“It will be serious. GDP dropping, real estate prices dropping, everything would be fucking dropping, falling, plummeting. Imagine, nearly half the value of your house wiped out overnight!”
“Mamma mia, that’s apocalyptic! Thanks for the warning, Georgi, I’ll see you’re compensated for your troubles. How long do I have?”
“A week at most. My apologies, but I have to leave now. Stash some dollars, Misha.”
Georgi left, probably hurrying to sell his warning to another client, and I sat at the table thinking about the news he’d passed on. I called Boris, David and John and set up a meeting where we could work out how best to manage the looming crash.
Once the initial shock was overcome, the meeting with my closest comrades yielded a battle plan to limit any negative effects of the coming crisis. We immediately switched employee salaries from dollars to hryvna. I almost completely eliminated my exposure to Ukrainian real estate and converted all my hryvna to hard currencies.
Ten days after Georgi’s warning the hryvna started its rapid decline, accomplished within a period of three months during which it depreciated by almost 100% against the dollar. The property and credit markets came to a standstill. No buyer was willing to purchase lands that were bought only a few months ago for tens of millions of dollars, even for one-tenth of the purchase price. There was no sense in developing these lands either, as all purchases of real estate stopped. The market was totally dead.
The banks’ real estate collateral and property holdings suffered unheard of depreciation in just a short period of a few months. The banks had run out of the necessary reserves to be able to lend, even if they were interested to do so. With no buyers, no construction, and no credit the real estate market went into a cardiac arrest.
Those few who didn’t panic during this crisis, kept a cool head and used the opportunities that it offered, would make a fortune. I enjoyed the luxury of time, since I wasn’t a forced seller at ridiculously low prices in a completely illiquid market. I was able to be a buyer and sell liquidity to a dry market at elevated prices.
Many investors tried to freeze their purchases and developments of properties until the market stabilised again. However, no freeze was possible. The Ukrainian authorities, once well-nourished by the booming real estate, now demanded expensive unofficial maintenance fees just to restrain from reclaiming the properties. If poor and bleeding foreign investors dared to disagree, the supportive and investor-friendly authorities didn’t hesitate to deprive them of their rights. They were worse than any local private raider.
***
Luckily, Georgi’s tip-off about the crisis helped me avoid the massive losses that befell most of my competitors.
The shares of Neplokho Real Estate on the London Stock Exchange dropped in value, but I knew that the reserve of properties that they represented was still extremely valuable. As Warren Buffet said price is what you pay, value is what you get.
Many of my rich peers were highly exposed to the global stock markets. As the wealth of many of my competitors fell through the floor, on a relative basis my wealth increased tremendously. While everything around me was falling down, I stayed more or less where I was, but on a relative basis I was shooting upward through the roof.
In 2009 I entered the Forbes World’s Rich list for the first time. It was the first time not because I wasn’t a billionaire before, but because it was the first time some of my wealth could be measured and categorised.
Entering Forbes meant that I was accepted and legit. My long term plan had come to fruition - I was a legitimate, respectable businessman and now I had only a finite number of people ahead of me to surpass to reach the top of the list
Seventeen years had passed since I had been sleeping on the beach in Tel Aviv, homeless and penniless. Now, I was one of the richest people in the world. How do you comprehend such a thing? Wow! This was like a football club moving from a local junior league to the top of the Premier League.
27 Football
London, 2010
Football is the most popular sport in Ukraine, and Dynamo Kiev was a true source of pride under the Soviet control. The club was the most successful team ever in the history of the Soviet First Division. When I was seventeen the club won the Soviet championship, beating into second place the defending champions, FC Spartak Moscow.
My friends and I never hated the Russians, as most of us had friends and relatives in Russia. However, we hated Moscow, and the main reason for this hatred was football antagonism. Similarly to English football hooligans, Spartak and Dynamo’s fans engaged in a fierce battle twice a year on the side lines as the teams played.
You can imagine the pride that we felt beating the Russians, or more precisely beating Moscow. What a glory. It was good to be Ukrainian the day we took the championship. The underdogs from Kiev beat the arrogant snobs from Moscow. David kicking Goliath’s ass. It was one of a handful days in my life that I was truly proud of my country.
In the nineties through my connections with foreign businessmen, I helped sell Ukrainian football players to European clubs. I made a few hundred thousand dollars on each transaction. It wasn’t much within the context of my global businesses, but it helped to motivate the players of my Lugansk club that if they were any good, I could promote them to better leagues. And it was fun. If I couldn’t be a famous football player, at least I was able to get involved in the industry.
In the mid-2000s, football became a source for serious money laundering. The process was pretty simple.
I bought a small football club in England, called Watford United that had unexpectedly made it into England’s Premier League. Nobody gave the club any chance of surviving for more than one season in the Premiership. I, on the other hand, had big plans for Watford United F.C.
I was already an experienced football team proprietor. UEFA rules didn’t allow owning two clubs, but that wouldn’t be a problem. With all my experience in making ownership chains untraceable, it wasn’t hard to conceal the connection between Metallurg Lugansk and Watford United. If Misha Vorotavich and Moshe Shaarim were two different persons, then the single owner of the two clubs had nothing in common with himself.
