The Hostile Takeover!

In 1995, the company I headed, Eastern Holdings International, had two partnerships in the Former Soviet Union. One was headquartered in St. Petersburg, Russia, with agreements covering all Former Soviet Union territories except the Baltic’s. The other was in Latvia with agreements covering the three Baltic nations (Latvia, Lithuania and Estonia) and was headquartered in Riga, the capital city of Latvia.

The Russian partner was Optica, dominant optical manufacturer and retailer in northeastern Russia with 3000 employees and led by three principals, Elena Drobiaska (former mistress of the assassinated Valeriy Solovyev), Arnold Kogan and Gregoriy Barinberg. Although partners, my relationship with Optica was one in which I moved with extreme caution. The undercurrent of plotting and trickery always ran close to the surface.

Pre-assassination, Valeriy Solovyev “plots” with henchmen, Arnold Kogan and Gregoriy Barinberg. Russians intrigue? Yes. But even more with the Latvians.

The partner in Latvia was MedTechExpress. It was smaller, befitting the smaller nation, gentler and friendly. Its three principals were Vladimir Brouck, Nina Holiavitskaya and Tatjana Barushka. They all appeared to be sincere and dedicated partners and, with their effort and area guidance, we, by 1995, had grown the business to encompass some 12 stores in Latvia and 4 more in Lithuania and were negotiating expansion into Estonia.

But, in May, 1995, things took a turn for the worrisome in Latvia.

I was visiting our key stores in the capital, Riga. The Retail Manager for our Baltics business was Nina Monyenchova and she accompanied me on this tour. On our third stop, we visited our small unit on the heavily trafficked Marijas iela, facing the Central Station of the Latvian RR system. This was a prime location in the city, for all the commuter traffic walked across the station plaza towards our store every morning and passed by us returning home at night. Numerous buses boarded and discharged commuters on the way from and to the station every day. It was the epitome of “location, location, location”.

This was a prime opportunity for our primary proposition, “Ochki za chas” or “glasses in an hour”. Unfortunately, the space available for our store was too small to house a lens laboratory on its premises. After our visit that day in May,  and discussions with the store manager and staff, we exited about 5pm and became immersed in a flood of commuters returning to Riga Central Station on their way home. I said to Nina, ” What a shame! If we had a lab on the premises, they could get an exam on their way to work and pick up their glasses on the way home.” She nodded her head but her expression disturbed me because she seemed to show more distress than should be shown in the face of a simple fact of life.

I asked her, “Why does this bother you so much?”

She looked away for a moment then seemed to brace herself and turned to face me. “I don’t know why they felt a fish store was so important!!” I was a bit confused. I had seen the takeover of the premises adjoining ours and construction of a new “high-end” fish store. But, I assumed this was property kept within one group and not available.

“Who do you mean, “they”?

“Tatjana and her group!” She now was shaking with visible anger.

My partner, Tatjana? I was stunned. “She owns the fish store? What about her two partners, Brouk and Holiavitskaya?”

“They had their own thing, so they could not protest.”

“What own thing?” My voice became more strident.

Nina now appeared frightened. She knew she had said too much to Jackum. She could lose her job if the Latvian partners were angered.

I knew they would be, so I decided to not put the hook in any deeper. “Never mind, Nina, I will find out from them.” She still looked concerned. “I’ll keep your name out of it.” Her face relaxed a bit more.

The other Nina, Nina Holiavitskaya, functioned as our Chief Financial Officer, and the next morning I went into her office, closed the door behind me and said, “I stopped into that new fish store next to us on Marijas iela and heard that you all have an interest in that store. You got into a new business without even consulting your British partners, is this true???” Nina was controlled, she continued to glance at some financial papers on her desk, then looked up and replied,” I’m sorry but you heard wrong, Jack, I have nothing to do with that and no interest in the fish store.”

I wanted her to pin it on Tatjana, so I said, “Oh, just Vladimir and Tatjana then, how did you get left out?”

She was still controlled, “No, no. Brouk and I had nothing to do with it, just Tatjana and some friends bought the property.”

I had what I wanted without implicating Nina Monyanchova. “Why would she do that when we could have added a lens lab to our store?”

“I guess you’ll have to ask Tatjana.”

