THE QUINTILLIONAIRE
At 58, Leonard Blavatnik seems to have it all. The billionaire’s net worth is about one third of the Alaska Permanent Fund. He owns Warner Music, the flashiest of his multiple holdings through Access Industries.
Blavatnik is the owner of a stately mansion on the Kensington Palace grounds. He has a penthouse in New York, because that is what men like him do.
Blavatnik throws extravagant parties where there are plenty of of gilded women and noticeably fewer men. In 2015, he was named Britain’s richest man. He’s close with Vladimir Putin.
Born in Ukraine when it was a subset of the old Soviet Union, and now with American and British citizenship, Blavatnik is what is referred to as an oligarch. He’s straight out of Central Casting for a Putin-friendly, Russian-linked high roller.
Blavatnik is the type of guy of whom you simply do not ask how he made his first million.
All of this is laid out in painstaking detail in a 2014 long-form story in the New Yorker Magazine, titled “The Billionaire’s Playlist.” The story centers on how Blavatnik acquired Warner Music.
What is not told in the magazine is the story of how the billionaire now intersects with Alaska’s future fortunes.
Blavatnik does not need money from anybody, but evidently one of his companies, Quintillion, needs Alaska to put some skin in the game through the Alaska Industrial Development and Export Authority, or AIDEA.
Because Governor Walker has all of a sudden appeared on the scene to publicly boost one of Blavatnik’s companies doing business in Alaska, that makes this man of mystery an item of public interest.
It raises the question of why Alaska’s governor would put his thumb on the scale for one telecommunications company over another, especially when that other company is GCI. In the recent debate over the state’s fiscal future, GCI has been a good friend to the governor.
It also raises the question of whether Governor Walker is using AIDEA as his private bank for his chosen projects, just as he has brought the Alaska Gasline Development Corporation under his total control. This is a pattern.
BLAVATNIK UNLIMITED
Blavatnik conglomerates, trusts, sub-trusts, and companies are what’s behind Quintillion, the company that describes itself as a “private operator headquartered in Anchorage, Alaska.”
Quintillion is led by an Alaskan, the founding partner and CEO Elizabeth Pierce, whose goal is to bring telecommunications fiber from Europe to Asia, across the top of Alaska and Canada, through the Arctic Ocean. Connecting points to Alaska villages along the coast are the icing on the cake. Some say the point of this would be to give high-speed stock traders a nano-second’s worth of advantage, but there are advantages to coastal Alaska communities like Barrow and Wainwright, where Netflix connections could dramatically improve.
The company will sell its capacity wholesale. Already it has just about completely installed the Alaska portion of the project, also known as Phase 1. In this phase is a terrestrial fiber optic cable network, connecting communities across the Arctic to the rest of the world through existing fiber int the Pacific Northwest.
A project like this comes at a very large cost, perhaps $290 million, without cost overruns. To put together financing for such a project, Quintillion had to look for deep pockets. Now, it appears the deep pockets own the company, but the reality is, unless one is a private equity expert, one could never get to the bottom of where the money comes from in this particular project. All that can be determined is that all paths lead back to Blavatnik.
As one of their spokesmen was quoted, “Quintillion has different investors, such as ASRC and Calista’s subsidiary Futaris are invested in different aspects of the project. We treat the nature of these investments confidentially and we’re not going to disclose details.”
QUINTILLION’S CASH FLOW
Quintillion’s web site says it is majority funded by the U.S. private investment firm Cooper Investment Partners. The head of Cooper Investment Partners is Stephen Cooper.
Cooper is the president and CEO of Warner Music Group Corp — owned by, you guessed it, Blavatnik. These two have finances that are tightly braided.
Cooper comes from a high-finance background, including being the man who was called in to fix Enron, after that company went into the largest bankruptcy and reorganization in US business history. Enron’s collapse was fraught with the company’s now-legendary fraudulent practices.
All that occurred before Cooper came to straighten it out. He’s a fix-it guy for distressed companies.
It’s through Cooper Investments that Stephen Cooper is connected Matthew P. Boyer, a senior member of the Cooper group.
