Glen Owen Our ref: JC/LEG18/1

Mail on Sunday jonathan.coad@keystonelaw.co.uk

12 May 2018

Dear Mr Owen,

Re: Denials issued by the Legatum Group

I act for the Legatum Group (“Legatum”) and its founder Christopher Chandler.

In the light of its contentious content I have been instructed to respond to your email sent to James
Bethell at 5:53 yesterday evening (“the Email”).

The two denials at issue

The two denials issued by Legatum cited in the Email are as follows:

1. “Gazprom Shares were widely held by major institutional investors. One is not in cahoots
with Putin merely because one owns publicly listed shares of a Russian company. To
suggest that Sovereign was instrumental in the ‘installation’ of anyone at Gazprom is a
verifiable misrepresentation”. (The First Denial);

2. “Christopher Chandler has no connection, and has never had any connection with the
Russian State in any capacity whatsoever”. (The Second Denial).

The Clermont Document

You sent via the Email a link to a document entitled “The Goodness of Business” which was
published in April this year by Clermont. You should note that neither Legatum nor Christopher
Chandler is associated with Clermont, the author of the document they cite, and bear no
responsibility for its contents. Clermont is Richard Chandler’s company and therefore if you have
questions about it or anything it publishes you should address any such questions to him.
The Clermont piece includes an opening message from Richard Chandler, who is the elder brother
of my client, Christopher Chandler. In the event that Richard Chandler played any part in writing
the passage at issue, he did so trying to recollect events which took place some seventeen years
previously. His approach was most likely an attempt to make the story simpler as the point of the
document appears to be to highlight the importance of corporate governance, not the minute
details of how and with whom Sovereign worked to call for change.
I presume that the sentences on which you alight as a basis for your assertion that this document
“flatly contradicts the Legatum’s denials” is as follows; “After producing several papers outlining
Sovereign’s vision for reform for Gazprom, Sovereign eventually appeals directly to President
Vladimir Putin. As a result, Alexey Miller, a young economist and close ally of the President,
replaced Gazprom CEO Ren Vyakhirev in 2001”.

With the utmost respect to Richard Chandler and Clermont, because he left out the details of how
Sovereign worked in Russia and omitted the role played by Boris Fyodorov and UFG, this is
therefore not an accurate recollection of the events at issue, from so long ago. Even if it were,
then all that it says is that Sovereign appeals to President Putin that Gazprom needs to be
reformed; not that Alexey Miller should be “installed” at its head. It has been previously made clear
that my client was unaware of Alexei Miller’s existence prior to his appointment at Gazprom, and
that this appointment was made without his knowledge or involvement.

Moreover, Sovereign was merely one among a number of minority shareholders pressing for
reform of Gazprom. The reference to an “appeal directly to President Putin” was undertaken along
with other shareholders through their representative on the board, Boris Fyodorov, as is usual
business practice.

The correct account of events

More reliable than a corporate brochure, an accurate account of the events in question was
recorded in a respected financial magazine, Institutional Investor, in March 2006, a decade
closer in time to the events at issue:

“I could have said to myself, ‘I’m a bad investor, I got it wrong,’” says Richard. “Instead, I
said, ‘We got in a bit early, but the value is still there.’ Just because the market deserted
Russia, it did not mean that Gazprom was a bad company. It was a great company
supplying 25 percent of Europe’s gas.” Indeed, Gazprom held natural-gas reserves worth
a stunning $2.9 trillion. It was not a profitable company, however. Gazprom posted losses
of $7 billion in 1998 and $2.8 billion in 1999, while amassing debts of $9 billion.

The reason, the Chandlers suspected once again, was transfer pricing. The utility was
selling vast quantities of gas at below-market prices to a little-known company called Itera
Group that Sovereign and others believed had close ties to Gazprom chief executive Rem
Vyakhirev and other company directors, who held five seats on the 11-person board. (The
government, which then held a 38 percent stake, had five seats and Ruhrgas, which voted
with management, one.) Gazprom also transferred control of many of its most profitable
production subsidiaries to Itera and gave management allies interest-free loans that an
independent audit committee of the Duma, Russia’s legislature, estimated in 2000 totalled
$850 million. “It was a company that was rife with investor abuse,” says UFG’s Ryan.

