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. Last Updated: 07/27/2016

Leading Law Partnership Dissolves In Acrimony

One of Moscow's top law partnerships has dissolved in acrimony, with the U.S. founder accusing the former chief auditor of breaching professional ethics and the auditor maintaining that he is owed as much as $1 million.


The State Tax Police said they intend to look into the firm of Firestone Duncan, although no formal investigation or inquiry has been launched.


The case has split the relationship between Jamison Firestone, a U.S. citizen who founded the Firestone Duncan law firm in 1994, and Konstantin Ponomarev, the former chief auditor and Firestone's partner for two years.


The schism in the auditing and law practice, which the Commersant Daily newspaper has ranked as the eighth largest in Russia, is only the most recent in a string of prominent Russian-foreign joint ventures gone sour, including two Irish-Russian supermarket chains and the Radisson Slavjanskaya hotel.


But the case of Firestone Duncan is unusual because it is a law firm. As a lawyer who advises companies on how to avoid such problems, Firestone said he never thought this kind of dispute could plague his own firm. Now, though, he said he may sue his former partner, Ponomarev.


The case is also unusual because it has resulted in Firestone bringing his own company to the attention of Russian law-enforcement authorities. Firestone said he himself asked Russian police and the State Tax Police to look into the case.


Firestone said he is prepared to face whatever financial consequences emerge from any official inquiries. He said that any wrongdoing is not his, and he insists that what matters is not the money but the rights and wrongs of the case. offshore company controlled by Firestone to repay close to half a million dollars it owed the partnership.


Gregory Krasovsky, a U.S. businessman who is handling the case for Firestone, countered that the dispute among the partners has "nothing to do with profit-sharing."


Firestone Duncan numbers several multinationals among its nearly 200 clients, the partners say. The auditing practice is now in the process of a formal liquidation, but Firestone and another partner, Andrei Sandikov, are carrying on the business using newly created companies.


Firestone said he has lost just two clients in the months of turmoil that began in October, although the affair has eaten up countless hours of its partners' time and created what the founder calls "a personal hell."


The conflict in the firm first emerged around the beginning of last October at a partners' meeting to review the fiscal year just ended. After that, Firestone said he conducted his own internal investigation and on police advice started taping conversations with Ponomarev. Firestone carried on his checks under the cover of telling his Moscow office that he would be in St. Petersburg.


Subsequent partners' meetings through the fall failed to fully resolve the conflict. Firestone demanded resignations and signed agreements from Ponomarev and another of the four partners in the firm at an emergency meeting Dec. 15.


"Although I regret the necessity for demanding their resignations arose, I believe my action was necessary to insure continuing adherence with the highest Western standards of ethics and professionalism," Firestone wrote in a letter to clients dated Jan. 13, 1997.


At the Dec. 15 meeting Ponomarev and the fourth partner signed prepared documents agreeing to liquidate the OOO Firestone Duncan auditing firm. As part of the liquidation process, outside counsel enlisted by Firestone commissioned an audit of the firm's books, which still has not been completed.


Firestone said he had left the day-to-day administrative management of the firm in the hands of Ponomarev, and so needs the audit to determine the precise financial state of the firm -- including what, if any, money was owed to Ponomarev -- and what, if any, legal action to take.


Yury Kuznetsov, director of the Interior Ministry's anti-organized crime department, said last week that no formal investigation was under way. "We are waiting for the firm to register a complaint before we can decide whether to proceed," he said.


Nikolai Medvedev, a spokesman for the Tax Police, said his agency was "aware of the conflict between the partners." He did not say whether the police or Firestone had first contacted the Tax Police over the case.


"We will most certainly conduct a check to see if taxes have been hidden," Medvedev said, explaining that the check could become an official investigation if the findings warranted it.


Ponomarev said in an interview last month that he hopes the differences with his former partners can be resolved without going to court. Ponomarev said he has "nothing to hide." He said as a foreign legal entity, Firestone owes "over half a million dollars" to OOO Firestone Duncan -- the company now under liquidation in which Ponomarev holds a 51 percent share. Ponomarev estimated his share in the net assets of the company as having a "book value in excess of $1 million."


Ponomarev also said he was concerned about the taping of conversations without his knowledge. He said that the tapes of his conversations with Firestone -- the scope of which he did not know -- was a chief factor in his decision to resign and agree to the liquidation process at the Dec. 15 meeting.


Both Firestone and Ponomarev said they thought the events of Dec. 15 marked the end of the story. But the Russian says the firm's remaining partners have not lived up to their side of the agreement -- conclusion of the audit was delayed, among other things -- while the American says Ponomarev has been soliciting his clients.


Repeated attempts to reach a rapprochement have failed.


Terry Duncan, the law firm's other namesake, was an American lawyer killed in the fighting near the Ostankino television station during the October events of 1993.





-- Rex Hughes contributed to this article.