Due Diligence Process

Phase II

Scope of Due Diligence Inquiry and Analysis

In support of Project Pumpkin below are questions the company is seeking to answer as part of its expanded due diligence process. To complete this endeavor, research analysis firms engaged for this task shall only collect information in a legal and ethical manner. Information may be gathered through the following sources: interviewsand/or discussions with individuals who are legally in possession of information of interest to the company, media (electronic, print, and cyber), public databases and/or libraries, legally accessible government, business, regulatory, court/judicial,and NGO records/documents. The final report shall include data sources and an assessment of source reliability.

The focus of the research is the retail company Lenta, to include its senior advisors, investors / financial backers, key executives within the company, as well as any other identifiable public or private sector persons/organizations who have direct involvement with Lenta and its owners or are directly influenced by Oleg and/or his businesses. This research will also assess August Meyer and Loren Bough and their relationship with Lenta and the founders/owners.

The goal of thedue diligence is to determine whether or not Lenta is a company whose values are consistent with our company’s three basic beliefs. In addition,we wish to know whether our company can confidently enter into a long-term business arrangementwith Lenta et al, wherein each party respects and trusts the other and promotes a mutually beneficial environment in accordance with legal, regulatory, political, ethical and cultural requirements.

Specific Due Diligence Areas of Inquiry

  • What is the reputation of Lenta (and those identifiable owners, advisors and “lieutenants” within the company) from the perspective of honesty, integrity, transparency, truthfulness, trust, and reliability?
  • What is the ownership of Lenta’s view relating to ethics and integrity? What factual, anecdotal or circumstantial data supports your analysis?
  • When facedwith adversity or is pushed into a corner how does Lenta and/or the ownership team typically react? Are the owners spontaneous and/or emotional? Does the Lenta ownership team have members who have a bad temper that affects their personal and/or business decision-making process? Are they shy or gregarious? Is there someone within the Lenta organization who is known as a reliable source of the ownerships thoughts/intentions? If so, who?
  • Does the ownership of the company appear to trust others? If so, who are their most trusted confidants and what is their background from a character and integrity perspective? What is the level of influence these advisors have upon the company?
  • Do the owners of Lenta require that they “win” every outcome or are they willing to compromise?
  • Has the company ever been known to hold a grudge and to seek vengeance for a real or perceived slight? Does anyone with the Lenta leadership have a history of personal violence or condoning the use of violence?
  • Has the company or its owners ever been a suspect or person of interest in any type of criminal investigation within Russia, any other nation or NGO?
  • What is the company and ownerships philosophy with respect to honesty and integrity? Does the ownership condone an “ends justify the means” philosophy within his personal and business life? Does it support using government and/or business corruption to achieve his personal/business goals? Has the company ever done so?
  • Does the Lenta ownership associate with individuals/organizations involved in criminal activity? If so, what is their involvement with these individuals/organizations and what is their influence upon the business?
  • Does the company or its ownership have any association with Russian organized crime? If so, at what level and how do they use that association?
  • What are the core personal values / beliefs of the Lenta ownership?
  • What are the business values of the core Lenta ownership team? To the extent possible, determine what are their long term business goals are and ascertain how they intend to achieve the goal(s).
  • Does the Lenta ownership seem to believe in the rule of law and the preeminence of law and the courts to resolve business and personal disputes?
  • Does Lenta or its owners have a history of implementing “dirty tricks” with respect to business partners or competitors (business or personal)? If so, how? What was the reaction of the government, media, and/or public to this type activity?
  • Is Lenta and its ownership team perceived to be ethical when dealing with the business, government, media, community? If so, why or why not? Do business partners (particularly foreign partners) recommend doing business with them? Would they recommend Lenta or its owners for a business partnership arrangement?
  • Has Lenta established and articulated policies that prohibit corrupt business practices, including “commercial bribery” (the payment of bribes to employees of private companies), as well as the payment of bribes to government officials?
