Apr 19

2022

The Roswell-Russia connection

Oligarch Roman Abramovich, long tied to Vladimir Putin, has been a major donor to Buffalo's cancer institute and an investor in a series of companies with business ties to Roswell

For more than a decade, Roswell Park Cancer Institute has been doing business with a leading Russian oligarch with long-standing ties to Vladimir Putin.

The annual reports of the charitable foundation that raises money for Roswell tell part of the story: The Russian billionaire Roman Abramovich has been a leading individual donor to the foundation, giving in excess of $1 million in four of the past five years.

But Abramovich’s charity isn’t the problem. 

Rather, at issue are Roswell’s relationships with for-profit companies whose investors include Abramovich and a Russian business partner, both sanctioned since the outbreak of the war in Ukraine.

Since 2011, Abramovich and David Davidovich, a long-time associate, and funds they control have invested more than $40 million in Cleveland BioLabs and several associated companies in whose products Roswell has a stake. In the same period, investment funds backed by the Russian government provided those companies at least another $16 million to help the companies develop their products. 



One of these products is a drug they hope to sell to federal agencies as an antidote to potentially lethal radiation exposure, of the sort that might be caused by the use of nuclear weapons on the battlefield or the failure of a nuclear power plant. 

Roswell has worked with these companies on research and obtaining grants, and stands to make money if and when the products they’re working on make it to market, according to filings with the U.S. Securities and Exchange Commission.

Gov. Kathy Hochul announces state sanctions against Russia on Mar. 16. Photo by Darren McGee, courtesy of Office of Gov. Kathy Hochul.

Those relationships may run Roswell afoul of sanctions against Russia and companies that do business there.

In two executive orders issued last month, Gov. Kathy Hochul directed state-run entities like Roswell to terminate, when feasible, all contracts with Russian companies, and even American companies doing business with Russian entities. The governor also said state agencies should enter into no such contracts in the future. 

Asked last month how it intended to negotiate the governor’s executive orders, a Roswell spokesperson told Investigative Post the center was in full compliance.

“Roswell Park has no current contracts with Cleveland BioLabs and has not since July 2018,” Annie Deck-Miller, the spokesperson, said in an email.  

She added that the spinoff companies are all “distinct corporations outside of Roswell Park.”

A review of SEC filings and other public records paints a different picture. 

Roswell and Cleveland Biolabs

Founded in 1898, Roswell Park Cancer Institute was ranked 34th last year in the U.S. News & World Report’s annual list of the best cancer hospitals in the country. Previously it was ranked as high as 14th. The public benefit corporation’s 14 board directors are state appointees. It employs nearly 3,000 and last year had a payroll of more than $296 million, according to state records.

Roswell and Cleveland BioLabs — a for-profit co-founded in 2003 in partnership with the Cleveland Clinic — signed an affiliation agreement in 2007, which brought the company to Buffalo’s medical campus. 

Roswell agreed to provide facilities to Cleveland BioLabs and help it to win grants. In exchange, the company agreed to align its research with Roswell’s and grant Roswell a share in licensing rights to the fruits of the collaboration. 

Those licensing rights could generate income for Roswell, if a drug developed by the company became profitable.


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In the following years, Cleveland BioLabs created a number of for-profit spinoff companies that also worked with Roswell. Abramovich and other Russian interests invested in these, too.

Statera — a new company created last year when Cleveland BioLabs merged with a Fort Worth, Colorado, company called Cytocom — inherited the spinoffs and the Russian investors. It also inherited the Roswell affiliation, which remains in place, according to a March 2021 SEC filing. 

The spinoff companies all have addresses within a block or two of Roswell on the Buffalo Niagara Medical Campus. One of them, Incuron — with which Roswell has “various sponsored research agreements,” according to the 2021 SEC report, as well as “an exclusive license agreement and clinical trial agreements” — identifies its headquarters as Moscow. 

The companies have had shared executive management, as well as board directors associated with Abramovich companies. The chief science officer for all the companies is Dr. Andrei Gudkov, a senior vice president at Roswell. 

Until sometime earlier this month, Roswell touted the affiliation agreements with Cleveland BioLabs and its spinoff companies on its website. After Investigative Post began to ask questions about the relationships, information about the companies was removed from the page. 

In its place was the message, “Access denied.” 

Roswell refused multiple interview requests, beginning in mid-March, and instead provided Investigative Post a handful of brief statements.

Who is Roman Abramovich?

Roman Abramovich was identified by jailed Russian opposition leader Alexei Navalny as one of Putin’s 35 most important financial enablers — the so-called “oligarchs.”

Russian billionaire Roman Abramovich. Photo by Amir Hosseini, courtesy of Creative Commons.

He became a billionaire by winning an auction to buy Sibneft, an oil company owned by the Russian government, for $250 million in 1995. He sold it back to the Russian government 10 years later for $13 billion. He and his lawyers have denied the deal was corrupt, as noted in a recent BBC documentary chronicling Abramovich’s rise. 

