- Print This Post Print This Post


By John Helmer, Moscow

Ukrainian oligarch Dmitry Firtash defeated a US government attempt last year to extradite him to the US for trial on corruption allegations. But now, encouraged by the US Government and by Ukrainian government officials in Kiev, a new group of US investors, led by Stephen Lynch (lead image) and the law firm Firestone Duncan, are targeting Firtash for a takeover of Misen Energy, an eastern Ukrainian gas producer which Firtash is believed to control. “We are slowly consolidating our position at Misen,” Lynch says, “and may move forward.”

Lynch has identified Firestone Duncan as the law firm with which he is working to buy up shares of the Stockholm-listed Misen Energy, the value of which has been slashed by sales, tax and other penalty measures applied by Ukrainian Prime Minister Arseny Yatseniuk.

Firestone Duncan is also the law firm advising Hermitage Capital and its founder, Bill Browder. The firm employed Sergei Magnitsky as an auditor before his arrest in November 2008 and subsequent death in prison in November 2009. The Magnitsky case and Browder’s long-running public feud with the Kremlin triggered the exit from Moscow of the firm’s eponymous partner, Jamison Firestone. According to Lynch, Firestone has also been engaged for representation by Firtash.

Lynch is the chief executive of OOO Monte-Valle, a firm originally set up in Moscow. Monte-Valle (also spelled without the hyphen) describes itself as in business to sell “electricity and heat production transmission, and distribution services”. A New York Times profile of Lynch in 2007 claimed he had been in business in Moscow for a decade earlier. An authorized resume of Lynch’s says he obtained university degrees in Boston and Philadelphia before moving to Moscow, and starting Monte-Valle in 1999.

Lynch (below, left) became better known when he and other US investors in Moscow, Robert Foresman (centre) and Richard Deitz (right), attempted what a Financial Times reporter, Catherine Belton, called a “backdoor approach” for a deal with former Yukos managers to take over Dutch-held Yukos assets worth more than $1.5 billion, and lift Russian litigation threats against the American managers of Yukos. A different version of what Lynch and his associates were doing can be followed here.


In March of 2015, RBC reported an investigation of Lynch’s continuing Yukos asset bid through Kirwan Offices, a Luxembourg front originally created by three Renaissance Capital executives, Robert Reid, Richard Olphert and Foresman. When Renaissance Capital was taken over by Mikhail Prokhorov and Suleiman Kerimov, and Foresman had moved on to Barclays Capital, their positions in Kirwan were taken over by Deitz and Lynch. Up to 2011, Kirwan reportedly spent $22 million on its Yukos litigation in Amsterdam.

In 2007 Lynch told Kommersant he had started in Russia with a US Government agency, the Peace Corps, then moved to Credit Suisse First Boston (CSFB). “In 1998, [I] started working at Credit Suisse First Boston making investments in real estate in Russia, the CIS and the Baltic. I’ve lived in Russia since 1992, except for those years when I was in business school and 2004-2006, when I lived in Kazakhstan. In 1992-1994, I worked as a consultant to the Peace Corps in Nizhny Novgorod, then in private business.” Senior CSFB veterans say they can’t remember what Lynch did in the Moscow office.

Apart from the Dutch litigation against Yukos, there has been almost no public record of transactions by Monte-Valle in the sectors Lynch says he is interested in – “agribusiness, Energy, Oil & Gas, Natural Resources, Real Estate.” That is, except for a reported bid in 2011 to buy into the Lenta supermarket chain.

Moscow sources say that Lynch also conducts deal-making on behalf of a group of Russians who include the Moscow region governor, Andrei Vorobiev (below, left).


According to Lynch,, he knows Firtash (above, right) well; has done business with him in the past; and shares lawyers at the Firestone Duncan firm with Firtash. “They know me well… one of my long time personal lawyers is also Firtash’s lawyer.”

Since April of 2014 Misen and its Ukrainian subsidiary Karpatygaz have repeatedly denied any association, direct or indirect, with Firtash. Here is Karpatygaz’s categorical denial of April 2014: “We declare that Misen Energy AB is in no way connected, directly or indirectly, with D. Firtash, or as well with entities of the DF Group.” There have been many repeats of this. The denials have not been believed.

