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Home Offshore leaks


STATE BANKER KOSTIN AND THE OFFSHORE NETWORK

by Andrew Fink
03/08/2022
in Offshore leaks
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As the head of VTB, Andrei Kostin is connected to a network of offshore
companies that own Russian and European real estate, as well as other assets
worth more than $100 million

Andrey Kostin, head of the state-controlled bank VTB, is not a poor man. He
first disclosed his income back in 2014, telling German journalists that he had
earned 240 million rubles. Kostin then strongly denied the amount of income of $
37 million that Forbes calculated for him, calling it “complete nonsense.”

This statement of the state banker turned out to be true: three tens of millions
of dollars is nothing compared to assets worth a hundred million. “Important
Stories” publishes an investigation by the Center for Corruption and Organized
Crime Research (OCCRP) about the relationship of the head of VTB to offshore
firms with Russian and foreign property worth more than $ 100 million. The big
list of assets has it all: houses, premium apartments, investment companies and
even an expensive hotel in Austria. The property was controlled through an
offshore network run by Costin’s confidant, Eric White, the son of a prominent
Canadian communist.

With communist greetings

Canadian citizen Eric White is mentioned in the Pandora Archive documents,
materials from the largest offshore company registrars around the world, which
were made available to journalists by OCCRP and the International Consortium of
Investigative Journalists (ICIJ) in 2021. In the documents, White is listed as
the actual owner of the companies established in the British Virgin Islands.
Those, in turn, owned firms mainly in Cyprus, which owned luxury real estate in
Russia and Europe. And this network was used, among other things, in the
interests of the head of VTB Andrey Kostin. His acquaintance confirmed to
Important Stories that Eric White is Kostin’s confidant in terms of managing and
owning property.





Network of companies associated with Eric White



The son of Canadian communist Burt White, Eric moved to the Soviet Union as a
boy in 1966 and was educated at the Interdom boarding school for children of
foreign communist leaders. These are almost all the scarce publicly available
details about his life. The memoirs of White’s late father make only a glimpse
of his birth. After leaving school in 1973, White Jr. stayed in Russia to study
history at Moscow State University. Then he moved to Canada and went into
business.

Eric White is not a public person. Most of the information about him personally
is connected with Interdom. Education in this boarding school, apparently,
influenced his whole life. The site about the school has an interview with White
from 2010, in which he spoke a little about himself.



Eric White at the meeting of Interdom alumni



“My father was a correspondent for a Canadian communist newspaper accredited in
Moscow. Now I work in business in Russia and Cyprus. <...> I believe that any
country that claims to be a world power must have an international children’s
school, in which children from all over the world would study. <...> It is not
necessary that there be a political background here, as it was in Soviet times.
<...> It can enroll children from disaster areas, who, growing up in Russia,
then, as in the case of our interhouse, will disperse all over the world. These
will be people for whom Russia is a second home. They will no longer be able to
listen to lies about this country, <...> they will always have a warm attitude
towards this country, they will be the voice of influence in society in support
of the country in which they grew up.

The government should be interested in this for the sake of future relations
with many countries. Here, in Russia, they give a good education, and people,
returning to their countries, get good posts in leading state institutions, they
become influential people, and they have influential friends. Do you
understand?”

White became a citizen of Cyprus in 2015, having bought a luxury villa near
Limassol, on the south coast of the island, as part of a citizenship by
investment program. On the wall at the gate of the villa there is a playful
inscription “The Whyte House”, in consonance with the White House (White House)
– the official residence of the President of the United States.



The gate of the Cypriot mansion of Eric White



White’s Cypriot home is right next door to a home owned by Vladimir Popov,
deputy head of the former VTB subsidiary in Cyprus, RCB Cyprus. A significant
share of RCB, as you know, back in 2009 unexpectedly turned out to be with its
top managers. Sources connected with VTB then said that in fact this Cypriot
bank had moved away from the state-owned VTB and went to Kostin’s people. As it
turned out, some companies associated with Andrey Kostin, from an offshore
network managed by White, received millions of dollars in loans from RCB Cyprus.

“White could have acted as Kostin’s confidante,” said Tamara Makarenko, a
business intelligence analyst with extensive experience in investigating
oligarchs, after reviewing the materials collected by OCCRP. She notes that
property ownership schemes suggest such an idea. And that the oligarchs used
similar schemes to hide their assets.

Kostin had reason to take care of the property he had accumulated over his long
years as a state banker: he has long been under US and European sanctions and
risks losing his foreign assets if they are discovered by EU or US authorities.

winery

During the Soviet years, some members of the party elite had summer homes in the
sunny seaside town of Foros on the Crimean peninsula. After the annexation of
Crimea to Russia in 2014, the Russian elite reached out there. Then for the
first time they started talking about the fact that Andrei Kostin bought a
luxurious villa in Foros along with the Alma Valley winery in the Alma River
Valley.

“The management of the winery does not disclose who owns it, although Russian
media suggest that this is the president of one of the most influential Russian
banks,” Meininger Wine Business International magazine reported in 2015. The
article said that the vine in Alma was personally planted by Vladimir Putin.