Since then, Abramovich has grown his fortune in other sectors, most notably purchasing a majority stake in the global steel company Evraz, which operates mills in western Canada and has numerous subsidiaries and joint ventures in the U.S. In 2003, he bought Chelsea F.C., the English Premier League soccer team.

In the wake of the Russian invasion of Ukraine, Abramovich and associates have faced sanctions by the United Kingdom, the European Union, Australia, Canada, and even traditionally neutral Switzerland, restricting access to his cash and his ability to conduct business. 

To date, he has not been sanctioned in the U.S. Media reports indicate Abramovich has tried to mediate peace talks between Russia and Ukraine, at the outset of the war and more recently.


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Forbes has described David Davidovich as Abramovich’s “much lower-profile right-hand man,” who was enriched by Abramovich’s acquisition and sale of Sibneft. 

Like Abramovich, with whom he often partners, Davidovich has diversified his portfolio to include mining, meat processing, real estate, and other interests. He is a major shareholder in Millhouse Capital, Abramovich’s primary investment vehicle. Forbes estimated Davidovich’s worth at $1.6 billion, though his full holdings are unknown. 

Last month, Business Insider reported Abramovich had transferred control of another investment fund, Norma Investments, to Davidovich, in response to sanctions. On April 14, Davidovich’s name was added to Abramovich’s on the U.K.’s list of sanctioned Russian oligarchs.

In a prospectus filed with the SEC last September, Statera listed the risks putative investors should be aware of. Among those risks: “…the geopolitical relationship between the United States and the Russian Federation, as well as general business, legal, financial and other conditions within the Russian Federation.”

Statera’s predecessor, Cleveland BioLabs, acknowledged the risks, too. In its 2020 annual report, the company warned: 

“… because the largest holder of our company’s outstanding common stock is an investor with ties to Russia, and several Russian citizens and residents serve on our board of directors, our ability to secure and maintain contracts with the U.S. Department of Defense and other U.S. government agencies or departments, from which we received 81.2% and 64.5% of our revenues for the years ended December 31, 2020, and 2019, respectively, may become more difficult, which could cause a material adverse impact on our business, prospects, results of operation, and financial condition.”

Buffalo companies, Russian money

To report this story, Investigative Post worked with Kevin Hall, a Pulitzer Prize-winning reporter with the Organized Crime and Corruption Reporting Project, and David Szakonyi of the Anti-Corruption Data Collective, both based in Washington, D.C. 

Together, we reviewed SEC filings, lobbying disclosures, annual reports and other public documents in an effort to untangle the Russian investments in Cleveland BioLabs, its successor Statera, and spinoff companies.

As noted, Cleveland BioLabs entered an affiliation agreement with Roswell in 2007. In the years that followed, the company had a hand in launching several spinoff companies with substantial Russian funding. 

  • Incuron was created in 2009 as a joint venture between Cleveland BioLabs and the Russian venture capital fund Bioprocess Capital Ventures. The Russian fund put up $5.8 million initially, with the prospect of investing as much as $18 million, should Incuron’s cancer-fighting drug reach “predetermined development milestones.” In January 2015, Incuron announced promising clinical results. Months later, Cleveland BioLabs sold its majority stake in the company and intellectual property to Incuron’s management for $4 million, but maintained 2 percent royalty rights in the drug.
  • Panacela Labs was formed in 2011 as a joint venture with the Russian state-backed investment fund Rusnano, a global tech incubator. Rusnano’s stake was $9 million, plus a $1.5 million loan that was later repaid; Cleveland BioLabs’ stake was $3 million. Upon its formation, Panacela entered a licensing agreement with Roswell.
  • OncoTartis, Inc., located in the Buffalo Niagara Medical Center’s Innovation Center, was launched in 2011 to develop “intellectual property from Prof. Andrei Gudkov’s laboratory at Roswell Park Cancer Institute,” according to the OncoTartis website. A Buffalo Business First report noted that the company’s $6 million in startup capital was provided by Abramovich. 
  • Genome Protection, Inc., or GPI, was launched in 2018 as a joint venture between Panacela and Everon Biosciences, a privately held company formed by Gudkov in 2011, according to Roswell’s website, which identified Everon as an affiliate. Startup capital came from Norma Investments: $10.5 million to start, with an option to invest as much as $30 million in total. GPI aims to develop entolimod as an anti-aging treatment.

As noted above, Norma Investments is one of Abramovich’s funds. It’s a subsidiary of Millhouse Capital, another Abramovich fund.

In 2015, Davidovich increased his interest in Cleveland BioLabs to 61 percent for $25 million, with provisions for more funding should the company’s drugs meet certain benchmarks on the path to commercialization, according to a Buffalo Business First report.

