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How a Mega-Rich Oligarch Linked to Putin Derailed a Bay Area Homeless Shelter

Written by Matthew Kupfer, Matt SmithContributors Annie GausPublished Nov. 17, 2022 • 5:00am
In 2016, Russian Oligarch Suleyman Kerimov, who has direct ties to Russian President Vladimir Putin, purchased a former church in Russian Hill known as Nuestra Señora de Guadalupe. San Francisco officials had planned to use the vacant building as a homeless shelter before it was suddenly purchased by Kerimov. | Illustration by Lu Chen/The Standard

English

San Francisco politician Aaron Peskin thought he’d gotten lucky: He had just discovered that an unused Mission Revival church in San Francisco’s tony Russian Hill neighborhood was up for lease.

Towering over the intersection of Broadway and Mason Street, the marble-white historic sanctuary could be repurposed as a shelter for homeless people, fulfilling a campaign promise Peskin made when running for his third term on the Board of Supervisors. But as he was working to finalize lease negotiations with the owner of the church, known as Nuestra Señora de Guadalupe, he received a disheartening call.

“They had sold it to this unnamed party. And we were like, ‘What the hell?’” Peskin said. “We were told, ‘These people gave us a huge amount of money.’ To me, it made no sense.”

District 3 Supervisor Aaron Peskin speaks at a Board of Supervisors meeting in City Hall of San Francisco on May 3, 2022. | Camille Cohen/The Standard

Unbeknownst to Peskin, the church had been purchased in January 2016 by a venture capital firm with money from one of Russia’s richest men, Suleyman Kerimov, an oligarch and politician currently under U.S. sanctions, who Forbes Russia said was worth $4 billion as of April. 

Kerimov made news in May when the Fijian authorities, assisted by the FBI, seized the Amadea, his 348-foot yacht worth a reported $300 million. In April 2018, the U.S. Department of the Treasury added the oligarch to its sanctions list, and later froze $1 billion in assets in the United States, including a trust linked to the purchase of the Nuestra Señora de Guadalupe Church. 

That last outlay was part of roughly $28 million that investment managers working for Kerimov plowed into Bay Area startups.

The $300 Million yacht “Amadea” owned by Russian Oligarch Suleiman Kerimov was seized by Fijian law enforcement in May. | United States Department of Justice
Billionaire Suleyman Kerimov attends a UEFA Europe League group game in Moscow, on November 22, 2012. | AFP via Getty Images

According to hundreds of internal memos, emails and court records reviewed by The Standard, the investments flowed through a money pipeline that traced its way from San Francisco real estate and Silicon Valley tech ventures through offshore companies and U.S. financial and legal firms to a Delaware trust associated with Kerimov, a man who has a reputation in banking circles as a Kremlin proxy. 

The idea that a Russian oligarch could derail a homeless shelter in San Francisco may seem outlandish, but experts say it is just another example of the complications that can result when foreign billionaires plant their money in secret U.S. assets. They’re often more concerned with finding investments they can keep secret than they are in finding the best possible bargain, giving foreign oligarchs a reputation for overpaying and driving up real estate prices, experts said. 

“You are pricing out legit buyers,” said Lakshmi Kumar, policy director at Global Financial Integrity, a Washington-based think tank.

In the case of Nuestra Señora de Guadalupe, the city’s goal of using the site as a homeless shelter was thwarted after an investor working with Kerimov paid $7 million for the church, turning it into a tech event space that would eventually close down amid the Covid pandemic.  

Exteriors of the former Nuestra Señora de Guadalupe Church (Our Lady of Guadalupe Church), which became the Startup Temple. | Michaela Vatcheva for The Standard

But the ramifications of these investments go far beyond real estate issues. The ability of Russian billionaires to place their money in countries such as the United States helps reinforce the autocratic regime of President Vladimir Putin, whose power is linked to his ability to enrich, placate and, therefore, control a clique of multibillionaires. They are rewarded with power over political and business fiefdoms as long as they remain loyal to the Russian president. And U.S. banks, companies and operatives make it easier to hide, preserve and grow the wealth, experts said.

“If it’s propping up authoritarianism to flourish in another country, it weakens the United States,” Kumar said.

“Every citizen should be concerned that the United States, or whatever country they live in, is being used by foreign agents, oligarchs or dictators to wash their money and increase their investments,” added John Jay, a New York attorney specializing in international crime and corruption cases.

While The Standard was able to speak with a number of Kerimov’s business associates, we were unable to interview him directly despite attempts to contact him via telephone, email and through attorneys representing his interests.

