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. Last Updated: 07/27/2016

Evil Knievil Sets Sights on Fyodorov

The man who gained notoriety for predicting the end of British magnate Robert Maxwell's empire is mounting an attack on Boris Fyodorov, a board member at Gazprom and founder of Moscow-based brokerage United Financial Group.

Bear trader Simon Cawkwell, who calls himself Evil Knievil, said Tuesday that he has raised $1 million to engage in a legal battle over Fyodorov's sale of Gazprom shares through UFG.

The brokerage has allowed foreign investors to snap up shares traded in Russia that were meant for Russian investors, Cawkwell said. The Russian shares sell at a steep discount to Gazprom's New York-traded paper, which was meant for non-Russian investors.

Cawkwell said that Fyodorov's actions have helped drastically reduce the value of Gazprom's American Depository Shares and ADS holders want compensation.

"We believe that Gazprom's domestic stock was bought, packaged up and resold on the foreign markets," Cawkwell said in a telephone interview from London.

He said he is gathering proof that Fyodorov played a role in the drop in ADS prices, adding that Fyodorov's position as a member on the Gazprom board and a shareholder at UFG make him a prime suspect.

Fyodorov fired back Tuesday that Cawkwell is a puppet in the hands of Gazprom management, who want to discredit him ahead of an annual shareholders meeting planned for this summer.

Fyodorov represents a group of minority shareholders on Gazprom's board.

Gazprom has weathered a storm of criticism for its two-tier stock system. When it first floated shares in New York in October 1996, the cutoff price was $15.75 each, a sum five times higher than the price of Russian shares. Each ADS is equal to 10 Russian shares.

ADSs were trading at 2.2 times the Russian price of 32 cents on Tuesday, suggesting that while the price of domestic shares remained virtually unchanged over the past four years, ADSs lost more than 50 percent of their value.

Cawkwell said that schemes used to resell domestic shares in the foreign markets undermined ADS prices and that a company which he represents took substantial losses as a result.

That company, which Cawkwell refused to identify, put together the $1 million to mount a court war against Fyodorov.

Fyodorov, a former finance minister, said that Cawkwell is being manipulated by Gazprom's managers, who consider him a troublemaker for publicly accusing the gas giant of engaging in insider deals.

"They try to get rid of me," Fyodorov said. "It is no coincidence that several attacks were made after I attempted to make an independent audit of Gazprom's operations."

Fyodorov asked Deloitte & Touche to conduct an audit of Gazprom's books earlier this year after the company said it would stick with longtime auditor PricewaterhouseCoopers in an investigation of its relationship with gas trader Itera. Fyodorov alleges that Gazprom has been transferring assets to Itera.

In addition, Fyodorov has been trying to get Gazprom to scrap its two-tier trading system while campaigning to get elected to the company's board for a second term.

Fyodorov said UFG has not acted illegally because it only sold shares to locally registered companies in which foreigners own no more than 49 percent stakes. Thus, the transactions comply with Russian law.

Cawkwell said he may lodge the lawsuit in the London high court, invoking provisions of U.S. law. He did not say when the suit would be filed.

It was not clear whether the London court would accept the case.

"It has been done in the past in connection to defamation," said Laurence George, a partner with the Lovells law firm in Moscow. "But first of all, the court will have to decide whether the case falls into its jurisdiction."

Cawkwell's shot at Fyodorov is not the first in the recent months.

In February, Sir David Alliance, the multimillionaire founder of British textile group Coats Viyella, accused Fyodorov of abusing his role at Gazprom.

Later, Class Law, a firm of solicitors, complained to the London Stock Exchange and the U.S. Securities and Exchange Commission about the trading of Gazprom ADSs, putting the brunt of its allegations on Fyodorov.

Earlier this month, the Moscow branch of the Interior Ministry reported that it is continuing to investigate UFG's involvement in the sales of Gazprom shares on foreign markets.

"The problem is not whether Fyodorov himself or UFG is doing this or not," said Dmitry Druzhinin, oil and gas analyst with the Prospect brokerage. "If he kept mum at Gazprom's board meetings, nobody would trouble him."

Gazprom was not available for comment Tuesday.

It is not clear how Cawkwell got involved in the looming clash with Fyodorov.

Cawkwell said only that the company financing the lawsuit is in deep trouble and that such complicated cases are not normally handled by lawyers.

But Cawkwell is better known as a bear trader who chooses overvalued companies and then tries to capitalize on falls in their share prices.

He gave himself the nickname Evil Knievil in 1991 when he put it on a research piece predicting the fall of Robert Maxwell's business empire.

Evel Knievel was a nickname used by a motorcycle stuntman in the 1960s and 1970s in the United States.

After the Maxwell prediction — which caused Cawkwell to earn a tidy fortune — he also correctly predicted and profited from the demise of Asil Nadir's business empire and of drug-development firm Scotia Holdings.