The man who cared too little How Mikhail Prokhorov tried (and failed) to reshape Russian politics and media
Sources close to the billionaire Mikhail Prokhorov tell Meduza that the Russian authorities are putting serious pressure on the entrepreneur, with particular focus on the independent news organization RBC, which just fired its top three editors. According to our sources, as the pressure intensifies, Prokhorov grows increasingly indifferent about RBC, which until the dismissal of its top management last week was Russia's leading source of independent news. As the businessman once put it, he prefers to change his line of work completely every eight years. It has been exactly eight years since Prokhorov last experienced a drastic change in his professional life, when he divided his assets with Vladimir Potanin, a former business partner, and plunged into politics and news reporting. By 2016, all Prokhorov's political projects have ended. As for his news enterprises, their destiny remains unclear. Meduza's special correspondent Ilya Zhegulev reviews how Mikhail Prokhorov took his shot at big politics and independent media.
A warning raid
In December 2015, journalist Anton Krasovsky joined Mikhail Prokhorov for breakfast at his Skolkovo house, to be treated to cottage cheese pancakes and sausage. It was their first major meeting since the 2012 presidential campaign, when Prokhorov and Krasovsky spent two months side by side, the businessman running for election, and the journalist managing his campaign. This time, the businessman invited Krasovsky for a friendly chat over a meal. According to Krasovsky, however, the conversation didn't go as smoothly as expected. Prokhorov was excited and enthusiastic about the American basketball team he owns, the Brooklyn Nets, and then he showed Krasovsky around his private gym. But Krasovsky was more interested in the fate of RBC, Russia's largest independent media holding. But the businessman was evasive about rumors that he planned to sell the company, and seemingly indifferent about the issue.
At that point, the market was already alive with rumors about Prokhorov disposing of his media assets. However, the matter was not publicly discussed until a few months later, when the head office of the entrepreneur's ONEXIM group was searched on April 14, 2016 (with investigators also visiting the offices of his other companies: Quadra, Renaissance Capital, Renaissance Credit, and Soglassye). Russia's Federal Security Service said these steps were part of an ongoing investigation into Tavrichesky Bank, which was reorganized by ONEXIM Group in February 2015. The president's spokesman, Dmitry Peskov, insisted that the police raids were unrelated to the alleged pressure on RBC, but this statement only encouraged further rumors about the company changing hands.
Sources from Mikhail Prokhorov's entourage tell Meduza that the businessman has been negotiating the sale of RBC for over a year. Allegedly, Prokhorov first discussed this offer with Grigory Berezkin, owner of the newspaper Komsomolskaya Pravda. After Berezkin failed to acquire the Russian version of Forbes, word has it that he took an interest to RBC and turned to Prokhorov. At the same time, Berezkin has reportedly insisted that Prokhorov settle the debt he inherited when he acquired the media holding seven years earlier—and that was something Prokhorov allegedly refused to do.
Another source told Meduza that Zakhar Smushkin, the co-owner of the Ilim timber group, was also listed among RBC's potential buyers. According to the source, in February 2016, Smushkin's office was already negotiating certain staff appointments to take effect after the change of owners.
RBC's two rumored buyers are mutually acquainted, and both of them are also known to be on friendly terms with Prime Minister Dmitry Medvedev, who worked for Smushkin as a corporate lawyer in the 1990s. Meduza's source, moreover, says high-ranking officers the Federal Security Service's Economic Department confirm that a deal between Prokhorov and Smushkin was of particular interest to Medvedev.
One influential news media figure told Meduza that Smushkin and Prokhorov failed to agree on a price. Prokhorov has invested about $80 million in RBC, along with taking responsibility for a $220-million debt incurred by the previous owners. In addition, Prokhorov and his advisers were convinced in late 2015 that RBC had attained “increased political weight,” making it a more valuable asset. According to Meduza's media industry source, however, RBC's market value amounts to $60 million at the most, and Smushkin would hardly offer a considerably larger sum. But Prokhorov refused to compromise, according to the information available, and the talks collapsed, when police raided the billionaire's various companies in December 2015.
Meduza's sources in ONEXIM Group, the Federal Security Service, and inside Prokhorov's own entourage say they believe the raids on Prokhorov's assets had Vladimir Putin's personal approval. The president had previously expressed his indignation about RBC's reports focusing on his family. A source from ONEXIM Group management said the Kremlin's displeasure with RBC "went spiraling," especially in recent months. Officials in Moscow have disapproved of certain news stories published by RBC as early as in 2015, in particular, an investigation into Katerina Tikhonova, Putin's alleged daughter, as well as a story about the business assets of Putin's alleged son-in-law. The Kremlin was especially annoyed by RBC's coverage of revelations in the "Panama Papers" earlier this year.
In spring 2016, as news spread out about the searches at ONEXIM Group, another important RBC-related event was announced: Elizaveta Osetinskaya, the chief editor, announced her intention to go on sabbatical, leaving in early September, to take part in a program at Stanford University. According to an official statement by RBC, however, her academic leave would start much earlier—in mid-May. Reuters later reported that Osetinskaya's scheduled absence was likely the result of pressure from the Kremlin.