“Davidovich’s investment gave a badly-needed infusion of cash to Cleveland BioLabs, which was on the verge of running out of money after years of investing in the development of a drug that has shown promise as a treatment for radiation sickness, along with other drugs that could be used as cancer treatments,” Business First reported.

Davidovich’s investment enabled him to fill seats on the company’s board of directors. Those seats were filled with people whose resumes included stints at Sibneft, the original source of Abramovich’s billions, and Millhouse Capital.

By the time Cleveland BioLabs merged with the Colorado-based company Cytocom last year, creating Statera, Davidovich’s ownership stake had been reduced to 48.3 percent. 

Abramovich’s stake in Statera and its spinoffs remains unclear. His name does not appear in Statera documents filed with the SEC this year. 

Reached by phone last month by the Organized Crime and Corruption Reporting Project, Statera’s chief financial officer, Peter Aronstam, said “no comment,” even before hearing the entire question about Abramovich’s interest in the company. 

Statera’s chief investment officer, Nichol Ochsner, did not answer numerous emails from Investigative Post’s reporting partners requesting comment. A representative of the company’s public relations firm Finn Partners confirmed Abramovich was invested through the end of 2021, but declined to say if he’d sold his interest amid the threat of escalating sanctions.

Abramovich’s London-based spokesperson also declined to comment. 

Hard lobbying, government contracts

Cleveland BioLabs has spent more than $400,000 on lobbying since 2010, according to analysis of lobbying records by the Anti-Corruption Data Collective, a nonprofit group of journalists and data scientists.

The company lobbied for U.S. military contracts and won them. It also lobbied federal regulatory agencies for approvals that would allow federal agencies to start buying stockpiles of its anti-radiation drug.

“They were actually pretty aggressive on the lobbying front. On par with the major players,” said a lobbyist, who spoke to the Organized Crime and Corruption Reporting Project on the condition of anonymity. 

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The lobbyist, who worked for one of six firms hired by Cleveland BioLabs, was unaware until later of Abramovich’s involvement, but said there were always several Russians involved. 

“I was never really sure how the bios aligned,” the lobbyist said.

The Organized Crime and Corruption Reporting Project identified more than $21 million in Defense Department contracts won by Cleveland BioLabs since 2010. In a March 2020 SEC filing, the company said U.S. government contracts accounted for 81.2 percent of revenues that year, and 64.5 percent in 2019.

Corporate instability

Investments by the Russian state and Abramovich in entolimod, the anti-radiation drug, are worrisome to Louise Shelley, director of the Terrorism, Transnational Crime and Corruption Center at George Mason University in Virginia.

“I think there is an absolute need for a review of who is producing materials of national security concern and who are the investors in it, who is benefitting from it,” Shelley, who has long warned of opaque shell companies linked to Russians investing in key parts of the tech sector, told the Organized Crime and Corruption and Reporting Project.

She added, “We are just blind about who is behind our investments, what we are not looking at, how we allow shell companies and nesting companies to invest in key security sectors.”

Meanwhile, recent SEC filings suggest instability at Statera.

In late March, the company issued new shares in a bid to raise money. But on March 28 it notified NASDAQ that it was noncompliant with rules governing companies that offer stock. Two members of the board of directors had resigned, leaving it with an insufficient number of independent directors.

Days later Statera notified the SEC that it had been unable to file its annual report for 2021 on time. It said it faced problems caused by the resignations. 

One of the resigning directors lobbed insults in a resignation letter filed with the SEC. Randy Saluck cited “the multitude of poor decisions” made by management and unfollowed board directives.

“I simply do not feel that you are able to effectively manage the company,” he wrote.

On April 11, Statera’s auditing firm informed the company by letter that it was quitting. 

“Based on information that has come to our attention, we regret to inform you that we are resigning as your auditors,” the firm wrote.

Abramovich’s name does not appear on the list of donors in the Roswell Park Alliance Foundation’s 2021 annual report. That’s a big loss: Roswell wouldn’t say exactly how much Abramovich gave each year, only that it was more than $1 million annually. In 2017, the first year Abramovich’s name appeared in its annual reports, the foundation pulled in $17.5 million in donations. 

“Mr. Abramovich has been a generous supporter of the cutting-edge cancer research happening at Roswell Park, and his donations have helped to advance the progress of science that saves lives,” Deck-Miller, Roswell’s spokesperson, told Investigative Post in March. 

“Cancer is a global issue that affects all of us.”

Asked whether Roswell’s business relationships with these companies constituted a breach of Hochul’s executive orders, a spokesperson for the governor, Matthew Janiszewski, offered this statement via email:

“Roswell Park Cancer Institute should review their relationships to assess whether they fall under the Governor’s Executive Orders and act accordingly.”


Kevin Hall of the Organized Crime and Corruption Reporting Project and David Szakonyi of the Anti-Corruption Data Collective contributed reporting to this story.


 

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