Putting the ‘Russian’ in Russian Hill

Foreign billionaires don’t generally park their money in the U.S. without help from multiple enablers.

Kerimov’s investment went through GVA Capital, a company registered in the Cayman Islands and founded by Magomed Musaev and Pavel Cherkashin, two Russian businessmen who otherwise had little in common–aside from managing Kerimov’s investments.

Pavel Cherkashin, a Russian investor, inside the Startup Temple on Oct. 5, 2017. | Jason Henry
Pavel Cherkashin, a Russian investor, walks through the Startup Temple on Oct. 5, 2017. | Jason Henry

On the surface, GVA Capital looked much like any other swaggering Silicon Valley venture fund: A slick website showed Cherkashin styled as a comic book hero, and touted investments in early-stage startups ranging from a mobile marketing firm to an earbud concept created by the artist Will.i.am. 

In Russia, Cherkashin had built a career leading the Moscow offices of U.S. technology firms. In 2013, he moved to the Bay Area, where he says he got involved in the venture capital business. 

Pavel Cherkashin describes founding GVA Capital and his vision for the Nuestra Señora de Guadalupe Church in an interview on Oct. 11, 2022. | Video by Jesse Rogala

Musaev, president of the Russian edition of Forbes magazine, presents himself as a venture capitalist and philanthropist. But perhaps more notable are his political affiliations: His father-in-law is the former Kremlin-appointed provincial governor of the Russian state of Dagestan. Musaev declined to comment for this story.

“We are not your daddy’s typical VC firm,” boasted GVA Capital on its website, citing strong international ties without naming the source of its funds.

Among its major funders was Kerimov—one of the world’s richest men and a member of the Russian parliament’s upper house.

A close ally of Putin, Kerimov also has ties to a financial network believed to hold the Russian leader’s wealth, according to the European Union and previous reporting by the International Consortium of Investigative Journalists.

Russian billionaire Suleyman Kerimov (far left) greets Turkish President Tayyip Erdogan (center left) as Russian President Vladimir Putin (center right) and Russian Grand Mufti Ravil Gainutdin (far right) look on Sept. 23, 2015, in Moscow. | Sasha Mordovets/Getty Images
Exteriors of the former Nuestra Señora de Guadalupe Church, which became the Startup Temple. | Michaela Vatcheva for The Standard

International media has repeatedly tied the oligarch to bank transfers stashing his money abroad, and even giving money to political figures. He’s done this with the help of the same offshore network of companies deployed in buying Nuestra Señora de Guadalupe.

One Kerimov-linked front company involved in buying the San Francisco church, for example, was separately used to route $8 million to the husband of one of the biggest donors to the U.K.’s Conservative Party. The bank transfer fueled concerns two years ago over whether a Putin crony had sought to meddle in British politics. It was made under the name of Definition Services Inc., the same firm used for Kerimov’s San Francisco investment.

(How did Kerimov-linked companies invest in local concerns? The Standard followed the money.)

According to a GVA internal document, Definition Services is controlled by Heritage Trust, which the U.S. Treasury says “was formed in July 2017 for the purpose of holding and managing Kerimov’s U.S.-based assets.”

In a Nov. 16 email, Kasowitz Benson Torres, a law firm employed by Definition Services, denied that the company was connected to the oligarch.

In an interview with The Standard, Cherkashin defended accepting money from Kerimov, who at the time was not under U.S. sanctions.

Investing in Silicon Valley is “the sacred right of every human being on Earth,” Cherkashin added by way of rationale.

A recreational area inside the Startup Temple on Oct. 5, 2017. | Jason Henry

Kerimov’s investments made their way to multiple tech startups, leaked documents show. The most successful of those was a $20 million seed investment into a self-driving car technology startup called Luminar Technologies Inc.

“We just talked to Suleyman’s fund managers and got confirmation that all issues and concerns are taken away,” Cherkashin wrote in a September 2016 email to Austin Russell, the youthful founder of Luminar Technologies, Inc.

An IPO turned that into an investment valued in the nine figures. According to the latest information available to The Standard, the shares are valued at over $150 million. The Standard repeatedly reached out to Luminar and its founder for comment on the company’s connection with Kerimov, but did not receive a reply.

Other, smaller bets had more modest returns, with $4.8 million invested between 2015 and 2017 in 14 companies nearly doubling to $8.6 million by 2018, according to GVA Capital’s own internal estimates.