"This move was suggested by ONEXIM and approved by Derk Sauer [ex-president of RBC's Board of Directors and ONEXIM vice-president]," one of RBC's managers told Meduza. "Liza [Osetinskaya] will be on a leave for the duration of her studies," said Roman Badanin, then RBC's managing editor. "As for what happens in a year, time will tell."
Consequently, during the State Duma elections, which will take place later this year in September and be a source of tension for Russian authorities, Elizaveta Osetinskaya would be absent from RBC's editorial office.
As assumed by two sources privy to the holding’s management decisions, Osetinskaya's planned sabbatical (and formal resignation in early May) wouldn't be the end of RBC's troubles. The sources claim the Kremlin has also conveyed to Prokhorov that Roman Badanin and Derk Sauer need to go. (Badanin was in fact dismissed with Osetinskaya.) In addition, "the RBC case" is said to be overseen by Viktor Zolotov, the head of the newly created National Guard of Russia and Vladimir Putin’s close ally.
Mikhail Prokhorov categorically refused to grant Meduza an interview. His representatives told us simply, “This is not possible.”
A successful business divorce
Late at night on January 12, 2007, a plane carrying entrepreneur Mikhail Prokhorov arrived at the Vnukovo-3 airport. For the first time in his life, Prokhorov was awaited by a horde of journalists. But the co-owner of Norilsk Nickel, the world's largest manufacturer of nonferrous metals, chose not to speak to them. Together with his traveling companions, he swiftly crossed the VIP-hall, leaving those who had spent several hours at the airport in anticipation of his arrival with nothing but the sight of his limousines driving away.
The reason why the businessman was disinclined to speak with the press was rather evident: he had just been released from a pretrial detention center in France, where he'd been apprehended on charges of prostitution procurement. In the course of a brisk police raid aimed at fighting prostitution at the Courchevel Ski Resort, Prokhorov was detained for three days. In Russia, news about the incident caused an uproar: holding captive a major entrepreneur in the company of girls who had been brought there from Russia for that specific purpose looked outrageous.
Prokhorov's long-time partner and Norilsk Nickel co-owner, Vladimir Potanin, refused to defend him in front of the press and the employees. Moreover, he decided it was a good moment for a business divorce. Soon afterwards, Potanin arranged a meeting with Prokhorov and expressed his eagerness to buy his shares in Norilsk Nickel. According to Meduza's source familiar with the details of the sale, Potanin offered Prokhorov considerably less money for his shares than market value—less than $1 billion.
Two weeks later, Prokhorov and Potanin called a meeting, during which they announced the division of their assets. Prokhorov was mostly silent, while Potanin went on about how their principal common asset, Norilsk Nickel, would virtually become his sole possession. Some believed it made complete sense: once Russia's first prime minister (serving from 1996 to 1997), Vladimir Potanin always seemed to be the senior partner, though the shares were divided equally, whereas Prokhorov had slipped up, damaging his personal reputation and the company's in France.
No financial details of the “divorce” were disclosed at the briefing. However, Prokhorov wasn't quite content with the conditions offered by Potanin, to say the least. In other words, he was furious, so he decided to take his grievance about the unjust distribution of assets to none other than Valentin Yumashev, a friend and former President Yeltsin's chief of staff (as well as husband to Tatyana Dyachenko, Yeltsin’s daughter). In his turn, Yumashev appealed to Vladimir Putin. At the time, Yumashev had Putin's ear for several reasons, including his role in promoting Putin's candidacy to be Yeltsin's successor back in 1999.
Meduza's ONEXIM source says Prokhorov was soon granted an audience with Putin, who reportedly phoned Potanin in Prokhorov's presence and chewed him out, saying, "It's dishonest to cheat on partners."
At that point, a third party entered the deal, and Prokhorov sold his shares in Norilsk Nickel to an old friend of the Yumashev family, the businessman Oleg Deripaska, preferring him over Potanin. Eventually, after dividing his assets with Potanin and selling his shares to Deripaska, Prokhorov earned a total of $9.5 billion—all on the eve of the 2008 financial crisis. He then concentrated his focus on the ONEXIM investment fund, which he had founded in 2007, and used it to consolidate everything he had left, after he "business-divorced" Potanin. By the end of 2008, Forbes Magazine said Prokhorov was the richest man in Russia.
In 2008, Prokhorov met Vladimir Yakovlev, a legendary figure in Russian journalism and the founder of Kommersant Publishing House. Yakovlev convinced the businessman to establish a new media holding, under an optimistic name Zhivi! (Live On!), also abbreviated as ZhV! His main idea was to launch a periodical for the large Russian expat communities all over the world. October 2008 saw the first issue of Snob, a glossy magazine intended for the so-called "Global Russians," and in May 2009, the website Snob.ru went live. Apart from Snob, Prokhorov's media group included F5, a periodical for a young audience (headed by Yuri Katsman, ex-owner of Secret Firmy Magazine), the Zhivy! television channel, and the eponymous creative agency.
In the hectic cobweb structure of the media holding, Yakovlev combined the positions of chief editor at Project Snob and president of Zhivi! Group. Masha Gessen, who was put in charge of Snob (both the website and the magazine) told Meduza that at first she understood the mechanisms behind the holding's activities "on an intuitive level." "When we moved in [our office] at Arma Factory, the building had been completely renovated, and there even was a residential unit integrated in it," says Gessen. According to her, it was Yuri Katsman, head of F5, who made use of the corporate apartment. Soon after, Yakovlev decided to move the staff to Krasny Oktyabr and launched yet another costly renovation project. According to Gessen, Yakovlev would frequently take a private jet to Ibiza, where he had a house. (She assumes the money for it came from Zhivi! Group.)
