World-Renowned Scientific University Quietly Untangles Itself From Russian Billionaire
(Article ©2019 RFE/RL, Inc., Radio Free Europe/Radio Liberty – rferl.org – Mike Eckel – Jan. 14, 2019 – article also appeared at rferl.org/a/mit-quietly-untangles-itself-from-russian-billionaire/29708417.html)
Nine years ago, Russian tycoon Viktor Vekselberg was welcomed with open arms by U.S. companies, universities, and even the government.
Washington’s relations with Moscow were being reset, and Vekselberg was heading a Kremlin-backed initiative called Skolkovo to develop high technology, research, and entrepreneurship. To complete the academic piece of his innovation center, dubbed Russia’s “Silicon Valley,” he needed to partner with a prominent U.S. academic institution.
The Massachusetts Institute of Technology (MIT) — one of the world’s most prestigious, and wealthiest, universities — embraced the effort, and entered a $300 million collaboration to found the Skolkovo Institute of Science and Technology, or Skoltech, outside the Russian capital.
MIT elected Vekselberg to its board of trustees in 2013, a move that appeared to cement a lasting relationship. But today you won’t find the Russian billionaire identified as a trustee.
The Cambridge, Massachusetts-based university quietly scrubbed Vekselberg from its board in 2018, following the U.S. Treasury Department’s decision to list him and his business group among the Russian officials, “oligarchs,” and companies to be penalized for advancing Moscow’s “malign activities.”
Responding to inquiries from RFE/RL, MIT said only that Vekselberg had been “suspended” from the board not long after the Treasury announcement on April 6.
The previously unreported development reveals an effort to shield MIT from legal problems raised by continuing to do business with someone on the U.S. blacklist. It also highlights how U.S. companies and organizations have sought to untangle themselves from such relationships amid the downward spiral in U.S.-Russian relations.
Vekselberg, who made his billions in Russia’s metals industry and whose Swiss-based investment company is known as Renova Group, was first elected as an MIT “term member” trustee in 2013. He was reelected two years later.
Seen as an influential, forward-thinking Russian business leader, Vekselberg’s relationship with MIT went back to at least 2010, when the university reached an agreement with the Russian government to “work together to assess opportunities for MIT to conduct educational and research activities in Russia.”
Central to that effort was a private Russian organization called the Skolkovo Foundation, which Vekselberg was made president of in June 2010.
With a mandate from then-President Dmitry Medvedev, the foundation spearheaded an effort to build a high-tech business and innovation park on Moscow’s southern outskirts.
A year later, Skolkovo announced that MIT would help set up a research and entrepreneurship university that mirrored the U.S. institution. Vekselberg told Bloomberg in 2013 that MIT was paid $300 million for its participation in the project, which resulted in Skoltech.
In Russia, Skolkovo was viewed as largely a pet project of Medvedev, who projected a youthful, “plugged-in” public persona. In 2013, however, a year after Vladimir Putin succeeded Medvedev and resumed the presidency, investigators raided Skolkovo, accusing two top officials of stealing more than $750,000. An opposition lawmaker was also implicated.
In the United States, meanwhile, there were doubts about Skolkovo’s real intentions. In an unusual opinion piece published in 2014, the FBI warned about foreign governments using private companies to acquire critical technologies.
The FBI singled out Skolkovo. “It is the intent of the FBI for the recipients of the bulletin about Skolkovo to use the information to inform their decision-making process when selecting foreign investors to protect their interests which results in safeguarding our nation’s interests,” the article said.
In 2015, Vekselberg was reelected as an MIT trustee, a gesture that came one year after Russia’s annexation of Ukraine’s Crimea Peninsula and amid worsening relations between Moscow and Washington.
The Crimean annexation prompted the United States to hit Moscow with economic sanctions. However, those targeted were mainly top government officials, rather than business leaders like Vekselberg.
At MIT, Vekselberg donated money, becoming a member of the school’s William Barton Rogers Society, a listing of elite donors who give larger amounts of money.
It’s unclear exactly how much money Vekselberg gave to MIT.
School records published online show Vekselberg became a member of that society in 2016, and gave at least $50,000 in the 2017-18 school year; the school does not give precise amounts for most larger donors. Its listing for the current fiscal year of 2019 does not record any donation from him. MIT’s alumni office did not respond to e-mails and phone calls asking for more detailed accounting of any donations.
Vekselberg’s name does not appear in the school’s Charter Society, which “recognizes those individuals whose philanthropic commitment to the Institute has reached or exceeded $1 million.”
