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Plague of graft: Wave of high profile corruption scandals strike Russia

Published time: November 10, 2012 14:14
Edited time: November 10, 2012 18:14

Photo from www.tihaya.org

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Russia has seen string of corruption scandals develop in just one week. Hundreds of millions of dollars went missing during APEC constructions and Russia's ambitious GLONASS project. Another huge real estate scandal saw the Defense Minister sacked.

Leading aerospace firm Russian Space Systems (RSS) which is working on what is considered to be the Russian version of GPS, dubbed GLONASS, has been linked to a wide-ranging embezzlement scandal.

News broke on Friday that Igor Bozhkov, who was in charge of the probe until recently, had announced that at least 6.5 billion rubles (about $200 million) were allegedly embezzled by the company's management.

The names of those involved in the case have not been disclosed, as the investigation is still in progress. According to Bozhkov, RSS' initial contract with Russian space agency Roscosmos allowed the company several avenues for embezzlement.

On Friday, Russian security services confirmed that around 500 million rubles (about $16 million) had been lost to fraud. The funds were written off through fake contracts and transferred to the accounts of shell companies.

Raids of RSS management offices have revealed paperwork for the fake companies, and the CEO of the company was found with documents belonging to one of the firms used to embezzle the funds.

RSS spokesperson Aleksandr Zubakhin responded by casually dismissing the claims. A source in the Kremlin then rebuffed Zubakhin for his cavalier statement, Ria Novosti reported. On Saturday, Zubakhin reportedly voluntarily filed an advance notice to step down from his post at RSS.

Engineers work on a GLONASS-K space navigation satellite in the assembling area in Zheleznogorsk (Reuters / Ilya Naymushin)
Engineers work on a GLONASS-K space navigation satellite in the assembling area in Zheleznogorsk (Reuters / Ilya Naymushin)

The allegedly embezzled funds account for about 5.6 percent of total GLONASS funding, estimated to be about $3.7 billion. The state planned to spend over $9.5 billion by 2020 for GLONASS development.

GLONASS, an acronym for 'Global Navigation Systems,' is an ambitious Russian satellite project conceived during the Soviet era. Although the first satellites for the system were launched into orbit in the 1980s, financing was significantly reduced during the 1990s. The program was revived in the 2000s. Currently, 24 GLONASS satellites operate in orbit.

APEC money 'washed away'

Another scandal in Russia erupted when recently revealed that at least $3 million was embezzled during the construction of facilities for the APEC summit that took place in early September in Russia's Vladivostok region.

On Thursday, investigators conducted searches and seized documents from the offices of Minregion, the organization administering the construction of facilities. So far, the investigators estimate at least $3 million in embezzlement, but say that the sum could be as high as $5.5 million.

The investigation also revealed that the ex-Deputy Minister of Regional Development, Roman Panov,was involved in the case. During a search of his apartment, investigators found banking statements for accounts worth 73 million rubles (over $2.3 million) and $115,000.

Prosecutors for the case have demanded Panov be arrested. On Saturday, Panov spoke with the court about hearings set to begin in the near future, a spokesperson for Moscow's Tverskoy Court told Itar-Tass.

The summit cost Russian taxpayers and private investors over 660 billion rubles (around $21 billion). The facilities included a new building complex with tennis courts, waterfalls and fountains.

The APEC summit has been rife with scandals over faulty construction projects. In June, a $1 billion road built for the event collapsed after a rain. The base of the 40 kilometers (25 miles) roadway connecting the airport with Vladivostok washed away during the downpour. And in September, a number of other roads renovated for the summit experienced similar landslides.

Photo from www.tihaya.org
Photo from www.tihaya.org
Photo from www.tihaya.org
Photo from www.tihaya.org

Russian Defense Ministry shaken by embezzlement scandal

Another recent high-profile fraud scandal is a $100 million embezzlement case at Russia's Ministry of Defense, which sparked the resignation of Defense Minister Anatoly Serdyukov.

The case involves Oboronservis, which is affiliated with the Russian Defense Ministry. According to investigators, company officials took real estate belonging to the ministry and sold it at reduced price to affiliated business companies.

Serdyukov, who may be called as a witness in the case, was ordered to resign to ensure that the investigation remain objective, Russian President Vladimir Putin said.

Serdyukov was replaced with former Emergency Ministry chief Sergey Shoigu, who will head the investigation.

Vladimir Putin (L) and Anatoly Serdyukov (RIA Novosti / Aleksey Nikolskyi)
Vladimir Putin (L) and Anatoly Serdyukov (RIA Novosti / Aleksey Nikolskyi)