“Colossal criminality” behind shady Russian billionaire NBA owner’s rise to power

Wai Sallas

Brooklyn Nets owner and Russian oligarch Mikhail Prokhorov is trying to sell a share of the Nets. Compared to his meteoric rise to unimaginable wealth, this should be easy.

Despite the Nets owning the worst record in basketball this season, Brooklyn does not hold the number one pick in the draft. The Atlantic division doormat does not even have a first round pick–for the second straight year. If you think that’s criminal, wait until you hear how Nets owner, Russian Mikhail Prokhorov made his [B]illions.

Prokhorov’s name has been in the news of late as he attempts to find a suitor for a 49% stake in his NBA franchise. It wasn’t so long ago that the Russian billionaire was guaranteeing a championship. Paying whatever it took to get a roster of stars to win, now. It never panned out. This team will flounder near the bottom for the foreseeable future with no star and no assets. No buyer has come forward yet. The Russian oligarch at this point probably could care less. After almost 20 years of buying and selling assets, history has shown he usually ends up on top.

For most of us, the only things we know about the downfall of the Soviet Union is the image of the Berlin Wall crumbling. We’ve seen the videos on YouTube of David Hasselhoff getting a bunch of Germans in a lather while the newly re-unified Germany partied. Americans rejoiced the end of the Cold War. Capitalism had won.

In Russia, it was an entirely different story. The country, expecting financial help from the West, received nothing. The country’s Head of State dove in and out of depression while drowning in booze. Its people expecting a magical change overnight watched as they way of living remained unchanged. The country was close to being completely and utterly broke.

For those of us who have been broke, it’s not fun. In fact, any question about what you would and wouldn’t do to climb out of that hole are hypotheticals until you’ve been there.

The Russian government started selling assets to Russian banks, hoping they would reinvest in the country. Instead, these bankers began stripping those assets and moving them out of the country. The outsourcing of Russia’s commodities only made the desperation grow.

From The New Yorker:

In this febrile atmosphere, as Russia veered between a success always just around the corner and the reality of a plunging economy, there emerged, in 1995, the bones of a plan that became the most important element in the reform process — what has come to be called ‘loans for shares.’

Regarded today almost universally as an act of colossal criminality, it has defined the Russian economy and Russian business to the world. It completed Boris Yeltsin’s retreat into an isolation from his country and created billionaires without the tedious process of building wealth from below. For Anatoly Chubais, it was a ‘pact with the devil.”’

Vladimir Potanin was the lynchpin of this plan. His man in the shadows was Prokhorov. Together, they used leverage from their connections of running one of the main Russian banks used to work with the Western world. When Russia looked to sell Norilsk Nickel, the biggest nickel producer in the world with profits of $400 million per year, and a valuation of $4 billion, the two pounced like a tiger on a gazelle.

In details that are still questionable to say the least, Potanin and Prokhorov bid $170 million to take over ownership. That was less than half of what the business made annually. Of course it was accepted. While the Russian government turned down a bid from a rival bank for more than double. Did we forget to mention that Potanin and Prokhorov’s business Oneksimbank ran the auction?

Potanin and Prokhorov stripped down Norilsk Nickel. Assets were either sold off or streamlined.  Within 10 years time, a $400 million a year business was pulling in $10 billion in revenue.

In a decade, Prokhorov went from rising star in the banking world to one of the richest men in Russia. Prokhorov did not take it for granted. He bought multiple yachts and palaces around the world. His spare time was split between extreme sports, entertaining a revolving door of beautiful women, and continuing to grow his wealth. Even when involved in shady encounters with the police, Prokhorov made money.

Prokhorov was arrested in Courchevel, France on suspicion of soliciting prostitutes. A three-day debauchery would later be described as “one big orgy.”  It all came to a halt when 50 police officers crashed the party. His partner Potanin used to it to oust Prokhorov out of the company. A year later, the Great Recession hit. Prokhorov, now safely out of danger, saw his wealth rise to $13.5 billion.

He was now the richest man in Russia.

After making a big splash in America when he bought the Nets, the borough has seen less and less of the Russian oligarch. A few years ago, he declared the Nets would win a championship in five years or “I’ll get married.” I doubt he has any inkling to do so. Nor will anyone hold him to that. With his intent to sell 49% of his ownership, the vigor of winning now has dissipated. If history proves anything though, there’s no doubt Prokhorov will find a way to end up on top, with or without “models” by his side.

Join 1 other in the discussion

to comment