The company is reporting on its website that as of April 23, 2015, this was the shareholding structure: note that the free float appears to be less than 2%, while the Cyprus entities hold 79.04%; and two Swedish special purpose vehicles, 19.52%.


Investigations by Swedish and Ukrainian reporters of the ownership traces of the Cypriot names have reported a variety of connexions to Firtash companies, as have the previous employment associations of executives in the Ukrainian operations of Misen and Karpatygaz. For example, as reported on September 29, 2015: “If you carefully go through the chain of the reported beneficial offshores, winding your way, not only in Cyprus but also in Liechtenstein, and the Virgin Islands, then periodically you come across names appearing in the other businesses of Dmitry Firtash. For example,…Heico Ventures, serving one of the founders Norchamo Ltd., is seen…among the founders of Cypriot structures of Ostchem in 2010-2011. Under the brand Ostchem operate chemical plants from the group of Dmitry Firtash. Another bridge from Heico leads to the Ukrainian company Ukrenergomontazh, which, in turn, is not alien to the people from the business circle of Firtash and Boyko.”

At last report, on December 21, Misen Energy was producing substantial volumes of gas and gas condensate from wells in the far west and east of Ukraine, plus small volumes of liquefied petroleum gas and crude oil. Geographically, the operations can be found on the map as follows:


Source: Misen Energy, Annual Report 2014: http://misenenergy.se

Kiev’s political theory, and US calculations of the future profitability of such gasfield operators as Misen Energy, are that over the next 15 to 20 years imports of Russian gas will be substituted by a dramatic lift in domestic gas production. Misen Energy’s last annual report expresses the projection this way:


Source: http://misenenergy.se

The Swedes running Misen Energy aren’t the only ones in the race to stake gasfield claims to profit from the political manoeuvering in Kiev and Washington. Igor Kolomoisky is reportedly behind Burisma, along with US Vice President Joe Biden’s son. For the full story, see this report and this. Gennady Bogolyubov (below, left) and Kolomoisky (right), shareholding partners in Privat Bank, are behind the takeover attempt at London-listed JKX Oil & Gas.


The fight for control of JKX is continuing with a Russian business figure, with an old link to Mikhail Fridman and the Alfa group, now in the running.

Other Ukrainian oligarchs competing for gas assets have included Victor Pinchuk (Geo Alliance); Rinat Akhmetov (DTEK); and Vadim Novinsky (Smart/Regal Petroleum). See the Forbes report of April 2012. The Polish KUB-Gas unit of the late Jan Kulczyk was also a contender, see. It has recently announced that it has sold out.

The speculation reported in the Ukrainian media is that the current Ukrainian government has been attacking Misen Energy because of the presumed Firtash connexion, and his vulnerability. However, the conflict with Misen Energy goes back to late in 2012. It became public knowledge by early in 2013 when the source of the trouble was identifiable as a muscling-in attempt by interests connected with then-President Victor Yanukovich. The first steps to lock up Misen’s gas subject to discriminatory taxation were taken in April of that year.

Legally, the Misen Energy operations are part of a joint venture between Misen and the Ukrainian state gas producer, Naftogaz; Misen controls 50.01% of the joint venture; Naftogaz, through subsidiary Ukrgasvydobuvannya, 49.99%. The assets are substantial: “The Misen Group led JA has confirmed reserve base of 28.1-34.3 billion cubic meters (“bcm”) of natural gas, 5.8-6.8 million barrels (“MMbbls”) of gas condensate and 3.1-4.5 MMbbls of Liquefied Petroleum Gas (“LPG”). Numbers correspond to proven (“1P”) and proven and probable reserves (“2P”) assessed via the Competent Persons Report.”

However, there have been serious stumbling blocks. Misen’s annual report for 2014 describes the impact of measures to restrict sales of gas by non-state operators; increased taxes; foreign exchange risks, and threats to its gasfield licences. The regime in Kiev was the biggest, the war in Lugansk region the least of Misen’s problems. According to Misen’s annual report for 2014, “the major concern is in regards to the projects developed in the eastern part of Ukraine. All but one project of the JA are located outside these regions. The project in question is Markivska BCS located in the Luhansk region. This is the smallest installation planned by the Company as part of the JA investment program. The projected capacity of Markivska BCS is 0.298 MW, i.e. more than twenty times less than the capacity of successfully operating Yuliyivska BCS. As of the end of 2014, the JA has invested KUSD 2,062 (KSEK 17,150) (as per historic exchange rates) into the development of Markivska BCS, which constitutes about 75% of all planned works on this project. As of the end of 2014 all works at Markivska BCS have been suspended and all personnel have been removed from the site.” See page 32 of the report.

