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U.S. Businessman Buys $70M Noga Debt

Nessim Gaon in November 2005 Martial Trezzini
One of the Russian government's longest-running and most colorful debt disputes, its 14-year-old battle with Swiss trading firm Noga, could be nearing an end after the intervention of a Russian-born U.S. businessman.

Alexander Kogan, president of St. Louis, Missouri-based IPD Capital, has negotiated to buy some $70 million worth of Noga's debt to three European banks. The move leaves Noga owner Nessim Gaon without the backing of major financial organizations in a claim that dates back to an abortive oil-for-food deal in 1991.

Contacted by telephone via his St. Louis office on Wednesday, Kogan said he was buying Noga's debts to France's BNP Paribas and Credit Lyonnais and Switzerland's Banque Cantonal de Geneve. In doing so, he was acting with the knowledge of Russia's Finance Ministry and Cleary Gottlieb Steen & Hamilton, an international law firm that advises the Russian government on debt issues, Kogan said.

The deal could be a key step toward ending a wide-ranging legal battle that has seen temporary seizure of high-profile Russian government assets such as the world's largest sailing ship and a collection of valuable paintings, and two fighter jets forced to flee the Paris Air Show for fear of seizure.

Press officials at the Finance Ministry, which oversees all Russia's internal and external debt, had no comment Tuesday, saying that all the ministry's foreign affairs spokespeople were in Algeria, where President Vladimir Putin was due to arrive Wednesday. Comments would appear on the Finance Ministry web site Thursday, a spokesman said.

Wednesday, International Women's Day, was a national holiday.

A spokeswoman at Cleary Gottlieb Steen & Hamilton's New York office on Wednesday declined to comment on whether the company was involved in settling Russian debt.

Kogan said the Noga debt was the latest in a series of settlements of Russian government debt he had taken part in, including that of Russia's debt to the Bank of America in 1999 and to Japan's Nomura Bank in 2001. Kogan said he could not disclose the specifics of previous deals.

"This is my usual business," Kogan said by telephone Wednesday.

To completely lay the Noga debt to rest, an official document would have to be obtained from the international arbitration court in Stockholm to the effect that Noga has no more claims against Russia, Kogan said.

"This, of course, is a matter for Russia's attorneys to take care of," Kogan said. He declined to estimate how long it would take to obtain such a document.

Kogan said he had been involved in attempts to settle the Noga debt since 2001. The agreement to buy the debt from the three banks was reached some time ago but has yet to be fully completed, he said.

Noga and its owner, Gaon, have claimed that Russian debt to the company dating from a 1991 oil-for-food deal has grown to $1.1 billion over the last 14 years. The original sum, however, was $300 million, Gaon said by telephone from Switzerland on Wednesday.

Gaon complained that Kogan had gone behind his back to buy up his debt to the banks.

"We kept telling the banks that once we resolve our issues with Russia, we would pay the debt back," Gaon said. "Why did Russia let [Kogan] do that? Is there any sense in doing that?"

Gaon said he still believed Russia should have paid him what he had demanded, but admitted that he was forced to seek some kind of settlement due to his current financial situation.

"If I don't settle now, I am finished," he said. "I am ready to sit down and negotiate. ... You [in Russia] have a lot of money now. It's not like it was before."

Although Kogan refused to specify the exact sum of the purchased debt, Gaon said he had owed the three banks' $68 million. Gaon said he had been forced to sell two luxurious hotels, the Noga Hilton in Geneva and the Hilton Cannes Hotel, due to financial troubles.

Gaon also said he had lost $40 million in legal expenses alone. "And Russia paid double that amount," he said.

Kogan, 47, is a native of Tomsk and a former employee of Tomskneft who emmigrated to the United States in 1991. As well as finance, Kogan said he had business interests in construction. His Air Structures American Technologies Inc., or ASATI, has built airdomes -- lightweight air-supported tent-like structures -- for Russian clients including Gazprom and the Emergency Situations Ministry, he said.

ASATI's Russian-language web site boasts a single, but impressive, testimonial. "What a hall! So functional, so beautiful," reads the comment attributed to Putin during a visit to an Emergency Situations Ministry venue. Another page on the web site suggests that the airdomes by ASATI could be used as recreational facilities across Russia.

The Noga dispute dates from contracts to supply consumer goods to the Soviet Union in 1991 in return for $1.5 billion, payable in oil. The oil deliveries were stopped abruptly a year later, however, prompting Noga to begin its long legal battle against the Russian government.

Beginning in the mid-1990s, Gaon won several court victories, largely because Russia had waived sovereign immunity when signing the contracts. Russia has claimed the debt was owed by the Soviet Union, not its successor state.

Gaon first persuaded courts in Switzerland and Luxembourg to freeze $700 million in Russian assets. Then, in 1997, the international arbitration court awarded him $23 million. But Gaon still was unable to receive the funds.

Noga went to the French courts and won a $63 million ruling in Paris in March 2000, under which the French authorities could seize Russian government assets over the debt. In May 2000, France started freezing government bank accounts, and in July 2000, the Sedov, the world's largest sailing ship, was seized in Brest, France. The seizures were later overturned by French courts.

In May 2001, a Paris court of appeals ruled in favor of Noga, and a month later, two Russian fighter jets at the Paris Air Show literally flew away to avoid seizure by French officials. In 2003, a French court ruled that the disputed Sukhoi and MiG were military planes and thus could not be seized and sold to cover debts.

As recently as in November 2005, Noga also succeeded in briefly arresting $1 billion collection of paintings from the Pushkin Museum of Fine Arts.

Staff Writer Maria Levitov contributed to this article.

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