{"id":35745,"date":"2021-10-08T20:04:00","date_gmt":"2021-10-08T18:04:00","guid":{"rendered":"https:\/\/ostro.si\/uncategorized\/putin-image-makers-role-in-billion-dollar-cinema-deal-hidden-offshore\/"},"modified":"2026-06-10T07:47:57","modified_gmt":"2026-06-10T05:47:57","slug":"putin-image-makers-role-in-billion-dollar-cinema-deal-hidden-offshore","status":"publish","type":"post","link":"https:\/\/ostro.si\/en\/stories\/pandora-papers\/putin-image-makers-role-in-billion-dollar-cinema-deal-hidden-offshore\/","title":{"rendered":"Putin image-maker\u2019s role in billion-dollar cinema deal hidden offshore"},"content":{"rendered":"\n
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As the 2014 Sochi Winter Olympics approached, Konstantin Ernst, the floppy-haired intellectual who reigns as Vladmir Putin\u2019s chief image maker, faced the challenge of a lifetime: to produce opening and closing ceremonies spectacular enough to captivate the world \u2013 and to boost the reputation of Russia\u2019s increasingly besieged president.<\/p>\n

An Oscar-nominated film producer, Ernst, then 53, had been boss of Russia\u2019s leading TV network, Channel One, for as long as Putin had been president, and he had played a critical role in creating Putin\u2019s image as the savior of the Russian state.<\/p>\n

But a tide of bad news had eroded Putin\u2019s domestic support: pro-European protests in Kyiv were on the verge of toppling his ally in Ukraine; a decade of oil-fueled growth had given way to economic stagnation; and a protest movement, led by dissident Alexei Navalny, was gathering force on the streets of Moscow.<\/p>\n

Ernst flipped the script.<\/p>\n

In a dazzling parade of floating mountains, lakes and onion domes, heroes of the avant-garde, and more than 3,000 performers, Ernst\u2019s Olympic spectacle recast Russia\u2019s troubled reality into the Russia of Ernst\u2019s imagination: powerful, creative, forward-looking, triumphant. The world cheered. <\/p>\n

Ernst would later say that the production was a labor of love and that his pay for this achievement was just one ruble.<\/p>\n

\u201cIt would be silly to assume that professing your love should have a price tag,\u201d he said.<\/p>\n

But the International Consortium of Investigative Journalists has found that on the day of the Opening Ceremony, a company was incorporated in the British Virgin Islands that would pave the way for Ernst\u2019s secret 23% stake in a state-funded privatization deal worth a billion dollars.<\/p>\n

Files leaked to ICIJ, and shared with 150 media partners, show that nine months after the Olympic torch was extinguished, Ernst became a secret partner in a deal to buy 39 aging but valuable Soviet-era cinemas and surrounding property from the city of Moscow. The deal was financed by VTB Bank, a state owned institution that has been referred to as Putin\u2019s \u201cpiggy bank\u201d. <\/p>\n

The properties were sold at the minimum price set by a Moscow government-run auction. A legal challenge alleged that the auction was designed to effectively exclude all but the partnership in which Ernst, behind layers of shell companies, held a stake. <\/p>\n

The leaked files also show that Ernst was the beneficiary of a $16.2 million loan \u2013 from a Cyprus bank partly owned by VTB \u2013 used to fund his stake in the deal. The files show the bank explicitly instructed offshore lawyers to keep documents detailing Ernst\u2019s connection to the loan out of government records in the British Virgin Islands, where the shell companies concealing the deal were incorporated. <\/p>\n

Further, the files document how Ernst was joined in the partnership by a Russian media figure who is linked to some of Putin\u2019s closest and most powerful allies, including Ernst\u2019s bosses at Channel One.<\/p>\n

In an email to the ICIJ, Ernst said he had never made a secret of his involvement in the real estate project and denied any suggestion that his involvement in the project was compensation for his work on the Olympic ceremonies. He refused to answer ICIJ\u2019s questions on the basis that ICIJ was \u201cnot an independent investigation company but an organisation commissioned by the US secret services.\u201d <\/p>\n

The findings are part of the Pandora Papers<\/a>, a trove of more than 11.9 million files from 14 offshore law firms and service providers. The documents pull back the curtain on a financial system that allows the global 0.1% to stash their wealth away from tax inspectors, regulators and the public. ICIJ obtained the documents and shared them with journalists from 117 countries. <\/p>\n