In 2017, Vekselberg’s charity, also called Renova, announced a scholarship program for Russian students to study at MIT. Renova also paid for American undergraduate students to enroll at MIT, and study in Russia.
Expanded Blacklist, Added Scrutiny
In early 2018, the United States turned up the pressure on Vekselberg as it expanded its punitive measures against Russia. The U.S. Treasury Department later explained the effort, by saying it was due to Russia’s involvement in fighting in eastern Ukraine and Syria, attempts to subvert Western democracies, and malicious cyberactivities.
Sometime in March of that year, federal agents at a New York-area airport questioned Vekselberg and searched his electronic devices, according to U.S. media reports.
In April, Vekselberg and his Renova Group landed on the U.S. Treasury Department’s sanctions list, along with six other of Russia’s wealthiest and most powerful business leaders, including metals tycoon Oleg Deripaska and Aleksei Miller, the head of state-owned gas monopoly Gazprom.
Vekselberg “is being designated for operating in the energy sector of the Russian Federation economy,” the Treasury Department said in its announcement.
A month later, Vekselberg’s U.S.-based investment company, Columbus Nova, revealed that it had paid President Donald Trump’s longtime personal lawyer, Michael Cohen, as a consultant “regarding potential sources of capital and potential investments in real estate and other ventures.”
It later emerged that Vekselberg had attended Trump’s inauguration ceremony in Washington, D.C., in January 2017, a guest of his cousin Andrew Intrater, who heads Columbus Nova and who’d donated $250,000 to the inaugural committee, according to Federal Election Commission filings.
While Vekselberg’s profile was listed on the MIT’s Corporation board of trustees in past years, as of January 2019 all mention of him had been removed. The names of the other seven term trustees who were elected to the board in 2015, the same year Vekselberg was reelected, remain on the MIT website.
Among a comprehensive listing of the school’s trustees, going back to 1861, there is now no mention of Vekselberg.
“In April 2018, as a result of [the Treasury Department] adding Mr. Vekselberg to its specially designated nationals list, MIT reviewed its legal obligations and suspended Mr. Vekselberg’s Corporation membership,” Kimberly Allen, a MIT spokeswoman, told RFE/RL in an e-mail.
Allen declined to say whether the scholarship programs funded by Vekselberg were continuing, saying only that the funds donated to MIT prior to Vekselberg being added to the Treasury blacklist were not being returned.
She also said that MIT continued to collaborate on the Skoltech initiative, but declined further comment.
Officials with Renova Group in Moscow did not respond to multiple e-mails and phone calls seeking comment.
The Relationship Unravels
Brian O’Toole, a former analyst in the Treasury Department’s office overseeing sanctions, says that once Vekselberg was listed, MIT had to act right away. “They would have had to get rid of him quickly,” O’Toole tells RFE/RL. “The sanctions concern not just financial transactions, it’s any services and dealings with an individual…. And the duties he provides on behalf of MIT as a trustee.”
Ilya Zaslavskiy, a Russian researcher who once worked for the oil company TNK-BP, which was taken over by a consortium involving Vekselberg in the 2000s, says Vekselberg’s involvement in Skolkovo was never a business venture.
“He just did it to please the regime, to get tax breaks, to be part of the loyal elite. When it became expedient, under Dmitry Medvedev, Vekselberg jumped in to be one of the channels to try and establish external links. It was mostly done for prestige,” he says.
As for MIT, Zaslavskiy says the university’s approach appeared to be: “Even if it’s dodgy, in Russia, it’s not our business.
“As long as there is superficial due diligence in the West, if money was accepted in the West, then the attitude was, ‘Why not? Let’s do it.'” he says.
Carol Saivetz, an MIT professor who teaches Russian foreign policy in the school’s Security Studies Program, says that nine years ago it was understandable that MIT was interested in getting involved in a forward-looking program in Russia like Skolkovo and Skoltech.
In retrospect, the university may have been naive, says Saivetz, who’s affiliated with another MIT-Russia program that is unrelated to the Skolkovo project and is unaffected by the Vekselberg sanctions.
“Skolkovo needed the Western imprimatur of a major U.S. institution — it was going to be CalTech or MIT — and MIT said yes, and it benefited our students,” she says. “It all happened under Medvedev and the reset…. It was the heyday of the reset and everyone thought it was going to be fantastic.
“We just didn’t realize how many fingers they had in the pies,” she says of Vekselberg.
[featured image is file photo from another occasion]