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2 arrested in Defense Ministry’s $100MN corruption case

Published time: November 02, 2012 13:02
Edited time: November 02, 2012 17:05
Yekaterina Smetanova (right), the head of the Expert Center for Legal Support company and a suspect within the Oboronservis embezzlement case. RIA Novosti/Andrey Stenin

Yekaterina Smetanova (right), the head of the Expert Center for Legal Support company and a suspect within the Oboronservis embezzlement case. RIA Novosti/Andrey Stenin

A court in Moscow has sanctioned the pre-trial detention of two suspects as part of a major embezzlement case involving the Oboronservis company which is affiliated to the Russian Defense Ministry.

Khamovniki District court ordered the arrest of Yekaterina Smetanova and her partner Maksim Zakutailowho reportedlyare close friends of another suspect – the former head of the Defense Ministry’s property department Yevgeniya Vasilyeva.

According to investigators, Smetanova, who works as a general director in a law firm, planned and managed the sales of the 31st State Design Institute of Special Construction – a major state company that built docks for nuclear submarines, missile silos and launch pads for space rockets. In 2011 the institute was sold off by the Defense Ministry.

Smetanova was also detained earlier this year as she took part in the alleged kickback scheme during the sale of a supermarket building in the South Russian city of Samara. However, this case was quickly closed due to the lack of evidence.

The court agreed for the defendants to be detained because they possess real estate abroad and could flee Russia in order to avoid justice. In court Zakutailo asked the judge to release him on 800,000 roubles bail ($25,000) as with both partners under arrest no one would look after their children, but the judge ruled otherwise.

The defense lawyers said they plan to appeal the decision within three days.

A week ago the Central Investigative Committee conducted a search in Yevgeniya Vasilyeva’s Moscow apartment as part of their investigation into the alleged embezzlement of about 3 billion roubles (US $100 million) from the Oboronservis company.

Law enforcers suspect Defense Ministry officials of investing heavily into real estate before selling it to affiliates at well below market prices, the Investigative Committee’s spokesman said in a statement.

According to press reports, investigators seized about $3 million worth of gems and jewelry in Vasilyeva’s apartment.

Comments from Russia’s Chief Military Prosecutor Sergey Friodinskiy suggested that the Oboronservis probe touched upon a much broader corruption scheme. “A malicious system squeezed money from state budgets by means of joint stock companies controlled by the Defense Ministry”, the official said.

Defense Minister Anatoliy Serdyukov said the ministry was closely monitoring the situation with Oboronservis and stressed that any public statements on the amount of damage and the complicity of particular officials in the alleged fraud were nothing more than allegations. The minister stressed that Oboronservis was a separate commercial structure with its own regulation and management and noted that the Defense Ministry, just like anyone else, is interested in a detailed investigation into all charges the company managers are facing.

Earlier this week, Business daily Vedomosti reported on investigators’ plans to question Serdyukov about the case, but the government’s daily Rossiiskaya Gazeta wrote that representatives of the Investigative Committee dismissed the report as unfounded.

On the day of the first search Serdyukov met with President Vladimir Putin, who instructed him to “ensure full cooperation with the investigation launched into Oboronservis,” presidential press secretary Dmitry Peskov told journalists.

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