Initially, the annual budget of Project Snob alone approached $6 million. The newsroom included 127 employees, but Gessen says she can only guess what many of them were actually doing. For instance, she claims Yakovlev's personal masseur was on Snob's payroll, too.
According to ONEXIM Group sources, the launch of Zhivi! Group cost Prokhorov a total of more than $80 million, with the project not only failing to pay off, but also requiring a few dozen million dollars more, year after year.
In 2010, the entrepreneur extended the ONEXIM Group team by inviting Sergei Lavrukhin, a financial expert who had previously worked for the Profmedia holding (which included the 2x2 and MTV Russia television channels, Rambler search engine, Afisha Publishing House, and a number of other assets), owned by Prokhorov's ex-partner, Vladimir Potanin. Lavrukhin was charged with restoring order to Prokhorov's media companies, which had become anything but a simple task. Lavrukhin found the state of financial affairs at Zhivi! Group downright shocking. "It took me four months to get through to Prokhorov and show him the scale of the Bacchanalia," he told Meduza.
According to Lavrukhin, an internal investigation showed that Yakovlev not only allocated funds in a prodigal manner, but he also simply "diverted money from the company." "Having looked into the matter, Prokhorov decided neither to prosecute Yakovlev nor disclose the incident to the general public," Gessen told Meduza.
"I think it was a crafty scam," Lavrukhin says. "It looks like Yakovlev asked for a huge amount of money from Prokhorov to create some kind of a bogus media holding. It showed negative results for five years in a row, without any operating profit. It was a feast in time of plague."
Sources close to Prokhorov describe a phone call he made to Yakovlev, catching him in Ibiza. "In the good old times,” Prokhorov allegedly said, “you would have been a dead man. I can have a criminal case filed against you, and you'll be wanted by the police all over the world. But I will do no such thing. Why is that? Because you're nothing but an asshole."
Vladimir Yakovlev resigned from Zhivi! in the fall of 2011. Formally, he left on mutually agreed terms. He was also required to return some of the investments made in the project. Upon the insistence of Dmitry Razumov, ONEXIM Group's director general, Yakovlev was required to return more than $1 million to Prokhorov's businesses. Yuri Katsman, F5's chief editor, signed a similar agreement.
Lavrukhin says he doesn't know whether the money in question was ever returned to Prokhorov. In response to Meduza's request to discuss Zhivi! Group, Yakovlev said, "Thanks, but no, I'm not interested."
That same year, in 2011, Lavrukhin replaced Yakovlev as head of Zhivi! Group and got down to cutting costs. The F5 magazine, a paper-based periodical dedicated to Internet phenomena, was sold to Yuri Katsman in 2012 (and closed down in 2015), while the Zhivi! television channel was acquired by its managers, Milana Minaeva and Ilona Danilova.
Out of the whole Zhivi! empire, Prokhorov was left with nothing but Snob Magazine (and its website), which they decided to turn into an almanac and publish every other month.
Next in line!
Established in 1993 by German Kaplun and Alexander Morgulchik, the RosBusinessConsulting financial news agency (consequently known as the RBC media holding) grew into a successful Russian Internet project by mid-2000s.
In 2002, RBC became the first media holding to list its shares on Russian stock markets, with its equities rivaling even Norilsk Nickel in traded value. Over the six following years, the company's shares grew in value more than tenfold. As the management recalls, at its height, before the 2008 crisis, the company was worth $1.5 billion.
To boost the company's capitalization, the owners founded Russia's first business television channel, RBC TV, in 2003, and also began issuing a monthly magazine and a daily newspaper in 2006. Moreover, the holding was extended by Salon-Press Publishing House with a number of glossy magazines and a subdivision called Mediamir, which included the Qip messenger, entertainment portals, and even the dating website LovePlanet.
Since the early 2000s, RBC's website was one of the most-visited information sources on the Russian Internet (and, according to many competitors, one of the leaders in "commercial traffic," as well). For several years in a row, the company's declared sales of online advertising were several times higher than the sales of other major media, including such Internet giants as Yandex, Mail.ru, Rambler, and others, according to an investigation by SmartMoney Magazine, published in 2006.
RBC's earnings were not always directly connected to legal advertisements. The same SmartMoney publication mentioned a "colossal volume" of commercial materials being published on RBC without any "Sponsored Feature" designation or any information at all about the company's partner agreements with sponsors. In other words, SmartMoney accused RBC of publishing advertisements as editorials and straight news reports.
"Although these were just one-time incidents at first, it soon became a steady trade. The agency acquired a solid reputation on the market: RBC is like McDonald's. Next in line, please," says one of RBC's former key editors. "Thus, RBC TV would just send price lists to companies for inviting guests to programs. And that was official."
Another media manager familiar with RBC's founders, told Meduza that in the 2000s the holding offered a "shit blocker," which was a kind of paid subscription that would prevent and block negative reports about the subscriber's company. A number of entrepreneurs were approached after a series of negative stories and asked to pay money to stop the reports, says Meduza's source.
