Detained Russian’s Company Under Investigation for Fraud

The company of Russian businessman Sergei Polonsky, who is currently being detained by Cambodian authorities after a maritime incident off the coast of Preah Sihanouk province last week, is being investigated by the Russian Interior Ministry for fraud, according to a statement on the ministry’s website.

Mr. Polonsky, 40, formerly one of the richest men in Russia, was among three men charged on Wednesday with intentional violence following an incident on December 30, Preah Sihanouk Provincial Court prosecutor Mong Mony Chakrya said. However, Cambodian police and Mr. Polonsky’s representatives have given contradictory accounts about what led to his detention.

Mr. Polonsky is alleged to have abandoned an indebted real estate company in Russia and taken refuge on a tiny private island in Cambodia’s waters in recent months. Disgruntled investors, who claim Mr. Polonsky ran off with nearly $200 million of their money, are calling for him to be extradited from Cambodia.

Cambodian authorities’ version of what happened in the run-up to his arrest differs greatly from that offered in a statement from a public relations agency on behalf of Mr. Polonsky, which claims that Mr. Polonsky has been released on bail.

Mr. Mony Chakrya denied the claim outright, insisting that Mr. Polonsky was being held in pretrial detention, along with the two other Russians, at the provincial prison.

“I would like to deny the information in the statement. It is not true,” he said.

Var Chanthan, chief of the provincial military police’s criminal bureau, said Mr. Polonsky, along with his two companions Karachinsky, 24, and Baglay, 25, had attacked six Cambodians in their employ while on board a large cruiser near Koh Tang, an island more than 40 km to the southwest of Sihanoukville.

“They used a sharp knife and threatened to use violence on the six workers,” Mr. Chanthan said, referring to accounts given by the workers.

The Russians then ordered the workers to jump into the sea, he said, where a military police patrol boat soon rescued them.

Mr. Chanthan said that military police officials fired warning shots and chased the Russians’ boat, prompting them to jump into the water, where they were arrested.

A statement released Saturday by The PR Office—a public relations firm based in London—on behalf of Mr. Polonsky, however, said that the incident was a “misunderstanding,” which occurred when the Russians were “enjoying a private party on a small uninhabited island when their fireworks attracted attention from a nearby military base.”

Asked for identification, Mr. Polonsky, whose firm Potok owns a high-end tourism development on Koh Dek Kuol, then “offered to retrieve relevant documents from his private island nearby,” according to the account.

“Unfortunately, the language barrier between both parties led to some tension as Mr. Polonsky and his friends were taken to the military base by force,” the statement said.

An official at the Russian Embassy in Phnom Penh declined to comment about the case and referred questions to the lawyer for the three Russian nationals.

The lawyer, Virak Both, declined to comment on the specifics of the case, but confirmed that the three men were still in jail.

“I don’t have the document in my hand. On Tuesday, I will go to the court,” he said. “Now, he [Mr. Polonsky] is at the prison.”

Mr. Polonsky’s company, formerly named Mirax Group, was a massive real estate conglomerate until the global financial crisis.

“The company received RUB6 billion from the customers, then it froze the construction of the housing project, unfulfilling its obligations on contracts with customers. After that, the management made steps aimed at premeditated bankruptcy and liquidation,” the Russian Interior Ministry said in a statement in September.

According to a statement released by the allegedly defrauded investors in November, they are planning to file a class action lawsuit against Mr. Polonsky.

“We believe the investigation will ultimately lead to criminal charges. If so, we expect the prosecutor general of the Russian Federation to also initiate a ‘collective claim’ against Mirax and its successor company Potox on behalf of the investors to recover their lost funds,” the investors said.

Mr. Polonsky is in a long-running spat with fellow oligarch Alexander Lebedev, the owner of British newspaper The Independent, who punched Mr. Polonsky live on Russian television, apparently over allegations that Mr. Lebedev made about the poor quality of one of Mr. Polonsky’s construction projects.

Fred Harrison, a public relations consultant at Wellington International in London, said that he is representing the group of Russians who are pursuing Mr. Polonsky for allegedly taking millions of dollars they invested in a troubled real-estate project.

“They have asked the [Russian] prosecutor general to look into extradition,” Mr. Harrison said by telephone yesterday.

The Russian Interior Ministry in September announced that it had initiated a criminal investigation into unnamed employees of Mirax, Mr. Polonsky’s company.

Mr. Harrison said that as soon as Cambodian authorities were finished dealing with Mr. Polonsky, the investors wanted to “get him back to Moscow so we can get him to court.”

Mr. Harrison said that Mr. Polonsky had as much as $600 million in debts in Russia and elsewhere, but had “abandoned his business and left it in the hands of a banker in Moscow.”

“He took off to Cambodia [two or three months ago] to his private island,” he said.

© 2013, All rights reserved.