Editor’s Note: The following is an edited version of a story about ownership disputes involving TVi, written by the Organized Crime and Corruption Reporting Project, a Kyiv Post partner.See the complete story here.
The battle over TVi got its start in events that happened in March 2008.
At that time, Vladimir Gusinski, a media mogul who in the 1990s established Russia’s NTV channel, formed a partnership with his friend, Russian businessman Konstantin Kagalovsky to create and manage a television network to be known as TVi.
Gusinski had been through some tumultuous times with NTV, which began in 1993 as an independent (and some said anti-government) news organization. In 2001, after a series of reports critical of Russian President Vladimir Putin, Gusinski was squeezed out and replaced by state-owned gas giant Gazprom.
Despite their friendship, the partnership between Gusinski and Kagalovsky did not last long. Within three years they were suing each other in the Supreme Court of New York State. The case came to trial in late 2011, and in August 2012 the judge issued a 108-page decision in Gusinski’s favor.
The decision sheds light on how Kagalovsky used offshore entities to wrest control of TVi from Gusinski:
When the partnership was formed in 2008, Gusinski controlled a company called New Media, registered in Delaware, and Kagalovsky a company called Iota LP, registered in Jersey in the Channel Islands off the coast of the UK. Each of these companies had a 50 percent stake in Delaware registered Iota Ventures LLP, and finally of the TVi channel.
They appointed Mykola Knyazhitsky as the channel’s CEO.
In the spring of 2009, the partners fell into a dispute. Kagalovsky suspected that Gusinski’s company NMDC which licensed programming content to their partnership was charging too much for movies TVi was airing.
Knyazhitsky recalled that: “Gusinski wanted to sell movies to this channel, way overpriced, at $20,000 per hour” when the going rate was $400-500 per hour. The court documents say NMDC was charging $15,300 for premiere movies and $8,000 for repeat airings.
Instead of renegotiating costs, Kagalovsky moved to take the channel away from Gusinski.
According to the court decision, “In the summer of 2009, Kagalovsky invited Knyazhitsky to his house on the French Riviera. Kagalovsky admitted that he made a deal with Knyazhitsky – in case Gusinski doesn’t step out from the channel voluntarily, Kagalovsky will squeeze him out of TVi, using the ‘traditional Russian-Ukrainian method’ – diluting Gusinski’s share in TVi.”
The result was that Kagalovsky used lawyers, offshore jurisdictions and Knyazhitsky to insert two Cyprus-based offshores – Aspida Ventures Limited and Seragill Holdings Limited – into the channel’s ownership structure, the decision says.
Then, between Sept. 22 and 24, 2009, Kagalovsky and Knyazhitsky conducted a series of transactions by which Gusinski’s share in TVi was reduced to 1 percent. Meanwhile, Kagalovsky’s Cyprus-based offshores ended up controlling 99 percent of TVi, the decision notes.
“This was done with my own hands,” Knyazhitsky said in an interview. “Back then I didn’t fully understand those things, but I had a fully legitimate power of attorney from Iota Ventures LLP.”
According to the 2012 ruling of the New York court, Kagalovsky owes Gusinski $25 million plus interest, but not TVi itself. In 2009, the station was firmly in Kagalovsky’s hands.