In the aftermath of the 2008 crisis, the media holding, which used to enjoy success both in terms of audience and financial outcome, suddenly found itself sinking under an immense debt load. In January 2009, German Kaplun, one of RBC's founders and the chairman of its board of directors, warned the moneylenders that RBC could go bankrupt as early as February. The company had over $200 million in debts, with about $11 million available funds.
RBC's lenders grew nervous. Natalia Peksheva, the former head of sales and stock-market customer service at Raiffeisen Bank, who oversaw the negotiations on RBC's debt restructuring, says she had never had a client like this in her career and hopes she'll never have one like it again. According to her, many of RBC's financial issues were "man-made"; that is to say, related to other factors, as well as the advertising market's decline in 2008. Thus, shortly before the crisis, the company made a bogus follow-on offering, which entailed the company buying its own shares with money it had borrowed from a bank against the collateral of the very shares in question. The money was invested in a number of irrelevant assets, such as cars, apartments, and other companies' shares in a declining market. "Had you bought a television relay tower or a porn site, I'd have understood it," Peksheva told German Kaplun. "But why on earth did you think of yourselves as professional traders who know all the ins and outs of the stock market?"
"German got into the wrong pocket," explains one of his friends, a former RBC top manager. "He thought RBC's shares were a solid collateral and borrowed money against them, to speculate on the stock exchange."
Every day, Peksheva would take an elevator to her office and watch RBC TV on its built-in screen. In spring 2008, journalists on RBC TV insistently encouraged viewers to buy Russian shares, explaining that they were becoming more and more attractive everyday. "Just like they told people to do in their programs, they did in real life," Peksheva now says with indignation.
According to her, the creditors never received any realistic proposals from RBC's proprietors. "All RBC wanted was a comfortable grace period. They refused to discuss any other options or additional guarantees. The theme of their position was 'We can't pay—end of story. We will pay you back when we can,'" she says.
As for RBC's assets, their value was not easily estimated, either. The entangled structure of the holding desperately lacked transparency due to a great many companies, Russian as well as offshore, with crossed ownership. At the same time, RBC rented its office, while keeping its computers, the TV studio, the desks, and the chairs on its books.
RBC's lenders started looking for buyers, and so did the owners. The prospective candidates included Mikhail Fridman (the head of Alfa Group), Alisher Usmanov (the owner of Kommersant Publishing House), and even Sergei Chemezov (the head of Rostekhnologii, who allegedly had a meeting with Kaplun).
Eventually, the holding was sold to Mikhail Prokhorov. One version of this story says RBC's general director at the time, Yuri Rovensky, was able to win over the billionaire. Another version says Prokhorov's old acquaintance Chemezov convinced him to buy it.
Whatever the case, Prokhorov's arrival was a real redemption for RBC. He transferred to the holding company's founders a total of $80 million for a 51-percent share in RBC, not only inheriting its debts, but also crafting a restructuring scheme that managed to satisfy creditors, as well. The businessman increased RBC's indebtedness, but prolonged the payment. RBC's founders remained minority shareholders and top managers of the project. In spite of his issues with creditors and a precarious exchange speculation, Kaplun was appointed CEO of RBC. The Board of Directors of Mikhail Prokhorov's new media holding was headed by Sergei Lavrukhin, who was also in charge of Zhivi! Group.
Having purchased a financially dubious asset, Prokhorov began considering various options of turning it into a big-time media business. At first, he intended to consolidate the holding with Snob and Zhivi! Group; however, according to Meduza's information, he was talked out of it by both sides, that is, by both Lavrukhin and Kaplun. It wasn't easy for them to make Prokhorov refrain from buying more companies in the media market, as he seemed to have acquired a taste for it. "We were making all sorts of excuses we could think of," recalls a source who was close to RBC's management in those days. "Prokhorov would frequently call Kaplun, and listening to them was almost funny at times, 'Yes, Mikhail Dmitrievich, thank you, but no, anything but Russky Newsweek.'"
Lavrukhin, the former chairman of RBC's board of directors, confirms that negotiations with the German holding AxelSpringer, the owner of Russky Newsweek, did take place: "We could have closed the deal. But we looked into the magazine's financial affairs and realized there was no point. Weekly press was dying anyway, and Newsweek was no exception."
According to him, between 2010 and 2012 Prokhorov also considered merging his companies with media assets belonging to Alexander Mamut and his SUP Media group (with Livejournal and Gazeta.ru listed among his assets at the time). Furthermore, on behalf of Prokhorov, Lavrukhin met with the founders of the Dozhd private television channel (broadcasting since 2010), Natalia Sindeyeva and Alexander Vinokurov, to negotiate a possible merger with RBC, but the parties never reached an agreement. And finally, Prokhorov made advances at Russia's largest private news agency, Interfax, having his experts at ONEXIM look into the possibilities and risks of the deal. However, Mikhail Komissar, Interfax's co-owner and CEO, was not interested in the proposal, according to Lavrukhin.
Both German Kaplun and Natalia Sindeyeva declined to comment to Meduza about their history with Prokhorov.
RBC entered into its largest and most profitable deal in 2011, buying Ru-Center, a hosting company that engages in registering .RU Internet domain names. Since 2014, the company has accounted for one third of the holding's revenues.
