Goldman co-chief quits to join oligarch

Financial News

Jason Corcoran in Moscow

31 July 2007

A top banker from Goldman Sachs in Moscow has been recruited by a relatively unknown Russian billionaire to run his investment fund.

Magomed Galaev, co-head of Goldman Sachs in Russia, has been hired as president of Summa Capital, the investment vehicle of Ziyavudin Magomedov whose main businesses include oil transportation logistics, telecoms and metals.

One Moscow analyst, who declined to be named, claimed Galaev was lured by a remuneration package of $12m (€8.8m) a year. "Not even the generous Russian investment banks can compete with this money," he said.

Goldman was left rocking in March this year when Gordon McCulloch, then co-head of Russia with Galaev, left to join Russian bank Renaissance Capital.

According to sources, Galaev, who was hired from Morgan Stanley last year, shocked the bank by tendering his resignation on the same day.

Galaev had told friends he was going to work for one of his Russian clients. Goldman and Galaev's office denied he was leaving, fuelling speculation he might have been persuaded to stay to allow Goldman time to find a successor to McCulloch.

A source close to Goldman Sachs said Galaev would continue to work for the bank as an adviser although there was no details as to a new role.

Christopher M. Barter and David Schwimmer were appointed co-chief executives of Goldman's Russia and CIS business in June. Barter, who is believed to be moving to Moscow in August, will concentrate on securities and financing activities while Schwimmer will focus on investment banking.

Barter, who was previously co-head of the European financial institutions group, joined Goldman in 1993. Schwimmer, who helped orchestrate the New York Stock Exchange's merger with Archipelago, joined in 1998.

Goldman reopened for business in Moscow in January this year and has faced tough competition hiring talent. It has yet to make a big impression in the domestic capital markets' league tables.

In May, Goldman lost out to Russian bank MDM in a race to hire Oleg Vyugin, a former top regulator and respected banker.

Goldman Sachs declined to comment.

The bank, which employs over 100 staff in Moscow, is taking a measured approach to building its Russian business.

It opened its previous Moscow office in 1998 with a party attended by guests including George Bush senior, the former US president. Two months later, the Russian government defaulted on its debt and Goldman scaled back its presence.

In April, Goldman's group's chief executive, Lloyd Blankfein, wrote to President Vladimir Putin seeking a meeting in Moscow, according to the Kremlin. Blankfein wanted to discuss proposals to expand ties with the Russian state and companies, and talk about the economy.

It was announced last week that Magomedov's Summa Telecom, would spend $1bn out of the pockets of its main shareholder to build broadband wireless networks across the country.

The St. Petersburg-based company was founded in 2005 by Summa Capital. In November, Summa Telecom became the only company in the country to receive a nationwide WiMax licence.

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