But the Nuestra Señora de Guadalupe church, located at 906 Broadway St., wasn’t simply a repository for Kerimov’s funds. 

The church, which Cherkashin dubbed Startup Temple, was envisioned as a startup incubator and event venue catering to the red-hot tech scene—a place for investors and startup founders to mingle, party and even cohabitate in a former church rectory that was converted to a co-living space. 

People enjoy a dance party at the Startup Temple in 2017. | Daniel Lee

The idea was that the so-called Startup Temple would be a boon for Kerimov’s future business ventures. “I convinced him by saying that this will turn into a place where we can [get to] know everybody in the city,” Cherkashin said.

Pavel Cherkashin reflects on working with Suleyman Kerimov in an interview at The San Francisco Standard’s office on Oct. 11, 2022. | Video by Jesse Rogala

In a January 2017 column in App Developer Magazine, Cherkashin compared startup culture to a “religious experience” and beseeched readers to build an IRS-approved “Church of Hacktivism,” offering to cover costs and provide event space. 

That year, the Startup Temple hosted a series of techie-friendly events including a TEDx talk, a rave and an “intercontinental startup battle” pitting California entrepreneurs against Eastern European counterparts.

But in the end, the project made little business sense—particularly for Kerimov, Cherkashin admitted.

Capital Flight Capital

While it may not be as famous as New York or Miami, the San Francisco Bay Area is a top destination for foreign capital flight.

The new apartment complexes dotting the former Hunters Point Naval Shipyard, for example, are repositories for millions of dollars from Chinese citizens seeking a safe haven for their wealth. 

Pavlo Lazarenko, a former prime minister of Ukraine who was convicted of money laundering and fraud by the U.S. District Court for the Northern District of California in 2004, once owned a Tiburon mansion estate that had previously belonged to Eddie Murphy. The family of his alleged henchman, businessman Peter Kiritchenko, has owned commercial and residential properties in neighborhoods all over San Francisco.

There’s “a lot of Russian money in Silicon Valley. A ton,” said Leonard Grayver, a California venture capital attorney who is involved in GVA Capital, the company that helped Kerimov invest. Grayver says he has worked on investments involving around half of the billionaires in Russia.

As things stand, oligarchs and others can count on commitments to financial secrecy from lawyers, real estate agents, hedge fund managers and some investment advisors because these professionals don’t have to report suspicious transactions in the way banks do, according to a recent report by the German Marshall Fund, a Washington, D.C., think tank.

Russian billionaire Suleyman Kerimov attends a meeting on April 14, 2021, in Dagestan, Russia. | Mikhail Svetlov/Getty Images

One reason why oligarchs look to Silicon Valley is because startups are particularly easy places to stash money in secret, according to Gary Kalman, executive director of the U.S. operations of Transparency International, a Berlin based anti-corruption group.

Venture capital firms “have absolutely no anti-money laundering responsibilities to check the source of funds, or who’s giving the money,” he said. All they have to do is make sure the investor isn’t under sanctions.

That creates other serious worries.

“There’s no such thing as an independent Russian oligarch,” said Casey Michel, a researcher and analyst focused on financial crime. “These are all figures whose wealth is retained solely through the good graces of the Kremlin and solely through their willingness to do whatever it is that Putin wants.”

Michel says that investments here can help oligarchs to establish a footprint in the U.S. and gain access to other companies—and sometimes even politicians. Kerimov has had a notable footprint in the United States for decades.

See Also

The Special Counsel investigation into Russian interference into the 2016 elections scrutinized the actions of Rinat Akhmetshin, a Kerimov-linked Washington, D.C., operative who attended an infamous June 2016 Trump Tower meeting involving Donald Trump Jr. 

Rinat Akhmetshin (left) arrives at the Capitol for a closed door meeting with the House Intelligence Committee in Washington, DC. on Nov. 13, 2017. | Alex Wong/Getty Images

Emails submitted as exhibits in an unrelated lawsuit show that Akhmetshin in 2011 was coordinating his lobbying activities with Switzerland-based Nariman Gadzhiev, who is Kerimov’s nephew. In a phone conversation with The Standard, Gadzhiev said that Akhmetshin was not answering to him, but had merely included him in an email chain regarding his activities.

Gadzhiev, it so happens, also supervised the Kerimov-lined investment into the Nuestra Señora de Guadalupe church, according to records reviewed by The Standard. In an interview, Gadzhiev said the Kerimov money was initially meant for buying the church as an ordinary real estate investment. On Nov. 14, the U.S. Treasury announced sanctions against Gadzhiev—whom it described in a press release as “a primary financial facilitator for Kerimov”—along with Kerimov’s wife, children and alleged proxies.

