In 2005, the founders of Norebo, Magnus Roth and Vitaly Orlov, wanted to buy the Chukchi company Tralflot from Roman Abramovich. But the billionaire pulled out of the negotiations when he learned that their partner Alexander Tugushev was on trial for fraud. Magnus Roth, who estimated the damage of the failed deal at $150 million, told about it in the High Court of London.
In the beginning of 2005 the founders of the largest fish holding company Norebo negotiated with the billionaire and Governor of Chukotka Roman Abramovich on the purchase of Tralflot from the latter, Magnus Roth, one of the founders of Norebo, told the High Court in London. He gave his testimony (Forbes has a copy of the defense response) as part of the hearings on the claim of former official Alexander Tugushev.
In London, Tugushev is trying to prove that he is entitled to a third of Norebo shares. The defendants in the suit are also Vitaly Orlov #121, a billionaire who now owns 100% of Norebo, and Andrei Petrik, an employee of the holding company. All three, Tugushev claims, stole his stake in Norebo.
Aborted negotiations
At the time of negotiations with Abramovich, the Norebo holding company did not yet exist. The Russian business was formalized in the holding company Almor Atlantic, the company Ocean Trawlers, which bought fish from Russian fishermen, was operating in Norway. According to Roth’s statement in the London court, negotiations with Abramovich were at a preliminary stage, but when the billionaire learned about Orlov and Roth’s connection with Tugushev, his representatives curtailed negotiations. Tugushev was then under arrest for fraud and extortion – this embarrassed the head of Chukotka and his representatives, Roth said.
Tugushev was arrested in June 2004, at which time he headed the commission for the liquidation of the main fishing agency – the State Fishery Agency. Pollux, a Far Eastern company, accused the official of promising to give it quotas of 50,000 tons of pollock for a $3.7 million bribe, but Pollux only received a quota of 7,000 tons. In February 2007, a court found Tugushev guilty of extortion and fraud. The former official received six years in prison.
Roman Abramovich’s representative did not confirm Forbes the negotiations. Forbes did not manage to find any connection of the businessman with JSC Tralflot, which is now registered not in Chukotka, but in the Khabarovsk territory. According to SPARK-Interfax, Maxim Petrushin and Sergey Popov have been co-owners of Tralflot since 2012. “Tralflot is part of their holding company Sigma Marine Technology. Forbes reached out to Sigma Marine Technology for a comment.
Three in Norway, one in jail
Roth’s testimony in London sheds light on the story of Norebo’s creation, previously known only from rare interviews with co-inventors. In a 2017 interview with Forbes, Tugushev revealed that he had been a full partner with Orlov and Roth since 1997. Roth confirms this in testimony to the London court. According to him, on Oct. 20, 1997, in the Norwegian town of Drobak, all three signed an agreement to form a joint venture, which they agreed to own in equal shares. The joint venture initially included Ocean Trawlers, created by Roth and Orlov, as well as Tugushev’s Russian company Karat. In 2001 Carat and other Russian assets of the partners were merged into the holding company Almor Atlantic. Tugushev had a direct 25.38% stake in it. Although, as Roth says in his testimony, it was understood that Almor Atlantic was part of a joint venture, which means that Tugushev owns a third in it. The same Roth stake was held by Orlov’s relative Dmitry Romanovsky.
In 2003, Tugushev went to work for the State Fisheries Committee. “Then in 2003, he [Tugushev] completely withdrew from our joint business, as required by Russian law,” Orlov claimed in an interview. – So since Tugushev went into state service, we don’t have any joint business.” Tugushev did transfer his shares to Orlov and other individuals, Roth acknowledged in his testimony, but stipulated that even so, he always understood that the Russian business was part of the joint venture established in 1997 in Norway, which means that Tugushev owns a third of it.
Tugushev was released from prison in 2009 and, according to Roth, returned to work in Russian companies that had by then been merged into the Norebo holding company. In 2010-2011, there was talk of reassigning a third in those assets to Tugushev. But Roth says that the partners decided to wait, so that his ties with Tugushev would not affect his business negatively, as was the case with Abramovich. In addition, Norebo began to actively buy up northern and far eastern fish companies.
Roth’s testimony states that under the provisions of the 1997 agreement, after his release, Tugushev could not claim the same share in the joint venture that he had before his arrest. First, between 2004 and 2009, Tugushev did not participate in any way in the management and development of the assets of the joint venture. This means that he has to compensate Orlov and Roth for their efforts in managing the company by reducing his share. Second, if the actions of one of the partners cause damage to the joint venture, his share is also reduced by the amount of the damage. As an example, Roth cites the thwarted deal with Abramovich. According to Roth, the deal resulted in a $150 million loss for the business. The partners had planned to pay $50 million for Tralflot and believed that the positive financial effect from the acquisition of the company would be about $200 million.
Norebo, which was contacted by Forbes on Thursday, could not provide Forbes with an official comment on Roth’s testimony at the time of publication. “We are pleased that Magnus Roth has confirmed that Alexander Tugushev is entitled to one-third interest in the joint venture founded by Tugushev, Roth and Orlov,” his representative told Forbes of Tugushev’s comment. – This is a significant step forward in the case against Vitaly Orlov. Alexander Tugushev is looking forward to pursuing his claim in the High Court in London for full restoration of his rights and compensation.”
Divorce in Hong Kong
The London lawsuit is not the only one involving Vitaly Orlov. In 2016, he became the sole owner of Norebo by buying out Magnus Roth’s 33% stake in the group’s parent company, Norebo Holding. “We don’t communicate much now,” Orlov said of Roth. But the relationship between the former partners is more complicated than that comment might suggest, as the Hong Kong High Court is hearing their dispute over Three Towns Capital. Roth and Orlov founded Three Towns Capital in 2006 with the aim of making it a single holding company for the entire business. But these plans were never implemented. The Russian government prohibited foreign companies from controlling assets in the fishing industry. And in 2008 the Russian assets were transferred from Three Towns Capital to Norebo.
Orlov and Roth each own 50 percent of Three Towns Capital. Among its assets are the maritime agency Katla Seafood Canaria, the Rainbow Reefers group, which owns refrigerated ships, and the Lithuanian fishing company Baltlanta UAB.
What is the nature of the mutual claims? In court in Hong Kong, Roth accused Orlov of hiding the company’s true state of affairs from him. Orlov, in turn, claimed that Roth fired employees of Three Towns Capital and took control of the company. The Hong Kong High Court recently ordered Roth to buy back his stake in Three Towns Capital from Orlov. “What was once a successful, harmonious business partnership has fallen into such disrepair that it has caused an abundance of allegations and counter-allegations, each participant in this process having a completely different, different view of what happened and what is happening,” Judge Coleman said in his ruling, which compared the partners’ litigation to a divorce proceeding.