Mystery Oligarch in a Seaside Town

Valery Kogan was entirely unknown in Israel up until a month ago, when he drove the local business and real-estate world crazy by purchasing five lots in Caesarea, a total of 11.5 dunams, for $17 million, on which to build an estate. Amid the media circus, it was reported that the Jewish businessman is connected to the secret services in Russia, and that he is close to former president Vladimir Putin. Some imagined Putin coming to visit his close friend and the two of them walking along the beach in Caesarea.

The aura of mystery increased when news came of the impressive rise in Kogan's wealth, at least according to the Russian magazine Finans. In 2007 it showed him in 499th place on the list of the richest people in Russia, worth $90 million. A year later he skipped up to 157th place with $600 million.

The only thing that is known for certain is that Kogan is connected to East Line, which operates Domodedovo International Airport, the largest airport in Russia, with 13-14 million people passing through each year. According to the company's Web site, Kogan is chairman of the board.

When it comes to other information about Kogan, there are serious questions. A source very familiar with the Russian government claimed last week that Kogan's wealth is estimated at only $100 million, and that he is not friendly with Putin. The source added that Kogan has only a few shares in East Line, and that the real owners prefer to have him serve as the frontman.

Officially, the owner of East Line is a holding company called FML Ltd., registered on the Isle of Man, which is located in the Irish Sea between Britain and Ireland and serves as a tax shelter. The owners of the company are two citizens of the island, Sean Keinars and Jane Penders, but the Russian source said that they apparently serve only as "straw men." A survey published last November by the international credit-rating company Standard & Poor's implies that the management of FML may warrant the attention of the Israel Money Laundering Prohibition Authority (IMPA).

Several Russian newspapers have written recently that Kogan's arrival in Israel may be related to attempts by the elements behind him to transfer sums of money of unknown origin from Russia to Israel, via companies that operate in tax shelters the world over. In addition, the journalists surmise that Kogan, even if he is not close to Putin, is quite close to government circles in Russia. A name that comes up in this connection is Boris Gromov, the governor of the Moscow region, who supports the Russian soccer team Saturn Ramenskoye. The fact that Arcadi Gaydamak also invests in the team raises questions about possible connections - at least some form of acquaintance - between him and Kogan.

Although Valery Kogan was unknown in Israel until recently, even in Russia people started taking a serious interest in him only after the news of the real estate deal, which made waves there as well.

"Since the deal went through, the Russian press has been all worked up, trying to find more information about him," said Alexander Kogan [no relation to Valery Kogan - S.S.], who works in the Russian-language press in Israel, last week. "Nobody knows how he really made all his money. Up until three years ago he was in the shadows. There are many mystery men in Russia who simply refuse to step into the spotlight."

Scandals in Russia

Valery Kogan, 57, married, a father of two and grandfather of two, lives in Moscow. He was born in Ukraine, apparently in a town called Mariupol (that was named Zhdanov during the Soviet era), on the banks of the Sea of Azov. According to the East Line Web site, Kogan served in the Soviet navy and worked in the diplomatic service. The site also mentions that he studied economics.

Finans, which has covered his business dealings in recent years, has written that Kogan, like many of the other oligarchs, made his money with the help of connections to the Russian administration during the period when the Soviet Union was divested of its assets. The magazine mentioned that his wealth increased greatly because of his flourishing airline business. East Line is also familiar in Russia thanks to Kogan's partner, oligarch Dmitry Kamenshchik - a rising star in the country's business firmament.

According to Russian press clippings, the company started out by opening a business for transporting merchandise between Russia and China. Kogan and Kamenshchik were involved over the years in several scandals, most of them actually associated with Kamenshchik. This may be because among the general public Kogan's name as the owner of East Line was revealed only three years ago, when the government tried to nationalize the Domodedovo airport.

One of the scandals that was reported is related to the company's real-estate transactions in the 1990s. One project in question involved the construction of single-family homes near Moscow on 60 acres of land that had housed a huge poultry farm. The owners of the farm sold the land to East Line, in exchange for having Kogan and Kamenshchik cover 50 percent of its debts, a sum of about $1.5 million. But Kogan and Kamenshchik managed to change the designation of the land from chicken runs to private residences and earned millions.

