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Russia: Abuse of Criminal Prosecution Print E-mail
Written by OCCRP   
Monday, 01 September 2008

“For my friends, anything; for my enemies, the law.” - former Peruvian President Oscar R. Benavides

Why do Russian public prosecutors target some public officials and businessmen and not others who may be equally guilty of crimes?

Russian state officials and businessmen can be dragged into court not only because of their recent actions but also because of events that took place many years ago. The state can suddenly remember a businessman’s economic crime 10 years after its commission, or it can just as suddenly review a criminal investigation that officially ended several years ago.

Many Russian public officials and businessmen found themselves in uncomfortable, even illegal situations when the Soviet communist system was untidily transformed into a capitalist one. The rules of the game changed, and the boundary between legal and illegal shifted.
New entrepreneurs couldn’t avoid situations in which their positions became illegal and their interests became mixed with the interests of criminal groups and the bureaucracy. Doing business was almost impossible without cooperating with criminal groups and corrupt state officials. Many state officials could not keep their jobs without participating in corruption and protectionism. Clear legal lines still haven’t been drawn, and there remains narrow separation among state, business and criminal groups. 

If in Russia we began to apply the principle that all wrongdoers must be punished, including taking into account past activities, then the state itself could disappear. Prime Minister Vladimir Putin and some cabinet ministers have been involved in criminal cases. It is possible to find grounds to prosecute most big businessmen because their past was regulated by vague laws remaining from Soviet times. 

The state hasn’t drawn the legal line at which before old economic faults are forgiven and after all violations of law are punished severely. This is convenient for authorities who have much influence on investigative bodies, the public prosecutor’s office and the judicial system. This state, in which public control is feeble or almost absent and politics are nonpublic, was best characterized by former Peruvian President Oscar R. Benavides, who said, “For my friends, anything; for my enemies, the law.” 

The interests of public power can be seen behind any high-profile criminal case in Russia, regardless of whether the accusation is fair. At the same time, nothing really threatens businessmen, officials or criminal leaders who break the law but who keep good relations among authoritative clans. The threat appears when conflicts arise within clans or when they fall out of the system, which is beyond the law. 

This must all be taken into account when considering the effectiveness of official measures to combat corruption and crime.

Some noteworthy examples:

Vladimir Putin

Criminal case #144128 was instituted Feb. 4, 1999, by the Ministry of Internal Affairs Investigative Committee. One of the high-profile criminal cases involving Putin and colleagues from the administration of Saint-Petersburg, it alleged that state funds were passed illegally to a private building corporation, Dvadtsaty Trest. 

Vladimir Putin
Vladimir Putin
Almost 4 billion rubles (about $4.5 million) were given to the company as credits and loans from the budget of St. Petersburg as well as from the special city fund – this at a time when the city was strained to pay state salaries. The money wasn’t returned. It was transferred from the company to the addresses of little-known companies in eight countries, mainly Spain and Finland, to pay for projects including hotels, restaurants, a villa and real estate market monitoring. 

According to the deed of inspectorships, carried out on instructions of the investigation committee, Putin, acting as a mayor, ordered the money given to the company under pretext that it organized recreation for war veterans. 

The documents of money transfers to the corporation was signed by Aleksey Kudrin, who headed the St. Petersburg city finance committee then and is now minister of finance and vice prime minister of Russia. 

The payment orders were signed by Nadezhda Savolaynen, chief accountant of the city’s finance committee, and Dmitry Pankin, deputy head of the committee. 

Afterwards, Savolaynen became deputy director of the administrative department in the Ministry of Finance; Pankin became the head of the department for international financial relations, national debt and national financial assets in the Ministry of Finance and later deputy minister of finance. 

The criminal investigation was terminated in 2000. Andrey Zykov, a former senior investigator and a manager in the St. Petersburg investigation group for the Dvadtsaty Trest case, said unprecedented pressure was put upon the investigation. 

“When in November 1999 the man from Moscow was sent to us, we understood that the criminal case would be stopped,” Zykov said. “We knew that we had dug far down, and we were rather interested in how they were going to use to stop the case softly. When they tried to bring pressure upon us, we just found more and more evidence. In the context of the investigation, we sent international requests to Spain. Also we prepared the requests to the U.S.A.,Canada, Israel and Finland. But the case was stopped, and we weren’t allowed to send them.” The case was dropped Aug. 30, 2000, with the consent of the General Prosecutor’s Office. 