In the meantime, Mikhail Prokhorov switched to a new area of activity, taking a sudden interest in public politics.
The ‘Right Cause’ Party
Autumn 2010 found the Kremlin in a discussion about who would represent the liberals in the 2011 Parliamentary Election. It was then that Valentin Yumashev, Boris Yeltsin's old chief of staff, remembered his friend Mikhail Prokhorov.
A couple years earlier, several members of the political party Soyuz Pravykh Sil (the Union of Right Forces), which was dissolved in 2008, accepted the Kremlin's proposal to join the Pravoye Delo party (Right Cause). Leonid Gozman, the former acting chairman of the Union of Right Forces' political council, told Meduza that Right Cause was intended to become "a political force of the liberal fraction of the country's government." The party was supposed to have one of the country's elites at the top.
By 2011, Dmitry Medvedev, then president, took an active interest in the party. According to sources in his administration, at that time Medvedev was on good terms with Alexei Kudrin, the minister of finance, and it was Kudrin who got the presidential offer to head the project. However, Kudrin turned down the opportunity, and Medvedev was provided with another draft of the right-wing party's "managing triumvirate," comprised of Vadim Dymov (the owner of the Respublika store chain), actress Chulpan Khamatova, and Andrei Sharonov (who was then serving as Moscow's deputy mayor). But Medvedev wasn't happy about the list. "The country is going through tough times. I need someone who will pay for everything," the president concluded, according to Meduza's source. Evidently, the president meant that the Kremlin wasn't prepared to invest in the new project or promote it at its own expense.
As Prokhorov once said in a private conversation, he received the offer to head Right Cause from Valentin and Tatyana Yumashev. Prokhorov regarded this idea as "yet another grand objective." "He was sparkling like a Bengal light," the businessman's close associate told Meduza.
Prokhorov was a raving success at the party convention held on June 25, 2011. He committed to investing $100 million in the project, and promised to raise another $100 million for the party's development from his fellow-entrepreneurs Alexader Mamut (SUP Media) and Suleyman Kerimov (Uralkali), who Prokhorov expected to join the party, as well.
Kerimov and Mamut never joine the party, but Prokhorov's political endeavor attracted several celebrities, including singer Alla Pugacheva, rock-musician Andrei Makarevich, and actor Yevgeny Mironov. Later, the Kremlin began urging Prokhorov to approach certain other individuals with whom he had neither professional nor personal connections. "They suggested adding [TV anchor] Yulia Bordovskikh and even [singer and actress] Jeanna Friske," recalls a source close to Prokhorov who worked at Right Cause. Prokhorov refused categorically.
His political image was put in the hands of campaign managers like Iskander Valitov, Dmitry Kulikov, and Timofei Sergeytsev—men who previously canvassed for the Ukrainian politician Arseniy Yatsenyuk in the Ukrainian presidential election, flooding the country with billboards depicting the intelligent-looking and skinny Yatsenyuk in camouflage. (He came away with about 7 percent of the vote, finishing fourth in 2010).
With Prokhorov, the strategists decided to exploit his masculine side, as well, turning him into a harsh, independent politician who spurned guidance from the Kremlin. Many of these moves did not pay off.
First, the party introduced a new branding that resembled Russia's imperial flag (already used by Russian nationalists), and an aggressive new motto: "Our cause is right." "At the same time, the [ultra-right] field was already taken by other people, and the administration wasn't interested in more. Prokhorov didn't grasp any of this," a man who worked with him told Meduza.
Second, Prokhorov triggered a strong conflict within the party by hiring Rifat Shayhutdinov, an LDPR deputy in the State Duma, to head his election headquarters. Shayhutdinov quickly started disposing of liberal members and enlisting those who were a far cry from the party's ideology.
Third, Prokhorov's campaign managers set him against First Deputy Chief of Staff Vladislav Surkov, who was then a leading arbiter of Russian domestic politics. In order to prove his independence, the first thing Prokhorov needed to do was to get rid of his "Kremlin appointee" image, which he pulled off rather clumsily. "They [political technologists] got carried away with creating a brand-new politician and stumbled into a conflict with Surkov," a source tells Meduza, claiming that the counselors were always telling the businessman, "Vladislav Surkov is an enemy. We follow different paths." They insisted that Prokhorov was a freestanding politician who didn't need to look up to someone as a leader.
And last, but not least, Mikhail Prokhorov had a falling out with Dmitry Medvedev. Shortly before the start of the 2011 election campaign, Medvedev gathered the party leaders and gave a speech about the necessity of excluding people with a criminal record from party lists. Medvedev gave a special warning to Zhirinovsky, addressing him specifically, but did not as much as look at Prokhorov, because he had confidence in the businessman. Little did he know that Prokhorov was planning to include Yevgeny Roizman, a Yekaterinburg politician who had served time in prison for theft as a young man.
"What choices does a politician have in such circumstances? You can start a profound discussion with the purpose of proving that such a suppression of human rights is ungrounded," one of Prokhorov's former party members says today. "You can wait until the meeting is over and drop on your knees begging 'Please have mercy, your majesty! The conviction was 20 years ago!' But Prokhorov turned a deaf ear to Medvedev and announced almost the next day that Roizman would be coming with him."
