Chapter 57 AN OLD FRIEND
Kennedy swallowed hard and tried to compose himself, his eyes bulging as
would those of a frog contemplating a serpent, as he stared at the thick set
figure. Almost forgotten images flashed through his brain. At first he had
not recognised the Armenian, who now looked like Joseph Stalin’s ghost, older, his
hair white and his moustache fuller. It was the evil smile that brought the memories
of Tallinn rushing back.
Ten year had passed since he had said goodbye to the Armenian in a grim Soviet
style apartment on the outskirts of the Estonian capital. For almost ten years
Kennedy had lived in the idea his secret was forever hidden after Erikkson went
down with the Marie Gallant off the southern coast of Cuba in a tropical hurricane.
Holy Mother of feckin Jesus Christ! He swore under his breath as he recalled the
khaki kitbag that had contained five million dollars in forged one hundred dollar
bills packed neatly in chocolate boxes.
Dermirshian lifted his index finger to his lips, ‘In banking secrets are important
Mr Kennedy n’est ce pas.’
Kennedy spluttered.
‘I think it’s a good moment to toast to our cooperation,’ said the Armenian
pouring two glasses of Vodka to the brim and handing one to Kennedy.
‘Твоё здоровье!’
Kennedy swallowed the ice cold Vodka in one gulp just as Tarasov returned.
‘I see you are friends already.’
K
‘How you say in English?’ asked Dermirshian, ‘Almost like old friends.’
Kennedy choked.
‘You’ll get used to our Vodka Pat,’ said Tarasov giving the Irish banker a
friendly thump on the back, thinking it would help the vodka on its way down.
Ten years before, Pat Kennedy had been unwittingly involved in the Tallinn
transaction with Dermirshian, a deal set-up by a corrupt Swedish banker, Stig
Erikkson. Only the Armenian would have remembered the affair, that is unless he
had confided their dirty little secret to Tarasov.
Fitzwilliams was met in the VIP arrivals area of Moscow’s Sheremetyevo Airport
and led directly to the oligarch’s armoured Maybach limousine. With sirens
wailing and flashing blue lights the limousine, joined by two black Mercedes
SUVs, left the airport. Reaching the outskirts of Moscow the convoy hogged the
central lane, normally reserved for police, emergency services and high ranking
government officials, as it sped towards the city centre and the Hotel Metropol.
The Russian spared no expense to demonstrate his power and influence in the
Russian capital. The managing director of the Metropol, surrounded by a crowd of
fawning assistants, met the VIPs on the hotel steps and led them through the vast
Art Nouveau reception hall at the mezzanine level. They were ushered to the lift,
up to the fourth floor, and to the magnificent early 20th century style presidential
suite overlooking the Teatralnaya Ploshchad and the Bolshoi Theatre.
‘Welcome to Moscow,’ Tarasov said theatrically as he took one of the bottles of
chilled Champagne from a silver bucket placed on an antique table in the suite’s
splendid reception room. He opened the bottle with a flourish and poured the
foaming liquid into three glasses, then handing one to Fitzwilliams, and the other
to Kennedy. Then lifting his glassed he beamed and addressed his guest: ‘Майкл,
добро пожаловать в Москву, па здоровье.’
‘That’s welcome to Moscow Michael and good health,’ said Pat proud to be able
to show off his linguistic skills to Fitzwilliams.
They lifted their glasses.
‘Sláinte mhaith!’ replied Fitzwilliams.
‘Sláinte agus táinte!’ Kennedy rejoined adding ‘wealth’.
‘Help yourself gentlemen,’ added Tarasov inviting them to a tray spread with
miniature blinis and a crystal bowl of glistening caviar.
‘For our programme tonight we have booked a box at the Bolshoi, a performance
of the Nutcracker.’
‘Excellent,’ said Fitzwilliams flattered by the attention of his Russian host.
‘But first, if you are not too tired, we shall spend a short while looking at our
business for tomorrow.’