Investigator Oleg Kalinichenko came under “very serious pressure,” said Zykov. Kalinichenko was senior operative officer of the anti-corruption department in the Chief Internal Affairs Administration of St. Petersburg, and he insisted on starting the investigation. 

“In summer 2001, he phoned me and said that he had to retire,” Zykov recalled. “Then he disappeared. It was his mother who told me that he had gone into a monastery. I visited him. His cell is a rather modern one, with a phone. We had a talk. He said that he had got tired of all those things: the materials in which such surnames were mentioned were doomed anyway, that’s why in his computer he cancelled all the information concerning those who are in Moscownow, and he said that he didn’t want to talk about it anymore.”

Zykov also retired. Afterwards, he sued Putin. But the court received a letter from the then-president’s administration, saying that Putin couldn’t be a party to the trial. 

When Putin and the Russian authorities make declarations about the struggle against corruption, it is necessary to take into consideration that they don’t mean themselves. Ten years haven’t passed yet since case #144128 was filed, so in theory a new group in authority and in conflict with Putin could reopen the investigation. 

In 1999, some teammates of the former president Boris Yeltsin did not welcome the appearance in Moscow of Putin, which enabled the Dvadtsaty Trest case. But when it became clear that Yeltsin had made his choice, and Putin was supported by serious power -- for example, the oligarch Boris Berezovsky  -- the case against Putin evaporated. 

The “Tri kita” (“Three Whales”)

Filed in the summer of 2000, this case targeted businessmen, but not the public officials they worked with, accused of smuggling furniture into Russia for sale in big Moscow-area retail shops. Representatives of the Russian Special Services, General Public Prosecutor’s Office, Ministry of Internal Affairs and the customs house were mentioned in the case. The investigation lasted seven years, initiated by the law machinery of the Moscow region, then assumed by an investigation committee attached to the Ministry of Internal Affairs, and finally by another investigation committee attached to the General PublicProsecutor’s Office, when then-President Putin put the investigation under his control. 

During those years assassinations, assaults and threats to people connected to the case became regular. In February 2002, unidentified people attacked the customs official who had helped prepare the case. In March 2002, the customs official who recorded the smuggling received a head injury in an attack. Also that month, the militia vehicle transporting the investigator from the Moscow region, was blown up. Pavel Zaytsev, the MIA investigator and manager of the investigation group for the case, received death threats against his family. A case witness was assassinated in a hospital in May 2003.

Investigators said that Spanish, Italian, French, English and German furniture was being transported across the border using counterfeit documents through bogus firms. It was delivered to the “Grand” and “Tri kita” firms. The merchandise quantity and value were understated significantly in the forged documents, minimizing customs duties. Only the entrepreneurs who controlled the bogus firms and furniture centers were accused. One of them was a former deputy director of the affiliated enterprise of “Rosoboronexport,” the state structure which exports Russian weapons. 

While the businessmen remain under arrest and the case in court, no state employees are among the accused. This is despite the fact that large-scale smuggling couldn’t happen without the complicity of high-ranking officials in customs, the Federal Security Service (which controls the customs house), and the Ministry of Internal Affairs. 

For example, the assistant to the deputy director of the Federal Security Service was mentioned in the case. According to a transcript of the interrogation of a witness, he tried to influence the investigation. But he isn’t among the accused. He was appointed to an executive position in one of the daughter organizations of Gazprom, the Russian gas monopoly. 

On Nov. 22, 2000, just hours after the witness had implicated the Federal Security Service officer, and after the interrogation of the officer, the case was transferred without explanation to the General Public Prosecutor’s Office of Russia. There, in 2001, there were attempts to terminate the case because of a lack of evidence. Moreover, the General Prosecutors Office started a separate criminal case against investigator who had been in charge of the Tri kita case. 

Yury Shchekochikhin
Yury Shchekochikhin
But the State Duma Commission on the struggle against corruption protested. A journalist and deputy of the Russian parliament, Yury Shchekochikhin, was especially vocal. 
Afterwards it was found that high-ranking officers of the General Public Prosecutor’s Office received some $2 million in bribes from businessmen who wanted the investigation dropped. No public prosecutor was called to criminal account. They have since retired. 

