PPF Investments and Russian Bribes, or When in Moscow...

“When you work in such an atmosphere, some things are more difficult to do and some are easier”, Ladislav Bartonicek, CEO of Czech-based Generali PPF Holding, told Moscow-based newspaper Vedomosti that asked him how the company deals with Russian corruption. “There are companies that complain they can’t work and be successful because of this problem, but we believe it should be just taken for granted, as a fact of life.”

It’s rather difficult to say exactly what Mr. Bartonicek meant by taking corruption for granted, but the following report published today by another Moscow-based publication, Kommersant, may shed some light on Generali PPF’s Russian practices.

(click here for the original full Russian text, we at The Insurer have translated only the key part)

Yesterday, representatives of the Chief Investigative Office of Moscow and the Chief Administration for Economic Security and Anti-Corruption of the Russian Federation seized files from the headquarters of Mosstroiekonombank. The files were seized in connection with the criminal case on embezzlement of USD15 million from the Czech company PPF Investments (PPFI)

According to investigators, in 2007 Russian citizens Vladimir Korovin and Ekaterina Alabuzhina persuaded the Czech businessmen to transfer the money to their Mosstroiekonombank accounts in exchange for help in resolving the conflict around PPFI’s share in Insgosstrakh <a key Russian insurer – WAFT> <..>

As sources close to the matter told Kommersant, legal actions against the fraudsters had been initiated several years ago. According to investigators, in 2007 anonymous persons contacted representatives of the company. They offered to organise a meeting with key state officials of the Russian Federation that could help the Czech businessmen to resolve the conflict over ownership in Ingosstrakh.

For a quick reminder: in May 2007, the Czech-based PPF Investments acquired 38.46% in Ingosstrakh from Alexander Mamut <a Russian businessman – WAFT>. On October 8, 2007, Oleg Deripaska, owner of a 60.1% share in Ingosstrakh, organised a shareholders’ meeting, which decided to increase the charter capital of Ingosstrakh from RUR2.5 billion to RUR10 billion (this effectively would decrease the share of PPFI to 9.6%). In responce, PPFI filed a complaint with the Federal Service for Financial Markets, Office of Attorney General, Office of the Russian President, and the Central Bank of Russia, claiming it didn’t know about the meeting. On October 24, Czech prime minister Mirek Topolanek discussed the Ingosstrakh conflict with Russian vice prime minister Sergey Naryshkin. After that, on November 8, PPFI filed an arbitration claim.

The conflict widely discussed in the media attracted attention of the fraudsters, who decided to take advantage of it, investigators believe. The Czech businessmen were contacted by a woman that called herself Ekaterina Vavilova. She offered them to organise a meeting in Kremlin and showed them several photos of her in the company of senior government officials (the pictures had been photoshopped) and letters of recommendation. Then she organised a meeting with a “high-ranked member of the presidential office”, who also demonstrated fake proofs of being an important political figure.

The parties met several times in the most expensive restaurants of Moscow. Finally, the insurers were offered to transfer USD15 million to Mosstroiekonombank accounts of several companies. “This is not a payment, - the fraudsters noted to the insurers – this is some kind of insurance, to guarantee you don’t back out. Later, when all your problems are settled, you may decide to pay us a compensation out of this money. You’ll get back the rest”. The money, as investigators believe, was indeed transferred to the accounts, and later abroad.

For a long time, investigators couldn’t identify the fraudsters. However, last year, investigation gained momentum, when representatives of the Chief Administration for Economic Security and Anti-Corruption detained Vladimir Korovin. <...> Later, the official bodies learned that Ekaterina Vavilova's real name was Ekaterina Alabuzhina.

PS: Today, we at The Insurer have received the following press release from Jan Piskacek, spokesperson for PPF Investments (translated). “PPF Investment Fund states that information in some Russian media regarding losses in the amount of USD15 million, which some fraudsters were supposed to receive in exchange for a meeting with key state Russian officials, is false. Some media mistakenly pointed to a connection between the Fund and law enforcement actions in Mosstroiekonombank”. Here is the original:

Ян Пискачек, представитель PPF Investments по связям со СМИ :

Фонд PPF Investments заявляет, что информация, появившаяся вчера в некоторых российских СМИ о якобы имевших место убытках фонда в сумме 15 миллионов долларов, которые должны были получить мошенники, обещавшие организовать встречи с должностными лицами ведомств РФ, не является правдивой. Некоторые СМИ ошибочно указали на связь фонда с обысками в Мосстройэкономбанке.