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A man looks at a computer screen showing logos of Russian social network VKontakte. (SERGEI KARPUKHIN/REUTERS)
A man looks at a computer screen showing logos of Russian social network VKontakte. (SERGEI KARPUKHIN/REUTERS)

A Russian social network tale: Censorship and a CEO on the run Add to ...

For years, Mr. Putin had been hands-off when it came to the Internet, but this was a moment of intense political frustration in Russia. Sites like VK gained currency by helping coalesce that anger, especially among a generation of younger users who had come of age in the post-Soviet era. Its wide reach broadened the appeal of protest rallies, which were no longer just political parties gathering a few hundred supporters, but something more organic and hip. And it became a platform for circulating cellphone camera footage posted to YouTube that purported to show evidence of ballot-box stuffing on voting day.

VK nourished the largest public rallies those cities had seen in at least a decade. First, some 10,000 people gathered in Moscow, shouting “Russia without Putin!” Then another protest was called the following week, with VK pages hosting details of events in some 120 cities. Anywhere from 30,000 to 100,000 people turned up at a square in Moscow – estimates varied wildly – and 10,000 others gathered in St. Petersburg.

“The authorities in Russia, they were shocked by what happened in 2011 and 2012, and they don’t want a repetition,” said Konstantin von Eggert, an independent Russian journalist and commentator for Kommersant FM Radio.

The day before those rallies, Mr. Durov was summoned to the prosecutor’s office in St. Petersburg, where he refused to block protest groups’ profiles. But less than a year later, Russia began passing new Internet laws making it much harder for him to say no.

A power struggle emerges

Politics and Mr. Putin weren’t the only factors weighing on VK as it grew. In April, 2013, the company’s ownership changed, sowing the seeds for a battle over control.

Mr. Durov’s partners, Mr. Leviev and Mr. Mirilashvili, sold their combined 48-per-cent stake to United Capital Partners (UCP), a private investment group based in Moscow that some believed was acting on the interests of Mr. Putin’s close allies.

UCP is led by CEO Ilya Sherbovich, a former board member of the state oil company Rosneft. In interviews with The Globe and Mail, Mr. Sherbovich has flatly rejected speculation that he was acting as some sort of Putin agent. He says he wants to boost VK’s mediocre revenues, telling The Globe last year: “We want to change the way the company makes money.”

Nonetheless, the timing of the ownership change raised eyebrows. It came a day after investigators searched VK’s offices and Mr. Durov’s home over allegations he struck a police officer while driving – although the charges were later dropped. Mr. Durov‘s associates said the charges had been trumped up to intimidate him but others close to the company said the inquiry was legitimate. The perception of political pressure on the company lingered. In late May, 2013, Russia’s Federal Service for Supervision of Communications, Information Technology and Mass Media, or Roskomnadzor, put VK on a blacklist, only to lift the ban later the same day, saying it had been an error.

It was little more than six months later, in December, 2013, when Mr. Durov opened the FSB’s letter demanding information about Ukrainian users. He was already showing signs of wanting out. He’d reached a deal to sell his 12-per-cent stake in VK, held through a company called Bullion Development Ltd.

The buyer was Ivan Tavrin, the CEO of MegaFon, a Russian telecommunications provider. Megafon is controlled by USM Holdings Ltd., a Russian firm run by Alisher Usmanov, Russia’s richest man and a presumed Putin loyalist with an estimated net worth of $19.2-billion, according to Forbes. His business empire aside, Mr. Usmanov owns a stake in British soccer club FC Arsenal and a Victorian mansion in London that he bought for $84-million and reportedly renovated to include a large Roman-style bathing complex. Through USM, Mr. Usmanov also controls Mail.ru Group, a leading Russian Internet and telecom company that already owned 40 per cent of VK’s shares.

Estimates suggest the transaction netted Mr. Durov between $200-million and $300-million, and he pledged to stay on as CEO.

Mr. Tavrin wasted little time putting his stamp on the company and solidifying control for Mr. Usmanov. According to allegations in court filings, he began cleaning house, pressuring the company’s deputy CEO and the chief financial officer, brothers Ilya and Igor Perkopsky, to resign or be fired over allegations of misconduct. The men were replaced by people with connections to USM and MegaFon.

Then in March of this year, Mr. Tavrin sold his 12-per-cent stake to Mr. Usmanov’s company, Mail.ru Group. That set up an ownership deadlock. UCP owns 48 per cent of the social network and Mail.ru now owns 52 per cent, but because of VK’s peculiar management structure, the company has just four directors and each group appoints two. The result is that neither shareholder group can make a decision of any substance without agreement from the other.

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