Shchekochikhin, the Russian parliament member who insisted on a detailed investigation, had planned a U.S. visit in 2003 to meet with the FBI about the case. He fell ill and died suddenly a few days before the trip. The preliminary diagnosis was “poisoning.” The official diagnosis was Lyell’s allergic syndrome. 

Shchekochikhin’s relatives weren’t given the documents for an independent expert examination. The Public Prosecutor’s Office twice refused to institute a criminal case concerning his death. The General Public Prosecutor’s Office Investigation Committee started such a case in 2008 that is ongoing. 

Tri kita illustrated the confrontation between different Russian “national security” groups in the Ministry of Internal Affairs and Federal Security Service which shared supervision over the customs house. During the investigation, several generals were dismissed from the Federal Security Service, the customs house was left by its directors, and the customs station where the smuggling took place was disbanded. Nevertheless, no customs official or Federal Security Service officer was charged. The former deputy general prosecutor who declared the case terminated in 2001 “completely according to the law” is a member of Russian Senate today. The other former deputy general prosecutor, whose telephone number was mentioned in the telephone conversation between the subordinates of arrested businessmen, is now a member of an anticorruption parliament commission.

Smuggled Chinese merchandise

Special Service officials are mentioned in this case as they were in the Tri kita case. Again, only businessmen were accused. 

The MIA Investigation Committee instituted criminal case #290724 in April 2005 over the smuggling of goods fromChina. More than 100 railroad cars were seized. According to documents, a military unit responsible for a warehouse that stores goods for a department of the federal Security Service, was the payer and consignee of the goods. According to the materials of the MIA Investigation Committee, the freight was received by an officer who presented a proper service certificate. 

Victor Cherkesov
Victor Cherkesov
Just seven days after the case was opened, the General Public Prosecutor’s Office took the materials and transported them to the Federal Security Service – the very agency which unit was named as the consignee of the contraband – for investigation. Only in August 2006, after a change of the head of the General Public Prosecutor’s Office, was the case returned to the Public Prosecutor’s department for especially serious case investigations, currently the Investigation Committee attached to the General Public Prosecutor’s Office. The investigation is finished, but none of the officers of the special services has been accused. The case is in court now. 

The smuggling cases involving Chinese merchandise and furniture were battles in a conflict between Russian national security services. Victor Cherkesov, one of Putin’s closest acquaintances and former head of the State Committee on Control of Drugs Circulation, managed to move those two criminal smuggling cases to the “operative maintenance” of his committee employees. This is possible in Russia, even though the cases were outside the competence of the anti-narcotic department. Operative maintenance means the collection of information by all available means including wiretaps and secret observation. The president was given personal reports on the investigation results, and subsequently several generals of the Russian special services retired. No criminal cases were filed. 

The confrontation between Cherchesov and the leadership of the Federal Security Service informally supervised by Igor Sechin, the former deputy head of the president’s administration, resulted in the appearance of the next criminal case against the general of the anti-narcotic committee who was Cherchesov’s second-in-command. Sechin eventually became vice prime minister under Putin. Finally, Cherchesov lost his position in the anti-narcotic committee and lost the use of “operative maintenance” tools.

The anti-narcotics committee general

On Oct. 1, 2007, General Alexander Bulbov, head of the operative maintenance department of the anti-narcotic committee, and two of his subordinates were arrested by Federal Security Service officers in the Domodedovo airport. They were accused of illegal wiretaps and taking bribes. The General Public Prosecutor’s Office Investigation Committee initiated the case that might be interpreted as a strike against corruption – except that Bul’bov was in charge of operative maintenance in the Chinese merchandise and furniture smuggling cases. His lawyer clamed the general was arrested because of this. 

After the arrests, Cherchesov, head of the anti-narcotics committee, pleaded through the mass media to the special services officers not to begin an internal war.

Deputy Minister of Finance Sergey Storchak

Sergey Storchak
Sergey Storchak
Deputy Minister of Finance Sergey Storchak and two entrepreneurs were arrested Nov. 15, 2007, in a case alleging theft of public funds brought by the General Public Prosecutor’s Office Investigation Committee. Storchak is accused of trying to steal public funds during the adjustment of the state debt of the former USSR. The case concerns $43 million. Investigators found $1 million in Storchak’s flat. Soon after, another criminal case was filed against the deputy minister accusing him of misfeasance in 2005 during negotiations concerning adjustment of the debt of the formerUSSR to Kuwait. 