The documents revealing Ernst\u2019s secret deal come from Trident Trust, one of the world\u2019s largest offshore service providers, with offices in the British Virgin Islands (BVI), Mauritius, Singapore and other secrecy jurisdictions, including the U.S. state of South Dakota.<\/p>\n<\/div>\n\n\n\n

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Russia\u2019s corrupt system and the offshore world<\/h3>\n

The documents show that Trident officials worked with lawyers and bankers in Russia, Cyprus, the U.K and the BVI \u2013 including Russian oligarchs\u2019 go-to London law firm \u2013 to administer corporations and loans on Ernst\u2019s behalf.<\/p>\n

For Russians, the offshore world plays a special role in securing the wealth of oligarchs, cronies and public officials. Vladimir Putin\u2019s corrupt system made many of them rich and could just as easily make them poor again. Russian nationals are disproportionately represented in the Pandora Papers. ICIJ\u2019s analysis reveals that Russians are behind about 14% of the more than 27,000 companies whose ownership details are revealed by the leak. Among them, at least 46 Russian oligarchs were using offshore companies, the analysis found. <\/p>\n

Putin has spoken out against the use of offshore structures by Russian businessmen and politicians and has backed laws to curb the practice. But his inner circle figures prominently in the files. <\/p>\n<\/div>\n\n\n

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\"The
The hallway of the Monte Carlo Star apartment complex where Svetlana Krivonogikh once lived in Monaco.<\/figcaption><\/figure>\n<\/div>\n\n\n
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The Pandora Papers reveal that a $4 million Monaco apartment was bought through an offshore company in the fall of 2003 for a woman reported to have been in a hidden, years-long relationship with Putin. The former store cleaner from St Petersburg, Svetlana Krivonogikh, had just given birth to a girl with no father listed in official records. The online investigative news organization Proekt reported that the girl is Putin\u2019s daughter. Krivonogikh did not respond to reporters\u2019 requests for comment. <\/p>\n

The documents show that Andrei Bolotov, former son-in-law of one of Putin\u2019s close friends from the KGB was the true owner of offshore companies that received $80 million in contracts from a state-owned pipeline company run by his then father-in-law. They also show that he was in business with one of Russia\u2019s most notorious criminal bankers. Lawyers instructed by Bolotov said that he had never received improper business advantage from personal connections, and denied any wrongdoing. <\/p>\n

And the records reveal that a Russian company which received $500 million in contracts from Russia\u2019s state gas company in 2013 was owned by Ruslan Goryukhin, a one-time aide to Arkady Rotenberg, billionaire businessman and Putin\u2019s onetime judo partner. The records also show that until at least August 2016, Goryukhin was the owner of owns the Palais an der Oper in Munich, a city landmark long-rumoured to have been bought by one of Putin\u2019s friends. In January this year, activists demanding freedom for Alexei Navalny protested outside the building. A lawyer for Goryukhin said that he had paid all relevant taxes. <\/p>\n

These Pandora Papers revelations show how the offshore world\u2019s parallel financial system has provided the means for Russia\u2019s elite to become fabulously wealthy at the expense of the country\u2019s ordinary citizens.<\/p>\n

Ernst, for instance, used offshore secrecy to obscure how he benefited from a deal to buy and develop public assets, then valued at nearly half a billion dollars, at a discount price.<\/p>\n

The exposure of the Moscow cinema deal is the first time one of Russia\u2019s media elite has figured in such a leak. One of the leading propagandists of contemporary Russia has been caught in a deal typical of Putin-era cronyism. It is a stark revelation of the importance the Kremlin attaches to Ernst and to the myth-making machinery that helps keep the Putin autocracy alive. <\/p>\n<\/div>\n\n\n\n

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The artist as a young man<\/h3>\n

Konstantin Lvovich Ernst was one of the zlataya maladosh \u2013 the golden youth \u2013 of the late Soviet era. The son of a well-known Soviet scientist, Ernst has a PhD in genetics but his real passion lies elsewhere. He dropped out of a promising career at a state lab and passed up an offer to study at the University of Cambridge (a decision he later said had caused his mother to stop speaking to him for two years) to join the industry that would come to dominate post-Soviet culture: television. <\/p>\n

