Sergey Katalin, Vladimir Panasenko
The case of the prosecutor’s protection racket at Moscow casinos and other corruption scandals raise doubts as to the success of Russia’s corruption legislation reform.
The participants of the 119th session of the International Olympic Committee decided to host the Winter Olympic Games and the Paralympic Games in 2014 in the Russian city of Sochi. As such, the international community placed great trust in Russia as a country with a well-functioning legal system, which allows maintaining public order during the Olympics and, most importantly, ensures a level playing field for competing athletes from the different countries. The opponents of selecting Sochi said that Russia will not be able to hold well- organized Olympic Games because the funds allocated to the Olympiad will settle in the pockets of corrupt Russian officials.
Fighting corruption on the eve of the Olympics has been declared a priority of Russia’s internal reforms, as the main mechanism for the rule of law and the development of civil society.What are the successes in the fight against corruption now that only a little over a year remains until the Sochi Olympics?
Stories of protection racket of gambling operations by Russia law enforcement agencies in the Moscow region, including high-ranking policemen and prosecutors, attracted great publicity not only in Russia but also in the other countries of the world.
The Russian taxpayers were outraged at the instigation of nearly 400 fabricated criminal court cases at the hands of a Moscow region prosecutor Yuri Lukyanenko in the city of Podolsk.
According to Life News, prosecutor Lukyanenko and his two deputies wrote criminal reports as they wished. A supervisory prosecutorial inspection revealed that the prosecutors in Podolsk improperly commenced 400 criminal cases against individuals. Once it was established that the number of such cases was over 25 and that in some of them the accused actually received real prison sentences, the head of the Criminal Investigation Department of the Podolsk Police Administration and his deputy were removed from office. Almost immediately, a prosecutorial inspection was initiated, led by the prosecutor of the Moscow region Alexander Anikin. The identification of 400 unlawfully-commenced prosecutions, which already resulted in 100 convictions, forced high ranking prosecutors to stop some cases from moving through the courts. The inspectors even started looking into initiating a criminal case against the sacked Police Administration officers. Other news sources, including MK (Moskovsky Komsomolets), Vedomosti, Vzglayd, and Delovaya Gazeta confirmed this story, reporting that the residents of Podolsk complained that the local prosecutor’s office in Podolsk was not fulfilling its normal working functions. In particular, reports surfaced that the law enforcement agencies in the city practiced the so-called “iron” system that allowed investigators and operatives to fabricate criminal cases with impunity, to intimidate witnesses, to compel people to make false confessions, to forge signatures, and to commit other kind of forgery.
In response to news publications, the People’s Community Council of Podolsk expressed its own opinion on the subject, taking the stance that the criminal actions of individuals should not go unpunished. The citizens expressed hope that the former prosecutor Lukyanenko and his accomplices get real jail time.
It was noted that the name of the Podolsk prosecutor also appeared in the case of the Moscow region casino protection racket. The scandal, which involved a number of Moscow region prosecutors, began with the arrest of Ivan Nazarov, who became the prime suspect in the organization of an illegal gambling business in the Moscow region. According to the FSB (Federal Security Service), the prosecutor’s office had been involved in an illegal scheme that brought from five to 10 million dollars a month. According to the Russian Investigative Committee (IC), in exchange for protection, ex-prosecutors received not less than 15 million roubles. The regional prosecutor’s office tried to paralyze the investigation, first by refusing to open the case, and then by not supporting the request for the arrest of the accused. Forbes Magazine cited the testimony of a confidential source, who described for the court the operation of Ivan Nazarov’s slot machine halls in Noginsk, Klin, Klinsk, Odintsovo, Ozera, Podolsk, and Pushkino, “If the underground casinos had problems with the security forces, the management would immediately contact the local prosecutor’s office and the matter got settled. The inspections ended. Competing casino operations, on the other hand, were choked with various inspections. Their clubs got closed, and the slot machines seized in favor of Nazarov. For their protection, the prosecutors normally obtained from Nazarov around 30 thousand dollars.”
The Russian news portal Lenta.Ru reported that 11 people were in custody as a result of the casino operation, including five former prosecutors, who worked under the former head of the investigation supervision department Dmitry Uromov, as well as three policemen and three civilians. Two ex-prosecutors, including the former first deputy regional prosecutor remained at large, but wanted. The assistant prosecutor of the city of Serpukhov was also taken into custody, suspected of taking bribes. According to the news source, one of the defendants in the case of underground casinos was the chief of the anti-telecom crime section, who was alleged to have received bribes of as much as 75 thousand dollars. However, as the Rosbalt agency reported, Yuri Lukyanenko from Podolsk and Ruslan Rezumenko in Pushkin still remained at their posts.
