Suspect Lawsuits Target Russian Financial Firms

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This is the figure provided to investors, representing what was paid in taxes on their behalf. Renaissance's Moyse says this amount was paid in full before Renaissance sold the companies for liquidation.

Yet according to the financial accounts of the two subsidiaries themselves, provided to BusinessWeek by Rosstat, the Russian government's statistical arm, Financial Investments and Selen reported a total of just $1.2 million in taxes in 2006. So what happened to the other $106.9 million, the difference between the taxes Renaissance says it paid on behalf of investors and the taxes that the two units reported to the government? Renaissance's spokesman says he doesn't know the reason for the discrepancy.

Outside lawyers uninvolved in the situation say a possible explanation is that Selen Securities and Financial Investments subsequently claimed a refund from the tax authorities, using the questionable court judgments to lower their profit numbers—and their final tax bill. BusinessWeek couldn't corroborate this theory because the units no longer exist; public records led to dead ends.

A CURIOUS CASE

What's clear is that in 2006 the two units reported to the Russian government that they had $430 million in unspecified "other expenses." That amount is close in size to the legal damages awarded by the two courts. It also nearly matches the total profits that the two companies made from selling Gazprom shares.

Investors in Rengaz expressed bafflement over the situation. Stephen Barber, head of global marketing for Pictet Asset Management, says the firm's Eastern European Trust invested in Rengaz. "But if an investment bank were to approach us with a similar scheme in the future, I think we might say: 'No, thank you.' " He adds that any potential risks stemming from the curious litigation wouldn't affect Pictet's investors.

The companies that filed suit against the former Rengaz units are elusive. According to Russian records, Poleta was founded in October 2005, just five months before it filed for damages against Financial Investments. Accounts provided by Rosstat show that Poleta reported unspecified "other income" of $330 million in 2006—and almost identical costs. As a result, it paid a total of just 1,000 rubles, or $37, in taxes.

When BusinessWeek attempted to contact Poleta, using a Moscow phone number provided in the company's registration records, the person who answered said the number belonged to a private apartment. She denied any knowledge of Poleta.

Another head-scratcher: State documents show that the last owner of Selen has the same name as the owner of Prior, the company that originally filed suit against Selen.

Bush is BusinessWeek's Moscow bureau chief .