The Best-Laid Plans

Not long after the purchase of the San Francisco church, Kerimov was detained in France on charges connected to an alleged scheme where Kerimov used money transfers and smuggled suitcases of cash, each worth up to $20 million, into France to purchase villas on the French Riviera. While these charges were eventually dropped, France would later investigate him for suspected tax fraud.

At first, Kerimov’s San Francisco investments were not clearly affected by the sanctions the U.S. Treasury instated in 2018: They were registered to an offshore company he didn’t directly own. But the designation raised risks for GVA Capital; the firm received legal advice on how not to violate the restrictions, according to company records reviewed by The Standard.

This June, following Russia’s full-scale invasion of Ukraine, the U.S. made good on promises there would be severe consequences by launching a global effort to identify and freeze the assets of oligarchs friendly to Putin. Heritage Trust, the Delaware trust controlling Kerimov’s San Francisco investments, was subsequently blocked following what the U.S. Treasury described as an “extensive enforcement investigation.”

Russian President Vladimir Putin is seen on a screen in Moscow as he addresses a rally marking the annexation of four regions of Ukraine on Sept. 30, 2022. | Alexander Nemenov/AFP via Getty Images

As a result, the Luminar shares are also frozen. But, in a pattern familiar to observers of oligarchs and their money, there was another layer to the asset structure: Heritage itself was co-owned by another Delaware trust that benefited members of Kerimov’s family, according to a confidential email from an investment manager involved in helping the oligarch comply with sanctions. 

In a phone call with The Standard, Gadzhiev decried the sanctions.

“Wealthy individuals are suffering, businesses are suffering, but does it impact policy? Definitely not, as you can see,” he said. “Russia is a different political system. It’s independent from capital.”

Two weeks later, he himself was on the blacklist. 

Vacant Church 

Today, the pews in Nuestra Señora de Guadalupe Church sit empty. But the stained glass windows provide a view into the consequences of oligarchic investments for American cities largely unaware of them.

The church may have barely been a drop in Kerimov’s vast portfolio, but the investment made waves in San Francisco. After the Kerimov-backed venture capital firm bought the church out from under negotiations to turn it into a shelter, it ultimately took three more years to find another location, delaying the growing unhoused population’s access to critical services.

Exteriors of the former Nuestra Señora de Guadalupe Church (Our Lady of Guadalupe Church). | Michaela Vatcheva for The Standard
Melvin King organizes his belongings next to his bed at the homeless shelter on Pier 80 on April 1, 2016. | Paul Chinn/The SF Chronicle via Getty Images

“Had it not been for this huge infusion of cash, it would have been a navigation center somewhere around 2016,” Peskin told The Standard.

But, in a turnabout, it was Peskin who ended up dealing a blow to Kerimov’s investment upside. A strong supporter of historical preservation and an opponent of much construction in his district, the supervisor led a successful 2019 effort to restrict the church’s owners from making changes to the interior. 

Cherkashin then scaled back the concept he’d pitched Kerimov’s Swiss investment manager, transitioning from a tech incubator to a nonprofit event venue he rechristened 906 World Cultural Center. By 2020, the Startup Temple was planning to host weddings and school proms in addition to business networking events.

After three to four years of struggling, the company ran out of money, with Covid lockdowns pushing the meet-and-greet-focused Startup Temple to close down. 

“Then I gave up,” Cherkashin said. The building is now under foreclosure and is going to be sold. 

Pavel Cherkashin speaks during an interview at The San Francisco Standard’s office on Oct. 11, 2022. | Sophie Bearman/The Standard

So far, the historic church hasn’t found a buyer. The co-living space continues to operate in the adjacent former rectory. 

A fading sign on the front door offers little hint of the building’s strange path from defunct house of worship to Russian oligarch-funded tech space and back again.

Despite it all, Cherkashin hasn’t entirely given up on Nuestra Señora de Guadalupe.

“I’m still dreaming about buying it back and turning it into something,” he said. He says he’ll continue soliciting Russian money, just not from oligarchs.

As for Peskin, he feels vindicated.

“I always had my suspicions that this was some oligarch money,” he told The Standard. “And this solves that mystery in my mind.”

The Organized Crime and Corruption Reporting Project contributed reporting to this story.

English

Matthew Kupfer can be reached at [email protected]
Matt Smith can be reached at [email protected]


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