Kommersant, ITAR-TASS, and Kompromat.Ru also presented confidential witness testimony that the deputy regional prosecutor set up a power vertical within the regional prosecutor’s office, whose officials became the cogs in the corruption mechanism that was constantly taking in more and more employees. The active members of the group numbered twenty people. As rank-and-file members of the prosecutorial corruption scheme the news sources named the former prosecutors of Klin, Odintsovo, Serpukhov, and Noginsk, as well as the prosecutor of Podolsk Yuri Lukyanenko. A law enforcement source around the time of the initial arrests commented that the list of defendants can still expand.
Other sources have reported on the involvement of senior authorities from the Interior Ministry and the Prosecutor General’s office in the protection of the unlawful gambling business.
MK, Izvestiya, Gazeta.Ru, Expert Online, Rosbalt, and Kompromat.Ru have all covered the searches in the office of Nikolai Golovkin, the head of the Moscow regional Police Administration, and the interest of the Investigative Committee toward the deputy head of the Police Administration of the Moscow region Alexander Voronin. There were also reports of bribe-taking by a “trusted representative” of the Moscow region police chief Nikolai Golovkin, who also was acquainted with Voronin. The bribes were reported to have originated from Ivan Nazarov, the alleged organizer of the illegal casino network, who bribed the leadership of the Moscow regional police. As a trusted man for Golovkin, the intermediary organized board meetings between casino owners and senior officials.
The Spravedlivost legal portal stated that the trusted man was a “mediator between the organizers of illegal casinos in Moscow and law enforcement agencies.” However, in predicting the “inglorious finale” of the unprecedented case of illegal gambling protection racket in the Moscow region, the news agency expressed the view that the rapid exposure of corruption by uniformed authorities would soon lose its pace. On the one hand, none of the cases had yet advanced to trial. On the other hand, the most important officials charged were quickly released from confinement.
Some years ago, MK published an article entitled “How to turn an innocent man into a defendant,” in which the journalists described the story of the Stupino Metallurgical Company takeover, which involved the prosecution of the enterprise’s former director Alexander Shoror. The authors argued that the reason for the prosecutor’s office indifference to earlier complaints of Alexander Shoror to institute a criminal case in connection with attempts to capture the Stupino Metallurgical Company, which were spearheaded by Mr. Voronin of the Criminal Investigation Division of the Police Administration of the Moscow region, had to do with the fact that the Police provided cover to the black raiders and acted in the interests of a foreign trading group that intended to seize Russian strategic assets. All the witnesses in this case were bribed and the evidence fabricated, the newspaper reported.
Following these events, Voronin received the rank of general and the prestigious post as the chief of the Central Investigation Division of the Police Administration of the Moscow region. The author claimed that the business competitors of Mr. Shoror with corrupt ties to the Interior Ministry and the Prosecutor General’s Office paid to order Shoror’s criminal investigation. According to MK, a Yugoslav businessman paid five million dollars to have Shoror arrested and held until such time as the metallurgical enterprises will have been taken over. Fearing that Shoror could became dangerous by accusing those who paid for his prosecution, the competitors were reported to have agreed to take extreme measures, including the businessman’s physical annihilation.
No less shocking is the prosecution of the former director of one Russian pharmaceutical plant, initiated by law enforcement agencies of the Moscow region, with the active support of the Podolsk city prosecutor Yuri Lukyanenko done in the interests of the former government official.
As it became known to the media, on July 17, 2008, the Central Investigation Division of the Moscow region Police Administration opened a criminal case against the former head of JSC ZiO-Zdorovie V. Ageev, who built a pharmaceutical plant, which was to produce domestically much needed medicines for the Russian market. The creation of the enterprise and the building of a pharmaceutical plant is a project begun by the Zdorovie Fund, a non-profit aimed at supporting health care services in Russia. The foundation was created by Russian scientists and health care opinion leaders, including academics Chazov, Kulakov, Paltsev, former Minister of Health and Member of the United Russia Party Supreme Council Ms. Dmitrieva. The foundation participated in the affairs of the enterprise through business entities that it created, Optimalnoye Zdorovie (Optimal Health) and Zdorovie Invest (Health-Invest). With the enterprise’s takeover by a foreign shareholder, namely the Actavis company from Iceland that bought out a 51-percent stake and then refused to implement innovative projects that it promised to undertake as part of the merger agreement, former managers, workers, and scientists at the plant left the company and decided to implement the innovative project at another company. The group successfully implemented its plans for innovative medicine production in the Lipetsk region of Russia, with the approval of the Russian President and of VEB Bank. The unique Rafarma Russian pharmaceutical complex is a one-of-a-kind pharmaceutical production facility in Russia.
One could only assume that the purpose and the motives behind the prosecution of the former director of JSC ZiO-Zdorovie, as in other similar cases, were not only the elimination of competitors, but also the shielding of black raiders from a foreign company. A criminal case was opened against ZiO-Zdorovie’s former director with dubious evidence of guilt.