Matt Boyer is formerly with the Carlyle Group: He served as Managing Director of Carlyle Partners III. Launched in 2000 with $3.9 billion, the fund conducts leveraged buyouts in North America.
Also, Boyer was the managing partner of Carlyle Partners IV, and Carlyle Partners V. When he was at Carlyle, he focused on U.S. buyouts in the telecommunications sector, specializing in wireless and wireless industries.
Boyer is a point person on the Quintillion project. His ties to Carlyle are interesting to Alaskans because Carlyle’s founder and principal manager is David Rubenstein, married to the wealthy fortune-hunter and Alaska Dispatch News owner Alice Rogoff.
Rogoff sat with the governor in meetings as he tried to figure out how to run a state with a sudden cash flow problem, all the while brushing off the $6 million a year losses at her new newspaper investment. Rogoff has also stated great interest in assisting the development of Western Alaska. She’s not known to be part of the Quintillion project.
While the Alaska portion of the main cable project is just about done, word on the street is that Blavatnik has invested as much as he is going to and that Cooper Investment Partners needs to raise the rest of its financing from other sources.
AIDEA HAS CASH
On Aug. 8, Governor Bill Walker appeared in Dutch Harbor to review the work being done by Quintillion as it completed the Alaska portion of the cable project. Walker declared it promising for Alaska.
“Alaska is changing,” he told KUAC radio. “Alaska is changing because the Arctic is opening up. So to be able to have this opportunity for Alaska — the connectivity with the rest of the world with the high-speed internet this is going to provide — it’s pretty exciting.”
Two days later, at the board meeting for AIDEA, who should show up but the governor’s deputy chief of staff, Marcia Davis, sitting alongside Quintillion’s Elizabeth Pierce. At the end of that meeting, the board went into executive session to discuss the financing of telecommunications in Alaska.
Marcia Davis, it’s known, drove the Calista investment to Quintillion when she was Calista’s general counsel.
If AIDEA is getting ready to make a decision about financing a portion of this project, then the public will want to know a lot more about it because it’s an unusual piece of investment with an uncertain outcome.
Not long ago, the governor erased the bright line between the Alaska Gasline Development Corporation and his office, as he pushes ahead to build a gasline that fewer and fewer people believe is a solid investment.
Now is he also pressuring AIDEA? In any project like this, the big investor dictates the terms. Does AIDEA really have the sophistication to play in this international pond?
Word is that Quintillion needs an answer right away from AIDEA, and that in itself might signal it’s best to slow down.
ALL THE QUINTILLIONS
There are all kinds of reasons why a corporate structure might be too difficult for most people to understand. Sometimes its financing, taxation or international investors that cause complicated structures. Sometimes it’s simply to hide who owns what.
There are three known groups of entities in the Quintillion group:
- Quintillion Networks, LLC, which appears to be the original Alaska group led by Elizabeth Pierce and Hans Roeterink.
- Quintillion Holdings, LLC, jurisdiction unknown.
- Quintillion Subsea Holdings, LLC (Delaware), which is 95 percent owned by Cooper Investment Fund LLC. The equity interest in Cooper Investment Fund is ultimately held through various entities in a Bermuda trust controlled by Len Blavatnik.
- Quintillion Subsea Operations, LLC (Delaware), which is the owner of the entire Quintillion submarine fiber optic cable system, controlled by Cooper Investment Fund.
GOVERNOR STEPS OVER BRIGHT LINE
AIDEA, like the Alaska Gasline Development Corporation, is a separate entity authorized by the State of Alaska. Its charter is to “promote, develop, and advance economic growth and diversification in Alaska by providing various means of financing and investment.” Decisions made by the board are supposed to be free from political intervention and crony capitalism. Its investments are supposed to bring returns to the state’s general fund.
Created in 1967, since its reconfiguration in 1987, AIDEA’s financing has purchased more than $1 billion in loans, issued more than $1.5 billion in conduit revenue bonds, developed AIDEA-owned projects, and put back $379 million of dividends into the general fund.
Whether the governor is putting his thumb on the scale for one telecommunications company or another in Alaska is an outstanding question. At the very least, it appears that, as with Alaska’s gasline agency, the governor is crossing over the line and putting political pressure on the formerly independent boards, over which he now has enormous control.