While the property’s connection to Kostin has never been conclusively proven,
the EU cited his ownership of the estate and winery when it imposed sanctions on
him in 2014, saying that Kostin supported “activities and policies that
undermine Ukraine’s territorial integrity” and extracted benefit from
annexation.







As it turned out, the winery and estate had been in the hands of Eric White for
years. White’s offshore firm Vargas Properties controlled the Russian company
that owns both the house and the winery. This March, shortly after Russia’s
invasion of Ukraine triggered another round of sanctions against prominent
Russians (including Kostin himself), ownership of the property was transferred
to a Russian company whose owner was not disclosed.

Apartment and residence

The winery is not the only example of White’s companies holding assets related
to Kostin. White, for example, owned firms in the British Virgin Islands that
were involved in the exchange of expensive Moscow real estate between Kostin and
his girlfriend.

Russian opposition leader Alexei Navalny’s Anti-Corruption Foundation showed how
two luxury apartments were handed over to Kostin’s girlfriend, TV presenter
Naila Asker-Zade. One apartment was given to her by a top manager of VTB, and
the other was presented by the state bank itself. But there was an intermediary
in the transfer of the apartment from VTB to Kostin’s girlfriend. A year before
Asker-Zade received the apartment, the property was transferred to an offshore
company registered in the British Virgin Islands, Erelson Investments.







As it turned out, this company belonged to Eric White. And another of his
offshore firms acted as an intermediary in the transfer of the Moscow residence
from VTB to Kostin himself. The State Bank transferred ownership of a luxury
three-story townhouse in Moscow to Whyte’s Laroy Enterprises in 2006. In October
2015, she handed it over to Kostin. The following year, he sold the townhouse to
Angerston Holdings in Cyprus. By the way, for this deal, Angerston received a $7
million loan from the now former VTB bank in Cyprus, RCB Cyprus. As we have
already noted, the Cypriot bank soon sailed away from the state-owned VTB and
went to people close to Kostin.







Cypriot anti-money laundering expert Anna Stylianou told OCCRP that before the
tightening of rules in 2018, many wealthy Russians gave their property to
Cypriot companies, which provided anonymity and the opportunity to avoid paying
taxes.
“Real estate rental income could be presented as income from dividends
[компании] in Cyprus and, therefore, was not taxed, ”explained the expert.
Cyprus has been popular in this regard also because, until last month, it did
not have a public database of ultimate beneficial owners. “Hiding Russian
property was easy,” Stylianu concluded.

Austrian hotel

Set high in the Alps, the luxurious Tannenhof Hotel in Austria’s elite ski area
Sankt Anton am Arlberg consists of seven large suites, the most expensive of
which costs around $6,000 per night. The situation there “is like as if your
close billionaire friend decided to create a fabulously luxurious <...> alpine
retreat,” a British travel journalist commented on him.



Austrian Hotel Tannenhof



According to numerous media reports, the Tannenhof is owned and operated by
married couple Axel Bach and Judith Volker, who the media say completely rebuilt
it in 2011. In a 2017 interview, Bach revealed that the unexpected legacy helped
him “realize his philosophy” of hospitality, implying that he used the windfall
to buy the hotel. “The notary was looking for me for a year and a half and asked
what I would do with all the money now!” Bach recalled.

Another article published the same year reported that Bach and his wife had sold
an estate in Italy to buy a hotel. According to former hotel chef James Baron,
staff were also told that the establishment was owned by Bach and Volker.

However, Austrian and Cypriot corporate reports say that between 2010 and 2015,
the Tannenhof hotel was owned by a Cypriot entity held by VTB. Whether the bank
created this structure in the interests of any client was not disclosed.







The US and EU imposed sanctions against VTB in 2014. And the following year, the
ownership structure of the Tannenhof changed. Prior to the imposition of
sanctions, the hotel was owned through the ITC Consultants (Cyprus) company
created by VTB.







But in 2015, ownership passed to other Cypriot firms – Cahulia and Aktien
Enterprises. Their owners were not disclosed. That all changed last month when –
after years of pressure from the EU, Cyprus released a register of beneficial
owners. Eric White turned out to be the owner of Aktien Enterprises.

Resort in the Tver region

Another offshore firm, Bramsen Trading of the British Virgin Islands, also
speaks of Kostin’s ties to White. Bramsen was founded in 2010 by Kostin’s son
Andrey, who died the following year in an accident with an ATV. After that,
White became the actual owner of Bramsen. The transfer of the firm, as well as
the participation of White’s other companies in the transfer of ownership, may
indicate that “he is a confidant of Kostin,” says Austrian anti-money laundering
expert Florian Horsica.

Bramsen Trading was liquidated in 2017, but before that it was a “daughter” of
the Cypriot Naderbord Trading. Since White was listed on corporate documents as
100% owner of Bramsen, this means that he must also own Naderbord (this is
confirmed by experts). And if so, this connects him with the Russian resort and
hotel complex in the Tver region “Upper Volga”.

