Rise of an Oligarch: The Way It Is: Book One

by Carlito Sofer

  “Okay. Do we know what’s going on in Belarus?” I asked both Boris and David.

  “The project has been approved, generalisimus,” David answered. He always made up titles for me and this time he used one of the titles of Joseph Stalin. Even he, an Israeli-born, rarely called me Moshe.

  “What are the final numbers?”

  “The tender is scheduled to close in three months. Three bidders will remain; two are our companies and the third is the company of the president’s nephew. Three other bidders will be removed due to technical reasons. Any legal proceedings after the tender will be handled by Big Bird.”

  Big Bird was the nickname for the Chief of Staff of the President of Belarus. We chose this nickname since his surname, Orlovich, was akin to an eagle - Oryol. We liked to use codenames from the animal kingdom as most phone conversations were tapped in Eastern European countries, so we commonly used nicknames instead of using the real names for men in sensitive positions.

  “Our Ukrainian company, Neplokho Transportation will win the tender with a bid of 5.4 billion dollars for the project’s total budget. The budget covers construction, materials, salaries, as well as planning and technology,” continued David. “The tender committee will recommend that we’ll take the nephew’s company as a sub-contractor and we’ll have to pay the nephew 15% of the budget, but his company won’t take part in any construction. In other words, we pay the useless bastard eight hundred million dollars just because his uncle is the president.”

  Both Boris and I grimaced at the high figures.

  “The highway project will be financed 100% from the budget,” David went on. “However, we’ll show that we also bring an investment, equalling 20% of the budget as our own funds. This will allow us to take a 50% ownership of the company that’s going to operate and maintain the highway. After we bring our own funds, the down payment that they pay us is going to be 40% of the budget, made against a bank guarantee. We won’t need to bring a real bank guarantee; our Ukrainian bank’s guarantee letter will suffice. Our costs will be 3% for planning and 15% for constructing the road using winter-proof asphalt. This is about 18% together. We can assume an overhead deviation of up to 10% of the above, making it up to 20%. It all adds up to a cost of up to 1.9 billion US dollars, including the payment to the inept bastard and the excess 10% of costs. This is a profit of three and a half billion dollars. What do you think?”

  I thought that overall the project made sense. One advantage was that with such a project, the Group would enter Belarus. Its development was lagging that of Ukraine by a decade, which meant that there were numerous opportunities to repeat some of the plays we’d made before.

  There might be further similar projects as Belarus developed its infrastructure to get in line with neighbouring countries. Developing an appetite on the way, the Belarusians would likely want to build a highway to Kiev or Warsaw afterwards. We could help them reach the decision that they wanted such further extensions by making it worthwhile to the decision makers or their advisers.

  Another advantage of the project was that the nephew would ensure that the senior government officials, including his uncle, the president, would get their share and I wouldn’t need to deal with each one separately. The payment to the pathetic nephew was expensive, but the senior leadership would know where the money came from and would be interested to do more business with us in the future.

  We would need to take care of the less senior officials, such as the Chairman of the State Committee on Tenders of Belarus and the officials at the Ministry of Transportation. Those on the Olympus wouldn’t throw them any bones, so we would need to keep them happy. If they were content it would be easier for us to win tenders going forward.

  While it all sounded sensible, I decided to play hard ball with David. It was Friday and I needed some entertainment.

  “David, you know that I was born at night. But it wasn’t last night. Are you kidding me? Tell me something, David. You say they pay 40% down payment, but in fact I’m going to pay a 20% down payment of the budget for the maintenance company upfront from my own pocket, right? And I’m giving them a bank guarantee. Do you think that that’s worth nothing? Maybe the contract they’ll award me will also be worth nothing and they won’t have money to even pay back the down payment. That’s a big fucking risk, don’t you think?”

