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. Last Updated: 07/27/2016

Business: When It All Goes So Wrong

ST. PETERSBURG — Disegni general director Harald Jonassen says he came to do business in Russia with an "innocent optimism." But following police raids, the arrest and detention of the administrative director of his company and the seizure of all its assets, that blush of innocence is gone.

In July, police investigators closed down and then conducted four raids at the main office of the clothing-store chain, removing 21 boxes of documents. They also froze Disegni's accounts.

Disegni was set up in December 2000 by Jonassen. Two months later, the German investment company Quadriga Capital Russia, which was managing two European Bank for Reconstruction and Development funds here, gave Disegni the first tranche of a $1.8 million investment. The EBRD, in return, received 48 percent of Disegni's stock.

However, according to Jonassen's lawyers, the raids at Disegni were part of an effort by his former business partner, Ruben Kalashyan, to take control of a different business the two had formed together.

"This hasn't been a standard investigation," said Boris Gruzd, an attorney with Yury Shmidt and Partners, who represent Jonassen. "We strongly believe the real motivation for the investigation is to help Kalashyan take over Eldorado Group."

Before forming Disegni, Jonassen — a U.S. citizen who was born in Norway — had been part owner of another clothing company, Eldorado Group, which initially sold the Disegni label under a contract with the American Disegni International clothing firm. Eldorado was founded with Kalashyan, who was originally general director of the firm and held 45 percent of its stock. Jonassen held the remaining 55 percent.

EBRD representatives are now concerned that Disegni has been dragged into the fight.

"The attitude the prosecutor's office is taking in regard to the biggest investor in Russia is incorrect," said Anna Gurevich, senior investment officer at Quadriga Capital Russia, on Monday, referring to the EBRD. "The criminal case concerns only the two partners at the Eldorado Group. The actions in investigating Disegni are absolutely illegal."

Kalashyan, who Disegni Administrative Director Yulia Chebotayeva says has not taken part in running Eldorado for 2 1/2 years, took the first step in trying to take control of the firm by having his own stake in the company annulled.

Under Russian laws, elections of officers at closed joint-stock companies such as Eldorado must be approved by three-quarters of all shareholders. Kalashyan's 45 percent stake had originally belonged to a different firm: TOO Eldorado, which Kalashyan owned together with his wife, Irina Kalashyan.

Irina Kalashyan filed suit against her husband, arguing that his purchase of the 45 percent stake in Eldorado Group from their company had been illegal and that he had had no right to vote with them at shareholders meetings.

On June 4, a St. Petersburg arbitration court agreed, ruling that Ruben Kalashyan had never been a shareholder of Eldorado Group, returning control of the stake to TOO Eldorado and voiding Jonassen's election as general director.

Kalashyan then filed his own suit June 15, this time in St. Petersburg federal court. That suit claims Jonassen had illegally signed a consulting agreement with Delaware-based U.S. First Moscow Group Inc., which is wholly owned by Jonassen. Kalashyan charges that, in 2001 alone, Jonassen transferred $196,000 to First Moscow Group for consulting services that were never performed and, as a result of Jonassen's activities, the company had lost in total about 6.1 million rubles (about $208,000).

The court has not yet set a date for hearing this case.

Kalashyan's suit is odd because it claims that the consulting agreement was signed with First Moscow Group on Dec. 1, 1998, two months before Jonassen took over as general director, seeming to mean that Kalashyan himself would have had to sign off on the agreement.

Jonassen and his lawyers categorically deny the charges, saying no money was transferred under the agreement.

"I didn't do anything illegal at all," Jonassen said. "In fact, I even paid $900,000 of Eldorado's debts, which were there when Kalashyan left."

Three days after the second suit was filed, a criminal investigation against Disegni was opened, and Gruzd believes Kalashyan probably submitted a complaint to investigators as well.

"I've seen the documents outlining the nature of the criminal investigation, although I'm not allowed by law to get a copy, and the focus of the investigation as listed there is the same as the claims in Kalashyan's suit," he said.

"This is a very complicated case, and the details are still unclear to me," Jonassen said. "But I think that the investigation has been paid for."

"Kalashyan is a doctor by profession, not a businessman, and this whole situation is just a vicious attempt on his part to destroy something really successful that we've built here," Jonassen said.

Repeated attempts over the last week to contact Kalashyan have been unsuccessful. Valery Tsykun, the senior police investigator in the case, declined to comment.

The pressure on Jonassen and his staff has not been limited to law suits and police searches. Jonassen says that shortly after the criminal case was opened, his wife received a call at their home in France from a man who hurled a number of insults at her husband in broken English. Normally, Jonassen commutes between his home just outside of Paris and an apartment he rents in St. Petersburg. He is presently staying in France on the advice of his lawyers.

Chebotayeva says that her own apartment has been raided twice by investigators and that she was arrested Aug. 16 under suspicion of being involved in criminal activities.

She was held at a pretrial detention center and was only released Saturday without any charges being filed after she signed an agreement not to leave the city.

Jonassen further alleges that the police have been involved since before the investigation was even opened. At the end of June, he and Kalashyan met to review the company's annual financial report. Accompanying Kalashyan at that meeting was a man who didn't identify himself and who Jonassen thought was a lawyer. Later, however, one of Jonassen's staff members claimed to recognize the man as a member of the tax police who had taken part in an earlier raid of the office.

"I asked him who he was, but he refused to show any identification or answer me, so I got my camera to take his picture," Jonassen said. "When I started taking his picture, he covered his face and then ran and hid behind a door."

Disegni's lawyers applied to the St. Petersburg federal court to have the company's offices re-opened and its accounts unfrozen. The court decided on July 31 that the freezing of the accounts had been illegal. On Aug. 17, it further ruled that the sealing of the warehouse was also against the law. The firm's offices, however, remain closed.

Jonassen's lawyers say that Kalashyan has already de facto grabbed the company in Jonassen's absence, appointing his own general director in Jonassen's place.

Disegni's four outlets in St. Petersburg remain open as do others in Moscow, Rostov-on-Don, Nizhny Novgorod and 19 other Russian cities.

Chebotayeva, who earlier worked for Eldorado, says the firm was set up in December 1997 and initially was successful. The speed of its growth eventually got it in trouble, she said, causing it to take a number of loans in order to continue growing.

"As a result of the crisis [in August 1998], Eldorado Group found itself in a very difficult situation," Chebotayeva said.

"At the time the company had two large loans from banks as well as debts to foreign suppliers. At the end of January 1999, Kalashyan said the firm was unable to pay its debts and that he was unable to continue working as general director."

In February 1999, Kalashyan officially resigned the post and Jonassen took over as general director. According to Chebotayeva, Kalashyan ceased all activities related to the operation of the company.

"He just couldn't take the pressure anymore," Jonassen said. "He basically gave us two hours' notice that he was leaving. He called a shareholders meeting and then just walked in and said that he was quitting."

At the time of Kalashyan's resignation, the total debt of the Eldorado Group was 29 million rubles (about $1.3 million at the then exchange rate), Jonassen said.