Now, I was confident, not only about finding the truth about the fish store,  but whatever it was that Vladimir and Nina H. were up to that excluded Tatjana.

Late afternoon: “Tatjana, would you join me for a drink, couple of things we should discuss about the business?”

If suspicious, she didn’t show it. “Sure, just like old times.”

Old times were a few years before when we were putting the business together and Tatjana and I spent many a vodka-blessed evening discussing

store design, stuff like that (and a little more).

After the 2nd vodka neat, I said, ‘So what’s with this fish store?”

No shock. No flinch. After all, Tatjana was of Russian heritage, not Latvian. Her life was one of many truths.

“Oh, I was just going to mention that to you. A number of my close friends had an idea to have the first quality fish store in Riga. One of them knew the owner of a property on Marijas and heard it was going on the market. He immediately made a bid and then came to all of us to participate. I loved the idea. I love good fish.

“So you have a small piece of the ownership?”

“Well, this is just a new country. Nobody has much money. I have been more fortunate.”

“With money made from the optical business, right?”

“Uh, yes. So I own the most stock.”

“Great! Good for you . But what about your optical partners, Vladimir and Nina? Didn’t they feel cheated, not getting in on the deal?”

“Those Two! Hah! They had started another business without me and never offered me anything of it.”

“Really? Are they in the fish business, too?”

“No, not fish. They got into a business they know well. Optical.”

Now I was shocked. One thing for partners to go into another trade investment. Another thing, not to be aware of diverting a property from the good of the company. But, to open a business competitive to that owned by you and your partners … Wow! I felt betrayed. I also felt dismayed. This was going to be a major conflict among the the British and Latvian partners.

“What kind of optical business?”, I asked.

“What else? Stores, that’s all they know is stores.”

I noticed that Tatjana appeared relieved that she had told me. The heat was off her. I decided to give her a feeling of “partnering up”.

“Tatjana, I was upset when I heard about you opening a fish store in the premises we could have used for a lab. But, that’s a mistake not a plan.”These stores they are opening sound more like a plan. Could you tell me where they are?”

Tatjana touched my arm in a comradely way. “I can do better than that, why don’t we visit a couple?”

Tatjana drove. The first stop was on the fringe of Riga situated in the center of a multi-building, high-rise apartment complex. There were a few stores within the complex. One, standing alone, bore the name Perfect Vision. It was not a large store but it had one overwhelming characteristic; nearly all of its fixtures were identical to our own MedTech Express (Vision Express) stores. When Tatjana and I entered, nobody seemed surprised. Obviously, they all presumed we were part of the owners group. I asked Tatjana, where the fixtures came from and she told me that they were from our own company’s storage warehouse. I was disturbed but not distressed. This little out of the way store was not really much competition to our flourishing Baltic business. Then, Tatjana drove us back to town to Brivibas bulvaris, just two blocks from our number one store, on a 4-lane boulevard with busy bus lanes, and dense with cars and pedestrians out to shop. There, with a wide and impressive entrance, and also bearing the name, Perfect Vision, was a modern optical store that looked like it could have been lifted out of any  prestigious U.S. mall. When we entered, I discovered a very modern optometric examination room and a small lens laboratory, supporting a very fashionable show room with all the same western designer frames that we had brought to Eastern Europe over the past three years. Tatjana greeted the lady manager and introduced us. The manager was impressed. She recognized me from the TV commercials I starred in for our own stores. After a few minutes, we left and Tatjana drove me back to my apartment.

I did not express any concern or anger to Tatjana. I simply said, “Well, you guys sure are busy and ambitious. I’m surprised you were not included in this venture, especially in the Brivibas bulvaris store. It’s the kind of fashion opportunity that you would seem to be best at.”

“Well, Nina asks me about frame choices a lot, but I am not too excited to help.”

“Why? It looks exciting.”

“Well, it’s kind of taking away from our business.”

Ah, I was pleased that somebody understood that basic fact of marketing life. Perhaps she would later understand that you don’t bite the hand that feeds you.

I said, “Yeah, in a way.” But, I did not want to tip off my real feelings so I asked Tatjana to drop me off at my apartment and thanked her for the tour.

I sat down at my lap top and typed out thoughts about the situation and possible solutions.

