Statement on Vostochny Case
Vostochny: Background
In 2019, Mike Calvey was detained and placed under investigation by Russia’s FSB for misappropriation of funds. A Russian court in 2021 issued Calvey with a suspended sentence. In 2024, this conviction was finally vacated and nullified.
The root cause of the criminal investigation was a corporate conflict that occurred after a 2017 merger of Vostochny bank, which was owned by Baring Vostok funds, and another Russian bank, Uniastrum.
Shortly afterwards, numerous loans and investments made by Uniastrum bank (UNI) and its former owners immediately prior to the merger became impaired or went into default. An audit by the Russian Central Bank characterized those transactions by the UNI owners as being suspicious of asset-stripping and demanded the combined bank (Vostochny) make provisions for write-offs of 27.5 billion Roubles to account for them. The Russian Central Bank also demanded a capital increase to offset the losses.
The owners of UNI blocked the Vostochny capital increase since it would have diluted their stake in Vostochny and caused them to lose the opportunity to gain control of the bank. Baring Vostok funds initiated an arbitration claim in the London Court of International Arbitration for breaches to the merger agreement by the UNI owners. Before the London arbitration proceeds could commence, the UNI owners approached Russia’s FSB with accusations about Mike and other Baring Vostok colleagues.
The Russian FSB arrested Mike on 14 February 2019, one day after the formal accusations were made by the owners of UNI. Meanwhile, independent auditors (Big-4) of Baring Vostok Capital Partners concluded that “the claims being made by another Vostochny shareholder have no merit and are abusive tactics designed to pressure Baring Vostok funds to drop its arbitration claims in London for damages from such shareholder relating to a fraudulent misrepresentation and to obstruct a planned share emission of Vostochny”.
Mike was detained for two months in Russian prison, Mattrosskaya Tishina, for pre-trial investigation in an isolation unit (SIZO). He was subsequently released to house arrest in Moscow.
John Sullivan, the US Ambassador to Russia from 2019 to 2022, described Calvey’s detention as “extraordinary and unjust”, and made numerous public statements decrying Russia’s use of its criminal justice system to exert pressure in private commercial disputes. The United States Department of Justice submitted a Statement of Interest in support of an application from Baring Vostok to a US Federal Court to issue a subpoena to BCS, a Russian brokerage firm which was involved in the relevant transactions. This application was successful, and the subpoena recovered exculpatory evidence which proved the innocence of Mr Calvey and the other defendants.
A trial at Moscow’s Meshansky Court, which concluded in August 2021, issued Mike and other Baring Vostok detainees a suspended (probationary) sentence. All restrictions were removed in January 2022 by a Russian cassation court and Mike left Russia. In February 2024, the cassation court ruled to reduce the probation period by a further 15 months, calling the original sentence “unfair”. On 5 April 2024, the probationary period expired, and the conviction was vacated (nullified).
Michael Calvey issued the following statement:
“I am relieved that the unfair and unlawful conviction in my case has finally been vacated and nullified. The investigation against me was wrongful from the beginning and it took a significant toll on everyone involved. But I have turned the page and am full of energy as I now contemplate the next steps in my life.
I would like to thank everyone who supported me in my ordeal, but special thanks to my excellent legal team, led by Timofey Gridnev, and to former US Ambassadors, Jon Huntsman and John Sullivan.”