To combat the abuses and release the company’s value, the Chandlers backed a
campaign by Ryan’s partner, UFG chairman Boris Fyodorov, to gain a seat on
Gazprom’s board and oust Vyakhirev. A former Finance minister and one of Russia’s most
prominent reformers, Fyodorov asserted that the company was plundering corporate
assets for the benefit of third parties. Their stance wasn’t without risk. Fyodorov’s Siberian
husky was killed by a rare form of cyanide, and Ryan was repeatedly questioned by tax

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 authorities, according to people close to the two financiers. These sources say both men
believed they were the targets of a Gazprom-inspired campaign of terror. Neither Fyodorov
nor Ryan would comment on the alleged intimidation. To calm his nerves, Richard took up
golf in 1998 and began to make annual two-month trips to Florence to learn Italian.

By December 2000, Gazprom had recovered from its lows, but its market cap still stood at
just $6.2 billion, leaving Sovereign with a sizable paper loss. Chandler and others familiar
with the situation contend that management allies repeatedly offered to buy Sovereign’s
stake at a price that would have given them a profit. “If we were in it simply for the money
at Gazprom, we would have just taken the money,” says Chandler. “But it was not about
the money. In Russia we believed we could change a culture of fraud by going after the big
fish, and that was Gazprom.”

At the company’s annual general meeting in July 2000, Sovereign and other minority
investors succeeded in getting Fyodorov elected to the board over a management
candidate. By teaming up with the five government appointees, who were sympathetic to
complaints about management abuses following the election of President Vladimir Putin in
March 2000, Fyodorov changed the balance of power at Gazprom. In May 2001 the board
removed Vyakhirev as chief executive, kicking him upstairs to the largely ceremonial
position of chairman, and installed Alexey Miller, then deputy Energy minister, as his
replacement.

Vyakhirev stepped down a year later, replaced by current chairman Dmitry Medvedev. With
Miller, a confidant of Putin who remains CEO, stopping much of the transfer pricing,
Gazprom’s share price rebounded. Sovereign sold off its stake between late 2002 and mid-
2003, posting a 12.5 percent total return on its investment over nearly four and a half years.
It was not the kind of result that the brothers were used to, but in unseating Vyakhirev they
had made a point — and saved the fund from a significant loss. “We finally left after nearly
ten years in Russia because we felt we had done as much as we could in corporate
governance and in shareholder rights,” Richard explains.” [Emphasis added]

The key sentence is as follows; “At the company’s annual general meeting in July 2000, Sovereign
and other minority investors succeeded in getting Fyodorov elected to the board over a
management candidate”.

Clearly, Sovereign was merely one of a number of minority shareholders who voted at an AGM to
elect Mr Fyodorov; a process for which the verb “install” is a complete misdescription. Sovereign
lacked the votes and was not taking the lead in this purely democratic exercise, which was taken
by UFG on behalf of a group of minority shareholders. Indeed, following board meetings, Mr
Fyodorov would systematically hold a call with all minority shareholders to report on events,
treating them all equally.

The contrasting and inaccurate account of events in your article

This stands in stark contrast to the account of events set out in your Mail on Sunday article of 25
November last year (“the Article”). The key elements of the Article were as follows; “[Christopher
Chandler] helped Vladimir Putin’s associates take control of the energy giant Gazprom… Shortly
after Putin became Russian President for the first time in 2000, the Chandlers, angered by the

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corruption they had witnessed in Gazprom, were credited with helping to trigger a boardroom coup
which subsequently led Alexey Miller being installed as head of the company… Miller was a close
ally and confidant of Putin’s from their time working together in St Petersburg”.

The clear implication of the Article was that Richard and Christopher Chandler were in cahoots
with President Putin which led to a “close allay and confidant of Putin’s” being “installed as the
head of the company”. The Article was (inter alia) in that respect seriously misleading.

The context of the use by Legatum of the term “installation” in the First Denial

In the Article, you spoke about Sovereign helping the Russian government to "take control" of
Gazprom. That was the context in which the term "installation" was used. It was to that wholly
inaccurate account of events that Legatum was responding by means of the First Denial. It is clear
therefore from the word “installation” being in quotation marks that the word is being used in the
same sense as in the Article.

The fact that the Chandler brothers/Sovereign merely co-operated with other minority investors to
secure the appointment of Mr Fyodorov does not begin to contradict the assertion made by
Legatum that they had not been responsible for the “installation” of Mr Miller more than a year later,
as you claimed in the Article. Indeed, it is impossible for anyone to arrange the “installation’ of
someone that they do not know even exists.

Furthermore, the verb "to install" is wholly inappropriate to the actual sequence of events, because
it suggests that the individual or company doing the "installing" has some unilateral or controlling
power to achieve a particular outcome – which was the clear implication of the Article. That is a
wholly inapposite term for a process whereby one only of a group of minority shareholders deploy
the normal procedures of a company to seek the election of someone to a board, in an exercise
which is being led by a professional and independent representative of all those shareholders.

