Brexit ‘Bad Boy’ Arron Banks, another ‘Bad Boy’, and a fund that invested in Russian diamond company Alrosa in 2013 and 2016 with the Russian Direct Investment Fund.
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Stories seem to break daily about the number of meetings Brexit funder Arron Banks and the Leave.EU campaign had with Russia’s ambassador to the UK, Alexander Yakovenko. In a scoop from Carole Cadwalladr and Peter Jukes in The Observer this weekend, the number of meetings the Leave.EU campaign had with the Russian ambassador is now up to eleven. The last reported number of meetings had been seven. And for two years, Arron Banks claimed “his only contact with the Russian government consisted of one ‘boozy lunch’ with the Russian ambassador.”
In November 2015 when the Leave.EU campaign, largely funded by Arron Banks, officially launched, Russia’s ambassador to the UK, Alexander Yakovenko, introduced Siman Povarenkin to Arron Banks to discuss possible gold deals.
In addition to gold deals, the New York Times reported that Povarenkin offered Arron Banks a deal with Russian diamond company Alrosa. Although Banks said he did not pursue the deal, a few weeks after the June 2016 Brexit vote, a fund manager within a company called Charlemagne Capital which had been founded by Jim Mellon, Arron Banks business partner at Manx Financial, invested in Alrosa.
The Guardian reported that the 2016 Alrosa deal followed an earlier, 2013 deal the Charlemagne Capital fund participated in with Alrosa. New reporting reveals that Charlemagne Capital was identified as being part of a consortium of companies organized in 2013 by the Russian Direct Investment Fund run by Kirill Dmitriev.
Arron Banks and Jim Mellon
Late last year investigative journalist James Patrick reported on Arron Banks’ link to Jim Mellon. Patrick foreshadowed recent news stories by questioning whether the millions Banks had used to fund Brexit, had come from loans from Mellon, who was “personally estimated to be worth £850 million” and “who made ‘spectacular amounts’ of money in Russia during the 1990s.”
Back in 2000 Jim Mellon had a reputation as a vulture — an article from the South China Morning Post described how Jim Mellon had been called “a pirate, a vulture, and a buccaneer. Britain’s Sir Chips Keswick declared him ‘gratuitously rude’, and his local detractors claim he’s unprincipled.”
In the 1990s his company Regent Pacific Group invested heavily in Eastern Europe and in Russia, and then in 2000 they turned their attention to investing in South Korea and in hi-tech companies in Asia. Despite various ups and downs, Mellon’s fortune is now estimated to be $1 billion.
Arron Banks and Jim Mellon have been business partners for a decade since they bought Manx Financial Group together, where Mellon is the chairman and, as of June 2018, Banks is the largest shareholder — owning 29% of the shares.
Manx Financial owns several subsidiaries including Conister Bank based in the Isle of Man, where Arron Banks is also the majority shareholder.
Mellon reportedly introduced Arron Banks to Nigel Farage and donated between £50,000 to £100,000 to support Brexit. However, as a resident of the Isle of Man which is not part of the UK, Mellon was not eligible to vote for the Brexit referendum. Arron Banks was the largest Brexit funder, and reportedly gave £12 million in cash, loans and services to pro-Brexit causes.
Not only do Banks and Mellon have a long business partnership through Manx Financial and share pro-Brexit views, in an interesting coincidence, Jim Mellon was described in the early 1990s as one of the “Bad Boys of Emerging Markets,” a nickname that would later appear in a slight variation in the title of Arron Banks 2016 book “The Bad Boys of Brexit.”
Jim Mellon, Alrosa, Russian Direct Investment Fund
The New York Times reported that in January 2016 Arron Banks was involved in discussions about a deal with Russian diamond company Alrosa. An investment adviser working for Banks wrote to Russian businessman Siman Povarenkin that Banks’ team had “not forgotten about your Alrosa project.” Arron Banks denied pursuing the deal.
However, three weeks after the Brexit vote in 2017 a second round investment was made in Alrosa by the OCCO Eastern European Fund, managed by an investment manager at Charlemagne Capital the firm founded by Arron Banks’ Manx Financial business partner Jim Mellon.
The Observer reported “that investment followed an earlier one Charlemagne made in Alrosa in October 2013, when the Russian government sold 16% in the firm, more than half of which was bought by US institutions.”
New research reveals that when the investment fund at Charlemagne Capital participated in the 2013 Alrosa IPO, they did so as part of a consortium that was organized by the Russian Direct Investment Fund, run by Kirill Dmitriev.
The 2013 Alrosa IPO sold a 16% stake in the company for $1.3 billion. The Russian Direct Investment Fund’s 2013 annual report stated that the:
“RDIF has attracted a number of leading foreign investors including Templeton, East Capital, Union Investments, Capital International and Charlemagne into a consortium to invest in the IPO of ALROSA.”
The RDIF CEO Kirill Dmitriev has been covered widely in news stories related to the Mueller investigation, which is looking into a January 2017 meeting Erik Prince had in the Seychelles with Dmitriev.
In testimony to the House Intelligence Committee Erik Prince claimed he only learned about Dmitriev after he arrived in the Seychelles and they had a short encounter over a beer. However Prince’s testimony was called into question when George Nader, who had once consulted for Prince’s company Blackwater, told investigators he had met Prince a week before the Seychelles meeting and provided information on Dmitriev. Nader, who went to the Seychelles, said the meeting with Dmitriev was to discuss foreign policy and to establish a line of communication between the Russian government and the incoming Trump administration.