Why were the criminal cases instituted almost three years after the crime was committed? Some observers say the timing is connected with the conflict between the Ministry of Finance and Russian national security over the allotment of money and supervision over its spending. 

Minister of Finance Alexey Kudrin was strongly against giving some enterprises and state-owned shares in some companies to state corporations. In particular, he has publicly called for clarification about how the state corporation Rostechnologies will use property it is given. Rostechnologies included weapons trading. The head of that corporation is Sergey Chemezov – who is considered one of Putin’s close friends.

Solntsevsky and Tambovsky

In 1996 Swiss police arrested Russian businessman Sergey Mikhaylov on suspicion he was head of the Solntsevsky criminal group and that he participated in money laundering. The court acquitted him, in part because Russian officials didn’t give efficient assistance to their Swiss colleagues. 

Many doubt that the Russian law machinery could have helped the Swiss investigation or will ever assist in prosecution of the Solntsevsky group. 

Mikhaylov is a member of the coordinating counsel of the private Russian organization, “Polus,” which organized the expedition for the leadership of the Russian special service to the South Pole in January 2007. The following people were among those who participated in that expedition: Nikolay Patrushev, director of the Federal Security Service (He lost his position in 2008 and now is a head of the Russian Security Council); his first deputy Vladimir Pronichev, who was also director of the frontier service of Russia; and Victor Patrushev, brother of Nikolay Patrushev. Artur Chilingarov, who is a member of the committee on defense in the Russian parliament and a member of the superior counsel of the pro-president political party Edinaya Rossiya, headed the expedition. 

Gazprom was among the sponsors. Its affiliated company, Gazprom-avia, provided the flight. Experts estimated that the expedition had to cost about $5.8 million. Gazprom representatives refuse to reveal the exact cost. Mikhaylov said that he didn’t help with financing. the Federal Security Service doesn’t answer questions on the subject. 

Vladimir Barsukov (his last name was Kumarin until he legally changed it), leader of the Tambovsky organized criminal group, had less success. He was arrested last year and accused of murder in a case that is ongoing. The mass media has called him a criminal leader for years, but he was always successful in protecting his honor, dignity and business reputation. He even brought an action against the former head of militia in St. Petersburg who spoke unfavorably of him in the mass media. 

A criminal case against him appeared only when a business conflict arose between him and the companies which are connected with powerful state officials in St. Petersburg.

YUKOS

The criminal case against Mikhail Khodorkovsky, former director of one of the biggest Russian companies, “YUKOS,” was based on events a decade old. He and some colleagues were accused of swindling and non-payment of taxes. Khodorkovsky was arrested on Oct. 25, 2003. Soon after, YUKOS was declared bankrupt and its main assets transferred to the oil company Rosneft, which is controlled by the state.

Boris Berezovsky

The General Public Prosecutor’s Office accused Berezovsky of stealing more than 214 million rubles ($8 million) from the national airlines, Aeroflot, and of legalizing stolen funds. The trial began in 2007, but Berezovsky was not present, having been granted political asylum in Great Britain. The Russian court sentenced him in absentia to six-years in prison.

Boris Berezovski
Boris Berezovsky
Several years earlier it had been the same General Public Prosecutor’s Office, staffed by many of the same investigators that had halted investigation of criminal cases that named Berezovsky. Nikolay Volkov, investigator for especially serious cases at that time who had collected the materials for the cases had to retire from the public prosecutor’s office. Volkov blamed his fate on the Berezovsky cases. During that period, Berezovsky had been very powerful in Russia. Some believe he helped Putin become president. The two later had a falling out. 

Some observers found it ironic that the General Public Prosecutor’s Office would demand Berezovsky’s extradition. During the period of his influence, leadership of the Prosecutor’s Office consisted of the same people who several years before were at full power and at the same positions when the criminal cases against the powerful oligarch were stopped. And the same people told Volkov to retire after he brought documents from Switzerland, showing the activity of companies Berezovsky controlled. 

