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. Last Updated: 07/27/2016

Court Rules 1999 Astoria Stake Sale Illegal

ST. PETERSBURG -- The privatization of the Astoria Hotel, one of St. Petersburg's oldest, was called into question in a trial at the St. Petersburg arbitration court.

The court Monday declared a Nov. 24 tender of a 35-percent stake in the Astoria, held by the City Property Fund and won by Aroma Investments with a bid of 245 million rubles (then worth $9.3 million), to be illegal.

Surprisingly, the process was initiated by Aroma. In July 1998, Aroma won a tender for the Astoria stake with its bid of 34 million rubles ($5.5 million at the pre-crisis exchange rate), but the deal was later called into question by the city prosecutor. It was declared illegal and the stake transferred back to the city because the investment company did not coordinate the deal with Antitrust Ministry officials.

"Now we have the permission of the Antitrust Ministry," said Yevgeny Melnichenko, Aroma's lawyer, in a telephone interview Monday.

According to him, after the November 1999 auction is canceled, the July 1998 auction will be declared legal.

"Aroma paid its first bid of 34 million rubles in 1998 and did not ask for it back from the city budget," he said.

According to Tatyana Zibareva, the Property Fund's lawyer, the new tender should be rescheduled unless the City Property Committee, or KUGI, changes the conditions of the Astoria's privatization.

KUGI officials were not available for comment Monday.

The Property Fund can appeal the court decision within one month.

Aroma Investments is controlled by well-known businessman Alexander Sabadash, who owns local vodka producer AFB-2 and has stakes in the city's oldest vodka factory, Liviz, the Vyborg Pulp and Paper Mill and other companies located in the Leningrad region.