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Corruption

According to the most recent reports, the posthumous trial of Sergei Magnitsky, who died while in police custody, has been delayed further to a request from the defence for more time. What defence you ask? Well obviously defence attorneys selected by the state, so you can be assured of their objectiveness….

It beggars belief that President Putin, Prime Minister Medvedev and other cronies would want to raise the spotlight on one of the most blatant instances of state corruption, when various state officials, including from the police, scammed tax payments to their benefit and then laid the blame with a foreign investor. Magnitsky had uncovered the crimes, only to be arrested on trumped-up charges and to die in mysterious circumstances in prison.

Medvedev, who was President at the time, promised to look into his death and to punish those responsible. Nothing has happened since. This led to sanctions on travel imposed by the USA against various Russian politicians

And now in response, the Russian authorities have decided to try a Russian citizen who died in police custody in Russia, an individual who had uncovered corruption, a well educated lawyer trying to make things better for everyone in Russia, representing a foreign investor (Hermitage Capital).

You would have thought that the Russian authorities, the Sechins of this world, would want to put this episode behind them. You would have thought that the powers that be in Russia would understand the adverse impact on Russia and the country’s investments.

You would have been wrong. This regime doesn’t care. The various clans in power have already stolen so much that they really don’t care what happens to Russia – they have already got their escape routes should they be required, buying property in Florida, the UK, France, Germany, Italy, Spain, Greece.

If they did care, they wouldn’t try a dead man who was killed by the regime.

As reported in the Russian media in February, and in particular in the blog by anti-corruption blogger Alexei Navalny, the longstanding chairman of the State Duma’s parliamentary committee of ethics Vladimir Pehtin would appear to have some ethical issues of his own. 

Despite working as a member of parliament since 1999, Pehtin has amassed considerable real estate in Russia, a fleet of expensive cars (Porsche, Mercedes-Benz, etc.) and also real estate in… America. Furthermore, for some reason Pehtin omitted to mention the existence of this prime real estate in Florida in his tax reason.

Subsequent to the disclosure on 13 February, Pehtin resigned his post during the investigating, while adamantly denying ownership of the property, claiming that it was owned by his son Alexei Pehtin, an alleged 35-year old businessman.

However, as Navalny noted in response, Pehtin has been receiving a state salary since 2004 from the State Duma. He would appear to be his father’s “advisor”. Moreover, Pehtin senior has allegedly been paying tax on the Miami real estate in the USA, which is strange behaviour if he doesn’t own any property in the country! If you ever hear this “ethical” deputy lambasting America, you will have to laugh even more at the utter hypocrisy of the Russian state official. 

So yet another parliamentary deputy and state official has been found out. The corruption reeks more and more. The officials are so convinced that they won’t be caught that they flaunt their wealth.

Interestingly, when you type in Vladimir Peshtin in the Internet in English, Google assumes you have made a mistake and meant to write Vladimir Putin. Maybe this is not so surprising, if Putin lets such corrupt people assume leading roles in his parliament. He is not the first deputy to be caught and clearly won’t be the last.

Welcome to President Putin’s Russia. Vive la corruption!

The New York Times posted an interesting piece on 12 February on alleged attempts by President Putin to force Russian officials to bring their cash back home entitled Russia May Restrict Investing Abroad

Putin has submitted a draft law to parliament, which will naturally be adopted by the servile members of the State Duma. According to the law, all top state officials, including in government, their spouses and young children (what young means is not defined at present) will be expected to close down any bank accounts or shares held outside Russia.

The apparent goal is to crack down on corruption – however, it would appear more likely to be another way of pressurising officials at all levels to toe the party line and also make them share more the backhanders that they receive with other senior officials.

Furthermore, the law has loopholes – surprise, surprise – officials can as in the past retain money in foreign accounts linked to offshore companies that will not be accessible by the ban or by using the names of proxies and friends – a measure that has, by the way, proved quiet handy for UK businessmen seeking to avoid paying high rates of tax in the UK.