  Before David had a chance to reply I carried on, “I’m going to pay this little shit incompetent bastard 15% of the budget just because his uncle happens to be Veniamin Selevich, the President of Belarus. This little piece of shit nephew does nothing. He’s going to get eight hundred million dollars for doing nothing. Are you fucking kidding me? Are you out of your fucking mind? Once you knew how to negotiate. Now you get confused by big numbers. What has happened to you guys? Who has cut off your balls?”

  David and Boris knew me, so they didn’t seem too moved by my response. This time Boris answered.

  “Listen, Misha. I met with the worthless nephew, and the little bastard has an uncle, and the uncle has friends, and they also know how to count. According to their calculations the profit on the deal is 3.2 billion dollars. They demand a slice of 25% of the profit. We should be thankful that we can get out with more profit than they think.”

  “And don’t forget, generalisimus,” added David, “that later on we’ll be able to sell the 50% stake in the company that operates the highway to the government or to the Chinese for at least another two billion dollars.”

  “Belarus isn’t Ukraine. Selling anything in Belarus, except for weapons, is difficult, so we’ll probably have to sell it back to the Belarusian government. You need to agree on this beforehand, including price, bonuses and all the other shit. Nobody else will buy a company in Belarus. Today you own it, tomorrow the government nationalises your holdings. Nothing could stop them,” I said.

  Both Boris and David were silent. After a pause of a few seconds, I decided to conclude.

  “Fine. Make sure that they understand that they aren’t going to get a cent more than the 15% of the budget. Neither the bastard rubbish nephew nor his divine uncle. What’s more important is that I also want to win the tender for the segment of the road in Russia. This is our chance to start doing business with the Ministry of Transport of Russia.”

  “Yes, but Misha...”

  “I don’t care,” I said, raising my hand to interrupt Boris. “For the Russian part I’m willing to give them 25% of the budget - not just of the profit, including the share to the Russians. I don’t care how they divide the cash between them. You can hint to him that I have my own contacts in Moscow. If I get the deal without his help, they’re out of the picture. They won’t see a dollar. Capish?”

  “It will be difficult, but if that’s the position you want to take...” David responded.

  “And another thing; we need to set up a maintenance company for the highway. And I mean right now. We cannot wait until the tender is closed. I want everything to be in place. Make sure that most of the work won’t be covered by our limited guarantee. Start training the First Deputy of the Ministry of Transport and the members of the committee responsible for supervision. I expect a nice income stream from the repairs that will be on par with that of the prostitution business in Minsk.”

  The prostitution business in Minsk was a high bar and nobody knew it better than Boris.

  “Anything else, Boris? David? No? Good. The meeting is adjourned. Shabat shalom. See you tonight at my mama’s birthday party. Remember to behave; we’re in Israel, not Kiev.”

  “You insult us, Misha,” Boris said, feigning insult. “Are we not civilised gentlemen?”

  “Fuck off, Boris. This is my mama we’re talking about. Behave!” I ordered, as David sniggered at the exchange.

  Overall, I had high expectations for this project. It was time to step up a gear and progress to the major league: projects with turnovers of billions. On IPOs I actually had to share ownership interests with others. Here, I shared nothing, except for commi
ssions agreed in advance. It was all mine, mine, mine!

  The post-Soviet countries were becoming richer and their reserves were full of hard currencies. It was the right time to help them to spend or to wisely invest the wealth that they’d accumulated.

  I felt an adrenaline rush in my body from the prospects of making billions. I felt alive. I felt that the top spot of the rich list was in sight.

  30 Old Fart’s Deliberations

  Tel Aviv, 2013

  That evening was a joint birthday party for me and my mother. It was a relatively modest gathering of around fifty people to celebrate my mother’s sixty-fifth birthday at the same time as I was turning forty. This required modesty and limited exposure to the usual immoral behaviour that occurred at my previous birthday celebrations.

  The event was very low-key, but I must admit the tame celebrations were a welcome change from the usual raucous affairs. Maybe it was an age thing. Forty is quite a symbolic age and years before I had set it as the target age to achieve all my goals. Despite my success and wealth, my main goal of becoming the richest came closer but remained yet unachieved.

