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. Last Updated: 07/27/2016

Allegations Fly in Firestone Duncan Dispute

In response to "Leading Law Partnership Dissolved in Acrimony" published on March 12, 1997 on events at the Firestone Duncan consulting firm.


To provide a more complete account, The Moscow Times is publishing a version of events prepared by Konstantin Ponomaryov, one of the parties. The Moscow Times takes no position in the dispute. Court proceedings are pending.





Firestone Duncan was founded in 1995 by me (a 51 percent stake) with other partners, including Jamison Firestone, Igor Yesipov and Andrei Sandakov owning 49 percent in total. By the end of 1996, we employed several dozen people and served over 200 clients with audit and legal services.


Instead of attempting to refute all the false and inaccurate information in The Moscow Times article, I would like to present my own version of events on the basis of objective evidence.


Of course, it will only be possible to make a final decision on whose version is more accurate once a court has made its decision. But if Firestone and Sandakov think that the facts I am alleging here are untrue and harm their reputations, I am happy to prove them in court.


As often happens, the conflict started during the preparation and approval of our annual accounts as of Oct. 1, 1996. I discovered numerous cases of breaches of the company charter and other internal documents by various founding partners, and also of shameful facts of misuse of money from the St. Petersburg office, which was being run by Firestone.


After these cases were confirmed with documentary evidence, they were made public in a series of extraordinary general partners' meetings. It was also proposed to file a lawsuit with the aim of excluding Firestone and Sandakov from the partnership and getting compensation for the losses.


I also informed Firestone and Sandakov that, as our agreement was lapsing, they were required to return about $1 million, transferred as a loan to Firestone Duncan Legal Services, a company they controlled.


On Dec. 15 last year at 11:10 a.m., about 20 armed men burst into the Moscow company office, some in police uniforms. Having cut off the phones, they spread out across all floors of the building. I was forced into an interview room where there were eight people I did not know as well as Firestone, Yesipov and Sandakov, who told me that an extraordinary shareholders meeting was taking place.


After that, Firestone read a prepared statement. It was made clear to me that immediately after the meeting, I would be arrested by agents of the police, the Federal Security Service, or FSB, the Tax Police, and the Federal Bureau of Investigation of the United States, who were all present. I would be charged with embezzlement, grand larceny of clients' funds and tax evasion. I was told, however, that I could avoid this by signing a prepared document liquidating OOO Firestone Duncan and appointing Firestone and Sandakov as liquidators.


Of course, I refused categorically at first and demanded that the phones be turned back on, the local police be called in and that the people who had burst into the office show me documentary proof that they were really special agents and also show a warrant for my arrest, if there were such a thing. After this demand, I was forcibly led from the room, placed in handcuffs, beaten up by one of the unknown intruders and then returned to the room.


When they realized that my fake arrest for a whole gamut of serious crimes had no effect, one of the partners pointed to a mountain of audio cassettes lying on the table. I was told that for two months, bugging devices had been installed in my office and in the interview room and that my conversations with partners, clients and employees had been taped. Parts of these conversations were cited to me.


I was told that if I still refused to sign, I would be arrested for 30 days as provided by presidential decree and that a tax audit would be held into clients who had supplied me with confidential information and they would be told that it was I who supplied that information.


The consequences of that for my reputation and life are obvious. As a result, I did under duress sign the document liquidating OOO Firestone Duncan. After that, I was ejected from the building, where my personal effects, documents and bearer securities worth several billion rubles (hopefully) remain to this day.


After Dec. 15, 1996, the funds of OOO Firestone Duncan were in contravention of liquidation procedure disbursed without my knowledge. No true liquidation is taking place. Firestone and Sandakov have not turned up to general meetings, making it impossible for them to obtain a quorum. My suggestions to contract an independent and recognized auditing firm as liquidator have gone unanswered. In these circumstances, I was forced to go to the law enforcement authorities.


Some of the participants in the events of Dec. 15 have now been established; some are still being sought. Neither the Tax Police nor the police nor the FSB have confirmed either the presence in the office of their workers on that date or any operation in relation to OOO Firestone Duncan and its founders on that date.


To justify the events of Dec. 15, 1996, some of my former partners filed complaints against me with various Russian law enforcement agencies. It goes without saying that these complaints resulted in no charges against me or even in an official investigation.


Moreover, further doubt is cast on the accusations made against me by the fact that while Firestone told The Moscow Times that he intended to sue me or take other legal action, so far, eight months after the above events, I am not aware of any legal action against me either in criminal or civil law.


Since Dec. 15, an armed guard has been placed at the door of the building, which prevents my gaining entry to the office, where, apart from my personal property, is located corporate property worth hundreds of thousands of dollars.


At present, several companies have been established, using the OOO Firestone Duncan trademark and business reputation, which are still operating with the active participation of the members of the liquidation committee of OOO Firestone Duncan.


Some employees of the company were fired in January and February this year illegally, without receiving compensation, accrued leave or even salary for the month or two they had worked. The dismissals were primarily directed against individuals who were aware of the real financial situation at OOO Firestone Duncan, loans issued, funds misused, etc.


On my advice, some of them have filed suits with the Tverskaya inter-municipal court.


Others and I have recently lodged suits in the same court. Another five suits are being prepared, including one against the auditor retained by the liquidators of OOO Firestone Duncan. I hope that The Moscow Times will inform readers of the result.


Stepping back from the conflict in Firestone Duncan, I would like to warn the foreign community in Russia as a whole against prejudging any conflict between local and foreign business partners in Russia. It will eventually become apparent that not every foreigner in Russia is an investor and not every foreign investor is a boon for Russia and not every Russian entrepreneur is a potential crook or a member of a mafia band.


Konstantin Ponomaryov





Media's Help Can Hurt


In response to "Western Press Coverage Shows Russia's Bad Side," by Leonid Bershidsky, July 24.





Men need power; women need attraction. The media needs both. But it's difficult to get both when most readers crave neither poetry nor philosophy. They want action, scandals, violence.


The international media in places where a sound government does not exist could be crucial for helping people in opposition, whose opinions are suppressed. But when the Western press in developed countries takes this role of middleman too far, it inevitably becomes highly biased on the topics it chooses and always tends to reflect the miserable sides of developing countries. An activist's, emigr?'s or dissident's pessimistic voice or criticisms are always preferred to a respectable optimist's view. Having an insider's word on how bad life was -- and still is -- in those countries, they can persist in basing their coverage on evil sides of the countries in transition in Eastern Europe and elsewhere, thus fortifying the cultural differences and preserving the never-closing gap that separates the elite from the ordinary.


Gokhan Harmankaya