I first made note that the two main culprits in defrauding Eastern Holdings, their partners, were Vladimir Brouck and Nina Holiavitskaya. But, I couldn’t approach Vladimir who had,  just a week before, through his Jewish Federation relationships, obtained a permanent pass to immigrate with  his family to the United States and had just settled in the State of Washington. I believe he received this pass based upon “escaping religious persecution” which was a bit questionable since he enjoyed a life of power, headed a company with over 500 employees, and was reported to have substantial “Jewish mafia” connections in the Baltics. In his absence, his financial partner, Nina, had his proxy in daily transactions which position, excepting my oversight, gave her operating control.

My exploration drew me to one conclusion: Our partners were not to be trusted. They could no longer be in charge of operations. But, knowing they had a strong security force working with them at out offices at 5 Gertrudes iela and knowing, although they grew up in Latvia, they were Russians to the core, I realized they would not step aside graciously. We had to take over control of the company and a certain amount of strategy, backed by force, would be required. I decided that I could not plan my moves well, or even use communication lines to the UK management, while in Latvia.

The next day, I announced I had to get back to our Russian headquarters in St. Petersburg. I called our offices there and made arrangements.  I caught the overnight express. Veronika and Sergey, my driver, met me upon arrival the next morning.

In my apartment at 5 Pobeda Ulitza, I had a few hours to talk with Veronika about the situation before calling Vision Express headquarters in Nottingham where the time was 4 hours earlier. Veronika had no “worldly” or “business” experience but in her 25-year-old, estimated 175-IQ  brain, she bore a certain wisdom which was only bolstered by her deep understanding of the mentality of her Russian “comrades”. We came to an agreement that 1) the West would have to take over operating control of the Baltics, 2)  that would not be possible without taking over control of the security employed by the company, 3) that a new security force would have to be put in place and the existing one ousted without recourse, 4) that the take-over would have to be legal and ordered by the Board of Directors of the company, and 5) that everything should happen as soon as possible, as even the low profile I had presented would have stirred some concern and perhaps commenced a cover up of those things of which I was not aware.

At 1PM, we called Vision Express, UK, (9AM there), knowing that Dean Butler, the chairman, was likely to be in even earlier. He was. It took only a few minutes to explain the situation as Dean was a very experienced businessman, experienced at duping others and being duped as well. He quickly agreed that we had to take action, Board action. Then he said, he was heading for New York in 5 days and suggested we have a Board Meeting in New York. He said he would notify Vladimir Brouk in Spokane and have tickets and a room ordered for him and, also,  Gary Tillman would join Dean on the trip from London. I would come from St. Petersburg or Riga. We would meet at Dean’s hotel, the Waldorf=Astoria. The Board was comprised, of Dean, Gary and me from the West and Vladimir and Nina H. from the Baltics. Vladimir would have Nina’s proxy. That gave us a 3-2 majority, meeting our company regulations for the steps we planned to take. Dean said it was up to me to take care of the execution of the Board’s decision which was to remove Vladimir and Nina and Tatjana from management and appoint Jack Byrne as the sole Managing Director of the joint company. All my directions would be backed by the Board majority.

After the call, Veronika and I started preparations. The first task was to find a security group that could enforce the Board Decision over the security forces that Vladimir had put in place, and had always seemed to me larger and more armed than necessary for an eyewear company headquarters. Quite some time before, following the assassination of my partner, Valeriy Solovyev,  I had a meeting in London with Ray Adams of Kroll, a large, world-wide security company. Kroll introduced me to some ex-members of Alfa Group, which had been the Soviet elite force prior to the breakup of the Soviet Union and now provided “security” throughout the Former Soviet Union. Their key man, for me, was Yuri Volvatch who had a presence, not only in Russia, but in the Baltics, as well.

We decided that Yuri would be our best adviser, if not implementer, in this matter.  We managed to reach Yuri on the phone and, fortunately, found he was in Saint Petersburg. That afternoon, he came to my apartment at 5 Pobeda Ulitza. We laid out a plan.

We knew the order of action would require starting with a Board decision at the meeting in New York. But, further action would have to commence immediately thereafter. We would prepare  Important Notices” which  would be posted at the entrance of the Headquarters building and, after our entry, at the head of the stairs on each floor. The first Notice would carry the date and the time and state:

“By Order of the Board of Directors, Vladimir Brouk and Nina Holiavitskaya are hereby removed from all managerial assignments for Medtechexpress and Jack Byrne is elected as the company’s sole Managing Director.”