  • Does Lenta conduct training for its employees related to integrity, ethics, or anti-corruption? If so, how often and is the training considered to be an important?
  • Have there been any instances in which Lenta has disciplined or terminated employees for engaging in corrupt conduct? If so, what were the circumstances? How was the conduct discovered? Within the Lenta organization who conducts investigations into alleged corrupt conduct?
  • Has Lenta, ever requested that suppliers -- or others with whom it does business -- make payments to accounts in countries outside of Russia, or to third parties? If so, for what reason has this been done?
  • Does Lentamaintain bank accounts outside Russia? If so, what is the purpose of such accounts?
  • Is there any evidence that Lentahasever requested that “foreign”, i.e., non-Russian suppliers, goods being imported into Russia, provide false documentation which indicates either a lower or higher value than the actual cost of the goods?
  • Does Lenta or its ownership team appear to have enemies with the government, organized crime, media or the general population? If so, who and why and what does that mean to the business endeavors?
  • Is Lenta or its ownership team active politically? If so, at what level and how does this activity manifest itself? Does Lenta actively solicit government involvement in its business and if so how and to what end?
  • Has Lenta or its ownership team ever been involved in any type of government corruption, malfeasance or influence peddling?
  • What is the political history of the Lenta ownership team, i.e. do they appear to have aspirations for political power either directly or indirectly?
  • Does Lenta or its ownership team have a personal relationship with any current members of the Russian national or local level governments? If so, who, and how do those relationships affect the business?
  • If Lenta or its ownership team are active politically who are their political allies and benefactors and how does they use this relationship? Who will likely be their allies / benefactors in the future? Will this be a positive or a negative factor reference a business joint venture with a foreign company?
  • Is Lenta or its ownership team associated or allied with any political groups or potential future politicians who are not currently in office? Could these relationships harm a potential business joint venture?
  • If/when there is a change in government in Russia what will that mean to Lenta?
  • What is Lenta and the ownership teams relationship with the Russian military and defense establishment? What is their relationship with the security (domestic and foreign) services and the police? How do these relationships affect the business?
  • What type of association / relationship does Lenta or the ownership team have with those industries such as ground transportation, rail, maritime, ports, fresh and packaged food manufacturers, gasoline and heating oil, that are central to the operation of a retail business? Does Lenta have the ability (directly or indirectly) to influence the performance of those businesses?
  • Who are Lentas and the ownership teams primary business allies and how does that relationship benefit them? Are any of his business allies associated with government corruption or organized crime?
  • Are the Lenta owners selfless? If so, how does this manifest itself? Is it part of their business philosophy?
  • Have any of current or past business enterprises of the Lenta ownership team ever been involved in any type of criminal activity? Have there been any allegations of ethical breaches involving any of their current or past businesses?
  • Has Lenta or any members of the ownership team ever been accused of using a businessas a mechanism to support or enable any type of criminal activity including money laundering?
  • How many businesses does the Lenta ownership team own as a majority or minority shareholder? Are the Lenta owners involved in a leadership capacity with any businesses or organization that they do not have an ownership interest?
  • Does Lenta have any involvement with any NGO’s and / or charitable organizations? If so, what level of involvement and how does the company use that relationship from a personal and business perspective?
  • Does the Lenta ownership team believe a foreign owned retail consumer food company is good or bad for Russia from a strategic asset perspective?
  • Does Lenta or the ownership team have a history of double-crossing business partners (foreign or Russian) exploiting
  • How do Lentas employees describe the ownership team, as a individuals and businessman? How do his competitors describe them? What do their enemies say about them? What do their friends say about them?
  • Are any of the ownership teams family members associated or employed by Lenta? If so, who and in what capacity and role? What is the background of the family member from an integrity, ethics, honesty, criminal activity, and political perspective?
  • Where possible, compare, contrast and quantify Lenta and its ownership team against other successful retailers in Russia(i.e. X-5, Seventh Continent, El Dorado, Okey) from a reputation and ethics point of view.

PRIVILEGED & CONFIDENTIAL—PREPARED AT THE REQUEST OF COUNSEL