Hopes that the Kremlin might intervene in a case against Michael Calvey, the founder of one of Russia's most longstanding and successful private equity groups, were fading on Thursday after Russian prosecutors formally charged the American financier with fraud.
Mr Calvey was arrested in Moscow late last week together with several other executives from Baring Vostok Capital Partners on suspicion of defrauding shareholders in Vostochny Express Bank, a mid-sized Russian bank in which BVCP holds a controlling stake. They denied wrongdoing and said the case was being used to apply pressure on BVCP in a separate commercial dispute.
Russian prosecutors formally charged Mr Calvey with fraud on Thursday, a day after Vladimir Putin ordered law enforcers to stop terrorising the business community, saying the risk of prosecution was scaring investors away.
“Honest businessmen should not go around in fear of prosecution,” the Russian president said in his annual state-of-the nation speech on Wednesday. “So-called economic crimes must be treated in a fair way . . . Very often people are kept in jail simply because investigators are not sufficiently competent.”
Mr Putin did not mention Mr Calvey by name in the speech, although a Kremlin spokesman said he was aware of the case and of BVCP's success in attracting billions of dollars of investment to Russia over the past 20 years.
The case against BVCP has been brought by two minority shareholders in Vostochny Express and centres on a dispute over the value of their stakes in the bank that they say cost them more than $37 million. Russian media has reported that one of the shareholders made use of ties with the Federal Security Services – known in Russia as the siloviki – to press the charges that, if upheld in court, could land Mr Calvey in jail for 10 years.
Several liberal-leaning Russian officials, including German Gref, the head of the state savings bank Sberbank, and Alexei Kudrin, a former finance minister who advises Mr Putin on economic affairs, have spoken up in defence of Mr Calvey and warned that the case could inflict lasting damage on Russia's already-shoddy reputation as an investment destination.
Boris Titov, Russia's business ombudsman, said the detention of Mr Calvey was unlawful and urged prosecutors to review the case. Thousands of businessmen were serving time in Russian jails over trumped-up charges connected to business disputes rather than illegal activity, Mr Titov told the business news site bne IntelliNews this week.
After Mr Putin's speech calling for prosecutors to stay out of business spats, many people assumed that the Calvey case would be quietly dropped, said Timothy Ash, senior emerging markets sovereign strategist at Bluebay Asset Management. But with formal charges now served, that no longer seemed on the cards.
As an American citizen, Mr Calvey may have become caught up in the "geopolitical crosshairs" of the confrontation between Russia and the US. But it was more likely that the case reflected a "turf war between different parts of the Russian government, siloviki vs reformers", he said.
Mr Putin has retained power over two decades by balancing the interests of rival groups in the Russian elite. However, many observers believe that the ruthless siloviki, who have made deep inroads into Russian business, have gained the upper hand.
Mr Putin's address to the nation takes a long time to prepare and Russian officials would have known that the president would call for an end to the practice of holding businessmen in custody during investigations of commercial disputes, said Andrei Nechaev, an opposition politician and former Russian economy minister. "Is the president playing cunning or are the siloviki not subordinate to him?"