Another bulletin would state:

“By Order of the Managing Director, security for Medtechexpress is, henceforth, under the control of the Alfa affiliation, directed by Yuri Volvatch.” It was dated and signed Jack Byrne.

The meeting was to occur early afternoon at the Waldorf=Astoria. The timing of events was to be as follows:

NYC 1PM: Board meets (Jack Byrne, Dean Butler, Gary Tillman, and Vladimir Brouk (bearing Nina Holiavitskaya’s proxy).

NYC 3PM: Board meeting ends with vote ousting Vladimir Brouk and Nina Holiavitskaya from the Board and from company management.

NYC 3:15PM: Jack leaves meeting, reports outcome to Veronica in Riga (time 11:15PM). Veronica immediately notifies Yuri who awaits with his well-armed security team.

Riga 12 PM: Veronica, Yuri and 15-man security team, arrive at headquarters, and present Board decision bulletins to existing security guards who reluctantly stand down.

NYC: 5PM: Jack boards flight to Riga. (1AM Riga time)

Riga 10AM: Jack arrives at Riga airport and is met by Veronica with 2 cars and 5 armed guards provided by Yuri Volvatch.

Riga 11AM: Jack arrives at Headquarters and takes over control.

The plan in place, four days later, I flew to New York overnight, arriving at the Waldorf=Astoria at 10AM. I joined Dean Butler and Gary Tillman at their 2-bedroom suite. It was set with a conference table with four chairs, on which were a pair of large silver coffee urns, cups and saucers, and a spread of high-quality breakfast buns. Vladimir was booked in a separate room and had been told he would be called when the others were assembled.

I discussed in depth what I had learned in my investigation of our partners extra-curricular activities and we all agreed that we had to take control away from them and both accepted my recommendation that Nina Monyenchova, our current manager of stores,  who had given me the first clue to “the betrayals”,  be named company General Manager, reporting only to me as the General Director.

Dean called Vladimir Brouck’s room and informed him the Board was ready to meet.

The meeting started at 1PM (EST) as planned.

Vladimir was stunned at the Board proposal to remove him and Nina Holiavitskaya from management. He first plead their case, that they were sure 1)we, the partners, would not be interested in additional optical opportunities, 2)would not mind if they had other opportunities for making money after emerging from years of oppression by the Russians (ignoring that they were the children of the oppressors who took over the homes and lives of Latvians) and 3) he was sure Nina would agree to give us a share of the profits from their enterprise.

Dean explained that it wasn’t the money that bothered us, it was the lack of understanding of corporate honor “it is known in the west”, and, thus, our decision that, although they would remain our partners, they could not be trusted to manage the business we shared.

Vladimir shifted his “poor Jewish Lativan” demeanor to a meaner “Russian Jewish Mafia” one and threatened that he had major friends in Latvia’s judicial system and “others” who would put a stop to this usurping of his power.

We voting majority of Dean, Gary and Jack said “so noted” and then voted 3-2 to end their days in management.

The Board Meeting was adjourned at 2:45 pm (EST), 15 minutes earlier than my schedule.

Vladimir stormed out of the room (we were sure to his room and telephone).

I gave the hotel operator Veronica’s number in Latvia. She answered on the first ring (11pm Latvia time).)

I told her to notify Yuri Volvatch and his Alpha team and start the takeover. She was only 25, but she was a “Strong Russian Woman”, and she sounded very excited to embark upon her midnight escapade.

My Tel Aviv limousine driver was waiting outside the Park Avenue exit of the Waldorf=Astoria, and still on schedule, we left to catch my Baltic Airlines 5pm (EST) flight to Riga.

I did not sleep on the flight. My mind was astir with thoughts of possibilities of what I might face when I arrived at 1) the Riga Airport and 2) at 5 Gertrudes ilea, our headquarters. “What will Vladimir have done to stop our takeover?” “Will there have been a battle (with guns) between our Alpha forces and Vladimir’s security guards?” “Will he have managed to get some judicial/police action to delay our plans?” “Did I put Veronica into too much danger?” Each time I had not better conclusion than to face whatever situation and “solve” it when I got there. I did finally doze for a few minutes when my peace was interrupted by being told to “fasten my seat belt and prepare for landing”.