So this would appear to be another measure aimed at appeasing public anger over the high levels of corruption in Russia, while at the same time leveraging more control over officials and inevitably increasing corruption levels, as they seek to offset the cost of sharing their illegal earnings with other government figures now aware of the scale of their theft.

 

As reported by the BBC on 6 November 2012, President Vladimir Putin has sacked Defence Minister Anatoly Serdyukov, with immediate effect. Serdyukov had become one of the clan at the top through close personal links, but recently fell out with his father-in-law, former Deputy Prime Minister Viktor Zubkov. These could have planted the seeds for his downfall.

Brought in to run the Armed Forces despite a lack of experience in the sector, it had been claimed that he would root out corruption, using his knowledge from running the Federal Tax Service.

Unfortunately it now appears that he may only have exacerbated the already high level of corruption in the Armed Forces, with Russian investigators raiding the offices of a military contractor (Oboronservice) in connection with allegations that the state-owned firm had been selling assets to for-profit organisations at a loss (amounting to an estimated GBP 62.5 million).

Serdyukov has been replaced by a Putin ally Sergey Shoigu, previously Minister of Emergency Situations (from 1994 to 2012) and until now Governor of Moscow Oblast. He holds the military rank of General of the Army.

It should be noted here that Serdyukov was sacked by Putin, and not Prime Minister Dmitry Medvedev.

As reported in The Moscow Times on 19 October 2012, for some reason the police have arrested TNK-BP head of government relations Igor Korneyev, who was allegedly caught trying to sell positions, including that of head of the internal affairs department of the presidential administration. He had been seeking USD 3 million for each positions.

It is bizarre to see this kind of corruption reported by the Russian authorities, as it has been well-known by political analysts and other consultants that positions have always been up for sale to the highest bidder for the past decade at least, with ministerial posts among the most expensive.

If this is part of a new goal to appear more transparent and crack down on such practices, it would be good to see the authorities report on the number of instances where such practices have been stamped out in the past.

The next question that arises, of course, is why someone would be willing to pay USD 3 million for a position? Presumably, the perks of the job and the ability to influence various tenders/procurement programmes, including a percentage of the final bid or other kickbacks, which are  so prevalent among bureaucrats Russia, as demonstrated by the number owning properties in Europe and the USA, which would be not affordable on the basis of their official salaries. If you pay USD 3 million, you expect to recover far more during your time as a Kremlin official.

According to Kommersant (9 October 2012), the government has called for a “radical revision by the second reading” of the draft law that would allegedly have imposed a complete ban on ownership of foreign assets and bank accounts by state officials.

This is apparently due to the government’s concern that “additional bans” would prevent the state bureaucracy from attracting highly qualified specialists from the private sector.

So in the end a law will be adopted that will have no force whatsoever, stipulating that an official may not have a foreign bank account, with certain exceptions (FSB/KGB agents, individuals requiring the bank accounts to exercise their functions, etc.), but may own foreign property that he/she inherited.

How will this law affect all those state officials who boast about the properties they own in London and rent out? How will the law be enforced? How will the authorities ascertain ownership, as presumably such bureaucrats operate various offshore companies, with stooges operating for them?

In other words, a watered down law will be published purely for foreign consumption  in the hope that Russia will no longer languish at the bottom of countries perceived to suffer from high levels of corruption.

As they say, plus ca change….

As reported in the Guardian in September http://www.guardian.co.uk/world/2012/sep/27/deripaska-cherney-surprise-deal, billionaire Oleg Deripaska decided at the last moment to avoid revelations in the UK High Court and the need to swear under oath and risk charges of perjury by reaching a last-minute settlement with former partner Mikhail Cherney. Clearly Deripaska did not want to reveal any of his criminal actions in the past and disclose how the aluminium industry had been carved up between only a few players.

He may also have been persuaded by his political contacts to cough up, as they also didn’t fancy references to their role in providing patronage to dodgy dealings.