Abramovich to be sued for millions

ROMAN ABRAMOVICH used one of his oil companies as a personal piggy-bank and cheated British taxpayers of millions of pounds, according to claims in documents prepared for a major court case in Switzerland against the Russian owner of Chelsea Football Club.

The billionaire is alleged to have used company funds to pay for two yachts, a stay in a five-star hotel and even £12,000 of beauty treatments for his wife Irina.

The allegations emerged after an investigation by the European Bank for Reconstruction and Development, which is preparing to sue Abramovich for £9m over a debt it says it was owed by a company he controlled.

The EBRD, based in London and set up with money from British, European, American and Japanese taxpayers with a brief to finance the fledgling economies of Eastern Europe, sent letters in 2003 to Abramovich, his associate and fellow Stamford Bridge regular Eugene Shvidler and Sibneft, Abramovich's oil company, demanding payment of the £9m.

The money has not been forthcoming but the bank is determined to recover it. A source at the EBRD said: 'We have as much money as he does and will see this through. We will pursue him anywhere he goes.'

As is often the case with Abramovich's labyrinthine business dealings, the details are complicated.

The BBC programme Sweeney Investigates has discovered that the EBRD granted a loan in 1997 to a Russian bank, SBS Agro. As collateral the EBRD demanded first call over a loan SBS Agro had made to the Swiss-based company Runicom SA, which is controlled by Abramovich and is one of a series of companies used as a tax-efficient way to sell Sibneft's oil.

{1} When SBS Agro collapsed in the Russian banking crisis in the late Nineties, the EBRD set out to recover the collateral from Runicom SA. But Runicom claimed it had repaid the loan already and produced documents to back its claim. The EBRD sued in the Russian courts, but lost.

The EBRD, however, suspected that the documents were forgeries. Elizabeth Wallace, senior banker, is quoted in the bank's paperwork as saying: 'The documents produced by Runicom contained numerous inconsistencies which pointed to the fact that some had been forged at a later date. For example, the addresses on the seals were wrong and did not coincide with the current address of the organisation.'

Runicom SA denied there were any irregularities, but the EBRD took the case to an appeal court in Russia and this time, in January 2002, it won a judgment in its favour for £9m.

Four months later, before the EBRD could collect a penny, Runicom SA was declared bankrupt. The bank asserts that its funds had been transferred to the Gibraltar-based Runicom Ltd. Furthermore, when it saw Runicom SA's books, it found that big sums had been spent on items not closely related to the oil business.

Lawyers for the EBRD said: 'Runicom SA had numerous bank accounts with various banks which were charged with expenses made by Mr Abramovich or Mr Shvidler. It seems at the very least doubtful that all these expenses were made in connection with Runicom's business activities.

'One of many items catching the eye was the bank transfer confirmation in the amount of 27,800 Swiss francs (£12,000) for services of a beauty farm to be rendered to Mrs Irina Abramovich which was sent on Runicom SA stationery by a Sibneft fax machine on November 14, 1997.'

The EBRD's documents also show that in January 1999 Runicom SA paid £4,700 towards a hotel bill for Abramovich and a business associate, Alexander Mamut. They also reveal that Runicom Ltd purchased two yachts, Stream and Sophie's Choice, for $1m from a boatyard in Cannes.

Talks between the opposing sides broke down in July last year. The EBRD believes that Abramovich and Shvidler broke Swiss company law by transferring the assets of Runicom SA to Runicom Ltd in Gibraltar, without due payment.

There was also allegedly 'a complete failure of the directors to do a proper accounting'. And, perhaps most embarrassingly, 'there are no receipts and no explanations for the countless expenses Mr Abramovich and Mr Shvidler charged to Runicom'.

Sibneft, Abramovich and Shvidler have always denied the EBRD's claims and plan to fight any legal action. They maintain the original Runicom SA loan was repaid in full.