On Sunday, the New York Post broke the news that New Jersey Rep. Bill Pascrell, who'd previously asked the NBA to investigate Mikhail Prokhorov and obviously doesn't want the Nets to leave his state, asked the U.S. Treasury Department to investigate whether the investment bank Renaissance Capital--of which Prokhorov's firm Onexim owns nearly half--violated U.S. sanctions in dealing with Zimbabwe.
"Mr. Prokhorov reportedly controls nearly 50% of the investment bank, which recently sponsored an economic summit in Zimbabwe this past February on behalf of the government," Pascrell said in a letter.
On a weekend, that generated a lot of heat, but not much light. The Treasury Department sanctions don't apply to all business in Zimbabwe, just with certain persons and entities.
Responses deny charges
Yesterday came the responses. The Wall Street Journal reported a response from Renaissance Capital, which said Renaissance Capital Africa CEO Andrew Lowe did not attend the February event in Zimbabwe because people from the U.S. sanctions list were attending:
Renaissance Capital is fully aware of the sanctions imposed by the United States on certain Zimbabwean persons and companies and takes its compliance obligations extremely seriously. Contrary to erroneous reports in the press, we have at all times strictly complied with all laws and have no relationship with sanctioned individuals or companies.Conflicting evidence
That seems to conflict with a 2/15/10 report from the Zimbabwe government newspaper The Herald, headlined 1,000 Delegates Expected for Investment Summit:
MORE than 1,000 local and international delegates converge in Harare today for the 5th Pan African Tourism Investment Summit and the International Conference on Investment Opportunities in Tourism and Related Sectors.So, is this report incorrect? I can't find further confirmation that Renaissance Capital attended, but, if not, they should specifically respond to this article.
The investment summit, organised by Africa investor in conjunction with the Ministry of Tourism and Hospitality Industry, and the Zimbabwe Tourism Authority, offers the country the opportunity to position itself as an attractive and competitive investment destination.
...The World Bank, International Finance Corporation, African Development Bank, Afrexim Bank, Development Bank of Southern Africa, Industrial Development Corporation, CBA Capital Partners, Actis and Renaissance Capital have confirmed their participation.
SW Radio Africa News, an independent Zimbabwean radio station broadcast on shortwave and via the Internet, did not question the Post report but added a comment from a critic of the government:
Exiled investment banker, Gilbert Muponda, is familiar with Renaissance Capital’s involvement in Zimbabwe and told Newsreel; ‘They specialize in emerging markets that have a high return, but high risks, and they are experts at quantifying and spreading risk.’ He told us although the company did what any investment bank would do (i.e. seek opportunities) this was in violation of US targeted sanctions and the lawmakers in that country had a good case to charge them.If Muponda's conclusion that "this was in violation" of sanctions relies on secondhand reports, then it's hardly definitive.
Update: A sanctions expert speaks
Neil deMause reports for the Village Voice:
To at least one sanctions expert, though, Prokhorov's Zimbabwe dealings are far from trivial. Usha Haley, an Economic Policy Institute research associate who told the Post that Prokhorov was engaged in "sanctions-busting," tells Runnin' Scared that she doesn't buy the metals magnate's defense: "They have been working with Zimbabwe's officials that have been banned by the U.S. government — there's no doubt about that."Still, deMause notes that Prokhorov could certainly afford a fine and that the Treasury Department "has no jurisdiction over the organization who really matters in Prokhorov's Nets purchase: the NBA."
Onexim, NBA denials
The AP reported that both Onexim and the NBA denied the charges:
League spokesman Mike Bass said Pascrell was misinformed discussing the sanctions.Ratner comment: report "not accurate"
"U.S. companies are not prohibited from doing business in Zimbabwe; rather, they are prohibited from conducting business with specifically-identified individuals or entities in that country," Bass said. "The NBA is aware of no information that Mr. Prokhorov is engaged in business dealings with any of these individuals or entities.
..."Mr. Prokhorov's application is stillon track to be voted on by the NBA Board of Governors once a firm date is set for the State of New York to take full possession of the arena site," Bass said.
..."Onexim Group takes very seriously the issue of law and sanctions as applied to Zimbabwe," it said in a statement. "Contrary to erroneous media reports, the company and all of its holdings have always been in strict compliance with all United States and European rules regarding Zimbabwe and have had no dealings whatsoever with companies or individuals on the sanctions list."
The Daily News's Julian Garcia reported:
As for the transfer of power, Ratner said "everything is in great shape" despite accusations by New Jersey Democratic Congressman Bill Pascrell that Prokhorov is violating U.S. sanctions against Zimbabwe by doing business with that country.Questions raised to ESDC
"It was inaccurate," Ratner said of Pascrell's accusation. "Not accurate."
it's worth looking back at questions raised to the Empire State Development Corporation (ESDC) when Prokhorov was first announced as the expected majority owner of the Nets and minority owner of the Atlantic Yards arena.
Noticing New York blogger Michael D.D. White, writing on 9/25/09, took off from Pascrell's initial concern that the project likely wouldn't have been approved had Prokhorov been involved at the beginning.
White focused on the infamous incident where Prokhorov was detained in Courcheval, France on suspicion of shipping prostitutes in from Russia.
He also noted that "public agencies typically do background checks when projects are transferred. Otherwise the initial background checks would be meaningless." And, while public comment was submitted regarding the weakness of the ESDC's transferability provisions, White saw no answer from the ESDC.
I pointed out that the timing of the Prokhorov deal seemed clearly orchestrated, in the works but not announced until after the Atlantic Yards plan received its second approval, on September 17, from the ESDC.
White suggested that there is "probably no executed deal by which it would be enforceable." There surely is now, given that the Development Agreement was signed December 23--not that I've taken a recent look at the transferability provisions in the massive set of documents.
On 10/20/09, before the next monthly ESDC board meeting, White wrote:
ESDC spokesperson, Warner Johnston confirmed to us that Atlantic Yards was not on the agenda and that there were also no plans to put it on. We mentioned Mr. Prokhorov when he asked why it would be. No, he told us, the board has pretty much finished with Atlantic Yards.He concluded:
If the league does approve Prokhorov then, by virtue of having waited, ESDC can try to minimize its own embarrassment by piggybacking on that approval.I asked the ESDC Sunday if it had any response to Pascrell's charges and whether the agency had ever officially approved Prokhorov's role and conducted any investigation into him.
It is also quite possible that ESDC will try to sidestep the Prokhorov issue entirely by doing nothing, (as if that is appropriate). This is perhaps what Mr. Johnston meant when he said that ESDC’s board was pretty much done dealing with Atlantic Yards.
I haven't gotten a response yet.