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Moscow court convicts U.S. investor Michael Calvey in embezzlement case, but he will face no added jail time

U.S. investor Michael Calvey, founder of the Baring Vostok investment fund, arrives at court in Moscow on Aug. 6. (Dimitar Dilkoff/AFP/Getty Images)

MOSCOW — A Moscow court on Friday sentenced one of the most prominent U.S. investors based in Russia to a five-year, six-month suspended term after an embezzlement conviction, meaning he will avoid additional jail time.

The decision ends a more than two-year case that further tainted the country's reputation as risky for foreign business executives.

Michael Calvey, the 53-year-old founder of Russia-focused private-equity group Baring Vostok, which that invested billions in Russian companies, was found guilty by Moscow’s Meshchansky district court Thursday.

Embezzlement is punishable by up to 10 years in prison, according to the Russian criminal code. But the prosecutor sought a six-year suspended sentence for Calvey.

President Biden raised Calvey’s case in a June summit with Russia’s Vladimir Putin. Russian courts have handed down long sentences in cases involving American defendants over the past year or so.

A former Marine, Paul Whelan, was sentenced to 16 years in prison on espionage charges in June 2020. Whelan said throughout the trial that he was framed. In July 2020, Trevor Reed, also a former Marine, was convicted of endangering Russian police with violence and received a nine-year prison term. Reed said he was drunk and cannot remember the incident.

Calvey and other executives at Baring Vostok were arrested in February 2019 on accusations of defrauding Vostochny Bank out of about $32 million.

He and the other defendants denied the charges and said there was no evidence of wrongdoing, blaming the allegations on a business dispute with their former partners. A key figure in the dispute, Artem Avetisyan, is close to one of Putin’s top economic advisers, Andrei Belousov.

Calvey’s co-defendants also received suspended sentences Friday.

“Compared to most cases, receiving a suspended sentence is already almost a victory,” Calvey said in a statement, adding that he plans to meet with his legal team to assess possible next steps.

Prominent figures in Russia’s business community, including Kirill Dmitriev, head of the country’s sovereign wealth fund, vouched for Calvey at the time of his arrest.

Although Calvey, who was initially placed in pretrial detention and then under house arrest until December, will avoid a lengthy prison term, the damage to Russia’s foreign investment reputation might already be done, analysts said.

“No matter what is the outcome of the case, the fact that it happened just adds to the list of Russia risks for those who have avoided Russia,” said Chris Weafer, an investment strategist and the founder of Moscow-based Macro-Advisory.

“Such events make it difficult to attract new investors at a time when Russia needs to start being more attractive for investors,” he added.

Calvey and his colleagues were released from house arrest in December but ordered to stay in Russia. While still under house arrest last summer, Calvey was treated for cancer.

Calvey founded Baring Vostok in 1994, and the company has continued investing in Russian companies even as sanctions, corruption and the slumping economy scared off others.

In an appearance at Moscow’s Meshchansky district court last month, Calvey said that “a positive decision by the court could bring Russia billions of dollars in new investments, adding thousands of jobs.”

“A court decision to reject the accusation would be an enormous positive sign about the independence of the courts and the protection of investors’ rights,” Calvey said, according to the Interfax news agency.

Kremlin spokesman Dmitry Peskov said just one case would not have that much influence on Russia’s investment climate, but that “we know well that foreign businesses are following this case very closely. Foreign entrepreneurs, big foreign businesses, they met with our president more than once over this period, and they raised the Calvey issue.”

Peskov added that Putin’s response was that the government could not interfere in the courts.

Alexis Rodzianko, the head of the American Chamber of Commerce in Russia, said the Calvey case has most affected private equity investment.

“The flow of that kind of capital has really bated its breath and is just waiting for the outcome of this trial to make decisions on whether or not to invest in Russia,” Rodzianko said before Calvey’s sentencing.

“Putting your best investor in prison, that is not a great idea,” he added.

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