A Moscow court ordered wealthy businessman Vladimir Yevtushenkov on Thursday to remain under house arrest until Nov. 16, sending shares in his company Sistema sharply lower in a case that has shocked Russia's business community and unnerved investors.
Yevtushenkov, Sistema's chairman and main owner, was put under house arrest last week on suspicion of money laundering during the telecoms-to-oil conglomerate's acquisition of oil producer Bashneft. Sistema denies the accusations.
The charges against Yevtushenkov, who turned 66 on Thursday and is one of Russia's richest men, raised fears of a return to more state intervention in the economy and drew comparisons with the fate of ex-tycoon Mikhail Khodorkovsky, who spent a decade in jail on fraud and tax evasion changes after falling out with President Vladimir Putin.
Yevtushenkov's house arrest, announced last week, has further dampened the investment climate in Russia, which has been undermined by the stand-off with the West over the crisis in Ukraine.
Yevtushenkov's lawyers appealed against the arrest, saying it was "groundless, unlawful and contradictory to common sense" and asked the court to let him go on bail of 300 million roubles($7.8 million).
But Judge Yuri Pasyunin said the appeals court ruled to leave Yevtushenkov under house arrest. The businessman was not present for the hearing.
Shares in Sistema fell around 10 percent after the ruling on Thursday, extending its decline to more than 40 percent since last week and wiping 144 billion roubles ($3.7 billion) off its market capitalization. It pared losses to 7.7 percent on the day in late afternoon trade.
Shares in Bashneft were down 4 percent by 1150 GMT.
Many people had expected the court may lift the house arrest on Thursday.
The head of the Russian Federation of Industrialists and Entrepreneurs (RSPP), a big business group that controls two thirds of the Russian economy, said it had sent a letter to Putin criticising Yevtushenkov's house arrest last week. Unlike Khodorkovsky, Yevtushenkov is not seen as a foe of the Kremlin.
'Very wealthy man'
During the hearings on Thursday, a state investigator asked the court to allow Yevtushenkov to go to his office to avoid "inflicting financial harm to the company and its personnel", but only on weekdays.
"This is a very wealthy man who may influence the investigation (if the house arrest is lifted completely)," the investigator told the judge, calling Yevtushenkov the mastermind behind the acquisition of Bashneft, one of Russia's top 10 oil producers.
The court has not ruled on whether he will be permitted to go to his office.
The deal to buy Bashneft was signed in 2009 and Sistema acquired an almost 80 percent stake in Bashneft, which is based in the Russian Ural mountains' region of Bashkortostan, for $2.5 billion.