By Stephen Grey and Michele Kambas and Douglas Busvine
NICOSIA (Reuters) - When the Cyprus bank run began earlier this year, Russians set much of the pace. Documents seen by Reuters show that as the Mediterranean island headed towards financial meltdown in March, most notable among companies transferring money from the country's two main banks were Russians and East Europeans.
At least 3.6 billion euros ($4.67 billion) was removed in two weeks by big depositors, according to the documents. Though many companies listed initially appear obscure, a Reuters analysis shows a significant proportion are vehicles for foreign investors more at home in Moscow or Kiev than Nicosia.
The lists give an insight into the March crisis and how the tax haven, with a population of just 1.1 million, had amassed bank deposits that peaked at 72 billion euros - more than four times the island's GDP.
Prepared in April by private sector lenders Bank of Cyprus and Laiki Bank, and passed to lawmakers by the island's central bank, the documents list 5,323 transactions, most previously undisclosed. They detail transfers of 100,000 euros or more from Bank of Cyprus and Laiki Bank in the two weeks before Cyprus closed its banks on March 16 as it desperately negotiated an international rescue.
Reuters analyzed 129 companies that each transferred 5 million euros or more over the two-week period, collectively accounting for 1.9 billion euros. Of those companies, 95 could be traced.
Out of that group, 34 have links to Russia, five have links to Ukraine and two to Kazakhstan. The remainder comprise companies from Cyprus and other countries including tax havens such as the Cayman Islands, the British Virgin Islands and the Dutch Antilles. By value, more than half the transactions were made in dollars.
"This list verifies as well-founded Cyprus' reputation as an offshore economy used as a conduit for people, particularly Russians, to hold large sums of money, often to avoid paying tax and without too much scrutiny," said Michael McIntyre, professor of law and a tax expert at Wayne State University in the United States.
While the transfers appear mostly related to moving money out of Cyprus, Reuters could not establish where the funds went. It is possible some transfers were between banks within Cyprus.
Deposits that did flow out of the country had to be funded by emergency liquidity assistance from the European Central Bank, according to analysts. In effect, the ECB was paying for depositors, many of them Russian, to remove money from Cyprus before those depositors could be compelled to contribute to the international rescue of the island.
As debts threatened to overwhelm Cyprus early this year, money began to flow out of the country in fluctuating amounts. In January 1.7 billion euros left the island and a further 900 million in February, according to Central Bank of Cyprus figures.
The run accelerated in March as Cyprus found it had few friends among international institutions suffering bail-out fatigue. Many of the biggest transfers were by firms linked to Russia.
One of the largest was listed under the name of UCP Industrial Holdings, which is recorded as moving 80.2 million euros out of the Bank of Cyprus on March 7. UCP Industrial Holdings is part of United Capital Partners, a $3.5 billion Russian investment firm led by Ilya Sherbovich, a former head of investment at Deutsche Bank Russia and now a board director of the oil giant Rosneft.
Sherbovich, whose UCP fund recently acquired a stake in VKontakte, a fast-growing social network known as the "Russian Facebook", told Reuters: "Our group has several dozen legal entities, and some of them have accounts at Bank of Cyprus, but we don't use those as primary accounts.
"Anybody serious who works on financial markets wouldn't have left any significant amounts in the Cyprus banks. Very simple reason: Look at the share price chart of the Bank of Cyprus. It went to zero many months before the freeze happened."
He could not confirm the transaction listed in the Cypriot documents and said his companies did not keep big deposits in Cyprus. A spokeswoman for UCP said the transaction "must be a mistake or incorrect information".
On March 16, the Cyprus government shut banks amid discussions over imposing losses on depositors as the price for an international rescue. On the day before, a company called Trellas Enterprises moved 2 billion roubles ($63.85 million) out of Bank of Cyprus. Trellas Enterprises is majority-owned by Maxim Nogotkov, an entrepreneur who controls Svyaznoy, one of the biggest retailers of cell phones in Russia. Nogotkov, 36, is listed by Forbes as having a net worth of $1.3 billion.
Nogotkov confirmed that he controlled his mobile phone and banking interests in Russia through Trellas, but declined to comment on the transfer recorded in the bank list.
"We never comment on financial transfers or mergers and acquisitions activity," Nogotkov said by telephone.
Asked whether he was considering restructuring his business interests in light of Cyprus' financial meltdown, Nogotkov said: "Not actively. We don't have any urgent decisions to restructure (the business)."
