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. Last Updated: 07/27/2016

Radisson Finale: Rocky Road to a Bad Breakup

The last in a three-part series on the joint-venture dispute at the Radisson Slavjanskaya Hotel. Part Three: The Divorce.


Even before the Radisson Slavjanskaya joint venture's wedding reception was over, a shrewd observer would have foreseen a rocky marriage.


Through the haze of satisfaction and the clinking of glasses, then-Americom Business Centers' partner Bernie Rome says he had premonitions of doom: "I did anticipate it," he said. The two American partners had "different management styles."


That wasn't the half of it. By the end of 1994, Radisson was appealing to a United States District Court in Minnesota to cut "the tethers that bind Radisson and [Americom subsidiary] Moscom to the rotting corpse of the partnership," according to court documents from the case, which are public record in the United States. The judge ruled that RadAmer should be dissolved merely on the grounds that "they loathe each other."


At stake is a valuable piece of riverside real estate, which according to documents obtained by The Moscow Times the Moscow city government has plans to sell. For Radisson, the priority is to salvage a promising relationship with its Russian partners. Paul Tatum, the Americom chief who remains holed up in his hotel suite, stands to lose his four-star, nine-story brainchild.


The first real trouble came just months after the original contract was signed in 1990, when a $33 million credit package RadAmer had proposed fell apart. The Americans were forced to draw all funds from available cash flow, which opened the field for fierce financial battles. Americom and Radisson were at each other's throats over joint accounts, offshore accounts, and basic business practices.


Radisson maintain that Tatum was just impossible to work with; that the clerks at the Americom Business Center had solicited for prostitution; that he badly mishandled the joint venture's finances; and that he destroyed the good image of the hotel. Tatum says Radisson is spineless, visionless and guilty of the very financial sins of which it is accusing him.


To make things worse, the Russian partners changed four times, sending a parade of representatives to the joint venture's managing board, with diminishing patience for the infighting with Americom. On a number of occasions, the Russian partners had threatened to dissolve the joint venture, with the lingering possibility that they would then proceed to sell the property to a new owner, perhaps breaking the 20-year commitment of the 1990 joint-venture agreement.


But although the partnership teetered on the edge of liquidation several times -- late on New Year's Eve of 1991, for instance, Tatum received a reprieve allowing his company to exist past morning -- the battle has worn on for five years.


This was "due to the fact that there was nobody strong enough on the Russian side to throw [Americom] out," said Roger Olenicoff, whose California real estate company considered a buyout of Americom in 1993. "There has been uncertainty on the Russian partner's side, which is why this soap opera has played itself out for such a long time."


With the city of Moscow as the hotel's new landlord, the matter moved to a higher level of authority. Last summer, Mayor Yury Luzhkov sat down and wrote a letter to his good friend Curt Carlson, the head of Radisson's parent company.


Luzhkov -- who has visited Minnesota several times, and whose photograph is bound into Carlson's recent autobiography -- sent his best wishes to Carlson's wife and family. Then he got down to business.


Tatum's "questionable machinations are leading to a collision with our law," reads the mayor's letter, which is also included in the court documents. "If the present state of affairs does not change radically, city authorities and legal organs will be forced to liquidate the joint venture, as the government has indicated to Moskomimushestva."


Carlson wrote back: "I generally understand that the city of Moscow intends to privatize the Radisson Slavjanskaya and is asking $60 million for the complex. 'MOST-Bank' in Moscow is reportedly interested in providing $50 million. And I understand that the bank and the city are considering inviting Radisson to participate by contributing the balance of $10 million." Carlson's letter, which Radisson confirmed as authentic, went on to say he was "favorably impressed" by the proposal.


The scales swung sharply again last winter, when a majority vote by the managing board named Umar Dzhabrailov as acting general director of the joint venture, replacing Tatum ally Uwe Christiansen. But according to the 1990 joint-venture agreement, the general directors of the joint venture, the hotel and the business center were to be appointed by the American side.


Tatum publicly lashed out at Dzhabrailov, who is Chechen, storming out of board meetings and publicly portraying him as a mafia kingpin. Radisson, by contrast, did not contest the choice. "It's Radisson's style to give them whatever they want," said Tatum.


Management style was not the only thing that divided the American partners.


Radisson and Americom had very different aims when they set up business in Russia. Radisson, a management company, owned only 10 percent of the hotel, and aimed chiefly to establish a good relationship with their Russian partners so they could expand their dealings in this country. Americom, by contrast, owned 40 percent, and had staked its existence on the Radisson Slavjanskaya Hotel.


So when the relationship between the Russians and the two American firms began to sour, RadAmer soured too. And when lawyers and security guards arrived to evict Tatum from his offices three weeks ago, charging that he owed the joint venture $300,000 in back rent, they were sent by both Radisson and the Russian partners.


"Throughout the whole thing, we have had a good relationship with Moscow," said Tom Polski, a Radisson spokesman, from the company's headquarters in Minnesota. "We support the joint venture in its efforts to remove Paul Tatum from the hotel."


The issue of Tatum's personal rent payments is only one of the legal wrangles that now guide the drama. Several months ago, the decisive issue was rent due from the joint venture to the city, which the city estimated at $7 million. According to Tatum, the original joint-venture contract allowed the partners to defer their rent payment. Tatum has filed manifold suits against the Moscow city government, including one for $35 million.


Stripped of his allies within the joint venture, Tatum has turned to lawyers, journalists and politicians for assistance, saying that his predicament is a textbook case of what he has termed "a creeping re-nationalization" of joint-venture property. He has circulated a case history on Capitol Hill, and with press flooding in for the upcoming May 9 summit, he is poised to disseminate thick, bound packets of documents to reporters.


Legally, Tatum is proceeding much as he would in the United States. He is clinging to the joint venture's founding documents, hoping that contract law will bear up his claims -- that Radisson was bound to accept a buyout offer from him, that the joint-venture managing board should be headed by an American representative, and that he still has veto power over management decisions. These are all clauses his partners dispute.


But even if the joint-venture contract supports him, Tatum may be stymied.


In a four-page memorandum issued April 7, his partners stated that the original documents "are not valid," because they have not been updated by re-registering the joint venture as a joint stock or limited liability company, which was mandated in 1992.


If this broad denial of the contract's validity can be upheld in a court of law, then Tatum has no legal ground to stand on.


More than that, if the city goes ahead with the plan to liquidate the joint venture, then Moskomimushestva will likely sell the building to the buyer of its choice, rather than offering it first to the original partners as the original contract stipulates.


Which would have come as a surprise to Paul Tatum five years ago. That was the summer he told a Washington Post reporter, "There is really nothing like this," and unveiled the first U.S. entry into the hotel business. "We really don't see any chance of this falling through."