As eyewitnesses recall, Medvedev became enraged. According to a source familiar with the president's executive office, Medvedev and Surkov still go through the roof at the mere mentioning of Prokhorov's name. "When Surkov demanded that Roizman be removed from the list, the businessman shrugged: 'Listen, I'm a public politician, and Roizman being on the list is common knowledge. How am I going to explain [his expulsion] to my voters?'" he answered.
As a result, Prokhorov was left without a party, which was skillfully snatched away from him in September 2011. At the party convention, Prokhorov's opponents grabbed control of the necessary committee and voted him out as party leader, in favor of Andrei Dunayev, the head of Right Cause's executive committee. "The return to our status quo was painful," Dunayev says. "Everyone understood that without Prokhorov the party had no chance of passing the threshold to the Duma." Dunayev says he can't explain why the delegates agreed to commit political suicide. Prokhorov, on the other hand, said Surkov was personally responsible for the incident and called him a "puppet master."
A factory director
From September to the beginning of winter 2011, Prokhorov kept a low profile, but on December 12, a few days after parliamentary election voting ended in mass protests in Moscow, he suddenly declared his intention to run for the presidency.
A source from the Presidential Administration tells Meduza that it was Vladimir Putin who suggested Prokhorov's participation in the election. As his third term was drawing near, Putin needed a decent, but harmless, competitor. According to Meduza's source, Putin met with Prokhorov and even picked out regions for the businessman to "handle without any trouble," such as cities with more than a million residents, including Moscow, St. Petersburg, and Yekaterinburg.
Prokhorov was someone Putin could rely on. The entrepreneur owed him a personal debt for the president's help in his business divorce from Potanin. Besides, how could he refuse the national leader? In addition, according to Meduza's information, the businessman got a few hints that, depending on the outcome of his campaign after the election, he might stand a chance of "integrating into the system," becoming mayor of Moscow or securing a portfolio in the cabinet of ministers.
While these negotiations were underway, the "For Fair Elections" demonstrations were gaining momentum in Moscow. On December 24, 2011, Prokhorov towered over the crowd in Sakharov Prospekt at the largest protest in the history of the so-called “White-Ribbon” movement.
"Do you or do you not remain Putin's friend?" an elderly man asked Prokhorov. The businessman hesitated.
"It is for the people to decide who is good and who is bad," he began with a shrug. "I have seen sincere Putin's supporters. But I am not one of them. I don't suppose he is doing the right thing."
Participating in a major public event turned out to be a test of endurance for Prokhorov: parrying thrusts, he was also trying not to pay attention to snowballs thrown at him by Communists. Among the crowd, Prokhorov had at his back former allies from Right Cause: politician Yevgeny Roizman, straight from the Urals, and actor Leonid Yarmolnik.
A bit farther behind him stood Anton Krasovsky, the NTV anchor. He was invited to join the protest on Sakharov by Prokhorov's long-time partner, Yuliana Slashcheva. Her company, Mikhailov and Partners, engaged in PR support for many high-profile businessmen and state officials, and Prokhorov was one of their major and most loyal clients (he still works with Mikhailov and Partners, though Slashcheva is now the CEO of another company, STS). It was on the day of the protest on Sakharov Prospekt that Prokhorov asked Krasovsky to head his election headquarters.
This time, the businessman decided to stick with his "natural self." "Realizing that he was no politician, we thought we'd count on his public appeal as a businessman," one of his presidential campaign managers told Meduza. "It worked well for Moscow, and for other regions we created an image of ‘the factory director’—someone common people could relate to. This wasn't an easy job. Prokhorov learned about 30 pages in small font by heart—an overview of prices of basic groceries in different regions. He knew how much a carton of milk cost in Krasnoyarsk and how much the very same carton cost in Novosibirsk."
According to Krasovsky, Prokhorov and his wealth became targets for all sorts of con men, and many got away it. "Once, even some advertisers billed us $1 million without batting an eye—just for producing a few dozen short TV clips,” a source close to Prokhorov's campaign told Meduza. Television networks charged Prokhorov to invite him on air, and there wasn't a single program (with the exception of the free air time on Vladimir Solovyev's show) that cost him less than $100,000. And Prokhorov never bargained.
In the election of March 2012, Prokhorov finished third after Vladimir Putin and Communist leader Gennady Zyuganov, securing almost 8 percent of the electorate. It was the best outcome for a liberal politician since Grigory Yavlinsky finished third in the 2000 election with 5.8 percent of votes.
Prokhorov found the outcome satisfactory. Soon afterwards, he started preparing for the next race, a less ambitious, but a more realistic one: the pre-term election of the Moscow mayor, scheduled for September 2013. However, according to insider sources, then Mayor Sergei Sobyanin secured a promise from the Kremlin not to admit such a strong competitor into the election. At the same time, Meduza's connection in the Presidential Administration denies that Sobyanin played any part in the story. According to him, the Kremlin was bluffing from the very start to Prokhorov, and only getting his hopes up. "Why did the Kremlin need these Prokhorov–Sobyanin roach races? Why would they want Prokhorov with his billions in Moscow? Why derail the stability?" he says.
Prokhorov was threatened with problems in the election and he evidently realized there was no use putting up a fight. Surprisingly, the Kremlin allowed the opposition leader Alexey Navalny to join the race, and he came second with 27.2 percent of the vote.