Galina appeared on cue presenting three folders containing the final version of the
memorandum of understanding and its annexes, which Fitzwilliams had already
received from Kennedy and approved. They went through the motions of thumbing
through the papers and then with little else to do headed off for the obligatory VIP
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visit to Red Square and the Kremlin Walls.
Under a blinding wall of spotlights and a barrage of flashes, cameras turned
zooming in on Sergei Tarasov and Michael Fitzwilliams. In the presence of Prime
Minister Vladimir Putin, at the new headquarters of Tarasov’s InterBank
Corporation, the two bankers surprised the business world with announcement of
the creation of the first major Anglo-Russian banking alliance.
Tarasov’s arrogantly proud tower, situated in Moscow’s new financial district,
was a symbol of Nova Russia, thrusting skyward amongst its peers in the form of a
futuristic crystal the tower was a challenge to the best the world had to offer.
It was good news for investors in the UK, as it was in effect a recapitalization of
Fitzwilliam’s INB Holdings Plc., backed by InterBank’s extensive holdings in
Russia’s major oil and gas producers.
The newly created INI Banking Group would be a new force to be reckoned with
in banking, as it reached from the Atlantic to the Pacific, across the Eurasian
continent, for the development of Russia’s vast oil, gas and mineral resources.
Putin underscored Russia’s ambitious plans for the development of its financial
sector and announced the construction of a new World Trade Centre in
Vladivostok, a cornerstone for Russia’s plans to counter China’s ever-growing
influence on the north-east Pacific façade.
Such plans whet the appetite of Nikolai Yakovlevich Dermirshian, who after a
long criminal career, could not avoid seeing the internationalization of the Russian
economy in terms of an extension to his mafiya related empire and links to other
criminal organizations, amongst them the Chinese triads, that enjoyed the
protection of corrupt senior officials, operating in Shanghai, Tianjin, Shenyang,
Guangzhou and Hong Kong.
That evening, in a tête-à-tête during the gala dinner given at the Metropol Hotel,
the bankers agreed that apart from the political chest-beating, their immediate
priority was the INI Europa Property Fund. They concluded that Kennedy should
immediately head for Hong Kong with a view to establishing relations with
important Chinese investors.
Kennedy wallowed in his gung ho reputation, he was an unconventional gogetter, who projected his natural enthusiasm into business relations, seeking new
business ventures and creating new relations in the most unexpected quarters.
Though his infuriating self-confidence was seen by Fitzwilliams as a quality, the
exotic drew him like a moth to a flame.
The majority of experienced investment bankers tended to be cynical with a
dislike of risk; nothing was more natural in a business where few were capable of
even approximately forecasting future trends. Some of course had lucky streaks,
but as casino owners knew only too well they never lasted. Most investment
bankers were survivors, wrong guesses and narrow escapes made them very
cautious men.
‘Nikolai Yakovlevich has good contacts in Hong Kong and Macau,’ Tarasov
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confided to his partner, ‘and he seems to have struck it off with Pat.’
If Fitzwilliams had been attentive he would have perhaps remarked the slightest
edge of doubt in Tarasov’s voice.
Then after a brief instant of thought, the Russian added, ‘Though it’s probably
best if Kolya stays in the background for the moment, when the moment comes he
can arrange all the introductions Pat will need.’
‘Excellent, we should also get Tom Barton involved, he knows property and that
part of the world…and perhaps Pat’s new man, a young Irish lad…Clancy’s his
name I think,’ Fitzwilliams enthused looking in the direction of Kennedy, who
seemed strangely dejected. ‘Quite a bright lad I’ve heard, anyway Pat will look
after the arrangements.’
Pat nodded.
‘I’m sure you know best Michael,’ said Tarasov. Such details were not his
problem.
The INI Europa Property Fund was what was commonly described as a ‘hedge
fund’, a term that had once been used to describe private unregistered investment
pools, using special hedging and arbitrage methods to trade in equity markets.
Modern hedge funds had evolved into sophisticated vehicles as had the instruments
traded and tools employed.
Unlike mutual funds, open to the general public, hedge funds were private and
very discrete investment vehicles, usually structured in the form of limited
partnerships, and reserved for exceptionally wealthy investors.