Just over 6 feet tall and broad-chested, with dark hair, often shoulder length, Ernst cut a striking figure on the Moscow cultural scene, with his trademark leather biker jacket offset by a cherubic face and often melancholy expression.<\/p>\n

His first break in TV was as a producer of \u201cVzglyad (Viewpoint),\u201d a news and discussion program that would become one of the most influential of the liberalizing perestroika years of the 1980s, the first tv show in Russia to play foreign pop music but also broadcasting investigations into Communist Party corruption.<\/p>\n

Even for the perestroika era, \u201cVzglyad\u201d presented journalism that pushed boundaries. One of Ernst\u2019s interviews was so controversial, a colleague recalled, Ernst had to strap the interview tapes to his belly in order to transport them back to Moscow for broadcast. <\/p>\n

Ernst\u2019s rise came amid a broader free-for-all that included the beginnings of a free press in Russia.<\/p>\n

Russia was undergoing an incredible wealth transfer and social upheaval \u2013 food shortages, rampant inflation, spiking alcoholism and suicide rates \u2013 that would pave the way for authoritarian backlash.<\/p>\n

Ernst was early to sense the public\u2019s need for a common identity and meaning. He produced a hit series of \u201cpublic advertisements\u201d called \u201cThe Russian Project,\u201d short films providing moral lessons in communitarian values. <\/p>\n

Ernst caught the eye of Boris Berezovsky, an ally of then-President Boris Yeltsin, who had used his influence in the Kremlin to secure half the state\u2019s share in its leading TV station, Channel One. He appointed Ernst chief producer in 1995 and, about four years later, appointed him CEO, just as a new president was taking power amid a collapsed economy and political chaos. <\/p>\n

Ernst was 38.<\/p>\n<\/div>\n\n\n\n

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Inventing Vladimir Putin<\/h3>\n

To the public, Vladimir Putin was almost completely unknown . To Ernst, the bland former spy and St. Petersburg deputy mayor became a sort of portrait subject, and the canvas was TV. <\/p>\n

At Ernst\u2019s suggestion, Putin\u2019s first inauguration was moved from a faded bureaucratic office building to a gilded czarist-era chamber. Ernst also re-imagined the World War II Victory Day Parade in Hollywood style, with cameras in cockpits of combat aircraft. And he initiated the annual \u201cDirect Line with Vladimir Putin,\u201d in which the president gave expansive responses to callers from across Russia\u2019s 11 time zones. <\/p>\n

And, each night on Channel One\u2019s leading news program, \u201cVremya,\u201d Putin might appear as a father figure, chiding his deputies for infractions or as a glamorous airman flying a fighter jet over Chechnya. Author Arkady Ostrovsky describes Vremya as the Russian news equivalent of \u201ca lullaby.\u201d <\/p>\n

Channel One, in the early years, also showed serious documentaries and original movies, and it brought in American series, building a reputation as Russia\u2019s cosmopolitan, less brazenly propagandistic network.<\/p>\n

According to a former colleague, Channel One\u2019s dual nature was a reflection of Ernst\u2019s personal ambitions. \u201cErnst, with his own hands and his own design, has made Channel One to serve two major interests,\u201d said Vasily Gatov, a U.S-based journalist and media analyst. The first of these, according to Gatov, was to establish himself as the most respected figure in Russian TV. And to do this, he made the station serve the Kremlin\u2019s ends. <\/p>\n

Journalist Joshua Yaffa described Ernst as the archetypal \u201cwily man,\u201d a term coined by Yuri Levada for a type of resourceful post-Soviet Russian who compromises himself to accommodate the state, but isn\u2019t fooled by it. According to Levada, the wily man \u201cnot only tolerates deception, but is willing to be deceived, and [even]\u2026requires self-deception for the sake of his own self-preservation.\u201d <\/p>\n<\/div>\n\n\n

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\"Ernst
Ernst and Putin.<\/figcaption><\/figure>\n<\/div>\n\n\n

<\/p>\n\n\n\n

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How Putin established control<\/h3>\n

As a new president, Putin famously installed friends from St. Petersburg and the KGB on the board of Gazprom, the state-owned natural gas giant and engine of the Russian economy. Gazprom would serve as the hub of Putin\u2019s economic control. A bank owned by his close friend Yuri Kovalchuk, who would become one of Ernst\u2019s bosses at Channel One, was put in charge of Gazprom\u2019s multibillion-dollar pension fund. Rotenberg, Putin\u2019s judo sparring partner, became Gazprom\u2019s main pipeline construction contractor. <\/p>\n

