A Labour member of the House of Lords has refused to step down as the chairman of a £17 billion investment firm whose major shareholders are Russian oligarchs.
Mervyn Davies (who is now Baron Davies of Abersoch) was Labour Government minister under Gordon Brown and received a life peerage in 2009. He is currently the chairman of investment firm LetterOne, which was founded by Russian billionaire oligarch Mikhail Fridman. LetterOne owns the health retail chain Holland & Barrett and energy assets across Europe.
Friedman and fellow oligarch Petr Aven own just under 50% of the shares in the company but have had their shares frozen after being hit with EU sanctions following Russia's invasion of Ukraine. Three other billionaires German Khan, Alexei Kuzmichev and Andrei Kosogov have also resigned from the board.
Friedman was said to have "strong ties to the administration of Vladimir Putin and has been referred to as a top Russian financier and enabler of Putin's inner circle" by the EU when it announced sanctions and Aven was described as "one of Vladimir Putin’s closest oligarchs" whose "friendship with Putin goes back to the early 1990s" and regularly meets him in the Kremlin.
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Mervyn Davies has refused to step back from his position and released a statement alongside LetterOne chief executive Jonathan Muir. The statement read:
"Following the imposition of EU Sanctions, Mikhail Fridman and Petr Aven have stepped down from the LetterOne board. As a result, they will no longer have any involvement with or influence over the business or its investments. They will not receive dividends, communications or any funds or economic resources, directly or indirectly. Their assets in the business are effectively frozen, they have no rights as shareholders and – if sanctions are lifted – the board is under no obligation to return these rights.
"We want to be clear that LetterOne is not impacted by these sanctions. Mikhail Fridman and Petr Aven own less than 50% of LetterOne shares and have no control of the business. I believe these steps are the right ones in light of the shocking and deeply saddening invasion of Ukraine. It is a war that Russia must stop.
"The total priority for us and our team is LetterOne. Through our investments, we support 120,000 jobs. We are and will remain long term investors in brilliant businesses – including Holland and Barrett and UPP in the UK, Dia in Spain, Destination Pet in the US, WDEA in Germany and many more."
There have been calls for Mr Davies to step away from his role in the company given the brutality of the Russian invasion, which was unprovoked and has killed many children, with countries, businesses and individuals around the world seeing to isolate the regime. WalesOnline contacted Mr Davies with the following questions:
1. Do you believe it is appropriate to head a group with such strong links to the Russian regime?
2. In your statement on Mikhail Fridman and Petr Aven you didn't actually condemn Vladamir Putin directly. Will you go on record doing so now?
3. Why were you willing to associate yourself with a LetterOne given the Russian oligarchs who founded the company and sat on the board?
4. Do you intend to stay on as the Chairman of the group?
In a statement a spokesman for LetterOne said that Mr Davies felt it was his duty to rebuild the organisation. He said: "Mervyn absolutely condemns Putin and is staying at LetterOne (which is not sanctioned) because he genuinely feels it is his duty to support the organisation as we rebuild without any influence from or benefit to our shareholders. Our investments support 120,000 jobs and while it would be easy and I daresay better for Mervyn if he walked away, he genuinely believes he needs to stay to help because it is the right thing to do."
The EU's statement announcing sanctions on Friedman read: "Mikhail Fridman is the founder and one of the main shareholders of the Alfa Group, which includes the major Russian bank Alfa Bank. He has managed to cultivate strong ties to the administration of Vladimir Putin, and has been referred to as a top Russian financier and enabler of Putin’s inner circle. He managed to acquire state assets through government connections. Vladimir Putin’s eldest daughter Maria ran a charity project, Alfa-Endo, which was funded by Alfa Bank. Vladimir Putin rewarded Alfa Group’s loyalty to the Russian authorities by providing political help to Alfa Group foreign investment plans.
"Mr Fridman and his business partner Petr Aven have been engaged in the Kremlin’s efforts to lift the Western sanctions issued to counter Russian aggressive policy against Ukraine. In 2018 Mr Fridman along with Mr Aven visited Washington DC on an unofficial mission to convey the Russian government’s message on US sanctions and on counter-sanctions by the Russian Federation. Therefore he actively supported materially or financially and benefited from Russian decision-makers responsible for the annexation of Crimea and the destabilisation of Ukraine. He also supported actions or policies which undermine or threaten the territorial integrity, sovereignty and independence of Ukraine."
On Petr Aven, the EU said: "Petr Aven is one of Vladimir Putin’s closest oligarchs. He is an important shareholder of the Alfa Group, which includes one of major Russian banks, Alfa Bank. He is one of approximately 50 wealthy Russian businessmen who regularly meet with Vladimir Putin in the Kremlin. He does not operate independently of the President’s demands. His friendship with Vladimir Putin goes back to the early 1990s. When he was the Minister of Foreign Economic Relations, he helped Vladimir Putin, then deputy mayor of St. Petersburg, with regard to the Sal’ye Commission investigation. He is also known to be an especially close personal friend of the Rosneft chief Igor Sechin, a key Putin ally. Vladimir Putin’s eldest daughter Maria ran a charity project, Alfa-Endo, which was funded by Alfa Bank.
"Mr Aven benefitted from his government connections. He wrote a letter to Vladimir Putin complaining about the Moscow Arbitration Court’s decision in the legal case concerning interests of one of Mr Aven’s businesses. Vladimir Putin instructed the Prosecutor General of Russia to investigate the case. Vladimir Putin rewarded Alfa Group’s loyalty to the Russian authorities by providing political help to Alfa Group foreign investment plans."
Friedman and Aven issued a joint statement saying they would "contest the spurious and unfounded basis for the imposition of these sanctions".
Referring to the resignation of the three other Russian directors, LetterOne said: "German Khan, Alexey Kuzmichev and Andrei Kosogov have resigned from all positions at LetterOne, including the board. None of these three individuals has been sanctioned, but they believe that this is the right thing to do in the long-term interests of LetterOne its employees and the many jobs it supports in its portfolio companies.
"In addition, the board have decided to make a substantial donation of $150 million to support the urgent work underway to help those affected by the war in Ukraine. We know that everyone at LetterOne, including our founders, support this action. LetterOne’s shareholders have also agreed that all dividends from LetterOne will be paid to ongoing relief efforts for the foreseeable future."
German Khan was born in Ukraine and told the Guardian that the majority of LetterOne founders had "deep roots in Ukraine".
He said: "The majority of LetterOne founders have deep roots in Ukraine and the destruction of the cities where I spent my childhood and which are home to the graves of our ancestors is heartbreaking. The recent bombing of the Babyn Yar Holocaust memorial centre, which we funded and helped create, feels inconceivable.
“My partners and I stand for the earliest end to war and will do all we can to help those affected – whether employees of our businesses in Ukraine, or victims of the violence. We fully support the board’s actions in this matter.”