Earlier still, Prokhorov was also authorized to register his own political project, the "Grazhdanskaya Platforma" party (Civil Platform), which first emerged in the summer of 2012. Now the entrepreneur didn't have to deal with either Surkov or Medvedev, and the project was considered to be "his own."
Three years later, the party already ranked first among non-parliamentary forces in number of regional election victories. Yet inconsistencies in the party's management undermined the confidence of liberal voters, as scarce as they were. When Prokhorov withdrew from the mayoral campaign, he said he was concentrating his efforts on the Moscow City Duma election. Nevertheless, in a while he withdrew from that race, too, and disengaged from his own party just as abruptly.
In March 2015, he insisted on the expulsion of party leader Rifat Shayhutdinov (who inherited his position when Prokhorov left in May 2014, two months after Russia annexed Crimea), citing Shayhutdinov's participation in the far-right “Anti-Maidan” political movement. The following day, Prokhorov left the party himself, seemingly ending his enchantment with politics in general.
Back to the media
Despite the arrival of Prokhorov's visionary, Sergei Lavrukhin, the issues related to the RBC's reputation were persisted, as its audience and colleagues continued to wonder about RBC's far too intimate relationship with sponsors, as well as the quality of its media production.
In late 2012, Mikhail Prokhorov made the acquaintance of Dutchman Derk Sauer, founder of the Independent Media holding and publisher of the newspaper Vedomosti. According to an ONEXIM Group source, Prokhorov asked Sauer to chair RBC's board of directors, with the purpose of bringing the holding's periodicals to a new level of quality. Finally, the holding's eldest top manager, German Kaplun, resigned from the post of CEO, yielding it to Sergei Lavrukhin. Strategic matters were put in the hands of Derk Sauer, who already had experience building a Russian business periodical with an impeccable reputation.
Back in 2013, before the Russian law on mass media was amended to introduce new restrictions on foreign capital in media companies, Sauer flew to Germany, to meet with the owners of AxelSpringer Publishing House in his new capacity. He intended to offer them an exchange of shares, so that AxelSpringer would become a minority shareholder at RBC, while the latter would acquire the Russian assets of the German publishing house, most notably, the Russian version of Forbes Magazine. Interestingly, Prokhorov had already made attempts to buy Russky Newsweek from AxelSpringer, but in 2010 the magazine closed down due to financial issues. Unlike Russky Newsweek, Forbes was an income-generating asset, and AxelSpringer was prepared for a bit of bargaining. According to a participant of the negotiations, the Germans estimated that RBC holding was worth roughly $50 million, whereas Derk Sauer believed its value was at least $120 million.
Be it as it may, the negotiations came to a standstill, and Derk Sauer decided to acquire Forbes' team instead of the periodical. In late 2013, he offered the magazine's chief editor, Elizaveta Osetinskaya, a similar post at RBC. She was followed by many key employees at Forbes, including Deputy CEO Valery Igumenov (who would head the RBC magazine), editor Yelena Tofanyuk, observer Irina Malkova, and several correspondents.
Sauer's in-house authority was growing more and more considerable. Lavrukhin recalls that Sauer was meddling with the company's operating activities from the very start, even making various staffing decisions. Conflicts between Sauer and Lavrukhin became common occurrence, and in summer 2013 (even before Elizaveta Osetinskaya's arrival at RBC), Lavrukhin learned from the press there was a replacement ready for him. The prospective CEO of RBC, Nikolai Molibog, used to manage Rambler and Afisha United Company (soon to be known simply as Rambler&Co), which he left shortly after it fell into the hands of Alexander Mamut.
"We placed an emphasis on delivering high-quality content to RBC's large audience, without losing any part of it, and even improving its quality," Molibog told Meduza. "And so we did. In addition, our audience turned out to be pretty well-off, and as a result, highly interesting to sponsors."
Elizaveta Osetinskaya, now RBC's chief editor, started with merging the editorial offices of the magazine, the site, the newspaper and the TV-channel. The quality of journalistic material at RBC improved noticeably. "We introduced some serious changes in the business model. While RBC used to be selling the idea 'Pay us some money, and we won't say negative things about you,' now it's more like 'We are holding the country's best and most economically active audience,'" argues Molibog.
RBC's transformation was also fueled by the new management's aggressive HR policy, aimed at hiring as many top-notch journalists as possible. Along with the Forbes employees, RBC welcomed a number of journalists from Vedomosti, including politics editor Maxim Glikin and Maxim Solyus, the deputy chief editor.
As Molibog puts it, in an attempt to boost the quality, they even had to overpay, while luring journalists from other agencies, but they managed to cut total costs by reducing other expenses. Thus, the holding's newsroom was reduced almost twofold, from 2,000 employees to 1,100. Furthermore, RBC was getting rid of various non-core assets; for instance, the Salon subdivision with a number of glossy magazines was sold to Burda Publishing House for a good price (according to ONEXIM Group sources, the Germans paid in nearly $20 million).
While the RBC website had been the market leader in volume of borrowed publications, in 2014 it secured a leading position as one of the most cited sources (according to Medialogia) and has retained its ranking ever since. The RBC Daily newspaper, which neither Kommersant nor Vedomosti had ever regarded as a serious competitor, suddenly became an influential periodical. In September 2015, it ranked among the leading business dailies by audience (according to TNS Russia, as cited in RBC's own annual report in 2015). Finally, according to Liveinternet, in the spring of 2016, RBC's average monthly audience online exceeded 20 million unique visitors, making it Russia's largest independent media agency.