Others became reported Putin proxies. The Panama Papers revealed in 2016 that Sergei Roldugin, cellist and godfather to one of Putin\u2019s daughters, had received, at least on paper, tens of millions of dollars in payments through offshore companies. He previously had professed to owning only an \u201capartment, a car and a dacha.\u201d <\/p>\n

And still others paid tribute. Alexei Mordashov, a steel magnate, Russia\u2019s richest man and another future part owner of Channel One, was said to have donated money to the president\u2019s pet projects and to have given generously to Putin\u2019s friends. The Panama Papers showed that a company linked to Mordashov\u2019s steel company forgave a $6 million loan to Roldugin. A spokesperson for Mordashov\u2019s company said that, \u201cwe do not comment on inaccurate reports, which appear to be the source of your questions.\u201d She declined to further elaborate. <\/p>\n

And then there were the hired hands, like Ernst.<\/p>\n

Putin took control of the media, including the country\u2019s first privately owned TV channel, NTV. Ernst\u2019s boss, Berezovsky, who had made the mistake of writing an open letter denouncing Putin\u2019s centralizing \u201creforms,\u201d was forced to flee abroad and sold his 49% stake in Channel One, much of which was later bought by Kovalchuk and Mordashov through their conglomerate, National Media Group. <\/p>\n

The Kremlin and its allies now controlled the two main television networks in a country where more than 90% of the people got their news from TV.<\/p>\n<\/div>\n\n\n\n

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Increasing cynicism shapes culture<\/h3>\n

Under Ernst, news unfavorable to the Kremlin disappeared from Channel One. The young director fired the channel\u2019s premier news anchor after he criticized Putin\u2019s handling of the Kursk submarine disaster that killed 118 crew members in August 2000. And during the 2004 Beslan school massacre, in which more than 330 children, teachers and parents were slain by Chechen terrorists after a botched Russian army rescue mission, Channel One cut to a Brazilian soap opera. The names of dissidents, like Navalny, were never uttered on-air, no matter how popular they became. <\/p>\n

In a 2004 interview with the Financial Times, Ernst articulated a philosophy that combined a belief in the inherent primacy of the state with a cynicism about the value of journalistic truth.<\/p>\n

\u201cRussia needs consolidation,\u201d he said. \u201cToday, Putin is the person who can do it.\u201d He dismissed the independent press that had emerged during the Yeltsin era as an \u201cirritant.\u201d \u201cThere is,\u201d he added, \u201cno such thing as an absolute freedom of speech \u2026 Everything depends on your purpose.\u201d <\/p>\n

Later, he would expound more cynical views. \u201cIt\u2019s become increasingly clear to me that justice, democracy, the complete truth \u2013 they don\u2019t exist anywhere in the world,\u201d he told the New Yorker in 2019. Ernst has defended Channel One\u2019s failure to report on the Putin family\u2019s alleged wealth, saying \u201csociety is in no way put in danger\u201d by the omission. <\/p>\n

Ernst\u2019s relativism, which downplays Russian authoritarianism and corruption by pointing to the West\u2019s imperfections, has become a popular defense of Putin\u2019s regime. It justifies the propaganda in Channel One\u2019s reporting by asserting that all media representations are influenced by the observer\u2019s perspective. Truth, therefore, is unattainable, and one angle is as valid as another. <\/p>\n

In his 2014 book, \u201cNothing is True and Everything is Possible,\u201d the writer Peter Pomerantsev describes how the repudiation of truth, and the dissonance between the authorized version of Russia and the actual one, has created in Russia a kind of mass disorientation, resulting in a general disengagement from politics and the abandonment of hope that a democratic alternative to Putinism is possible.<\/p>\n

But by 2014, reality was catching up to Putin. His return to the presidency in 2012 after having switched, officially, to prime minister because of term limits, was greeted with protests against the state\u2019s extravagant corruption. Navalny\u2019s allies used YouTube and online publishing to circumvent Ernst\u2019s messaging apparatus. To the west, noisy demonstrators in Kyiv occupied Maidan square and drove a Putin ally from power. And international press coverage of the Sochi games included reports of grand-scale corruption in the country\u2019s spending of $51 billion on the Olympic Games. <\/p>\n