The sentence of Judge Guskova of the Podolsky City Court of the Moscow region pronounced in December 2009 stated that, in the early fall of 2004, all the shareholders of ZiO-Zdorovie in accordance with their earlier agreement decided to transfer to R. Khabriev as compensation for pro-bono consulting services to the construction of a pharmaceutical plant 1680 common shares of the company at par value. V. Ageev, acting on behalf of the shareholders notified R. Khabriev as to that decision, who, in turn, proposed that the shares be transferred to his acquaintance Ms. I. Avgustinovich. The market value of the shares, according to the expert, was 111,831,934 roubles, which constitutes a large amount of money. The court also found that neither Khabriev nor Avgustinovich paid any money for the shares transferred to them. It was also the court’s finding that R. Khabriev, who was the director of Roszdravnadzor in 2004, received remuneration for services rendered to the Podolsk businessmen by issuing licenses to the pharmaceutical production company JSC ZiO-Zdorovie immediately after the transfer of shares to the elderly and disabled Avgustinovich.
After the acquisition of the plant by a foreign company, Khabriev was asked to return the shares that he got. When he refused, the company then procured an agreement signed by Avgustinovich for the return of the shares. In her turn, Avgustinovich lodged a complaint with the law enforcement authorities protesting the agreement for the return of the shares, saying that her signature was forged. The original of the agreement was never produced.
The court found Ageev (and not Khabriev or Avgustinovich) guilty of a crime, ruling that “at an unknown time and under unknown circumstances,” he instructed, “unknown persons” to forge the agreement. However, no experts have concluded that the signature was forged, and the original contract was not recovered by the investigators. In effect, the documents relating to the transfer of shares to Avgustinovich, were found in the office of R. Khabriev’s spouse Ms. T. Khabrieva, who is the head of the Institute of Law and the Legislative Process of the Russian Government and a member of the Council on Combating Corruption under the President of Russia.
The indictment in this case was signed and sent to the court by the Podolsk prosecutor Yuri Lukyanenko. Lukyanenko’s former assistant A. Verstova, who is now the deputy prosecutor of the city of Chekhov, Moscow region, zealously supported the state’s charge. The investigation of the case was carried out under the same Central Investigation Division leadership, including N. Golovkin, A. Voronin, and deputy chief B. Gorodkov
Through the joint efforts of law enforcement agencies, prosecutors, and the courts of the Moscow region, the government official’s fee for his pro-bono services allegedly provided free of charge that was taken away from him was returned, and the healthcare company executive was threatened with a new prosecution. As such, the authorities managed to thwart the company’s attempts to return the shares by way of threats. This same group organized a new prosecution of the former director of ZiO-Zdorovie, whom it actively sought to burden with debt, and his new projects were stymied with further law enforcement investigations. The new criminal cases also show signs of fabrication and evidence tampering.
The result of the prosecution of the former head of JSC ZiO-Zdorovie Mr. Ageev was the withdrawal of shares owned by business entities of the Zdorovie Fund, and their transfer to the shareholders of JSC ZiO-Health, which initially did not have any legal rights to those shares. All of these maneuvers preceded the sale of a controlling stake in Actavis to a U.S. company Watson.
Meanwhile, Lukyanenko was allowed simply to retire, Verstova advanced in her prosecutorial career, and the investigators successfully received their certification renewals. Khabriev now is teaching students, and is actively engaged in planning measures to combat abuses in connection with the 2014 Olympics! Khabriev was entrusted to lead and manage the National Anti-Doping Company RUSADA, which is designated in an agreement with the World Anti-Doping Agency as the entity responsible for counteracting the use of drugs at the upcoming Olympic Games in Sochi.
Will the Olympics be honest and fair, when the people responsible for their fairness are in the business of providing free-of-charge services for monetary compensation?
In his interview to Rossiyskaya Gazeta about the violations he discovered during an inspection in Podolsk, Moscow region prosecutor Alexander Anikin said that, despite the fact that he did not expect the irregularities to be so great in number and so prevalent, he still believed that the cases are ultimately not fabricated. Rather, the official said that the only thing wrong with the criminal cases is that they were initiated and investigated by persons unauthorized to do so, and that this is just a rough oversight on the part of the direct management of these assistant prosecutors and the lack of due process controls by the head of the Podolsk inter-district investigation division, who has already been fired from the Police.
For his part, the Podolsk prosecutor Lukyanenko was never asked to resign. Resignation was his personal choice because – as it became apparent in the investigation – the prosecutor’s duties do not include the verification of personnel orders of the law enforcement agencies of which that prosecutor is technically in charge.
According to this logic, the prosecutor in charge of law enforcement agents and their investigations is not obliged to check the legitimacy of their decisions. Curiously, this conclusion implies that by signing the indictment, the prosecutor does not have to check whether the law enforcement agents who carried out a criminal investigation had authority to conduct it.
It is unlikely that such a position espoused by the regional prosecutor meets the requirements of Russian federal law and the Russian Constitution. The loyalty of higher prosecutor’s offices in relation to the manufacturers of criminal cases, corrupt officials and the ubiquity of werewolves in uniform, whose reputation has been justly tarnished in the media, allows the latter to escape punishment, giving them more confidence in their unscrupulous actions and prevents any meaningful efforts to root out corruption in the country.