'Message' From Central Clinical Hospital

'Message' From Central Clinical Hospital

Photo: http://ria.ru

The death of Ravil Maganov, chairman of Lukoil's board of directors, who ‘went out’ the window of the Central Clinical Hospital, looks like a suicide or an accident only in the media. If one peeks under the hood, the details of such an original message for Vagit Alekperov may look intriguing.

It is hard to believe that it was suicide or an accident after the analysis of Lukoil's foreign assets

On the morning of September 1, the body of Ravil Maganov, chairman of the board of directors of Lukoil, was found under the windows of the Central Clinical Hospital of the Presidential Affairs Directorate. According to Telegram channels, by the time hospital staff found the body of businessman, he gave no signs of life.

The media very quickly sorted out the situation, giving two possible reasons for what had happened, remarkably, completely opposite – suicide or a weird accident. Lukoil did not share either option. The official statement, published on its website, states that Maganov's death was the result of a long illness.

Back to USSR

However, as a result, this tragic story has become surrounded by many questions, and no one can answer them. Judge for yourself. All this happened not in some ordinary hospital, but in the Central Clinical Hospital, where patients of Maganov's status are given special attention, and people do not fall out of the windows uncontrollably. The speed with which the verdict was announced in the media is also alarming, as well as the appearance of Lukoil's statement which was some kind of hint as to the reasons for what happened.

Considering that the businessman fell from the side of the main hospital building where there are no cameras, this situation is all too reminiscent of the early ‘wild’ 1990s.

In particular, at the end of August 1991, right after the failure of the State Committee on the State of Emergency, Nikolai Kruchina, the acting manager of the CPSU Central Committee, first ‘went out the window.’ A month later, his predecessor Georgy Pavlov ‘followed’ Kruchina. Ten days later, the same thing happened to Dmitry Lisovolik, head of the U.S. Department of International Affairs of the CPSU Central Committee. It is noteworthy that they all had one important thing in common, their close ties to the Communist Party's foreign assets.

It is only at first glance that such a comparison of the head of the CPSU and Maganov looks inappropriate. However, if we take into account such an indicator as the volume of foreign assets managed by the chairman of Lukoil's board of directors, it is certain to be no less than or even greater than the notorious “party money.”

Interesting Receipts

The analogy with the 1990s comes to mind for one more reason. The point is that at that time, just as now, the systemic structure of shadow assets was being broken. In the case of Lukoil, this is a program of obligatory conversion of American Depositary Receipts (ADR) into the company's ordinary shares, according to the Federal Law ¹ 319 of July 14, this year, which was adopted as a counterbalance to unfriendly actions of some countries.

ADR are in free circulation in the U.S. stock market as derivative securities on shares of a foreign company deposited in an American bank (derivatives). The vast majority, 95% of ADR issues, fall to just three banks such as the Bank of New York, Citibank and J. P. Morgan Chase. In case of Lukoil it is Citibank.

As for the ADRs of the company, they belong either to the lowest first level of receipts or to the Rule 144A category.

In the first category ADRs there is no need to provide a complete quarterly and annual financial statements under GAAP, just for this reason they are deprived of the opportunity to be on such major U.S. stock exchanges as the NYSE, AMEX and NASDAQ.

Such ADRs are not traded through exchanges, but directly. However, in the case of OTC transactions, the organizer of trading, the role of which in this case is assigned to Citibank, in case of default of one of the parties to the transaction is not responsible. As for Rule 144A category ADRs, they do not require any financial reporting at all, even by SEC standards, they are of private placement nature and are quoted in a closed electronic system.

To Blur and Hide

If we characterize Lukoil's ADRs in layman's language, it is just a way of hiding the distribution of share capital, the company's main beneficiaries and the payment of dividends. Just for this reason the composition of Lukoil shareholders and their shares is one of the most secret information on the market.

Vagit Alekperov's conversation with the President during SPIEF in 2017 confirms this. In particular, when asked directly about the composition of the owners, Alekperov, who was then president of the company and head of the board of directors, answered very vaguely that he personally owns 20% of shares, and that about 50% are owned by foreigners.

According to Lukoil's official site, legal entities own 94.6 percent of shares, while individuals own just 5.38 percent.

Notorious Two Weeks

In the current situation, created under the influence of sanctions against Russia, it is understandable that the company's owners want to completely “erase” themselves from the list of shareholders. The same Alekperov was even forced to announce his resignation from all positions in the company in order not to put the business at risk.

However, for the story in question, the percentage in the authorized capital of ADR, i.e. the amount of liabilities put into the shadow, is important.

Based on the most current disclosures, which date back to late May of last year, ADRs accounted for 30.6% of Lukoil's share capital. This is exactly the level of the company's ownership that should be disavowed in the context of Russia's response to the sanctions.

Recall that Lukoil hoped to extend the ADR circulation program in order to avoid the procedure. For this purpose, the company’s management even appealed to the president. The request was denied by the Ministry of Finance but the dates are important in this story.

The fact is that if the ADRs are kept in a Russian depository (e.g. Citibank), and the conversion process is automatic. It is done within strictly set time limits, limited to two weeks from the date of receipt of notification from Lukoil about the automatic conversion.

The company gave such notice to Citibank on August 17, 2022 (exactly two weeks passed on September 1). In case the ADR is kept in a foreign accounting system, the process becomes more complicated. A whole procedure is required, the details of which can be easily found on Lukoil's website and in the documents of the Central Bank.

Here you should pay special attention to one important fact. According to the terms and conditions, if you cannot or even do not have time to convert ADRs, they will remain in your account until the depositary bank sells the shares and distributes the proceeds of the sale to you. However, it should be taken into account that under the restrictions imposed by the Central Bank, the sale of shares by the depositary bank is prohibited for an indefinite period of time. It is important that in this case, no dividends will be paid on the hovering ADRs and they will not represent voting rights.

Little Something

If you add up the above information, the amount of mutual hidden liabilities among Lukoil's beneficiaries, who find themselves in limbo, becomes evident. In this context, the version of suicide under the windows of the Central Clinical Hospital or an accident does not look plausible.

The reality is that Maganov was particularly close to Alekperov, and this fact is confirmed by internal company sources. Obviously, leaving the post of chairman of Lukoil's board of directors, Alekperov could not entrust it to a random person. He needed an exceptionally loyal parson with safe pair of hands.

By a very strange coincidence, “the accident” took place on the birthday of Vagit Alekperov. Shouldn't this be taken as a kind of message from grateful but hidden shareholders?

It is worth paying attention to another curious fact. As a rule, news of the death of some of the last people in a company negatively affects the market stock quotes. On the day of Ravil Maganov's death everything happened in exactly the opposite way. Lukoil's shares jumped to their highest values since early May, when the company sent a notice to the London Stock Exchange to stop listing ADRs and shares. They have shown the maximum since the emergence of the underlying risk for the hidden liabilities of Lukoil's hidden shareholders.

Due to the fact that the randomness of the events in fact does not seem so random, it can be assumed that it is still very early to draw the curtains, and it would not be superfluous to prepare for new interesting details.

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