To relieve the pressure from the Kiev regime, Misen has been threatening to launch a Swedish arbitration or litigation since the spring of 2014, but has delayed. The Ukrainian assessment is that such action is unlikely because it may force the disclosure of the beneficial ownership of Misen. The company made the dispute with the government official on October 6, 2015, charging “targeted discrimination against Misen’s investments in Ukraine by applying a 70% royalty on gas prices fixed by the regulator. If it continues to be applied, the 70% royalty will render it impossible for Misen to realize any return on its investments in Ukraine and ultimately may even force Misen to close its operations in Ukraine and lose the total value of its investment as well as the expected income for the 30- year life cycle of the investments, estimated at over USD 3 billion.”

The notice is a bid for negotiation. Lynch and his US takeover group saw it as a white flag of surrender — at a takeover price which has fallen on the Stockholm exchange from 4.95 Swedish krona on October 5 to 3.51 today.


Source: http://www.bloomberg.com/quote/MISE:SS

In this interval the market capitalization of Misen has been forced down under the pressure from Kiev from the equivalent of $84 million to $60 million. At its peak, in August 2013, Misen was worth almost six times as much — $375 million.

1762_8After the notice’s six months expire in April 2016, Misen’s board chairman Andrius Smalinukas (right) claimed on November 25: “we have the right to initiate arbitration procedure. We hope that during this period the government [will] cease the discriminatory action against our company.”

Firtash has been indicted by the US on bribery claims, which originated in a titanium deal in India in 2006. But he is not subject to the US sanctions introduced against Ukrainian and Russian officials and businessmen since the war in Ukraine commenced in February 2014. See. Here is the full Specially Designated Nationals & Blocked Persons (SDN) list from the US Treasury’s Office of Foreign Assets Control. If Firtash were designated for sanctions, his name would appear on page 312. It doesn’t. This means that US nationals like Lynch and Firestone face no trouble from Washington if they try to buy him out.

After losing the extradition application for Firtash, lawyers in Vienna believe the US Government is intending to retry at the Austrian appeal court the evidence dismissed earlier at the district court in Vienna; for more on the court case, read this and this. The US Government has also been encouraging its Ukrainian allies to take over Firtash assets in the titanium sector. For more details, read this report.

According to Lynch, Firtash remains close to Firestone (pictured below). Last month, when Firtash was planning to fly from Vienna to Kiev – his first trip outside Austria since his arrest on the US charges in March of 2014 — Lynch says a Firestone firm lawyer “was also scheduled to be on that same jet to Kiev.”

Source: https://www.opendemocracy.net/oliver-carroll/fighting-for-magnitsky-interview-with-jamison-firestone

A Bloomberg account of Firestone’s exit from Moscow in 2010 has been removed from the web. Firestone’s personal Wikipedia profile has been issued on July 26, 2015.

According to media coverage of the abortive Firtash trip, several lawyers were invited by Firtash to accompany him to Kiev until threats from the Azov military unit to arrest or kill him on arrival forced the cancellation of their journey.

There are indications that Misen Energy has not been the only Ukrainian target for takeover by Lynch and his associates. A Kiev source says that during 2014 he believes Lynch was actively working with Kiev and US government officials on a privatization scheme for putting Naftogaz in the hands of US investors. “He didn’t originate the idea,” the source says. “He knew that a raid [on Ukrainian gas assets] was on, so he joined it.” A New York source adds: “That he’s a vulture is clear— he tries picking up artificially depressed assets when they’re under heavy state pressure.”

A Moscow source in a position to know says of Lynch: “He has no official US connection. He is a raider and [the Misen Energy takeover] sounds like his modus operandi.” According to Lynch, he is trying to take over Misen Energy, with or without Firtash. “They know me well, and would find it offensive (and possibly aggressive) that I did not approach them directly.”

Leave a Reply