OMG, UFG Relatives of Russia’s new prime minister earned millions of dollars from a trust fund, but the numbers don’t add up

Last week, the website RBC published a letter from Polina Gerasimenko, a managing partner at “United Financial Group” (UFG), about the salary paid to Mikhail Mishustin when he worked at the company from 2008 to 2009. Gerasimenko’s letter continues a public dialogue unprecedented in modern Russia between the new prime minister and his opponents. The letter presents what is already a second version of how the Mishustin family amassed its fortune. The first explanation appeared in the newspaper Kommersant, a few days after the new prime minister’s appointment was confirmed. Deputy editor Dmitry Butrin called Mishustin a “conservative investor” who put his earnings as a successful entrepreneur into long-term deposits before working as a public servant. The new story offered by UFG contradicts the one presented in Kommersant, and both accounts come up short when examined closely.

What is UFG and what did Mishustin do there?

In 1994, Charles Ryan (a former associate and principal banker with the European Bank for Reconstruction and Development who advised officials in St. Petersburg on privatization matters) and Boris Fedorov (a former Russian deputy prime minister and finance minister) founded the United Financial Group. A couple of years later, the asset management firm “UFG Asset Management” was created within the organization. 

UFG was an important player in Russia’s investment market. Until 2008, Fedorov also represented minority shareholders on Gazprom’s board of directors. In 1998, he briefly served as the director of Russia’s State Tax Service, where he invited his long-time acquaintance Mikhail Mishustin to work, launching Mishustin’s career in public service. In 2008, six months before he died, Boris Fedorov hired Mishustin to a new position, this time at UFG, and the future prime minister resigned as head of Russia’s Federal Economic Zones Agency. Over the 2000s and 2010s, both UFG and UFG Asset Management were sold off to Deutsche Bank, although UFG’s founders retained some private equity funds and property.

Mishustin joined the company as a managing partner and immediately received a share in the business. He previously worked as a public servant and was unknown in the industry.

What UFG says about it

When it was founded, UFG’s controlling partners were Boris Fedorov, Charles Ryan, and Florian Fenner. In March 2008, Mikhail Mishustin joined their ranks, becoming the president of “UFG Capital Partners” and a managing partner at UFG Asset Management. As a partner, Mishustin was granted a 25-percent stake in all the company’s existing funds and an identical share of any funds created in the future while he worked at UFG. 

Why this looks suspicious

Studying Internet archives, Meduza learned that UFG Asset Management’s website listed only three staff as managing partners in December 2008 (nine months after Mishustin joined the company). Mishustin was identified only as UFG Asset Management’s president and a member of the Investment Advisory Committee at UFG Real Estate (where Mishustin’s wife, Vladlena, worked from 2009 until 2014). Given the importance of official status in the investment business, it seems very strange that UFG would have neglected to state Mishustin’s supposed role as a managing partner.

Incidentally, it took Polina Gerasimenko, who wrote the letter to RBC, far longer to become a managing partner at UFG. According to her official biography on UFG Asset Management’s website, she joined the company in 2001 but wasn’t listed online as a managing partner until 2014.

A source who worked for UFG at the time told Meduza that he strongly doubts Mishustin was hired as a partner and granted a 25-percent stake in UFG Asset Management’s funds. The source says Boris Fedorov and Charles Ryan weren’t known for such generosity: “They could have just hired Mishustin at a very good salary with possible partnership down the road.”

Sergey Aleksashenko, who managed the “Merrill Lynch” investment bank’s Russian office and then subsidiary bank from 2006 to 2008, says he has his suspicions, too. “I don’t see anything strange about [Mishustin] getting 25 percent of the income from managing new funds, but 25 percent for managing old funds looks weird,” Aleksashenko wrote on his website. “But the time Mishustin got to the [management company], all 100 [percent] of the income had been ‘allotted’ between the existing partners, so the only way to have allocated him a quarter of the earnings would have been to squeeze the others pretty severely.”

When UFG hired Mishustin on these remarkably lucrative terms, he was mostly unknown in the investment banking industry, one of Russia’s biggest investment bankers told the website The Bell.

Mishustin established a family trust in 2008 to manage his own assets, but it seems the trust appeared before he ever joined UFG

What UFG says about it

In April 2008, Mikhail Mishustin created a family trust for the beneficial ownership of all his UFG assets. The trust’s beneficiaries were Mishustin and his family. Through this trust, he owned 25-percent shares of the funds that already existed when he joined the company and became a founder with a 25-percent stake in all newly created funds.