The Orient Global document

The Orient Global document contains this passage which you cite in the Email; "Sovereign, being
the largest shareholder in Gazprom after the Russian government, assured the Presidential
administration that they could rely upon support of the minority shareholders whose votes could
be essential in providing the crucial swing seat on the Gazprom board."

For the reasons set out above, this is an inaccurate account of events. The only individual who
had any dealings with officialdom and/or the Russian administration was Boris Fyodorov with the
assistance of UFG Asset Management who is referred to in the accurate account of events which
I quote above. Once again, as an independent director, Fyodorov represented a group of minority
shareholders.

The Second Denial; did Christopher Chandler have any "connection" with the Russian state

The dictionary definition of the word “connection” is; "a political, social, professional, or commercial
relationship".

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• Christopher Chandler has never had any political relationship with the Russian state, having
never played any part in its politics or operations;

• He has no social relationship with the Russian state, having never even met any of its ruling
elite;

• He has no professional relationship with the Russian state because he has never worked for
it; and

• He has no commercial relationship with the Russian state, since he has never operated for or
on behalf of the Russian state, and neither has he undertaken any commercial activities on
behalf of the Russian state.

It follows then that even if the accounts of events set out in the Email were correct, which they are
not, then those accounts would not contradict the Second Denial as you claim in the Email.

The implication that my clients have made false statements

You conclude the Email by asserting that the two documents cited in it "flatly contradict Legatum's
denials". The inevitable implication of this assertion is that Christopher Chandler and/or Legatum
have made statements concerning their activities in Russia in the early 2000’s which are untrue.
That is absolutely not the case.

As to the First Denial; the two documents which you cite inaccurately recount the relevant events.
However, neither account of events warrants the allegation made by you in the Article that
Christopher Chandler and/or Sovereign procured the "installation" of either Alexey Miller or
Mr Fyodorov into their roles at Gazprom.

As to the Second Denial; even if the two documents recounted accurately the relevant events –
which they do not, neither is any basis for asserting that my client has ever had any connection
with the Russian state.

Applicable regulatory and legal principles

It follows therefore that were your title to publish any suggestion that either Mr Chandler or Legatum
had made false statements in the form of the Denials concerning the relevant events concerning
Gazprom, that would constitute an infringement of section 1(i) of the IPSO code.

Since the inevitable imputation would be that either Mr Chandler and/or Legatum have made public
statements which they knew to be untrue; since that allegation would be made in a newspaper with
the immense readership of the Mail on Sunday and the Mail Online, then any such allegation
would be defamatory of my clients both at Common Law and according to Section 1(1) of the
Defamation Act 2013 (“the Act”).

In the light of the wholly verifiable nature of content of this letter, to which both Christopher
Chandler and his partner Mark Stoleson will attest on oath should it prove necessary and for which
– given time – we can add further corroboration, your title would not enjoy the benefit of the Section

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4 Public Interest defence provided by the Act, there being no public interest in your publishing
“information” which you have no good reason to believe is true.

This is a conclusion at which I believe a court would have little hesitation in arriving based solely
on a careful forensic analysis of the Email itself, as set out above, even without the benefit of the
ample additional rebuttal evidence available to my clients.

Conclusion

As James Bethell has indicated, my clients’ preference is to enjoy a positive and collaborative
relationship with your title. However, as you also know, where your title publishes material which
is false and/or misleading in contravention of your regulatory obligations and/or the legal rights that
my clients enjoy not to be the subject of defamatory allegations, then they will not hesitate to take
the necessary steps to correct the record.

My clients adopt this approach because of the high value that they rightly ascribe to their work;
something which has been recognised today in a leading article published by Charles Moore in the
Daily Telegraph, the content of which I commend to you and your colleagues.

As to the events which are the subject of this correspondence; there is ample evidence that my
clients can compile to prove that the account of events which you have posited by means of the
Email is erroneous. Many individuals with direct knowledge of the events in question would be
available as witnesses to corroborate the account of events set out in this letter were that to prove
necessary.

Please therefore note therefore that in the event that any dishonesty (or similar) is imputed to my
clients by your title then you may confidently assume that this firm will be instructed to deploy all
the regulatory and legal remedies available to set the record straight.

Yours sincerely,

Jonathan Coad
Consultant Solicitor
Keystone Law

CC: Associated Newspapers Legal Department