As I entered the security gate, after debarking, I saw Veronica at the first position allowed for receiving exiting passengers. She looked as beautiful and cool as ever, perhaps even more so since she had, on each side, a husky military type openly carrying an AK-47. I tried to hide an inner, “Wow!”, and a “Holy Shit”, and I tried to carry a “just another day at the office” look on my face to give confidence to my new bodyguards.

Veronica reported that the security guards had surrendered somewhat meekly when faced with Alpha, whose team was strategically placed throughout our offices, that the “Notices” were all in place and that the only disruption was Brouck’s attorney who had arrived at 8am and was still there, in my office, ranting and raving that he should have been consulted on such a corporate matter.

As we left the airport, I was led to three cars, each with armed driver. Veronica and I and one of the guards entered the middle car and all three cars left for our offices. I felt that I had “arrived”. I now bore the image that every man envies, that of the “Don” or, in this region, the”Tsar”.

The trip to 5 Gertrudes iela was a short 25 minutes. When we arrived, we were greeted by two “new security” guards who escorted “The New Tsar” and Veronica into our lobby. I hid my second “Holy Shit” of the morning. The entire population of 40 staff were huddled on the balcony, all bearing “deer in the headlights” expressions. At the bottom and the top of the stairwell stood two more AK-47 armed guards. Through Veronica, I spoke to all in Russian, saying, “Do not worry, this will all be explained in a few minutes, you all still have your jobs, but management is changing.” From behind my office door, above, I could hear a loud voice shouting into a telephone, it was {Dimitri Koskov}, the company lawyer and Vladimir Brouck’s close friend. I opened the door to my office.

Dimitri slammed down the phone and shouted at me in English (fortunately, Dimitri was fluent in my native tongue), “You can’t do this!!! Who do you think you are???”

I answered, “I am the Chief of this organization and if you don’t calm down, you will no longer be its lawyer!” He appeared surprised. Apparently he believed if I ousted his friend, Vladimir, he would be gone , too.

“Mr. Byrne, we don’t do these things in Latvia like this, you can’t just cut the top Latvians out of the partnership.”

“Since the British company owns 60% pf the stock, in Latvia and anywhere else in the free world, we can do what the hell we please. But, we would never oust our Latvian partners unless they used our knowledge and technology and even our equipment, to set up a competitive company to us. In England, they would be stripped of all – their stock, their rights and possibly even their freedom for such unethical corporate behavior.”

“But they didn’t think you would care.”

“Then they should have asked us.”

“What if they do not want to continue under these rules???”

“Then, Dimitri, you can make some money preparing the papers for a buy-out.” He seemed pleased to be not excluded.

Dimitri, was now quiet. And, I showed him the door.

“Dimitri, you can contact the stockholders and see if they want out. For now, I want you out so I can get this company reorganized.”

He walked out through the accumulated bodies of employees trying to hear our conversation.

That afternoon, I held a meeting with the entire staff, with my Latvia right hand, Ligita Zarina, interpreting. (Veronica was sent home as she was my Russian assistant, not Latvian, and her presence stirred unrest among the Latvians, especially Ligita. I told them that I was the new Chief but that I was appointing a Managing Director for the Baltic Nations, Nina Monyenchova who they all knew very well as she had been director of all our stores. Everybody was relieved and even happy as you could see they appreciated Nina was more like one of them, more friendly and not ambitious.

(But, dear reader, another chapter will discuss how Nina had her ex-KGB husband wire tap my office and my apartment, how her daughter ran a small theft ring through one of our stores, stuff like that. Oh, well.)

 

 

 

 

 

 

 

 

 

 

(Notes: 8 hour time difference NY/Riga. 4200 miles, 9 hr flight) If meeting ended at 3pm. Flight at 5pm (1am) arrive Riga 10am) VN would have word from me 11PM, alert Alfa, meet at 5 Gertrudes at 8am. Signs and takeover. Drive to A/P at 9am, meet me at 10 back at office by 11am) (Note: Gertrudes 5A LV 1333, Riga, Latvia)

NOTES” 5a Gertrudes iela, Kroll; Ray Adams and Martin Smith, Perfect Vision Stores

 

 

 

 

 

 

 

 

 

 

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