George Urumov, a Russian banker accused by his former employer of embezzling $23 million in signing bonuses intended for colleagues, says the money was paid to him to distribute at his discretion.
Otkritie Financial Capital, a bank part-owned by Russia’s VTB Group, is suing Urumov, his wife, Yulia Balk, and affiliated companies in London over an alleged $183 million fraud involving Argentine warrants and bonuses for colleagues, according to a court filing by Otkritie. Urumov denies the charges and says he had an October 2010 agreement with Otkritie to pay him $25 million to distribute as he saw fit, according to defense documents filed with the High Court in London on April 26.
The case is based on “a single e-mail” sent by Urumov to Roman Lokhov, then chief executive officer of Otkritie Capital, the group’s investment banking unit, agreeing to $5 million for each banker Urumov recruited to the Moscow-based firm, according to Urumov’s filing. “Yes, 5 for everyone,” the e-mail said, according to the filing. The e-mail acknowledged that Urumov agreed to “administrative arrangements” suggested by Lokhov for documenting the payments, the filing said.
London police arrested Urumov in October; no charges have been filed. According to a civil lawsuit filed in London on Oct. 6, 2011, the bank said Urumov offered to recruit four colleagues from Knight Capital Group Inc., a U.S. bank, if each received $5 million in hiring bonuses, or “golden hellos.” Instead, Urumov made three payments of $500,000, $750,000 and $1 million and kept the remainder of the $25 million, according to lawsuit.
Payments to Colleagues
Urumov said funds were distributed to co-defendants and then Otkritie bankers Ruslan Pinaev and Sergey Kondratyuk because the former had recommended him for a job at Otkritie and the latter stood to lose out on compensation when the new fixed- income team started at Otkritie.
The payments to Pinaev and Kondratyuk weren’t bribes and he was entitled to distribute the money at his discretion, Urumov said. He paid them about half the signing bonuses, Urumov said.
“There was no promise, request or agreement in respect of bribes and accordingly no dishonesty,” he said in the filing.
Otkritie said it lost at least $23 million of the $25 million given to Urumov. The bank has “traced and frozen over $120 million in stolen assets,” and is investigating the alleged fraud with authorities in the U.K., the U.S., Switzerland, Luxembourg and Hong Kong, according to Alexey Karakhan, a spokesman for Otkritie.
“We have recovered $34 million, and we are confident that we will make a full recovery,” Karakhan said in e-mailed statement today. “Since court proceedings are still under way, we are not available for any other comments.”
Urumov is also accused of defrauding Otkritie of $160 million in offshore transactions involving Argentine warrants. In response, Urumov said his only involvement was to reply to a query from Otkritie after the warrants were purchased.
Urumov’s documents also show he helped set up a Luxembourg- based hedge fund called Quantum Leap with Pinaev. Kondratyuk declined to invest, according to the documents.
Balk, Urumov’s wife, acquired a house in the London’s St. John’s Wood district for 19.8 million pounds ($32 million), according to the filing. Judge Julian Flaux ruled in March that Otkritie could seize the property because the company listed as its owner, Dunant International, didn’t respond to the lawsuit.
Balk believed the home had been bought with “the proceeds of genuine commercial transactions” and not from the “alleged Argentinian warrants fraud,” the filing said.
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