The rapturously received opening ceremony changed the narrative. Ernst\u2019s phantasm of music and spectacle gave the world a vision of another Russia. In it, a young girl named Lyubov (Russian for \u201clove\u201d) floated on hidden wires through otherworldly landscapes of floating lakes, fiery volcanoes, wooden churches and snowy tundra, all lit by a dreamlike crescent moon. The triumphal march through Russian history hailed the country\u2019s heroes and achievements of empire, science, the arts: Catherine the Great, the cosmonaut Yuri Gagarin, the periodic table, invented by Russian chemist Dmitri Mendeleev, the painter Vassily Kandinsky, the composer Tchaikovsky, the literary giants Dostoevsky, Tolstoy, Chekhov. <\/p>\n

Praise rained down on him for the \u201cdazzling\u201d ceremony. Even Navalny had to call it \u201cunifying.\u201d <\/p>\n

Ernst described the opening ceremony as an opportunity to \u201cbring my compatriots together in one emotion,\u201d and he said the games, \u201ctold the world that Russia is taking the world-power status back.\u201d<\/p>\n<\/div>\n\n\n\n

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\"ICIJ\"<\/a>
ICIJ<\/figcaption><\/figure>\n<\/div>\n\n\n
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A new company in the Caribbean<\/h3>\n

The law offices of Tulloch & Co. sit in a quiet corner of Mayfair in London\u2019s posh West End. Run by a low-profile South Africa-educated solicitor, Alastair Tulloch, the firm counts Elton John and the Duke and Duchess of Sussex (Prince Harry and Meghan Markle), as clients. But it has also become known for its work securing the assets of Russia\u2019s newly minted super-rich. <\/p>\n

Long the offshore world\u2019s beating heart, London has played a particularly important role in the looting of the former Soviet bloc. In the Putin era, London has become the go-to center for the Russian elite: the place for them to party, to invest, to send their kids to school. <\/p>\n

According to academic estimates, the richest Russians, by 2015, held as much in offshore centers such as London as all Russian households owned in Russia.<\/p>\n

But even in a city awash with the purloined assets of former Soviet republics, Tulloch\u2019s small firm stands out. Previous expos\u00e9s in the U.K press showed how the partnership helped structure trusts for Kremlin-linked Russian nationals. <\/p>\n

And now, the Pandora Papers reveal that Tulloch\u2019s firm structured networks of companies for former Russian Deputy Finance Minister Andrey Vavilov; Alexander Mamut, a billionaire oligarch and political insider; and Vitaly Zhogin, a banker wanted in Russia for alleged fraud. Tulloch used Trident Trust to arrange for their assets to be transferred to shell companies \u2013 like the thousands of Russian-owned companies already in the files \u2013 registered in the British Virgin Islands, Cyprus and the Bahamas, all secrecy jurisdictions. <\/p>\n

On Feb. 7, 2014, the day of Ernst\u2019s Olympics opening spectacle, leaked Trident Trust records show, Tulloch incorporated a new BVI limited company, Moscow Dvorik Ltd.<\/p>\n

\u201cDvorik\u201d is Russian for courtyard,and \u201cMoskovsky Dvorik\u201d is the name of a 19th-century painting by Vasily Polenov that depicts a peaceful, green corner of Moscow, with a golden church dome in the background. The name evokes a kind of traditional old-Moscow architecture largely destroyed by a corruption-fueled property boom in the 1990s. <\/p>\n<\/div>\n\n\n\n

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An auction of Moscow city property<\/h3>\n

A few months after Moscow Dvorik was incorporated, a Moscow government official announced a large-scale urban redevelopment project \u2013 beginning with the auction of 39 city-owned Soviet-era cinemas in a single package, one of Moscow\u2019s biggest sales of public real estate in years.<\/p>\n

The buildings were located mainly between the third and fourth ring roads in Moscow\u2019s bedroom suburbs, and some were dilapidated. But many of the cinemas were classics of later Soviet architecture, and together they covered more than 90 acres of prime Moscow land. <\/p>\n

