Russian-Born Businessman Challenges Fed Listing as ‘Oligarch’

WASHINGTON (CN) - A Russian-born businessman is challenging in federal court his inclusion on a Treasury Department list of oligarchs, saying the agency "effectively republished" the list from an issue of Forbes Magazine.

Valentin Gapontsev, who runs a company based in Massachusetts that produces fiber lasers, claims in a 33-page complaint filed Monday that the Treasury Department did not look closely at his alleged connections to the Kremlin or give him any chance to challenge his inclusion on the list.

"'Russian oligarch' is a widely understood term," the complaint states. "It refers to the few friends of prominent Russian leaders who were corruptly allocated public assets and became rich from it. Dr. Gapontsev is the polar opposite of a Russian oligarch. He had no friends in high places in the Russian government. His wealth came exclusively from his individual scientific innovation and global market demand for his unique products. He is not a 'Russian oligarch.'"

In a statement, IPG Photonics general counsel Angelo Lopresti said Gapontsev turned to the courts only after the Treasury Department refused to remove him from the list by itself.

“We tried to work for months with the Treasury Department to correct its error and remove Dr. Gapontsev from the list," Lopresti said.  "Treasury refused, apparently unwilling to rock the boat on anything relating to the politically thorny issue of this administration’s relationship with Russia.  The Treasury Department left us with no choice but to ask the courts to overturn this egregious error, and we are confident that this wrong will be righted. The only thing Dr. Gapontsev has in common with Putin’s cronies is that they were born in the Soviet Union, which cannot be the legal the reason for Treasury to label and harm Dr. Gapontsev, a remarkable immigrant success story.”

Gapontsev says far from being a stooge of the Russian government, his wealth comes entirely from the roughly 140 patents he holds and from the "U.S.-based, U.S.-listed, U.S.-headquartered" company he runs.

After the fall of the Soviet Union, Gapontsev worked to develop fiber optic and other technologies with multiple Western European and American companies. He opened the IPG Photonics headquarters in Oxford, Mass., in 2000 after securing $100 million in investments from U.S. companies, according to the complaint.

He then moved to the United States, becoming a naturalized U.S. citizen in 2008.

IPG Photonics went public in 2006 and reported $1.4 billion in revenue in 2017. Most of the company's business comes from deals with U.S., European and Chinese companies, with a "small portion" coming from sales to Russia, according to the complaint.

More than 98 percent of Gapontsev's assets are in the United States and the "entirety" of his wealth comes from IPG Photonics, but he was nevertheless listed as a Russian billionaire in a 2017 Forbes Magazine list of the world's richest people. The magazine has since corrected his entry to reflect that he is American.

Not long after that list published, Congress passed the Countering America's Adversaries Through Sanctions Act, which was in part a response to Russian attempts to interfere in elections in the United States. The law called for sanctions against Russians with close ties to the Russian government and President Vladimir Putin, but left it to the Treasury Department to compile a list of oligarchs who could be subject to the sanctions.

Though the list did not put in place sanctions against him, Gapontsev says his inclusion on the list has made IPG Photonics' business more complicated, as clients have questioned whether they can still work with the company given his  designation as an oligarch. The company has also lost out on government contracts and had difficulty working with its banks, according to the complaint.

"Any serious analysis of Dr. Gapontsev would show that he has no relationship with the Russian regime and that his wealth arises from purely legitimate sources, not from closeness to the Russian regime," the complaint states.

Gapontsev's inclusion on the list has made IPG Photonics' business more complicated, as clients have questioned whether they can still work with the company given his  designation as an oligarch. The company has also lost out on government contracts and had difficulty working with its banks, according to the complaint.

Represented by Michael Edney and Stephen McNabb with the Washington D.C., firm Norton Rose Fulbright, Gapontsev requests the court order the Treasury Department to remove him from the oligarchs list.

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