Freedom in exchange for Prestige

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MOSCOW. (RIA Novosti economic commentator Vlad Grinkevich)

A lawyer for the owner of the Arbat Prestige cosmetics retailer Vladimir Nekrasov said on February 11 that his client was offered to give up his business in exchange for the dismissal of the criminal charges against him.

Previously, he said that the case was inspired by Nekrasov's rivals who are setting their sights on his lucrative business. Nekrasov is not going to give in to these unnamed competitors, but this does not mean that he will keep his business.

Arbat Prestige is one of the largest cosmetics and perfumery retail chains in Russia. Nekrasov was arrested on January 23 on charges of tax evasion - it was claimed that his company owed 49.5 billion rubles ($2 million) in back taxes from January 2005 to December 2006. The Ostankino Court ordered the arrest of the businessman during the investigation because of fears that he may disappear or pressure witnesses.

Practically as soon as Nekrasov was arrested, his lawyer announced that the case was inspired by the company's rivals that want to re-divide the market. This version was backed by some participants in the market. Nekrasov's arrest by the Special Rapid Reaction Unit (SOBR) amounts to pressure designed to make him sell his business at a "reasonable" price.

Arbat Prestige is an attractive business. It is the second largest retail chain of cosmetics and perfumery in Russia. In 2006, its turnover was around $346 million, and its market value is estimated between one and one and a half billion dollars. Some experts believe that the unnamed competitors are interested not so much in the business but in the company-controlled real estate - it owns 23 stores and has long-term leases on another 70. The aggregate square area of these stores amounts to 48,000 square meters. Moreover, Arbat Prestige is Russia's only company that has perfume hypermarkets with a floor space of more than 1,000 square meters. Analysts maintain that changes in the real estate market will help understand who engineered Nekrasov's arrest.

However, the versions about rivals were relegated to the background because of the arrest of Sergei Shnaider (alias Semion Mogilevich), the owner of the Evergate Limited consulting company. His case eclipsed that of Nekrasov. It is rumored that Mogilevich is the de facto owner of Arbat Prestige and may have himself devised a tax evasion scheme for the company. He is involved in a number of high-profile criminal cases and is wanted by law-enforcement bodies of several countries, including the FBI (Federal Bureau of Investigation).

It soon transpired that Mogilevich may have taken part in schemes linked with Russian gas supplies to Ukraine. Gas smells much stronger than perfume. It was rumored that Nekrasov was arrested only to let the law-enforcement bodies get to the elusive Mogilevich.

At a session of the Moscow City Court on February 11, Nekrasov's lawyers Alexei Minchin and Alexander Sudakov urged the release of their client on bail equal to the unpaid taxes - 49.5 billion rubles. The court rejected their appeal. At the end of the session, Nekrasov's other lawyer - Alexander Dubrovinsky said that last week he was offered to tell Nekrasov that if he sold his business, his case might be terminated as early as this summer. He also said that Nekrasov dismissed this offer.

Nekrasov is not likely to part with his business out of principle. He already mentioned that he may sell it. In an interview in January 2004, he said that he had already agreed to sell Arbat Prestige to one of the world's leading cosmetics retailers - Marionnaud Perfumeries. In October of the same year, the sides reported that the deal involved the purchase of the Marionnaud franchise by Arbat Prestige rather than its sale. However, Nekrasov continued hinting that he may sell his company in the future. But the Russian and French plans were thwarted by the Chinese. In early 2005, Marionnaud came under control of the Hong Kong company A.S. Watson Group that owns about 7,000 shops all over the world. The Chinese were not interested in franchising. They preferred to conquer new markets by buying local operators.

Nekrasov's refusal to sell his business does not mean that he will not lose it. Participants in the market are saying that many of the company's partners have already discontinued supplies to Arbat Prestige. Its employees have confirmed this. A group of companies United Europe has halted its cooperation with Arbat Prestige (according to some sources, it supplied the latter with up to 15% of its products). Experts believe that a failure to resume supplies will lead to the closure of the company shops in a couple of weeks.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

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