Russian authorities can hardly explain why the former directors of the General Public Prosecutor’s Office who had refused to prosecute Berezovsky when he was reachable in Russia haven’t been punished. Former General Prosecutor Vladimir Ustinov, a relative of the deputy head of Putin’s administration, Igor Sechin, later became the head of the Ministry of Justice and is now a Russian president representative in the Southern region of Russia. Another, Yury Birykov, is a Russian senator.

Russian Nuclear Minister Eugeny Adamov

Since 1999, the Russian press and the parliament’s anticorruption commission have demanded the General Prosecutor’s Office launch a criminal case against former Russian Nuclear Energy Minister Eugeny Adamov. In 2001, Yury Shchekochikhin, a member of the commission, gave materials the group had collected to the FBI. Subsequently, Adamov was indicted for stealing $9 million from funds donated by the United States and other countries to develop Russian nuclear security. The U.S. indictment mentions these materials. Finally, in 2005, former minister Adamov was arrested in Switzerland at the Americans’ request. 

The criminal case in Russia started immediately, and Adamov was demanded back home. He spent time under arrest, then was released and he continued to work for the state nuclear institute in Moscow. In 2008, a Russian court found him guilty, but did not sentence him to jail. 

Adamov’s former colleagues, who also figured in the Russian criminal case, controlled the Global Nuclear Services and Supply company (GNSS). The company was one of the intermediate partners for the Russian state Techsnabexport (TENEX), which deals in HEU-LEU (highly-enriched uranium – low-enriched uranium) under a U.S.-Russian contract. 
When Vladimir Smirnov, a friend of Putin’s from St. Petersburg, became head of TENEX, the contract with GNSS was terminated. GNSS filed a civil case in a Stockholm court demanding $1 billion in lost profits from TENEX. 

That may explain why Adamov spent some time under arrest in Russia in 2005-2006. Even his opponents who had insisted on the investigation said the jail time was not necessary. He could not flee the country nor influence anybody because he had lost his position a long time ago. 

Later the Stockholm court received materials from Moscow showing that GNSS, along with its lucrative contract, came under the private control of Adamov’s colleagues when Adamov was a nuclear minister. GNSS lost in the court. Adamov was finally released. 
Nobody was interested in searching for the missing money that, according to the U.S. indictment, went from banking accounts Adamov and his U.S. partner controlled to a Russian company called Logic-Realty. Meanwhile, the company Adamov’s former subordinates opened develops luxury real estate projects near Moscow. 

From these cases, a clear picture of Russian justice as it is applied to high-profile people emerges. 

Powerful people such as prominent businessmen and high-ranking state employees are called to criminal account selectively. They are prosecuted primarily when they find themselves involved in a conflict between powerful groups or they confront power. 
Criminal prosecution can be recommenced at any moment, even many years after the criminal case officially ended. It all depends on the group that controls the law machinery, public prosecutor’s office or special services at any particular moment. The judicial system can’t be called independent, and the outcome of an investigation can be predetermined by authority. 

The leading employees of the special services, law machinery and public prosecutor’s offices seldom become figures in criminal cases, and as a rule they evade the prisoner’s box even when they do. Only businessmen are accused of large-scale economic crimes, almost all of which are impossible without high-ranking support. In extreme cases, the protectors who could be prosecuted instead peacefully leave their positions or are appointed to another prestigious post. 

Except for cases involving lower-ranking officials, criminal cases against employees of the law machinery, special services or public prosecutor’s offices are very rare. Such cases usually are theatrical or result from the confrontation in national security. There are very few of them: the case of “the werewolves with the shoulder straps” during which several Moscow militia officers and Ministry for Emergence Situations generals were arrested and accused of bribe-taking and extortion; the case concerning the Moscow militia officers who were accused of illegal wiretaps; and the case against a Moscow district public prosecutor who participated in the legalization of hijacked cars. As a rule such cases are of small local character and look like a drop in the ocean. 

Private property of prominent and influential businessmen is weakly protected from the encroachment of national security. The case of former YUKOS director Mikhail Khodorkovsky and that of Mikhail Gutseriev, former head of the oil company Russneft who had to leave Russia and sell his business last year, are vivid examples. 

Recently there are talks to limit the term during which the person can be indicted for economic crime.

Last Updated ( Monday, 13 July 2009 )
 
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