The complex is managed by the Russian company Sezon Okhota, whose former
co-owner (Cypriot Egern) in corporate documents declared affiliation with
Naderbord.

Egern sold its stake in Open Season in 2016 for $58 million. However, the new
owner (another Cypriot company Castelor Investments) is associated with a
network of companies of Eric White.

French villa and Moscow offices

White’s real estate portfolio includes a property in France that is linked to
Kostin. He owns a luxury villa near Saint-Tropez through Cypriot Gedsea Holdings
and its French subsidiary. Gedsea purchased the property in 2009 from Swiss
businessman Roger Markus Ingold, who was an adviser to Kostin.

The French registry shows that, through the Cypriot Hundbern, White also owned
Parisian property on the banks of the Seine in 2010 worth 6.2 million euros.

White is also the director of the Russian branch of a Cypriot company that owns
an old merchant’s mansion in Moscow, which was converted into elite offices.

Real estate associated with Andrey Kostin and Eric White companies around the
world

Related persons

Kostin also owned another apartment in the center of Moscow, in the luxurious
Embassy House residential complex, so named because of its proximity to the
Russian Ministry of Foreign Affairs. The apartment was valued at $2.8 million.
In 2016, Kostin transferred this property to the Cypriot Eralmor Holdings.

Who owned Eralmor remained a mystery. But Alexei Navalny, in his investigation,
suggested that the company was somehow connected with the state banker. Eralmor
was founded at the same address and used the same nominee directors as the
offshore firm of Kostin’s girlfriend, Asker-Zade.

Eralmor was part of a vast network of offshore companies linked to Eric White’s
structures, OCCRP found, holding much more valuable assets than just an
apartment in the “Ambassador House”.

Some of these companies were owned by another person associated with VTB and
Kostin: – Natalia Solozhentseva, who in the past worked as a director at RCB
Cyprus. Others have identified themselves in corporate filings as “related
parties” to White’s companies. This term means that companies have, for example,
a common owner or shareholder and this is usually mentioned in their corporate
records.

After reviewing these reports, OCCRP was able to map out an offshore network
linking Eric White’s structures in the British Virgin Islands and about 10 other
firms, mostly registered in Cyprus (including Eralmor, which owned Kostin’s
apartment). Each of these companies was created by the same person: the Cypriot
lawyer Christodoulos Vasiliadis, whose office is a stone’s throw from the
Russian Embassy in Cyprus.

What was useful Christodoulos Vasiliadis
Christodoulos Vasiliadis, Cypriot lawyer serving interesting Russians. Among his
clients were businessman Alisher Usmanov and, for example, the ex-wife of
criminal leader Semyon Mogilevich, Galina Telesh. Vasiliadis also created all
the companies that OCCRP identified as being owned by Eric White. His companies
in Cyprus are established directly through the office of Vasiliadis, while those
in the British Virgin Islands are registered with the Panamanian law firm
Aleman, Cordero, Galindo & Lee (Alcogal). Vasiliadis, according to ICIJ, is a
key middleman who brought many clients to Alcogal and is also a personal friend
of Jaime Aleman Healy, the firm’s founder. In exchange, the ICIJ said, the
lawyer was given the privilege “not to present certain documents that reveal the
true owners and directors of the companies and where the money is coming from.”
Vasiliadis declined to comment on the situation.

Fast food and household goods

A network of companies associated with White or owned by Solozhentseva held
stakes in large Russian businesses, including the Russian franchises of Burger
King and KFC. It is noteworthy that Burger King started a business in Russia
with the support of VTB (“VTB Capital”) in 2018, VTB sold its stake in Russian
Burger King for 4.6 billion rubles. VTB Capital was also the largest partner of
KFC in Russia.







In 2013 and 2014, White’s “related party” Landshut bought shares in CIS
Opportunities Fund, an investor in the economies of the former Soviet republics,
for $38 million. In January 2014, the fund bought a stake in Burger King’s
Russian franchise for $25 million, according to corporate documents.

White’s offshore companies are also linked to Kresorco Enterprises, which owns
the Russian Hoff furniture and home goods hypermarket chain. The Cypriot
Volkeburg associated with White’s structures reportedly acquired a 20 percent
stake in Kresorco in 2011, according to reports. As of 2020, this stake was
valued at $62 million.







Another Cypriot company, IFG Fund AIFLNP VCIC, a subsidiary of Solozhentseva’s
structure, acquired a stake in the Russian KFC franchise in 2018. And in 2021,
Ozon.ru shares worth $49 million and a stake in the Russian retail chain Fix
Price during its IPO.

Whether White still serves Kostin’s money and other assets or works, including
for himself and various wealthy people, helping them manage their property, it
was not possible to clarify. White, Kostin, and VTB did not respond to OCCRP
questions about real estate, investments, and the offshore network.

In March 2021, in his “Congratulations from Cyprus”, addressed to the former
pupils of the Soviet Interdom, White could not resist rhetoric:

“Life is not an easy thing <...>. In order to be successful, you need two things
– work and luck. Luck helps, but you have to work,” he taught.





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