  The party was a success, in the sense that my mother loved everything about it, from the venue, the lavish spread of food that was a mix of Ukrainian and Israeli fare, to the beautiful diamond necklace I bought her jointly with Sasha. When she left just after midnight, I had assumed I would want to move on to a club and start the real celebrations. Instead, I was content to bid my guests goodnight and return to my penthouse in Tel Aviv. The next day I decided to take a rare day off from worrying about multi-million dollar deals, and just relax.

  Masha and the children flew back to Kiev on the early flight, so I could spend the day relaxing for once and meditating over my achievements. The round dates in middle age were good to think about life, its purpose and my personal score.

  After having three highballs of Scotch my thoughts meandered around the universal drivers. Money makes the world go round. The richer you are the easier and cheaper is life. The world makes it easy for the rich to get richer and hard for the poor to be better off. The classes are preserved. The aristocrats or upper class stay at the top. The agrarians or working class stay at the bottom. The middle class gets screwed from every direction.

  Everything on the face of it is absurd. For example, the more prestigious your credit card, the less interest you pay on credit. You need to be rich to get a nice platinum or insignia credit card. Evidently, the poorer you are the less prestigious card you get and credit is more costly for you. So the rich get cheap credit that they don’t need and the poor, who really need credit, cannot afford it. If in theory there should be market or state mechanisms redistributing the resources more equally, in practice the rich get richer and the poor poorer.

  The more you fly or spend using credit cards, the more free flights you receive since you accumulate air miles. I really didn’t need free flights, since I could afford to pay for virtually anything, and I had a private jet on top of that. Those who would appreciate free flights didn’t receive any. But that is how the world is built - screw the poor suckers and lick the balls of the rich.

  I liked comparing my own path with that of my western competitors, whom I wanted to leave behind. In the West many people got super-rich using the same methods of corruption and fraud, but the difference was that it happened one or two centuries ago. Probably on a lesser scale the same was happening even now. And there it was usually covered in Western European wrapping or American elegancy and subtlety. In Ukraine, in contrast, there was no room for sentiments. Everything was crude and in your face. Lacking the centuries of tradition or breeding, I had to undergo a rapid transition to change from barbarian with a strong criminal smell, stinking from money to a subtle European aristocrat - well, that was a bit of overstatement, welcomed in the most prestigious forums.

  The gradual transformation of my colleagues from the sporty look of racketeers to that of royals was comical. First, they were keen to acquire the most expensive version of whichever item took their fancy. If they wanted a cell phone, then it had to be a Vertu. If they were happy to spend thousands on a phone, when it came to acquiring a new watch then the brand worth wearing was something like Vaucheron Constantin, with each one costing from thirty thousand dollars and up. The next trend was to buy the most expensive cars, such as Maybachs, together with the fanciest yachts and outstanding properties.

  It was considered a bad taste to buy cheap. Some, lacking subtlety, even boasted loudly, “Take a look at this watch. It cost me two hundred grand,” being sure that any ladies within earshot were having an orgasm just at the sight of their watch and men were biting their tongue from hopeless envy.

  Football clubs slowly became a must-have too. Most club buyers used cash from money-laundering schemes, tax evasion operations or stolen through dodgy privatisations from the Ukrainian or Russian nation. I didn’t know if it was true for Arab sheikhs, who often bought clubs, but it was certainly true for many of my rich ‘friends’ and ‘colleagues.’ Football fans worshiped generous club owners, however, only a small number of fans understood the real source of these investments.

  It was amazing how people who grew up under communism in Russia and Ukraine now had a lifestyle of tsars. Imperial Russia was back, only this time its oligarchy wasn’t made up of the few aristocrats but of the few self-made billionaires.