Such funds were mostly incorporated in non-regulated offshore locations, though
they were generally managed in the US or the UK. London based managers
required authorisation from the Financial Services Authority and were obliged to
respect UK rules and regulations, on the contrary the US had no requirements
obliging a hedge fund to register with the Securities Exchange Commission.
As far as investors in the UK were concerned, hedge fund regulations were set
out in the Investment Companies Act of 1940. Once set-up, all a hedge fund
needed to function was a modest administrative structure, and could operate from a
small office or apartment, often located in an exclusive district of London. In
general the minimum investment required was one million dollars though that
varied from one fund to another.
All an unsuspecting passer-by would see in London’s Mayfair district was a few
discreet nameplates. In the case of the INI Europa Property Fund it was technically
administered from a Knightsbridge address and there was of course no nameplate.
The fund’s day to day operations were effected out of Dublin, where managers
kept track of matters such as accountancy, movements of investors’ money, and
portfolio evaluation. The fund’s physical and legal locations were distinctly
separate, its registered headquarters, for tax purposes, being situated in the Cayman
Islands.
Barack Obama’s early hedge fund bluster was, very conveniently, forgotten, ‘put
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on the back burner’ as his American banker friends would have described it.
Offshore islands in the Caribbean and elsewhere had shrugged off Obama’s, and
other leaders, rant, which in any case had not had the slightest effect on their
business. Looking back, future financial historians would justifiably write Britain
lay at the heart of these legalised fiscal paradises. With three crown dependencies:
Guernsey, Jersey and the Isle of Man, and its fourteen overseas territories,
including the Cayman Islands, the British Virgin Islands, Turks and Caicos, and
Gibraltar.
Its huge capital dwarfed the size of the INI Europa Property Fund’s modest
structure. INI, whose registered offices were situated in Saint Mary Axe, was
appointed custodian of the fund’s portfolios; held its capital and managed the
leveraging of investment funds using securities in the fund’s portfolio as collateral.
INI also hedged bets to offset possible losses should the commercial property
market turned sour.
Property management was handled by a series of service firms who reported to
the fund manager, who transmitted the reports to the appropriate INI department.
Fitzwilliams beamed, he set down his glass, stood up and discretely opened a crib
note. Gathered before him at a luncheon held in the Savoy, was an assembly of
prominent guests to celebrate the fusion of his bank with that of Tarasov’s, to form
the INI Banking Corporation. It had become a rare event to see such a large
number of quality investors, clients and friends gathered together given the morose
atmosphere of the City.
Tarasov was an important stake holder in the new banking group. Surprising,
given the difficulties of the Russian a year earlier. Questions would have been in
order, but the fact so many of the rich and nouveaux riches had bounced back
eluded the question.
The oligarch had indeed been in difficulty, but it was his ‘godfather’ Dermirshian
who had come to the rescue, propping up the bank with vast injections of money,
the source of which was lost in a complex web of ephemeral offshore vehicles. The
aging mafiosa had little desire to see his life of luxury and his yacht on the French
Riviera vanish in a crisis that was not of his making, and of which he understood
little. With Dermirshian’s links to the murky world of Russian power and the
underworld, channelling the profits from his extra-legal activities into the legal
banking system was part of his business. The fact that these came from the
smuggling of timber, precious metals, oil and gas, not to speak of drug and human
trafficking, or deprived the Russian state of tax and export duties was of little
importance. Given the scale of the crisis that had hit Russia, its leaders did not look
too closely at the means its bankers employed to stave off peril when danger
threatened.
Organized crime had existed in Russia since the days of the Tsars, then known as
вор в законе. After the fall of the Soviet Empire many ex-government workers
turned to crime to survive, joining the mafiya, including ex-KGB men, and
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veterans of the Afghan and Chechen wars. Poverty and mistrust of the state had led
to widespread corruption, contributing to the rise of organized crime, as the new
criminal class erected a legal business façade behind which organized crime
flourished.