An anti-corruption activist cried foul. Dmitry Baranovsky, an independent city council member representing northeast Moscow, filed a complaint with the local competition authority. He alleged that the only reason to sell all 39 in a single lot was \u201cthe presence of a \u2018big\u2019 buyer.\u201d Selling them together, he said, was \u201ca way to eliminate other, smaller bidders from the auction.\u201d <\/p>\n

The complaint contended that the minimum allowable bid \u2013 just under $200 million \u2013 had undervalued many of the cinemas. Records collected by a lawyer from Navalny\u2019s anti-corruption foundation indicate that the taxable value of the buildings and surrounding land was about $465 million \u2013 more than double the asking price. <\/p>\n

The city government told the competition authority it had repeatedly tried to sell the cinemas in smaller lots.<\/p>\n

In its ruling, the authority said that the city\u2019s requirements for recreational and cultural spaces \u201csignificantly reduces the potential attractiveness for investors\u201d and that the price had been based on a valuation by an independent appraiser.<\/p>\n

The authority added that, while it agreed that the way the properties had been valued \u201cmay violate the applicable law,\u201d the matter of the valuation was outside its purview and declined Baranovsky\u2019s petition to obtain the appraiser\u2019s report justifying the price.<\/p>\n

The auction was allowed.<\/p>\n

Scooping up the theaters for the minimum price was a Russian company, Edisonenergo LLC, affiliated with an established Moscow development company.<\/p>\n

The development company was headed by two brothers, Grigory and Mikhail Pecherskiy, who had built malls in their hometown of Kaliningrad on the Baltic Sea. Grigory Pecherskiy, a regular on the Moscow art scene with long curly hair and thick framed glasses, was the public face of the project. His company\u2019s design was based on the concept of the communal courtyard, a \u201cdvorik.\u201d The cinemas and surrounding property would be rebuilt as \u201cneighbourhood centres,\u201d home to malls, cinemas, and cultural space. <\/p>\n

Pecherskiy told the press that the Edisonenergo\u2019s owners, who were not identified, had used their own funds to buy the buildings and that the Pecherskiy firm would invest an additional $800 million, with a $600 million line of credit put up by one of the most politically wired lenders in Russia, VTB Bank.<\/p>\n<\/div>\n\n\n\n

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I\u2019m not going to answer your questions, not because I\u2019m afraid of anything, only because I\u2019m more than sure you are not an independent investigation company but an organisation commissioned by the US secret services. And that has nothing to do with the independent journalism. <\/p><\/blockquote>

\u2014 Konstantin Lvovich Ernst<\/figcaption><\/figure>\n\n\n\n
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The role of VTB and a Cyprus bank<\/h3>\n

Sanctioned by the U.S. and the European Union in 2014 after Russia\u2019s military intervention in Ukraine, VTB has been described as a \u201ccompletely controlled bank\u201d by former U.S Ambassador to Russia Michael McFaul, a professor at Stanford University. The bank has denied that it is controlled by the Kremlin. <\/p>\n

The secrecy surrounding other partners in the mega-project touched off a flurry of speculation that they included Kremlin-linked elites. In a 2017 interview, Grigory Pecherskiy did not deny reports that the deal included Sergei Vasiliev, the longtime director of Russia\u2019s leading advertising group, Video International, whose ownership was linked to Mordashov and Kovalchuk,the billionaire Putin allies and part owners of Ernst\u2019s Channel One. ICIJ\u2019s Panama Papers investigation showed that part of Video International was also owned by Roldugin, the cellist and godfather to one of Putin\u2019s daughters. Video International ceased operations in 2016. <\/p>\n

In the same 2017 interview, with the leading Russian business newspaper Kommersant, Grigory Pecherskiy was also asked if the partners included Ernst.<\/p>\n

\u201cIt would be a very beautiful story,\u201d Pecherskiy responded. \u201cBut alas, this is not the case.\u201d <\/p>\n

The Pandora Papers show the public-facing Pecherskiy brothers were actually minority partners in the project.<\/p>\n

The records show that the Pecherskiy affiliated company that won the auction, Edisonenergo LLC, was owned by a Cypriot-registered company, which was in turn owned 50-50 by two other shell companies.<\/p>\n

One of the owners, Xelio Invest Ltd, leads to a dead end; the sole shareholder listed in Cyprus records is yet another firm, this one registered in the BVI, where public records do not disclose the true owners.<\/p>\n