While Kirill Dmitriev met with Erik Prince, there is no evidence to-date that he or the Russian Direct Investment Fund had any other connection to the Trump campaign. However, it is interesting to note that many of the names and deals mentioned in the RDIF’s 2013 annual report which described the first Alrosa deal, are names that have come up in reporting on the Trump-Russia story.
Other deals mentioned in the RDIF 2013 annual report included a co-investment fund established by the RDIF and the Abu Dhabi investment company Mubadala, a $5 billion investment from Abu Dhabi’s Department of Finance into RDIF infrastructure projects, and a joint investment by RDIF and Deutsch Bank in Rostelecom.
In this article I reported on the many overlaps between the United Arab Emirates, which set up several investment deals with the RDIF in 2013, and Trump associates, including Erik Prince, who lived in the UAE and had done business there, George Nader who was a senior UAE advisor, and Elliott Broidy who has also done large business deals with the UAE.
The RDIF’s 2013 International Advisory Board also included Steven Schwarzman, the Chairman of Blackstone Group and a donor and close advisor to Trump and Leon Black, the Chairman of Apollo Global Management which made large loans to Jared Kushner’s family business.
Charlemagne Capital’s 2016 Post-Brexit Alrosa deal
After participating in the 2013 Alrosa IPO consortium organized by the RDIF, an investment fund manager at Charlemagne Capital, the company founded by Jim Mellon, participated in Alrosa’s 2016 deal. The July 2016 Alrosa offering of approximately $800 million was significant because it was the largest major privatization deal Russia had done in almost four years, and since sanctions had been imposed after Russia’s actions in Ukraine.
Sources close to the 2016 Alrosa deal said Oppenheimer Funds (part of Lazard Ltd), Mubadala Development Company, Abu Dhabi Investment Authority and Charlemagne Capital took part in the offering. There were likely many additional investors, but it appears that a fund in the company Mellon had founded, Charlemagne Capital, once again participated with several UAE investors as it had in 2013.
The Observer reported about the 2016 deal that Mellon’s representatives said “said he learned of the Alrosa deal from a journalist only last week and that, although he founded Charlemagne Capital and, at the time, owned 19% of it, he was a non-executive director, had no role in investment decisions and no knowledge of the acquisition.”
The 2016 RDIF annual report notes that they were again actively involved in organizing investors in the 2016 privatization of the 10.9% stake in Alrosa, although they do not mention specific company names.
Regent Pacific 2012 deal with Andrei Pannikov
In addition to Charlemagne and Alrosa, another company originally founded by Jim Mellon, called Regent Pacific, invested in another deal alongside a Russian businessman from 2012 through 2016, a deal which Mellon has stated he was not aware of.
A June 2018 story in The Sunday Times described how Jim Mellon’s company Regent Pacific — which he founded in 1990 and where he serves as the Non-Executive Chairman — had invested in a deal in 2012 with Russian businessman Andrei Pannikov.
Andrei Pannikov had co-founded Bayfield Energy Holdings, which was later renamed Trinity Exploration and Production. In 2013 Pannikov was the largest shareholder and owned 17.79%, and Jim Mellon’s Regent Pacific Group Limited owned 3.73% of the company. Jim Mellon’s Regent Pacific and Andrei Pannikov were both listed as shareholders of Trinity Exploration and Production in the 2016 annual report, but neither was listed in the 2017 annual report, indicating they may have both sold their shares in the company.
Mellon told The Sunday Times “that he had ‘no idea’ how the deal had come about and had ‘never met Andrei Pannikov’.”
Andrei Pannikov was a former KGB officer who was expelled from Sweden in 1988 for trying to recruit westerners for espionage. In addition to many other business ventures, Pannikov reportedly co-founded Lukoil, however there are few references to his work with Lukoil or reports of when he departed.
Lukoil has appeared recently in the Trump-Russia story, when it was reported that in 2014 Cambridge Analytica gave several briefings to the Moscow firm, which is now on the sanctions list. Alexander Nix, the CEO of Cambridge Analytica, was involved in discussions with Lukoil, and told colleagues that materials were being shared at the most senior levels with the CEO of Lukoil.
There is no evidence that Cambridge Analytica pursued any business deals with Lukoil. And there is no apparent connection between Cambridge Analytica’s Lukoil discussions and the co-investment made by Jim Mellon’s company Regent Pacific with Andrei Pannikov, who had reportedly co-founded Lukoil.
There is also no evidence that Jim Mellon’s business partner Arron Banks had any involvement in the 2013 or 2016 Alrosa deals, or in the 2012 Regent Pacific investment with Andrei Pannikov.
However, it is notable how certain people and companies reappear, perhaps coincidentally, in the Trump-Russia story.
Author’s Note September 3, 2018: Since publication of the article, representatives of the British financier Jim Mellon have said that “Mr. Mellon was not involved in or aware of the 2016 investment in Alrosa, which investment was not made by Charlemagne Capital itself but by one of the funds managed by a Charlemagne Capital investment manager (the OCCO Eastern European Fund). The investment manager’s decision to invest in the fund would have been consistent with his/her mandate and input from analysts, who alone have sole responsibility in the investment process. Mr. Mellon himself (as indeed the rest of the Charlemagne Capital board) would not have been, and was not, involved in any of these processes.” Representatives of Mr. Mellon have also noted that “Mr. Mellon was a shareholder of the company that managed the fund but did not part-own the fund or invest in it or Alrosa or know of the investment. The fund’s investment was a secondary placement and followed its earlier investment in Alrosa in 2013. Any suggestion it was a mechanism for Russian funding of the Brexit campaign or that Mr. Mellon participated in such funding was not intended and would be incorrect.” Several edits were made to the article to reflect this additional information.
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