Shares representing 17% of Novolipetsk Metallurgical Plant (NLMK) have been arrested by the Lipetsk Arbitration Court following an unjustified claim by the Lipetsk Prosecutor. An appeal against the arresting order will be lodged.
The shares are owned by a company, advised by Cambridge Capital Management (CCM) that is engaged in a long-standing dispute with the management of NLMK over lack of transparency, dubious business practices, infringement of shareholder rights and inexplicably poor corporate results.
Tom Gaffney, the Chairman of CCM, today called upon members of the Russian government to take positive action on shareholder rights violations, in particular the continuing dispute at NMLK.
"The government pledged to improve the business climate and eliminate corporate corruption in Russia. It should begin to honour that pledge", said Gaffney.
The block of arrested shares was originally acquired at the NLMK privatisation auction in 1994. The arrest is seen as the latest attempt by the incumbent management, through the office of the Prosecutor, to have this auction annulled. The courts have already dismissed two previous attempts to annul.
Gaffney questions the motives of the Prosecutor. He believes the case is promoted by NLMK management, led by Vladimir Lisin, and Sputnik Funds manager, Boris Jordan in order to seize total control of the company for their own benefit,. Investors in Sputnik Funds include George Soro's Quantum Fund and Harvard Endowment.
The Prosecutor's case is based on an alleged technical violation by Credit Suisse First Boston (CSFB) in its tendering of vouchers in 1994. Boris Jordan, who was a director CSFB at the time, oversaw the tendering process.
Implications for all voucher privatisation auctions and the Russian privatisation process general are dramatic and could effectively mean re-nationalization of many privatized assets.
CCM wants NLMK's management to introduce the principles of good corporate governance, greater transparency, generally accepted financial reporting and proper management practices in order to maximize opportunities for employees and suppliers as well as enhance shareholder value.
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