RBC's ascent wasn't impeded even by a small-time reputation scandal that occurred in spring 2015, when hackers from Anonymous International leaked a few letters, allegedly from the correspondence between Timur Prokopenko, a presidential administration official (overseeing the Internet from autumn 2012 to winter 2014, and later put in charge of federal elections), and RBC's CEO, Nikolai Molibog. The latter confirmed the correspondence existed, remarking that "the scale of changes RBC has undergone over the last 18 months wouldn't have been possible without explaining [to the state] what we were doing."
Raising the standards of its website, newspaper, and magazine, RBC was still unable to improve drastically the quality of its TV production. RBC TV was under the charge of TV journalist Alexander Lyubimov, Prokhorov's old-time friend and political supporter, who combined the positions of chief editor and CEO. His vision for the channel was clearly different from Elizaveta Osetinskaya's plans. "You want to invite Navalny? Be my guest. But inviting his supporters, keep the ratio and invite members of United Russia, to reflect the real-life distribution of voters," Lyubimov told Meduza, explaining his approach to television.
"She [Osetinskaya] and I had long, meaningful debates. But they all led to nothing," Lyubimov admits. Eventually, in April 2014, his contract expired, and he wasn't offered a new one. A year later, in summer 2015, RBC TV his protege and replacement, Andrei Reut, also left.
According to Meduza's sources at RBC, after Reut's resignation, the Kremlin insisted on appointing their own candidate as head of the channel, and Osetinskaya fought tooth and nail to avoid it. The RBC office was sieged by protesters (activists of the ultra-right Russian Liberation Movement) calling for the dismissal of "foreign agent" Derk Sauer. Evidently, in an attempt to lower the temperature of debate, Sauer left RBC to become vice-president of ONEXIM. Meduza's source at RBC recalls that in November 2015 Sauer gathered the agency's key top managers and announced that he couldn't defend them against the Kremlin and the proprietor any more.
Despite pressure from the Kremlin, on April 1, 2016, Osetinskaya appointed her close associate and ex-colleague from Forbes, Elmar Murtazayev, as general producer of the channel (he became Forbes' chief editor after Osetinskaya resigned, and left the magazine when it was sold to the businessman Alexander Fedotov, who had little to do with either socio-political or business journalism).
Mikhail Prokhorov has never made any public statements regarding the holding's editorial policy, and lately he has avoided any contact with the press at all. Nevertheless, RBC's employees tend to believe Prokhorov found the changes in the editor's office flattering. "I only met Prokhorov twice, at formal events, so I cannot give any first-hand account of his attitude to our media," says Roman Badanin, managing editor of the RBC agency. "I have heard Elizaveta Osetinskaya say he is proud of us, our publications and the changes we have made."
* * *
After RBC gave up shadowy sources of income in 2014, the holding's revenue fell below market estimates, though it managed to increase earnings again in 2015. "We may be the only media company whose 2015 result exceeds that of 2014," says one of ONEXIM Group top managers. Molibog says something similar about the audited financial statement that was published by RBC last month: "In 2015 we managed to show results surpassing the market averages... The gross sales... slightly exceeded five billion rubles ($75 million), which means a 3 percent year-on-year growth, with a comparable increase in marginality. The group of companies' EBITDA reached 426 million rubles ($6.4 million), which is 59 percent higher than in the previous year."
Nevertheless, the group's net loss actually remained unchanged, amounting to 1.58 billion rubles ($23.7 million) in 2015, as compared to 1.6 billion ($24 million) in 2014. Meanwhile, the long-term debt hit 17 billion rubles ($263 million). Due to the debts that Prokhorov prolonged but did not pay off, RBC's stock value has continued shrinking.
RBC's market value is estimated at $60 million. However, should Mikhail Prokhorov be forced to sell the company, this amount may have no bearing on its actual price, as Russian media assets are often sold at non-market prices, regardless of their owners' and buyers' wishes.
According to Meduza's sources close to Prokhorov, the stronger the the authorities' pressure gets, the sooner he can be expected to lose interest in a particular project. Prokhorov said nothing about either the searches at ONEXIM or the possible sale of RBC. ONEXIM Group representatives deny pursuing any negotiations on the sale of the media holding.
Prokhorov's latest public statement was related to the world of sports: the businessman demonstrated a few moves from the ancient martial art called tescao to the players of Brooklyn Nets, which he bought in December 2015. According to Anton Krasovsky, Prokhorov also said he wanted to anchor a sports program on one of federal networks and even mentioned receiving an offer from the channel Match TV, which he declined.
The value of the Brooklyn Nets is estimated at $875 million and the team's home stadium, which Prokhorov also purchased, is worth another $825 million—several times more than he ever spent on RBC.
* * *
On Friday, May 13, the news company RBC fired its three top chief editors, Elizaveta Osetinskaya, Roman Badanin, and Maxim Soluys. For more on this story, see: The dismantling of the independent news organization ‘RBC’: How Russia gained and today lost a great source of news
This text was translated from Russian by Ksenia Khudadyan.