defendants of embezzling 2.5 billion rubles ($37.5 million) by persuading Vostochny Bank shareholders to approve a share sale at an unrealistically low price. All of them deny any wrongdoing and blame the case on a shareholder dispute.

The arrest took place on the same day Russia hosted leading business people in the Black Sea resort of Sochi for a major economic forum which trumpeted the country’s openness to investment.

Other business leaders said they fear the case will deal a severe blow to an investment climate already marred by corruption and the lack of independent courts – especially given the strong-arm tactics employed.

“This gives Russia a hateful image abroad,“ the president of the French-Russian chamber of commerce, Emmanuel Quidet, told AFP.

The organization said on Monday it was “very concerned” about the arrests in a joint statement with the Association of European Businesses, a federation of multinational companies working in Russia.

Some Russian business figures and economists also reacted strongly to investigators swooping on Baring Vostok, founded in 1994, which has brought in investments of more than $3 billion to Russia despite the geopolitical tensions and Western sanctions of recent years.

Arkady Volozh, the CEO of Russian internet giant Yandex, defended Calvey in a statement, saying he “has always been a standard for the market of decency and law-abidingness.”