The other was Moscow Dvorik, the BVI-registered company that Alastair Tulloch set up the day of the Sochi opening ceremony. Its owners are revealed by the Pandora Papers. <\/p>\n

Moscow Dvorik\u2019s half was split this way: The Pecherskiy brothers owned 33%, the records show. Vasiliev owned 20%. <\/p>\n

And 46.9% of Moscow Dvorik, or about a fourth of the overall development, was owned by a BVI-registered firm called Haldis Corp.<\/p>\n

And, the records show, Haldis was wholly owned by Ernst.<\/p>\n

What\u2019s more, the Pandora Papers show that, in December 2014, several months after the Olympic ceremonies, a Cyprus bank known as RCB, a former unit of VTB and still partly owned by it, a made a loan of $16.2 million to Ernst\u2019s company, Haldis, which used the money to pay for its stake in Moscow Dvorik and the overall development.<\/p>\n

In other words, Ernst\u2019s secret stake in the billion-dollar deal was acquired with a loan to his anonymous shell company from a Cyprus bank partly owned by Kremlin-linked VTB.<\/p>\n

The Pandora Papers show that RCB\u2019s lawyers took the extra step of instructing Trident Trust officials not to include the \u201cannotated share register,\u201d linking Haldis to Ernst, among official BVI records. Trident was to maintain those records at its offices instead. An email from RCB\u2019s BVI lawyers, at Harneys, explained that those instructions were \u201cconditions of the financing provided by RCB Bank.\u201d <\/p>\n

Citing banking confidentiality rules, RCB declined to say why it gave those instructions or whether such instructions are common practice.<\/p>\n

RCB\u2019s head of corporate affairs, Maratheftis Michalis, told ICIJ in an email: \u201cWhether the share registers are filed or not to the relevant registry, depends on each lending case and we want to categorically state that we meticulously follow all the regulations and requirements of each case accordingly.\u201d<\/p>\n

\u201cThat is, we file whenever that is required and do not do so when and if that is not required.\u201d<\/p>\n

He added that RCB, \u201cdoes not conduct its business with any mark or form of secrecy whatsoever.\u201d<\/p>\n

The Pandora Papers show that Vasiliev, too, got a loan from RCB.<\/p>\n

In total, records show, the Cyprus banking unit gave loans totaling $96 million to offshore companies with stakes in the development \u2013 including the mysterious Xelio \u2014 on top of the $600 million credit line from VTB Bank. Citing banking confidentiality, VTB said that it could not comment, but added that ADG Group had a \u201csolid business reputation\u201d. <\/p>\n

Neither ADG Group nor the Pecherskiy brothers responded to ICIJ\u2019s requests for comment, or questions about who is behind the secret 50% owner of the project. ADG Group\u2019s website says that the cinema development is Moscow\u2019s biggest retail project, and \u201cis aimed at driving new quality of life for 2.5 million Muscovites.\u201d <\/p>\n

In an email exchange with ICIJ Ernst denied having done anything illegal, saying that \u201cthis is how my parents raised me.\u201d<\/p>\n

He also denied having hidden his involvement in the real estate development: \u201cI\u2019m indeed involved in [the] Moskovsky Dvorik Project and I\u2019ve never made a secret of that.\u201d<\/p>\n

He said: \u201cI\u2019m not going to answer your questions, not because I\u2019m afraid of anything, only because I\u2019m more than sure you are not an independent investigation company but an organisation commissioned by the US secret services. And that has nothing to do with the independent journalism.\u201d<\/p>\n

He later sought to retract his statements when ICIJ did not agree to publish his email in full.<\/p>\n

His spokesperson said: \u201cSince you\u2019re not planning to publish Mr Ernst\u2019s answer in full we have to retract his text and forbid usage of any parts of it or mentioning the above-mentioned answer.\u201d<\/p>\n

A spokesperson for Trident Trust said that each of its businesses was fully committed to compliance with all applicable regulations.<\/p>\n

The use of a dubious auction to move valuable public assets to secret owners who turn out to have links to the Kremlin, financed by loans from a Cyprus bank partly owned by VTB reads like something out of the playbook of crony capitalism under Putin. It is a miniature version of the scenarios that Putin has presided over in energy, in media and across the Russian economy, and it provides insight into how Russia became one of the most unequal countries in the world. <\/p>\n<\/div>\n\n\n\n