Underflow | 5

In this episode: Estonian banker Lars Lipp has been hired to run Talcow Capital Partners, an offshoot of Vantor, a Russian-controlled commodity-trading company with close ties to the Kremlin. On his first day at work Lipp finds a briefcase full of cash awaiting him as welcome gift, and learns that his new employer's offices are riddled with concealed microphones. He wonders quite what he is getting into.

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December 2011 — Tallinn, Estonia

THE TALCOW OFFICE consisted of four main rooms and a kitchen. The largest room, facing towards the passenger port, was reserved for Pavel Gudichev, the boss, when he happened to be in town, which happened roughly once a fortnight. The smallest room, closest to the entrance and the kitchen, belonged to Stasia, Gudichev's personal assistant. To the right of Gudichev's room were two vacant rooms, side by side. Lars took the room directly adjoining Gudichev's. 

When he arrived for his first full day of work, Stasia showed Lars around the office and told him what he needed to know. There was no wi-fi network; Gudichev never used a computer. Since Lars would need to use a computer, obviously, a Mac Pro was waiting on his desk, connected by cable to an Internet router. The Mac Pro was locked to the table with a discreet steel wire.

A new iPhone 4 also awaited Lars, registered to a Bulgarian telecoms company which was owned, Stasia explained, by another associate company of Vantor. Lars could retain his own mobile phone if he wished, but he must never, ever, use it for anything that touched even indirectly on his work, and he would do far better, in her view, to dispose of it — which she could do on his behalf — and so avoid any possible misunderstanding.

His salary was to be paid into an account which Stasia had already opened for him with a bank in Cyprus. The account was in the name of Infrabeg Ltd, a company registered in the Channel Islands; and the beneficial owner of Infrabeg Ltd was, apparently, Lars himself — if not now, then as soon as he had given his proxy to one of Vantor's lawyers in Lichtenstein.

Also waiting on Lars's desk were a debit card and a credit card linked to Infrabeg's Cypriot bank account. The credit card was unconditionally guaranteed by one of Vantor's Swiss banks, meaning that Lars had more or less unlimited credit if his situation ever required it.

There was a connecting door between Lars's room and Gudichev's room which was lockable from Gudichev's side only. There was also, said Stasia, a system of microphones throughout the premises, linked to monitoring and recording devices in her own room. She showed Lars a button behind a curtain in his office which he could use to switch his own room's microphone on and off.

When the microphones were on, said Stasia, and they generally were, then everything said in any room could be recorded, and she herself could listen in. For example, if Lars had been wondering how Stasia had known exactly when his first meeting with Gudichev was coming to an end, then this was how. And if it bothered Lars to be overheard, Stasia seemed to imply, then Lars would soon get over it.

Lars thought privately that this was a strange arrangement; but perhaps it was not so very different in principle from Bank Livonia's practice of recording land-line telephone calls "for training purposes", so it was not something to which he would object now, but, rather, something which he would discuss with Gudichev as they got to know one another better. He might even come to approve of it.

Then came the matter of Gudichev's welcoming gift, which Stasia presented to him: An attaché case in soft brown leather, filled with bricks of brand-new twenty-euro notes. "One hunded thousand euros", said Stasia. "Mr Gudichev wishes you to have a good first impression of coming to work for him. He is certain that you will not spend this money in a way that might draw attention to yourself. Preferably you will not spend it at all. You will keep it somewhere safe and feel a degree of independence. This is not something which happens every day, by the way, only at significant turning-points."

If Lipp had had any doubts about what he was getting into, this briefcase full of cash clarified things. Evidently, old habits died hard. Gudichev was working for, or working with — or perhaps they were working for him — people who might have been described ten or fifteen years ago as gangs or mafias. In the chaos of the 1990s the best-organised and most far-sighted of these gangs and mafias had seized and consolidated control of Russia's biggest industrial plants, and oilfields, and mineral resources — the jewels of the old Soviet economy. By the end of the decade they had refashioned themselves into legal business entities; they had learned to conduct themselves in outwardly conventional ways; and — unless you happened to have a particularly serious argument with them — they preferred to settle their disagreements through the courts. They functioned to varying degrees as partners and instruments of the Russian State. 

A critic might say — and this was, philosophically at least, Lipp's own view — that these newly appointed owners of Russia's mineral wealth were profiting arbitrarily from resources which ought to have been the common property of the Russian people.

But then again, the economic system which awarded these resources to Russia's robber-barons was not one which the robber-barons had devised themselves. It was one which had been urged upon Russia by economists from Harvard University and the International Monetary Fund after the collapse of the Soviet Union. These Western advisers and experts had argued that only an immediate and wholesale privatisation of Russia's state assets would make the collapse of the communist system irreversible. They had also claimed that it was immaterial to whom these privatised assets were first allocated, or at what price, because, in a free-market economy, market forces would eventually ensure that every productive asset found its optimal owner, the person who could make best use of it. This theory was called the Coase Theorem, and had won a Nobel Prize for its inventor, Ronald Coase.

Lipp himself did not subscribe entirely to this theory of events. But he had thought a lot before deciding to join Vantor, and he believed that he could defend his decision against all obvious criticisms, at least in his own mind. His arguments were these: First: The Russian economy was consolidating. Russia had joined the G8. Perhaps the Coase Theorem was correct. Second: If Vantor did not exist to capture half of Russia's oil exports, some other company would exist in its place. Third: Working at Vantor, he would learn a lot about the world, which he could put to good use. Fourth: If there was a dark side to Vantor, then the risks of working there would be higher than average, but so, evidently, were the rewards. Fifth: He could leave Vantor any time that he wanted.      

And in any case, as Balzac had once said, behind every great fortune there was a great crime. Were Russia's robber-barons really so very different from the Rhodeses and Rockefellers of the 19th and early-20th centuries? Yet Britain had ennobled Cecil Rhodes, and America had appointed a Rockefeller as vice-president. 

True, there must be plenty of things that he did not yet know about Vantor, including things that he might not like. But they would be details, Lipp thought, not fundamentals. On this last point he was very wrong.

To be continued ...

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