After being told he'd provided no information "demonstrating or even suggesting" that Prokhorov or his related companies conducts business with those on the sanctions list, Pascrell sent a letter citing "specific examples of Renaissance Capital’s business with individuals and entities that have close ties to the Mugabe regime."
Those examples were hedged as "reportedly" and he carefully asserted that Prokhorov is violating "the spirit" of the sanctions rather than formally violating them.
(I wrote last week how Renaissance Capital, of which Prokhorov owns nearly half, said its CEO specifically avoided an investment summit so as to not violate sanctions, even though a government newspaper said Renaissance Capital had confirmed its participation.)
The Russian mob?
Beyond that, Pascrell asked whether the NBA has have examined documents filed last year in the Southern District of New York alleging Renaissance Capital has had a long-standing relationship with Russian organized crime, notably ties to an alleged scheme to defraud the Russian government of $230 million (as reported by Bloomberg on 7/31/09).
No backup documents were provided regarding Pascrell's charges, though I did find an declaration from a representative of Hermitage Capital Management, which seeks to prove it was a victim of fraud.
It is unclear how seriously the Treasury Department is pursuing Pascrell's initial request that it look into Prokhorov's activities.
Pascrell also provided the NBA's response to his initial letter. Both documents are embedded below.
Prokhorov's role is key to the Atlantic Yards project, as he was willing to buy 80% of the Nets and 45% of the arena, absorbing the team's losses and providing cash flow to a cash-strapped Forest City Ratner. In turn, he hopes to use the team as a platform for business in the United States.
While Mr. Prokhorov has categorically stated that he has no dealings whatsoever with anyone on the sanctions list in Zimbabwe, there is significant evidence to the contrary. He is a 50% owner of Renaissance Capital, which in June 2009, reportedly sponsored an economic forum in Harare, Zimbabwe, and offered foreign investors special access to government officials, including those on the United States’ sanctions list. Renaissance Capital is also reportedly a shareholder in CBZ Holdings, one of the largest banks in Zimbabwe. The Government of Zimbabwe is the bank’s largest shareholder.On Russian organized crime
It is clear to me that Mr. Prokhorov has violated the spirit of the sanctions the U.S. has in place against the brutal regime of Robert Mugabe in Zimbabwe. It is unlikely that anyone can do business successfully in the Zimbabwe financial services sector without engaging the Mugabe government and its henchmen. Zimbabwe remains an emerging market with poorly defined institutional and regulatory environments which Mr. Mugabe has actively worked to dominate both politically and economically.
Specifically, based on documents filed last year in the Southern District of New York, it appears that Renaissance may have long-standing working relationships with Russian organized crime. The court filings in New York describe in detail Renaissance’s connection to a complex tax rebate fraud in Russia through which it is believed at least $106.9 million in taxes paid from a Renaissance-managed investment fund was later embezzled from the Russian treasury through the payment of fraudulent tax refunds. In addition, the New York filing highlights an apparent working relationship between senior executives of Renaissance and the convicted Russian mobster, Dmitri Klyuyev, who has been described in Russian courts as a “business partner” of Renaissance who had “regular dealings” with senior Renaissance executives. It is alleged that the proceeds of the $106.9 million fraud and similar schemes were ultimately channeled out of Russia via U.S. banks based in New York.How hard did the NBA look?
I make no judgments as to whether Mr. Prokhorov violated our laws, which is why I have asked the Secretary of the Treasury to investigate his business in Zimbabwe and make a determination. However, your assertion that because Mr. Prokhorov is a Russian national he is immune to the laws of our land is unfounded. Mr. Prokhorov will most certainly have U.S. business interests after becoming the owner of the New Jersey Nets. Renaissance Capital operates a US subsidiary and leases office space in New York. To my knowledge, Brooklyn, not overseas, is the only possible future home for the Nets under consideration, so if Mr. Prokhorov hopes to attend games he will certainly be within the United States’ jurisdiction.So he asked again for details about the NBA's vetting process.
In the face of all this information, which was gathered only from public documents and press reports, I find the NBA’s apparent non-investigation of Mr. Prokhorov’s businesses very troubling. I would assume that a business relationship between a potential owner and a country subject to U.S. sanctions and links to organized crime would raise red flags in your vetting process. However, according to press reports, a Renaissance Capital spokesman has stated that the company was not even contacted by the NBA’s investigators. Your most recent letter brushes off these accusations as if they are of little importance or merit, as if the only qualification to be an owner of an NBA franchise is to not be found guilty of violating our sanctions laws.
I expect the NBA to hold its business partners to a higher standard. The NBA occupies a unique place in the public life of the United States, and every team in the league – and their owners – are holders of a special trust. The connections drawn between Russian organized crime and Mr. Prokhorov’s Russian investment bank, as well as the prior allegations of sanctions busting in Zimbabwe deserve the close scrutiny of your organization.
Pascrell Letter to NBA Re Prokhorov, April 19, 2010
NBA Letter to Pascrell re Prokhorov