Nolan Kerschner, a U.S. property developer who came to Moscow to build condominiums, has a story to tell that could inspire fear in the hearts of foreign entrepreneurs doing business in Russia.
He claims that his Russian partner in the Rosinka home construction joint venture robbed him of an investment worth millions of dollars, with the apparent connivance of government officials.
But to listen to Oleg Zakharov, Kerschner's former partner, the Americans were nothing more than carpetbaggers. He has accused Kerschner's company, Connecticut-based Senie Kerschner International Housing Limited, of breaking investment promises and even embezzling money from an inexperienced Russian partner.
The two sides have been in open dispute since May of last year, when the Russian side ordered an audit of the company's books, and are now squaring off in court.
No matter who prevails, Rosinka has already joined the list of joint ventures troubled by disputes.
Senie Kerschner and the Zavyety Ilicha, or Lenin's Legacy, collective farm founded Rosinka in 1990 as a 50-50 joint venture. Rosinka's sole project was to build an expatriate housing complex in the Moscow suburb of Krasnogorsk.
According to Kerschner, the foreign side promised to arrange the financing, construction, marketing and property management, while the Russians would secure the land rights, provide infrastructure and deal with the legalities.
Despite the dispute, the project has survived. Rosinka presently leases 50 high-quality condominiums to the U.S. government and another 17 to multinational firms. Tenants pay an average $5,000 a month for each unit.
Kerschner, interviewed during a visit to Moscow, said that in October 1993, after his firm had invested $3.5 million, the Russian side illegally reregistered the firm as a fully-owned Russian joint-stock company.
"They've terminated our joint venture, so that the investment we've made, $3.5 million, is gone," he said. Kerschner and his associate Alan Senie have appealed to politicians and diplomats in Russia and the United States, among them Ambassador-at-Large Strobe Talbott and Ambassador Thomas Pickering.
But Zakharov, a representative of the collective farm and general director of the new Rosinka joint-stock company, maintains that he was forced to reregister the firm because Senie Kerschner never actually invested any capital, meaning that Russian tax authorities refused to recognize Rosinka as a joint venture.
He said that the Americans duped the Russian side into signing three agreements that acknowledged a $2.1 million capital contribution before it had actually been made. He said the money never was paid.
Both sides said they will battle the case at an international arbitration court in Stockholm, Sweden, but a decision could take several years.
Senie, contacted at his law office in Connecticut, said that the Russian partners had blatantly ignored the joint venture agreement, which provided for arbitration in Stockholm, when they reregistered Rosinka as a joint stock company.
"If they thought that we had done something improper they should have arbitrated instead of taking the law into their own hands," he said.
The Russian government effectively backed Zakharov in September, when Agriculture Minister Viktor Khlystun and Moscow Region Governor A. Tyazhlov sent a reply to an inquiry from U.S. Senator John Lieberman stating that "no investment was made from the American side."
Russian and Western auditing firms disagree on the Americans financial participation. A May 1993 report from Russian auditing firm Aranco concluded that no money had been deposited, but in June 1993, auditing firm Coopers and Lybrand found that Senie-Kerschner had not only deposited $2.1 million in the capital fund, but had invested another $1.7 million in the project.
Kerschner points to the 67 units that have already been built as evidence of American capital investment.
"How do they think the buildings got built?" he said. "Funny money?"
But Zakharov said that Rosinka was only able to begin construction after project manager Richard Williams made a $1.5 million revolving credit deal with U.S. firm Deluxe, the supplier of the prefabricated units, when Senie-Kerschner failed to arrange financing.
He claims that his Russian partner in the Rosinka home construction joint venture robbed him of an investment worth millions of dollars, with the apparent connivance of government officials.
But to listen to Oleg Zakharov, Kerschner's former partner, the Americans were nothing more than carpetbaggers. He has accused Kerschner's company, Connecticut-based Senie Kerschner International Housing Limited, of breaking investment promises and even embezzling money from an inexperienced Russian partner.
The two sides have been in open dispute since May of last year, when the Russian side ordered an audit of the company's books, and are now squaring off in court.
No matter who prevails, Rosinka has already joined the list of joint ventures troubled by disputes.
Senie Kerschner and the Zavyety Ilicha, or Lenin's Legacy, collective farm founded Rosinka in 1990 as a 50-50 joint venture. Rosinka's sole project was to build an expatriate housing complex in the Moscow suburb of Krasnogorsk.
According to Kerschner, the foreign side promised to arrange the financing, construction, marketing and property management, while the Russians would secure the land rights, provide infrastructure and deal with the legalities.
Despite the dispute, the project has survived. Rosinka presently leases 50 high-quality condominiums to the U.S. government and another 17 to multinational firms. Tenants pay an average $5,000 a month for each unit.
Kerschner, interviewed during a visit to Moscow, said that in October 1993, after his firm had invested $3.5 million, the Russian side illegally reregistered the firm as a fully-owned Russian joint-stock company.
"They've terminated our joint venture, so that the investment we've made, $3.5 million, is gone," he said. Kerschner and his associate Alan Senie have appealed to politicians and diplomats in Russia and the United States, among them Ambassador-at-Large Strobe Talbott and Ambassador Thomas Pickering.
But Zakharov, a representative of the collective farm and general director of the new Rosinka joint-stock company, maintains that he was forced to reregister the firm because Senie Kerschner never actually invested any capital, meaning that Russian tax authorities refused to recognize Rosinka as a joint venture.
He said that the Americans duped the Russian side into signing three agreements that acknowledged a $2.1 million capital contribution before it had actually been made. He said the money never was paid.
Both sides said they will battle the case at an international arbitration court in Stockholm, Sweden, but a decision could take several years.
Senie, contacted at his law office in Connecticut, said that the Russian partners had blatantly ignored the joint venture agreement, which provided for arbitration in Stockholm, when they reregistered Rosinka as a joint stock company.
"If they thought that we had done something improper they should have arbitrated instead of taking the law into their own hands," he said.
The Russian government effectively backed Zakharov in September, when Agriculture Minister Viktor Khlystun and Moscow Region Governor A. Tyazhlov sent a reply to an inquiry from U.S. Senator John Lieberman stating that "no investment was made from the American side."
Russian and Western auditing firms disagree on the Americans financial participation. A May 1993 report from Russian auditing firm Aranco concluded that no money had been deposited, but in June 1993, auditing firm Coopers and Lybrand found that Senie-Kerschner had not only deposited $2.1 million in the capital fund, but had invested another $1.7 million in the project.
Kerschner points to the 67 units that have already been built as evidence of American capital investment.
"How do they think the buildings got built?" he said. "Funny money?"
But Zakharov said that Rosinka was only able to begin construction after project manager Richard Williams made a $1.5 million revolving credit deal with U.S. firm Deluxe, the supplier of the prefabricated units, when Senie-Kerschner failed to arrange financing.
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