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Ex-CEO of major Russian investment group accused of fraud

A former president of the AFK Sistema conglomerate has been placed under house arrest for two months

A Moscow court has placed a former president of the AFK Sistema investment company, Evgeny Novitsky, under house arrest until August 20. He has been accused of large-scale fraud involving an alleged attempt to steal money from a now-defunct private pension fund.

According to investigators, Novitsky, together with accomplices, devised a scheme that would have allowed them to illegally acquire money belonging to the ‘Ural FD’ private pension fund under the guise of purchasing securities on the stock exchange.

Ural FD lost its state license and ended its operations back in 2016. It had some 19,000 clients by that time. The total volume of pension savings entrusted to the fund then amounted to 890 million rubles ($10 million). The fund’s pension reserves held 117 million rubles ($1.31 million) by the end of 2015.

The court also placed two other suspects in the case – Oleg Mezentsev, a businessman involved in securities administration, and a woman identified only as Olga Illarionova – under house arrest. Mezentsev stands accused of fraud, while Illarionova is accused of a premeditated breach of contract. The court did not elaborate on their exact roles in the suspected fraud scheme.

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According to a source contacted by the Russian business news outlet RBK, Novitsky could also be linked to another fraud investigation. A suspect in that case – businessman Aleksey Taicher, a former owner of the Transfin-M leasing company – is accused of entering into fake loan agreements. The businessman supposedly never planned to return the money he borrowed, according to RBK. The damage inflicted by his actions amounted to at least 710 million rubles ($7.98 million), according to investigators.

Novitsky, 66, became a top manager of AFK Sistema back in 1995, just two years after the company was founded. He took over as the company’s president later that year and kept this position until 2005. He was also an AFK Sistema board member between 2005 and 2013.

Subsequently, the businessman held top positions with a major Russian fertilizer manufacturer, PhosAgro, and some defense industry companies.

AFK Sistema is a major Russian investment conglomerate headquartered in Moscow. The company’s global depository receipts traded on the London Stock Exchange between 2005 and 2023. The conglomerate operates dozens of firms in a wide range of fields, including banking, e-commerce, healthcare and pharmaceuticals, IT, telecommunications and media. Its enterprises employed over 140,000 people as of 2020, according to the Russian Union of Industrialists and Entrepreneurs (RSPP).

June 22, 2024 at 11:57PM

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