The Russian authorities claimed in 2000 that the two had carried out an underhanded deal, taking the land through deceitful methods, and changing its designation from agriculture to real estate with the help of government connections. In 2007 a lawsuit against the company was brought before the courts, and the matter is still under discussion in the judicial instances in Russia.

The first time the Russian public was exposed to Kogan and his East Line connections was in 2005. At the time a bitter conflict erupted between the authorities and the company regarding the leasing of the Domodedovo airport. The state threatened to nationalize the facility, although a 1997 agreement between the parties stated that the contract is valid for 75 years. In the end, the sides compromised on an annual payment of $1.2 million. However, the legal conflict regarding the question of ownership of the airport has yet to be resolved.

In the wake of the affair, Kogan also received support from a serious media figure: popular television personality Vladimir Solovyev, who has an investigative program and has in recent years been conducting a genuine crusade on behalf of Kogan and Kamenshchik. Solovyev claims that the Russian administration is persecuting East Line.

Since East Line received the airport, it has invested half a million dollars in it. According to Bank VTB, which is controlled by the Russian government, late in 2004 the company earned $450 million, with a net profit of $58 million. Early in 2005 the company issued bonds in order to build a new terminal at the facility.

In February 2004 the FML Ltd. holding company, which is behind East Line, received an international credit rating of B-. In a survey of FML carried out by Standard & Poor's in 2004, analyst Tatiana Kordyukova explained that the company's ranking was relatively limited - one reason being the functioning of its chairman. Said Kordyukova: "The ratings on East Line are constrained by the group's complex and nontransparent structure, the critical role the chairperson plays in most important matters concerning the company, a high reliance on its leasehold and operation of the Domodedovo airport complex, and limited access to capital markets." Four years later, the company's ranking remains B-.

Meanwhile in Caesarea, far from the eyes of the analysts, the planning committee of the Hof Hacarmel Regional Council approved the idea of combining all the lots purchased by Kogan. The demolition of the houses located on the land in question will soon get under way. Now Kogan has to submit the plans for the estate itself, which is being designed by Russian architects.

The new house, incidentally, will be registered in the name of Kogan's wife, Olga. The Web sites in Russia continue to report about the oligarch's huge future residence, emphasizing the fact that the entire project will cost about $50 million. Certain sites report that designers from Italy will be coming to Caesarea, and that the estate will include two houses, one of them three stories. The second, two-story building will have a spa. The estate will include tennis courts, and we can assume that the place will be well protected by means of guards and modern technology.

Alongside these descriptions, several Web sites expressed criticism of the construction carnival. One of them wrote, with no small degree of irony, that the time will come when Valery Kogan will build the first airport in Caesarea.

In the past two years, 15 Russian oligarchs have bought assets in Caesarea. Even before Valery Kogan's purchase, residents described the tempting offers they received for their homes; now they tell tall tales about how such offers increased after the deal was struck.

"There are many people showing an interest," said one resident last week. Another resident added: "Many representatives of oligarchs are walking around the neighborhood trying to find out who is selling, particularly on streets overlooking the sea. They come in luxury cars, impeccably dressed. In general, we're satisfied, because the value of the real estate is increasing. Anyone who doesn't want to continue living here can make a nice exit."

Some of the residents are actually not pleased with the new situation. Some are trying to keep Caesarea from turning into some alienated island, in total contrast to the vision of the founders, who in the 1960s hoped that there would be a flourishing communal life in the seaside town.

Those who are benefiting now, in any case, are the intermediaries. "Kogan bought at a price of $1.55 million per dunam (quarter acre), but now there's already an offer for $2.3 million," explains one, Avi Ben Yoav. "When they want to, these people work very fast. In one of the deals, the client arrived in the morning accompanied by his attorney, and at 4 P.M. a memorandum of agreement was signed between the buyer and the seller. That was a $2-million deal."