The day after he died, his woman friend gave Mr. Safin "a bag full of Schmidt's documents," including passports, photos and papers concerning Lukoil, said the prosecutor's report. Mr. Safin said he turned these over to the authorities. No will was ever found.

Mr. Safin, now a member of the upper house of Russia's parliament, didn't respond to phone messages and letters requesting comment. The woman friend couldn't be located.

The teenage Vadim Schmidt was then at school in England. U.K. court filings by his lawyers depict him as living a pampered life, with hefty expenses and his own Visa card from the Panama unit of MD Seis. The filings also assert that the senior Mr. Schmidt was grooming his son to join him at Lukoil and told him a great deal about company affairs. Informed of his father's death, Vadim rushed home.

In subsequent civil suits and criminal complaints -- in courts in the U.K., Germany and Switzerland -- Vadim has alleged that his father's apartment was stripped of many important personal papers. Russian prosecutors who looked into the matter years later at his behest said they found no evidence of this.

The son said in later court filings that a few days after the death, he attended a meeting with Mr. Alekperov, Mr. Safin, another Lukoil executive and his father's personal interpreter, Anna Brinkmann. He said the executives asked him to designate them guardians of his father's assets, but he refused.

"All the above gives me reason to fear for my life, as I know for sure that my father was one of the main founders and main shareholders of Lukoil," Vadim wrote two weeks after his father's death, in a statement used in later court cases. "I perfectly realize that all kinds of pressure will be put on me...to give up my inheritance rights." He and his mother, Mr. Schmidt's estranged wife, left Russia for Switzerland within weeks of the death. Vadim's court filings say the two haven't been back.

Vadim began trying to piece together his father's offshore empire, aided by documents in one of his father's homes, in Vienna. He learned that less than two weeks after the death, millions of dollars of assets belonging to his father in Liechtenstein had been shifted to a charitable foundation. Its officers: Ms. Brinkmann, his father's interpreter; Mr. Safin; and Semyon Vainshtok, another Lukoil executive and veteran of the Siberian oilfield. Vadim sought control of these assets.

A spokesman for Mr. Vainshtok -- who now heads Russia's state pipeline company, Transneft -- and a lawyer for Ms. Brinkmann's current company both said the matter has been thoroughly investigated and no wrongdoing found.

A longtime U.S. lawyer for Lukoil, L. Todd Gremillion of Akin Gump Strauss Hauer & Feld LLP, wrote to Vadim's lawyer urging that the young man drop allegations he had begun making against Lukoil executives. Mr. Gremillion warned that Vadim could have trouble with his immigration status and find himself drafted into the Russian military. "I fear that without the support of his father's confidants, it will be difficult for Vadim to personally manage this situation," Mr. Gremillion wrote in April 1998.

Spurning this advice, Vadim sued the trustees of the foundation to which his father's assets in Liechtenstein had been moved. Mr. Gremillion intervened in the suit after gaining power of attorney from Vadim's grandmother. But Vadim eventually won control of his father's abruptly transferred Liechtenstein assets.

Vadim also learned that Ms. Brinkmann, his father's interpreter, had become president of one of the companies set up in the early 1990s to work with Lukoil. Bank records show that throughout the 1990s, units of this company, CAT Oil, transferred millions of dollars to one of the Isle of Man trusts.

In Isle of Man court in 1998, Vadim sued several of his father's former colleagues as well as the firm that helped his father set up trusts, Lorne House. The son's contention, which encompassed his father as well, was that Lukoil executives "operated a complex structure of companies outside of Russia, which were used to hold Lukoil's non-Russian assets and to receive profits earned outside of Russia."

Lorne House denied Vadim's allegations, but the executives didn't respond to the allegations. They didn't have to because the litigation was soon halted over Lorne House's refusal to turn over trust documents. Vadim had to file a second suit against Lorne House to try to get the documents.

A lawyer for Lorne House, Kevin O'Riordan, said, "Whilst I do have a certain amount of personal sympathy with Vadim Schmidt, I regard his claims as ill-founded."

In the interim, the Isle of Man court ordered Lorne House and an affiliate to turn over hundreds of pages of records from one of the trusts, Angora. Vadim hired accountants from Ernst & Young to review them. The accountants determined that various companies working for or with Lukoil had poured $94.8 million into Angora trust from 1992 to 1998 and that the trust's beneficiaries included Messrs. Schmidt and Alekperov.

