Monday, April 16, 2012

Prokhorov, in the New Yorker, said he hasn't broken laws, but admits to corrupt dealings (and shrugs them off as inevitable in Russia)

Now that Nets principal owner Mikhail Prokhorov has visited Brooklyn, with a press conference last week at the Barclays Center site, let's take a look at Julia Ioffe's recent New Yorker piece, The Master and Mikhail: Are Putin and Prokhorov running for President against or with each other?.

The main message was that the billionaire may have appeared to be a Kremlin stooge when he entered politics, but he had moved past that--at least somewhat--in his run against Vladimir Putin.

But the two passages most interesting to me regarded Prokhorov's business success. The first
“Can you please tell me, is it possible to earn a billion honestly?” an elderly man asked, echoing the sentiment, common in Russia, that the oligarchs earned their fortunes through deceit and government connections.
“I think you can,” Prokhorov replied, his face radiating self-regard. “At the very least, I haven’t broken any laws.”
(Emphases added)

Not breaking the law is not the same as behaving honestly, as Forest City Ratner's dealings in Yonkers might show.

Getting rich

Prokhorov and his partner Vladimir Potanin got rich in the Wild West days of newly independent Russia:
When he met Potanin, Prokhorov was working at the ailing International Bank for Economic Cooperation, where he had been assigned after college and where he’d quickly earned a series of promotions. In 1992, as Russia went through its first painful year as a fledgling market economy, Prokhorov and Potanin started their own bank, which they called MFK. That year, the management of the International Bank—whose fold Prokhorov had just left—sent a letter to its clients, encouraging them to transfer their holdings to MFK. Within six months, Potanin and Prokhorov had three hundred million dollars in assets. All the old debt was left at the International Bank.

The following year, Potanin and Prokhorov formed the United Export-Import Bank, or Uneximbank, for short....

Uneximbank soon became the authorized bank for a number of state organizations, including the Finance Ministry, the federal tax service, the state arms-export agency, and the city of Moscow. At the end of 1994, the second year of the bank’s existence, it had 2.1 billion dollars in assets, nearly seven times more than it did at the beginning of the year.
Lawful, apparently, but honest?

Admitted corruption

The next step amped things up:
The partners’ next coup came in 1995. A resurgent Communist Party threatened to take down an enfeebled Boris Yeltsin in the 1996 Presidential election. Potanin masterminded a plan wherein he and the other oligarchs offered loans to the government, which couldn’t pay wages and pensions, and they asked for shares in state enterprises as collateral. After selecting the companies they wanted, Potanin, Prokhorov, and their compatriots bid on how much money they would lend the government for those shares. Should the government default on its loans, which was all but assured, Uneximbank and the others could sell the shares. When the government failed to repay the loans, the bankers kept the shares. Potanin and Prokhorov walked away with Norilsk Nickel, which was Russia’s largest platinum and nickel producer. At the time, Norilsk had revenues of three and a half billion dollars. Potanin and Prokhorov had given the government a loan of a hundred and seventy million dollars.

The loans-for-shares transactions, which made billionaires of Potanin and Prokhorov, remain highly controversial, and helped draw a connection in the Russian imagination between the crook, the businessman, and the Kremlin official. When asked recently on national television whether he had ever participated in corrupt dealings, Prokhorov shrugged and replied, “Yes, of course I participated in them. What, don’t I live in this country?”
Yes, as the article explains, Prokhorov further made bank after improving Norilsk in the midst of a global commodities boom, and got out at the right time.

So Prokhorov admits corruption, but not lawbreaking. It's a fine distinction, isn't it?

What Net Income wrote

And what did that 1/6/12 MSNBC article, Meet the NBA tycoon and rapper's friend who could be president of Russia, by Robert Windrem (aka "Net Income" on NetsDaily) on Prokhorov say? It began with a salute:
He is the most interesting man in the world!
Mikhail Dmitrievich Prokhorov, 46, is a singular figure in Russia and now the larger world. At 6 foot, 9 inches tall and thin, he is the Global Russian - very different from the short, dour New Soviet Man of decades past.A billionaire somewhere between 18 and 25 times over, he is a partying playboy who swears he has never tasted vodka. He is called Russia's most eligible bachelor and has been seen in the company of some of the world's most beautiful women. He is quick-witted, charming, droll and affable, someone who enjoys the spotlight, craves it in fact. In a literary sense, he is more Jay Gatsby than Dr. Zhivago.
And here's the summary of Prokhorov's business ventures:
Prokhorov doesn’t apologize for buying up dilapidated Soviet era properties for a song. He followed the rules, he will tell you. Some oligarchs succeeded more than others. He succeeded the most.
He followed the rules, or he took advantage of the lack thereof?

 (I called the piece "only slightly skewed" on first impression. I was too generous.)

Prokhorov on video during his visit

"Nets owner Mikhail Prokhorov tours Barclays Center and has a sit-down with Nets season-ticket holders," in this video.

Watch how Bruce Ratner, who surely knows how to pronounce Mikhail, calls him "Michael," which is apparently the focus-grouped alternative. "Along there is a Starbucks," Ratner says at one moment, gesturing to another not-quite-Brooklyn enterprise. Note the appearance of (the unbilled) Mr. Income at 3:51.


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