I decided to take a risk and dared to bring a young Russian manager to the English Premier League. This was unheard of at the time. He wasn’t much of a player in the past, but he seemed to be a smart guy, who managed just in two years to bring what was practically a village team in Russia to be the third best club nationally. He was hungry to prove himself, unlike some managers who sit on multi-million pound salaries and had lost their killer instinct.
Another angle for choosing a Russian manager was that it was a great publicity stunt. As it was unusual, it hit the front pages of all the English newspapers.
“The Russians are Coming,” “Russian Mafia Buys Watford,” “From Russia with Love to Watford,” “Vorotavich Brings a Russian Nobody to Manage Watford.” It was a news story that attracted serious attention. Suddenly my club was interesting.
The first thing that I did once I bought the club was to recapitalise it. The capital was raised partly by a loan to the club and partly by selling newly issued stocks on the London Stock Exchange. Because I was a somewhat well-known international figure my involvement meant that the club now had a strong financial backing.
The club was able to buy players and invest in their training. In football, like in many other areas in life, money was the number one factor in attaining success. Rich clubs did better than poor ones, which was just a fact of life. The correlation between money and the amount of silver in the club’s trophy cabinet was evident for all to see. The value of my club, and its stock price, went up as I expected.
After issuing the new shares on the LSE, I retained the majority shareholding and the club repaid my loan from the money that it raised through the issuance of the new shares. I entered into negotiations through agents to buy players from a number of other clubs. My agent was a Cypriot corporation. The transactions inclu
ded secret pay-back fees paid by the selling club to my agent. These pay-backs were incorporated into the price that I paid for the players.
My agent’s commission was paid onward to a third party, which was another offshore entity that I controlled. The total commission was equal to my initial investment in the club. I now owned the majority shareholding in a high-value football club at no net cost to myself. I also laundered the original purchase price of the club. Simple.
The money-laundering machine didn’t stop there. I used money from my less legitimate businesses to introduce large investments of new capital into the club. The club spent a few millions on improvements to its ground, including a brand new canteen, new training facilities and medical staff. Each of these improvements was provided by companies that I controlled, and the prices of the improvements were massively inflated.
With its new players, new manager and positive publicity, the club gained a great momentum. We started to win games. Unbelievably, against all odds, not only did we manage to stay in the Premiership for another season, we finished in fourth place. This Russian coach was a genius. Even the newspapers applauded him. This meant that the next season we were going to play in the Champions League.
At that point football stopped being just another business or money-laundering machine. Football was once again a passion. Owning the club was a source of endless pride and joy. Bringing guests to my private box at my club’s home stadium was worth all the hassles associated with owning a football club. I wanted my club to win titles, so I increased its financing each year. A big portion of the money laundered through the club was actually reinvested right back into it.
In Ukraine I knew that my small local club from Lugansk had a glass ceiling. In England, however, I hoped it could be different. On top of that, football club owners formed a certain informal league in itself. If you weren’t a club owner, it seemed, you couldn’t be counted as true oligarch.
This all coincided with my company, Neplokho Construction, being awarded contracts to build and renovate two stadiums for the European Championship that was to be jointly hosted by Poland and Ukraine in 2012. We didn’t even need to rig a tender. All we needed was connections with the officials and to give them a nice kick-back for allocating the contracts to us. We completely inflated the budget and used cheap materials, therefore basically stealing an enormous piece of state budget and making a huge profit. We came out with over a billion overbilled from the state.
I felt sportive after Euro 2012. So sportive that I wouldn’t need much time to prepare to participate in the ‘building and stealing’ discipline in the 2014 Winter Olympics at Sochi. Especially since my Chechen metal base was virtually just around the corner.
28 Johnny
Kiev, 2013
John Wiseman lay in his bed, wide awake in the middle of the night, staring at the ceiling. He couldn’t get much sleep lately. He wondered how his life would’ve been different if he hadn’t joined Michael in 1999. It seemed like a lifetime away.
He was twenty eight then and was about to get a promotion in Oldman Sucks, the most prestigious working place for MBA graduates back in 1999. But that vacation on the Maldives, to which David had invited him, changed his perspective. Conservative as he was, even he couldn’t have ignored the pleasures offered generously to Michael’s guests. After hearing Michael’s offer to join him in Ukraine, he thought why waste his life on a slow progressing banking career, if some damn hole called Ukraine offered such a brilliant shortcut?
Had he stayed with Oldman he would’ve probably become a managing director and a millionaire by now. He would’ve been divorced, with two heart bypasses and alimony payments. Investment bankers at Oldman didn’t have prospects for a solid family life and a long life expectancy. Their wives were called ‘Oldman widows’ since they rarely saw their husbands.
He would not have lived a life of utter morality as an investment banker. It was asking too much to strive to live a moral life and be an investment banker at the same time. However, there was no doubt that the level of morality as an Oldman banker was much higher than that of an investment banker in Ukraine. You couldn’t get much lower than that.