Another company illustrating the Russia connection is O1 Properties Limited, which moved 10.1 million euros out of Bank of Cyprus. The company is controlled by Boris Mints, a Russian politician turned businessman, and this year bought the White Square business center in Moscow for $1 billion.
In the 1990s Mints was a state official handling issues relating to property and local authorities. From 2004 until 2012 he was chairman of the board of Otkritie Financial Corporation, which describes itself as Russia's largest independent financial group by assets. He is now president of the firm.
Mints was not available for comment. A spokesman for O1 Properties said: "O1 Properties keeps an account at the Bank of Cyprus to use it for regular business activities. We didn't know that Cyprus banks (would) shut. O1 Properties suffered losses. We do not comment (on the) total loss."
The troika of the European Commission, the European Central Bank and the International Monetary Fund insisted on tough terms for providing billions to stop Cyprus going bust. As talks progressed, speculation began to spread that any package for Cyprus would include levying money from bank depositors - an unprecedented move that came to be known as a bail in, rather than a bail out.
The impact of what politicians and officials said - and did not say - is reflected in the pattern of fund outflows.
On March 4, depositors withdrew 261 million euros from the two banks, according to the transfer lists. Late that day, Jeroen Dijsselbloem, president of the Eurogroup of finance ministers in the euro zone, was asked whether the rescue of Cyprus would affect bank depositors. He did not give a clear answer. The next day depositors yanked 315 million euros out of the banks.
Account holders were further unnerved on March 5 when Panicos Demetriades, the island's central bank governor, publicly acknowledged for the first time that depositors might lose some of their money. Over the next two days transfers leapt to 342 million euros and 491 million euros; the latter figure including the 80.2 million euros withdrawn by UCP Industrial Holdings.
As fears of losses mounted, Russians were not the only depositors who transferred large sums of money from the tax haven's banks. There were also Cypriot companies, individuals both Cypriot and foreign, and the occasional well-known international firm.
These included Apax Partners, a private equity group based in London. A subsidiary, Apax Mauritius Holdco Ltd, moved 68.8 million euros from the Bank of Cyprus on March 8. A spokeswoman for Apax Partners confirmed that it controlled Apax Mauritius Holdco but declined to comment further.
Previous news reports have noted how the Electricity Authority of Cyprus transferred 19 million euros out of Laiki Bank just days before it was closed. The documents seen by Reuters show the authority also transferred 22 million euros out of Bank of Cyprus between March 1 and 15.
The Electricity Authority said there was nothing unusual in the transfers. "This represented payments for heavy fuel oil ... our annual fuel costs are 650 million," said Costas Gavrielides, a spokesman for the authority.
While some readily identifiable companies appear on the lists of transfers, what is striking is the complex nature of many entries.
Glenidge Trading, which transferred 22.5 million euros out of the Bank of Cyprus, is registered in the British Virgin Islands, a tax haven often favored because of its British-based legal system and lack of transparency. Glenidge was the vehicle through which a Cypriot company called DCH Investment UA Limited acquired an interest this year in the Karavan group of shopping malls in Ukraine, according to local reports and Cypriot and Ukrainian corporate filings.
In turn DCH Investment UA Limited is controlled by one of Ukraine's richest men, Oleksander Yaroslavsky, according to corporate filings. A representative for Yaroslavsky did not respond to requests for comment about Glenidge and the Cypriot bank transfer.
Some companies that made several of the largest transfers could not be traced. They include Jarlath Limited, which moved 76 million euros, and Accent Delight International, which moved 27 million.
Also on the list is Rangeley Services Limited, which transferred 9.3 million euros from Bank of Cyprus on March 15. A company of that name is registered at an address near Leeds in Britain and owned by Jason Rangeley, who is described in company records as an agricultural contractor.
But when asked if the transfer of 9.3 million euros was anything to do with him, Jason Rangeley said: "No ... I wish it was."
Rangeley, a self-employed farmer, said he had set up his company because he had hoped to buy a few sheep. "It just never came off." He said his company is dormant. It remains unclear who owns the company involved in the Cypriot transfer. ($1 = 0.7705 euros) ($1 = 31.3252 Russian roubles)
(Stephen Grey and Michele Kambas reported from Nicosia; Douglas Busvine reported from Moscow. Additional reporting by Himanshu Ojha and Natalie Huet in London, Olga Sichkar in Moscow and Olzhas Auyezov in Kiev; Editing By Richard Woods and Simon Robinson)