CTC Says Ex-Chief Violated Contract

VedomostiThen-CTC Media president Rodnyansky speaking at a conference in 2007.

CTC Media is suing its former president and chief executive, Alexander Rodnyansky, for breaking his contract by working with competitors, which could cost him stock options currently worth $100 million if a court agrees.

The company said Monday that it filed two civil suits against Rodnyansky, in New York and Delaware, because it believes that he is working with a competing company, which is prohibited by his contract and under his obligations as a member of CTC Media's board of directors.

According to a copy of Rodnyansky's contract posted on the web site of the U.S. Securities Exchange Commission, he is prohibited from disclosing information about CTC Media for two years following his departure from the board of directors. He is also prohibited from being hired, owning or consulting for companies in Russia that compete with CTC Media.

The violations could cost him options that, if realized now, would be worth about $100 million.

CTC Media's largest shareholders — MTG, with 39 percent, and Alfa Group, with 26 percent — told the SEC that they were removing Rodnyansky from the board of directors and that they had sent him written notice. The contract says he must leave the board within 90 days of such notice, or by Feb. 7, the companies said.

Yekaterina Osadchaya, a spokeswoman for CTC Media, declined to specify with which competitor Rodnyansky was accused of working. But market participants were unequivocal: The company in question is the National Media Group, which decided this year to reorganize its business and create a special television holding, NMG-TV. The unit is run by former CTC Media executive Vladimir Khanumyan.

Rodnyansky joined CTC Media in 2002, when it only owned CTC. The company had an IPO on the NASDAQ in June 2006, valuing it at $2.1 billion. In February 2008 its market capitalization peaked at $4.7 billion.

In June 2008, Rodnyansky left as chief executive, and in June this year he left as president. This spring, several CTC Media employees said Rodnyansky and Khanumyan were working on strategy for NMG's television unit and were offered positions there. People at NMG confirmed those comments.

None of Vedomosti's sources was willing to go on the record regarding Rodnyansky's possible links to NMG, and the holding's spokeswoman, Yulianna Slashchyova, has always denied that Rodnyansky is a manager there.

Rodnyansky told Vedomosti that he never consulted NMG on strategy or recruited workers for them and that he had repeatedly turned down offers to work for CTC Media's competitors. "So I'm absolutely calm," he said. "They won't be able to prove anything."

CTC Media's chairman of the board of directors, Alfa Bank President Pyotr Aven, declined comment.

If the company can prove in court that Rodnyansky worked with its competitors, then the courts could very well deprive Rodnyansky of his options, said Alexander Molotnikov, a professor at Moscow State University's law department.

Viktor Topadze, a partner at Mannheimer Swartling, said he could not remember any other company in Russia accusing a former executive of contract violations for working with a competitor.

"A contract is a contract," said a chief executive at one of the country's major television stations. "But not working for a competitor for several years in the TV business is basically a ban on the profession."