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Grounded: Major Russian space contractor accused of embezzling $17 million

Published time: July 10, 2012 20:05
Edited time: July 11, 2012 00:08

The new Glonass satellite. But how much of its budget actually went on improving it? (Reuters/Ilya Naymushin)

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Police are searching the offices of Russian Space Systems (RSS), as the bosses of the country’s biggest space contractor face accusations of large-scale fraud. The makers of Glonass, Russia’s rival to GPS, are accused of misappropriating $17 million.

­Police claim that between 2006 and 2010 RSS management set up several shell companies and then signed contracts with them to provide research and development for the Russian geolocation satellite program. The research was then done by internal staff, while the money was siphoned back to the top managers through a series of fly-by-night firms.

If guilt is proven, perpetrators will face up to ten years in prison, though no suspects have been named so far.

Tax inspectors raised similar charges against the company in 2010, but these were subsequently rejected in court.

Russian Space Systems has officially stated that there is no evidence of any crimes.

The company has enjoyed a tempestuous relationship with its main client, the Russian Space Agency, Roscosmos.

Russian media has widely speculated that Roscosmos has helped police initiate the investigation. Earlier this year, Roscosmos head Vladimir Popovkin accused RSS of financial irregularities. Russian Space Systems responded with an open letter demanding Popovkin’s resignation, citing his incompetence.

Glonass is a global positioning system conceived during Soviet times. Although it provided global coverage in the mid-90s, since then several of its satellites have fallen into disrepair. In recent years, Russia has spent billions on completing a constellation of satellites that would cover the entire planet. In 2010 3 Glonass satellites worth $80 million were destroyed after a failed launch, but the constellation was finally completed last year.

The Russian government plans to spend more than $9 billion on Glonass by 2020.