  From a distorted point of view the capitalism in Ukraine was ideal and it certainly was more honest than that of the West. For example, leaders of labour unions were bribed and did as the employer wanted them to do. The working force, therefore, didn’t have an organisation that truly represented the common goals of the workers and cared for their rights. If you believe that socialism gets in the way of capitalism then this was a purer version of capitalism.

  We were able to focus on making money, whether through legitimate and competitive business ideas or through stealing the public’s money via connections with the government. Anyone who was successful earned respect and fear just because he was rich. We didn’t pay any taxes, abused the employees, passed rules and regulations that were convenient for us and contributed prolifically to governance deterioration.

  This was pure money-making, without social responsibility, patriotism and other similar ideological nonsense that got in capitalism’s way.

  Many oligarchs hated the state. Their families lived in Monaco or Sardinia, their children were educated in London and their wealth was stashed in Switzerland. Ukraine was used only as a place where you make money and squeeze it of its last drop of juice. Impenetrable walls, fences, armoured cars, personal jets, bodyguards and private armies tightly separated them from their countrymen. And abroad all of them had what they called a reserve landing field - a comfortable and prepared hideout, ready for any contingency in case anything went wrong in Ukraine.

  Was this line of thought a kind of self-loathing? Definitely. I hoped I was a bit different though.

  I actually loved Ukraine and its people. Or maybe I was getting sentimental with age. Most of the Ukrainian people were honest, decent and cordial. However, these traits, especially in the Ukrainian reality, got you nowhere. Everybody treated such citizens as lokhs. But I couldn’t help them all. I tried, but the people didn’t vote for me when I was running for parliament. They had their opportunity to give me a chance, and they blew it. They didn’t help me to help them.

  At least I made sure that my inner circle and my close employees got reasonable salaries and were treated respectfully. This was something that was in my direct responsibility and I cared about it being observed properly.

  I also eagerly supported Ukraine joining the European Union. I established my foundation named ‘29 - Ukraine’, promoting Ukraine as the twenty-ninth member of the European Union. I strongly believed that this agenda played an important role for Ukraine's future. At least I was spending on something other than merely a flamboyant lifestyle, I thought to myself. A little bit of rounding the edges of the trut
h.

  ***

  I moved to the balcony of my sixteenth floor penthouse in one of the new residential towers in Tel Aviv, with a fantastic view of the peaceful Mediterranean Sea just a few metres away. I loved the sea; it always had a relaxing effect on me.

  I took another sip and resumed my reflections, using the same comparing pattern. The way it was in the West, if you strip the wrappings down, was rather similar. Western lobbying, for example, sounded much more decent than Eastern bribery, but in my perception they were similar in essence.

  In the West, employees were supposedly protected, the lower classes were supposedly getting benefits, and every governmental project was supposedly going through tenders. However, in practice, much of it was just a disguise.

  My favourite character Michael Corleone in the Godfather III, when he explained that all his life he wanted to get legitimate, but discovered similar criminal routines everywhere, phrased perfectly how I felt: “The higher I go, the crookeder it becomes.”

  Very few tycoons really paid taxes in line with profits, as they knew about creative tax planning, choosing favourable tax domiciles, offshore banking, placing assets abroad and not reporting revenues outside the country. Hard working employees didn’t have access to all these tricks.

  Similar to Ukraine, the state’s assets were allocated to people close to the government. It was supposed to increase competition, however, the most valuable assets ended up in the hands of a small number of tycoons and wealthy families who controlled the economy. When you control the economy you control the government. Isn’t that oligarchy?

  Sometimes the reciprocity between businessmen and politicians was uncovered (primarily by journalists, not the police), and then some corrupt politicians were prosecuted. Obviously, it was only the tip of the iceberg. And the iceberg was huge. Since I was part of it, I saw the arrangements that were hidden from the public. The lies that were sold weren’t a secret to me, such as that the benefits that were given to entrepreneurs and tycoons were dripping down to the benefit of employees and contributed to the creation of jobs.