Putting aside almost getting shot at three different occasions, he still struggled to come to grips with what he had to do at work on almost a daily basis. He bribed state officials. Handing envelopes full of cash seemed awkward at first, but he got used to it. He intentionally inserted loopholes in contracts. He structured companies to knowingly evade taxes. He laundered money. He lost count of how many felonies he committed.
Nothing was implicit, it was all explicit. If he was ever accused at a court of law, he couldn’t claim that he didn’t know. He damn well knew about everything. Defence of ignorance wouldn’t hold for him. At least his wrongdoings were of a white-collar nature, with which any businessman could probably put up with, he thought of possible self-justification for himself. He was actually a victim not a criminal, as some violent crimes were committed against him recurrently in Ukraine.
As for money, he indeed became richer than what he would’ve done even as an Oldman top banker. He had over fifty million dollars in cash stashed in offshore bank accounts, a magnificent flat overlooking Central Park in New York City, a huge flat in London’s Knightsbridge and a private house on Pechersk Hills in the centre of Kiev. He bought a new house for his parents in Long Island’s Great Neck. He had everything that he wanted that money could buy.
On a personal basis he couldn’t complain. He married a beautiful Ukrainian girl in 2002. Admittedly, she was a shiksa, not Jewish, so his mother wasn’t happy. However, they had two beautiful children. She treated him by far better than any JAP - Jewish American Princess, would have. And the sex with her was taken straight from a porn movie.
She didn’t complain when he came home late from work. She didn’t complain when he didn’t help her with the children. She just didn’t complain at all. The roles in their household were clear. He was the man and she was the woman. He made the money and she took care of the family, spent his money and fucked him. Simple, old-fashioned Ukrainian chauvinism. She was happy just because he wasn’t much of a drinker as opposed to the majority of Ukrainians. He didn’t beat her; another high prized bonus. John was a super-husband. He was both rich and treated her well.
When he came to visit his friends back in the United States, they were all envious of him. He was richer, he had stories about adventures - at least those he could tell them, and he had a gorgeous wife. On the face of it, John had it all. The American dream. Even better.
But while he had everything that he ever wished for, still he wasn’t happy.
After long deliberations he came to the conclusion that the main source of his unhappiness was the strong dislike that he felt towards his boss. John and Michael didn’t see eye to eye on many levels.
What irritated John the most was Michael’s belittling attitude towards him. John didn’t feel that Michael respected him. He felt that he deserved to be treated differently. After all, he was an MBA graduate from Harvard Business School.
On a professional level, and grotesquely as it may sound since many thought that Michael was a brilliant entrepreneur, John didn’t have a high opinion of Michael as a businessman. There was no doubt that Michael was an excellent thief and a schemer. He also had cojones - balls of a bull. He wasn’t afraid of taking risks, most of which paid off. He was super rich, but it was only due to taking the right risks in the crazy Ukrainian business environment. Despite Michael’s success, John thought that Michael was mediocre as a businessman.
There were so many decisions that could’ve been done so much better. Why use an insurance company only for money laundering, if insurance penetration was so low in Ukraine and the potential was huge? It could’ve been a profitable legitimate business. Why get rid of the hospital in Lugansk, if medicine in Ukraine was just the next Klondike Gold Rush? Michael could’ve added so many payable services to the basic medical service provided for free.
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Michael knew how to grab easy prey, but he was incompetent in how to best operate his own assets. He didn’t have a slightest idea how to use banks, leverage his business and accelerate the growth rate. As the demand for steel dropped considerably during the last few years, if Michael just took a loan to modernise his steel production, he would cut his costs by 50% and make his produce highly competitive. John tried to convince Michael to implement some of his ideas many times, but all in vain. Michael took John lightly in everything connected with Ukraine.
John was earning millions, but it hurt his ego that some Russian thief was so contemptuous to his advice. If John headed the Neplokho Group, it would be a real business, a real global success story! He knew it. But yet he had to obey some bear of a boss. He was definitely unhappy, although the bear had been in a comatose hibernation.
With Michael out of the way, it was John’s opportunity to take over the business. Michael’s two deputies, Boris and David, had some good skills, but surely they couldn’t head the entire Group. This was the moment that John was waiting for. He needed to carefully plan his next moves.
“Don’t ever wake up Michael,” John thought to himself. “I should lead Neplokho.”
29 Highway to Heaven
In 1991, Belarus emerged as an independent country during the Soviet Union’s dissolution. Belarus remained the most Soviet of all the other republics as Soviet-era politics were maintained, including state ownership of the economy. Belarus was like a European Cuba, and while Cuba preserved the look and feel of the Caribbean in the fifties, as reflected in the old cars and the overall appearance, Belarus preserved the look of the Soviet Union in the eighties.
Tel Aviv, 2013
At the beginning of 2013, Belarus announced its intention to tender the construction of a fast highway between Minsk, the capital of Belarus, and Moscow. At a meeting at our group’s HQ in Tel Aviv, David, Boris and I discussed our intention to bid for tender on the massive project.
Rise of an Oligarch: The Way It Is: Book One Page 23