For instance, about $6 million flowed to Angora from one such company called Lukoil Scandinavia, said Ernst & Young. "It would appear unusual, given Vitaly Schmidt's stake in Lukoil, for him to receive payments from Lukoil Scandinavia for no apparent reason," the accountants' report said.

Lorne House agreed in 1998 to pay Vadim $14.8 million as the administrator of his father's estate. Again Mr. Gremillion of Akin Gump intervened, seeking a say in the control of the estate and saying he represented a step-aunt of Vadim.

Mr. Gremillion has been identified as a Lukoil attorney in numerous news accounts, beginning with coverage of the Frankenburg lawsuit in Houston. But in this case, he filed an affidavit with the Isle of Man court saying that while Akin Gump had long represented Lukoil, in this action "I take my instructions from [the step-aunt], not from Lukoil." Mr. Gremillion, who is no longer at Akin Gump, didn't respond to messages left at two phone numbers.

Vadim now took a more aggressive stance. In 1999 he told Moscow prosecutors he believed his father had been murdered and some of his papers taken. Prosecutors began an inquiry in 2000 and had Mr. Schmidt's body exhumed and examined for poison, which wasn't found.

Vadim ordered his own examination. He hired a noted pathologist, Iain West, who also found no toxic drugs but added that the body was too decomposed to detect many such drugs. He confirmed that Mr. Schmidt had serious heart disease.

Reflecting on the episode in an interview, Mr. Alekperov said Vadim pursued the allegations in hopes of getting a settlement. "It gets to a point when it's blackmail. To exhume your father's body when everyone knows it was an accident -- it was tragic."

In 2003, the U.K.'s Privy Council said Vadim had a right to records of some of the Isle of Man trusts, as well as a right to proceed with a case against Lorne House, Lukoil and Lukoil executives. Running low on funds, he hasn't done so.

The Privy Council ruling revealed that after Mr. Schmidt died, Lorne House assigned the task of overseeing the Angora trust to another of his old friends from Siberia, the CEO of the supplier of seismic data, MD Seis.

That firm, under a new name, recently was sold to the U.S. oilfield-services company Schlumberger Ltd. Securities filings on the sale revealed that among the seismic firm's main shareholders was Mr. Basnet, the Lorne House official Mr. Schmidt dealt with.

Mr. Schmidt's death evidently didn't end Lukoil's penchant for related-party dealings. In 2004, Lukoil announced it had sold a 65 percent interest in its banking subsidiary, Petrocommerce, to a firm called IFD Kapital. Besides owning a bank where a majority of Lukoil employees hold accounts, IFD Kapital collects $130 million in insurance premiums from Lukoil per year and manages Lukoil's multibillion-dollar pension fund.

IFD's majority owners are Lukoil's president, Mr. Alekperov, and Mr. Fedun, a Lukoil vice president. Their ownership wasn't made clear until early this year, in Petrocommerce's annual report. Lukoil's own annual reports disclosed the deals in vague terms without naming the business or the insiders. Mr. Fedun said in an interview that "the transaction is fully transparent and is reflected in all reports, including the Lukoil annual report."

With litigation over Mr. Schmidt's estate still festering, Mr. Alekperov says that in September, he visited the Kogalym oilfield to honor his long-departed friend. "We named a street after him," he said, "Schmidt Boulevard, and I unveiled a bust of him. Bronze."

'THAT IS QUITE UNTRUE'
 
"It is said that I am Lukoil's attorney, that Emma is under Lukoil's "patronage" and that I promised Vadim that I would help him trace Lukoil's assets but then obstructed him -- in what way was not specified. The general allegation is that Emma is merely a willing tool of Lukoil in preventing Vadim from obtaining control of his share of his father's estate. That is quite untrue, as well as irrelevant. Akin, Gump, Strauss, Hauer & Feld is a very large law firm with numerous international offices. It is quite true that the firm is engaged by Lukoil in a wide variety of corporate matters and has been so since 1994. But in acting for Emma I take my instructions from her, not from Lukoil."
- Longtime Lukoil lawyer L. Todd Gremillion in an affadavit, claiming he is working for two Russian women, not for Lukoil, in the battle over Vitaly Schmidt's assets

<< BACK TO HOME  -   1 | 2

RETURN TO MAIN BUSINESS RUSSIA WEBLOG