In 2010, after going to work at Russia’s Federal Tax Service, Mishustin “transferred 100-percent ownership of the trust to his spouse, Vladlena Yurivna Mishustina, with an obligation to his UFG partners to sell these assets.” Selling these assets wasn’t immediately possible, however, and the sale dragged out as Vladlena Mishustina continued to earn income from these assets. In August 2013, because of new regulations, the trust was re-registered to Mishustin’s mother and sister, who then started collecting the trust money.

Why this looks suspicious

The Mishustin family’s income history doesn’t corroborate UFG’s version of events. 

Mishustin earned $2.5 million at UFG in 2009, as reported in 2010 by the Federal Tax Service (where Mishustin became director after two years in the private sector). Spokespeople for the agency told the newspaper Vedomosti that this sum of money was Misushtin’s salary as president of the “UFG group of companies” and the income he received “from consulting activities in this same company.” Tax officials mentioned no income from the family trust that UFG says Mishustin had already created by 2009. 

Mishustin’s wife told Vedomosti, however, that in 2009 she received roughly 12 million rubles ($187,140 by today’s exchange rate) in income from funds held since 2005 in a trust at “UFG Invest CJSC.” If this is the same trust already associated with the prime minister, it turns out that these assets belonged to Mishustin’s family before he ever took a job at UFG. 

In 2010, when UFG says the trust with Mishustin’s assets had already been transferred to his wife, Vladlena Mishustina’s income rose to 72 million rubles (now $1.1 million). In 2011, her earnings fell to just 6 million rubles ($93,600 today), before rebounding to 73.4 million rubles ($1.1 million) in 2012 and 149.5 million rubles ($2.3 million) in 2013. In 2014 (by which point UFG says Mishustin’s trust had been transferred to his mother and sister), Vladlena Mishustina declared a whopping 160 million rubles ($2.5 million) in earnings, including money received for selling assets from the family trust fund, according to an article published by Kommersant in January 2020 (which some observers have said was an attempt to explain and legitimize the origins of the new prime minister’s wealth). The Federal Tax Service has offered a similar explanation for Mishustina’s income, telling the press: “This amount includes funds received from installment payments on assets she sold in 2013 in accordance with the requirements of federal law N79-FZ [on public service].”

Mishustin’s wife, mother, and sister reportedly earned $33.6 million between 2010 and 2015, but this data cannot be verified

What UFG says

Over four years from 2010 to 2013, Vladlena Mishustina declared roughly $11.6 million in income from her family’s UFG trust fund. Between 2013 and 2015, Mikhail Mishustin’s mother, Luiza Mishustina, received $11.9 million from the UFG trust and his sister, Natalie Stenina, raked in $10.1 million over the same period. In other words, in the years from 2010 to 2015, Mishustin's three UFG family trust beneficiaries received $33.6 million. In later years, there were no new trust payments due to a lack of buyers for the remaining shares. It was only in 2019 that the family managed to sell off the last of its shares, and a complete picture of the trust fund’s calculations should be available by the end of 2020.

Why this looks suspicious

Meduza was unable to verify the reported UFG-trust-fund earnings declarations filed by Mishustin’s mother and sister.

Vladlena Mishustina’s official income between 2015 and 2017 remained at the 70-80-million-ruble level, which is roughly where it was when she and her husband still owned the family trust. In an article that attempts to explain the prime minister’s wealth, Kommersant reported that this money was a return on deposits for amounts received from selling assets in 2013 and 2014. But between 2010 and 2014 (the entire time UFG says she was collecting income from the trust fund), Vladlena Mishustina declared just 460 million rubles ($7.2 million) in earnings (and her husband declared another 112 million rubles ($1.8 million). In other words, even if this money had been deposited in its entirety at an unheard-of 10-percent annual interest rate, the Mishustins could only have earned 57 million rubles ($889,770) a year.

No matter how you add up the numbers, there’s no way to account for $33.6 million in income over the first half of the last decade. Perhaps what’s missing are the earnings from the assets managed since 2005 by “UFG Invest,” which the Federal Tax Service mentioned in its report on Vladlena Mishustina’s finances?

“Well, generally speaking, $33.6 million looks exorbitant for someone who worked at UFG for only a short time. Either he brought them [lucrative] deals or it’s something they don’t talk about aloud,” a former UFG employee told Meduza.