ОАО РЖД
"Suspicious banking activity"
Follow the money:
1 billion passengers a year and $42-billion in annual sales, the state company Russian Railways is a giant commercial opportunity. At its head is Vladimir Yakunin, an old friend and long-standing ally of President Vladimir Putin. He oversees a company that strikes international deals, issues bonds to major investors and plans hugely expensive new high-speed lines.
Investigation has uncovered another side to the state-owned company: Under Yakunin, it has paid billions of dollars to private contractors that disguise their ultimate owners and have little or no presence at their registered headquarters. A study of tenders held by Russian Railways also identified contracts worth hundreds of millions of dollars granted to companies that ostensibly bid as rivals but appear to be closely related. "In 43 tender competitions worth $340-million from 2010 to 2013, for instance, the same two companies were the only bidders each time. Those two firms, it turns out, were set up on the same day, by the same person acting on behalf of undisclosed owners. The firms opened accounts at the same bank on the same day, and declared an identical number of employees two years in a row. On one occasion, they filed bids for a Russian Railways tender within a minute of each other. And last October, after Reuters first inquired about the nature of the companies, both registered websites on the same day". Russian investigator Sergei Lesnichiy said Reuters findings appeared to show an attempt to manipulate tenders for state contracts, potentially inflating costs to the detriment of Russian Railways.
A further analysis of banking transactions between 2007 and 2009 involving one large private contractor to Russian Railways showed patterns of activity that U.S. and Russian financial investigators said were typical warning signs of suspicious banking activity. The analysis suggests that millions of dollars originating from Russian Railways ended up with companies that had nothing to do with railway work. Some of these companies have been judged by Russian authorities to be bogus companies with no genuine operations.
This article, which is based in part on a confidential database of Russian bank records, focuses on one of the country’s largest businesses in state hands: the railways. The money at stake is huge: In 2012 Russian Railways handed contracts worth $22.5-billion to private contractors – more than the $19.7-billion it paid its staff.
In a leafy suburb of east Moscow stands a red-roofed town house with a children’s playground in the yard. One day last summer, a group of young men in T-shirts and jeans stood around smoking. There was more to the town house than met the eye. It was the registered headquarters of a company that has won 9 billion roubles ($270-million) in contracts from Russian Railways and its subsidiaries since 2010, and says in corporate filings that it employs more than 100 staff. When a reporter inquired at the property, a man in his 40s – head shaven, arms tattooed – came out. Asked whether the contractor, MPCenterZhat (MPC), was based there, he sent for a younger man, whose hair was cropped at the sides and hung in a ponytail at back. “They sit here – they have an office on the second floor – but they only come here once a week,” the ponytailed man said.
MPC is one of a sample of 10 rail contractors studied by Reuters; together they have received more than $2.5-billion from Russian Railways since 2007, according to tenders and other documents reviewed for this article. Reuters chose the firms because they bid for the same type of work, mainly the upgrading of track signalling and train control systems. They were selected from a longer list of railway contractors provided by a Russian banker now living in Britain,*German Gorbuntsov, who survived an attempt to assassinate him in London’s Canary Wharf district in 2012. Before he left Russia, Gorbuntsov used to be co-owner with Krapivin of a bank called Capital Commercial Bank (known by its Russian initials STB). All the 10 rail contractors examined by Reuters had accounts at STB.
"analysis of tender competitions involving the 10 companies showed little attempt by bidders to compete for contracts on price. Out of 185 cases where the winning bid was listed, 79 were only 0.5 per cent – down to the kopek – below the maximum price set by Russian Railways. A further 35 of the winning bids were 1 per cent below the maximum allowed price"
THE TRANSACTIONS
Russian Railways was looking to upgrade the historic line to take electric trains running at 220 km per hour (140 miles per hour). One of the biggest beneficiaries of that project was a private contractor called Setstroienergo. In total, Russian Railways awarded Setstroienergo nearly $1-billion between 2007 and 2013, according to public tender records and a database of bank transactions supplied by Gorbuntsov. When Gorbuntsov left Russia after falling out with former business partners, including Krapivin, he brought with him a laptop. It contained, among other banking data, millions of transactions that took place through STB between the beginning of 2007 and late 2009. Money frequently moved through a whirl of accounts, making it hard for anyone such as outside auditors or tax officials to track, Gorbuntsov said.
Between 2007 and 2009, Russian Railways paid $772-million into Setstroienergo’s account at STB, according to the database. Those payments, and subsequent transactions, appear to follow the pattern described by Gorbuntsov. For example, Russian Railways made 98 payments to Setstroienergo, worth $211-million, where the money was moved on to other bank accounts almost immediately. In each of these transactions, Setstroienergo received a sum from Russian Railways and either that day or the next working day paid out exactly the same amount to a company called StroiMontazh. The money went into StroiMontazh’s account at a bank called Industrial Credit Bank (Incred). That bank was also run by Gorbuntsov; Krapivin was not a shareholder.
It is not clear who controlled StroiMontazh and its account at Incred, or why the company received payments from Setstroienergo. StroiMontazh was liquidated in 2010, and its previous shareholders and management could not be traced. Setstroienergo declined to comment.
In one 30-month period, starting in 2007, StroiMontazh paid a little more than a third of the funds it received to accounts outside STB and Incred. This money appeared to go to railway contractors for work such as installing new track and signalling equipment, judged by an examination of public records and interviews with local railway officials and company executives.
But nearly two-thirds of the money StroiMontazh received moved on quickly to other companies with accounts at STB or Incred. A search of corporate filings, tender records, court judgments, business directories and media reports found no reference to these companies carrying out railway work. No officials from these firms could be traced for comment.
One recipient was a company named Legatta, which banked at STB. According to its published accounts, Legatta’s revenue totalled only $3,800 in the year to the end of December 2007. Yet in the same period, the bank database records the company was paid $115-million by StroiMontazh. Unable to contact Legatta.
A company called Univolt was another recipient of funds from StroiMontazh. It received $67-million between May 2007 and October 2007, according to the database. Reuters could find no accounts for Univolt and was unable to trace it. In a 2010 Moscow court case unrelated to Russian Railways, tax authorities said they had ordered the suspension of Univolt’s bank account at Incred because they suspected the company carried out no genuine business.
In addition to the $772-million that Setstroienergo received from Russian Railways between 2007 and 2009, the contractor also won Russian Railways’ tenders worth $223-million between 2010 and 2013, according to public documents.
Setstroienergo declined to comment for this story. Public information about the company is limited. It is a “closed joint stock company,” which means it does not have to disclose its owners. Its official headquarters is a single room in a run-down business centre in a block of flats in Moscow’s northwestern suburb of Tushino. When a reporter visited the address during working hours, no one was there.
above:German Gorbuntsov
above: Saint Petersburg
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