Popular Politics newspaper, issue 5.

POPULAR POLITICS

popular-politics.ru

Read on pp. 6–7

10 astonishing careers of the children of officials and generals

children of officials and generals

ITAR-TASS

READ ON P. 4 →

“Putin’s Palace” was built at the expense of hospitals

Photos © ITAR-TASS, PhotoXPress, Kommersant

State Duma vice speaker owned a stake in a Cypriot company

How to improve Russian healthcare → p. 5

The son of the head of Russian Railways was linked to ticket sales → p. 3

Golden watches bought with budget money

Patriotic lawmaker concealed a foreign asset

The Mechta (“Dream”) yacht club is located on the shore of the Istra Reservoir

maps.yandex.ru

Sergei Zheleznyak, vice speaker of the State Duma from United Russia, concealed his stake in a Cypriot company for four years.

The Anti-Corruption Foundation (ACF) found that United Russia member Sergei Zheleznyak failed for several years to disclose his stake in a Cypriot offshore company in his official declarations. According to documents obtained by ACF, the lawmaker was a co-owner from December 2008 to December 2012.

The Cypriot offshore company owns the Mechta yacht club, located in a coastal area outside Moscow — an elite settlement on the banks of the Istra River consisting of thirty wooden cottages ranging from 120 to 400 sq. m. None of the buildings in the settlement is officially registered in the real estate registry. It is possible the houses are listed as a “stack of boards” — a loophole that allows developers to circumvent laws banning construction in protected natural areas.

“An official cannot be tied by economic obligations to other states,” Zheleznyak declared in December 2012. Naturally, the patriotic lawmaker also failed to report in his declarations the money he received from selling the foreign asset. ACF estimates the amount at about $1.5 million — money Zheleznyak was apparently too embarrassed to mention to his voters.

The foundation sent an official request to the State Duma commission demanding that the lawmaker’s declarations be checked for accuracy. In the organization’s view, he should leave parliament for concealing property and income.

Zheleznyak himself responded to the accusations on his Facebook page: “I do not own and have never owned any yachts, yacht clubs, or houses in yacht clubs,” the lawmaker wrote. But if that is true, why do the documents of the Cypriot company list his surname and his Moscow address?

Popular Politics will continue to follow developments. PP

WHAT A LAWMAKER FACES FOR VIOLATIONS IN ASSET DECLARATIONS

Russian lawmakers bear almost no responsibility for concealing income and property. Under the law, information about an elected official’s income and property must be published in Parliamentary Gazette and on the State Duma website. No other punishment is предусмотрено. This is an extremely lenient measure compared with other countries. For example, in Poland, former transport minister Sławomir Nowak faces up to three years in prison for failing to include a Swiss watch worth about $6,000 in his declaration. After Polish media reported it, the minister voluntarily resigned.

HOW ELSE SERGEI ZHELEZNYAK SHOWS HIS LOVE FOR THE MOTHERLAND

WORKED FOR A COMPANY OWNED BY AN AMERICAN BILLIONAIRE Before entering the State Duma in 2007, Sergei Zheleznyak was CEO of the major outdoor advertising operator News Outdoor Russia. At the time, the company was owned by American billionaire Rupert Murdoch.

HIS CHILDREN STUDIED IN ENGLAND AND SWITZERLAND The lawmaker’s eldest daughter, Anastasia, studied at a prestigious Swiss school and later graduated from Queen Mary University of London. The younger daughters of the State Duma vice speaker, Yekaterina and Elizaveta, also studied in Switzerland and England. According to ACF’s calculations, Zheleznyak paid at least 4 million rubles a year for his children’s education.

LIKES FOREIGN CARS Among the vehicles listed in Zheleznyak’s declarations over the years, expensive foreign cars predominate: the German Audi Q7 (worth up to 5 million rubles), the Japanese Lexus RX (about 2 million rubles), and even the American collectible sports car Chrysler Prowler (1.3–3 million rubles). According to his 2013 declaration, Zheleznyak currently owns two Harley-Davidson motorcycles (total value about 1 million rubles).

A family code of conduct

Universal Financial System, a company linked to the son of Russian Railways chief Vladimir Yakunin, earns up to 3 billion rubles a year in commissions from railway ticket sales.

The business model of Universal Financial System (UFS) is extremely simple: it sells railway tickets through third-party websites and a mobile app and charges a commission for its services. The commission ranges from 10% to 15% of the ticket price. For example, a ticket from Moscow to St. Petersburg bought through UFS costs 1,785 rubles, while on the official Russian Railways website it is 265 rubles cheaper. According to estimates by the Anti-Corruption Foundation, the company’s annual revenue reaches up to 3 billion rubles a year.

Other companies that sell tickets online are required to do so through the UFS system, under an order issued in 2012 by Russian Railways vice president Mikhail Akulov.

An investigation by the ACF (Anti-Corruption Foundation) found that UFS is linked, through a number of foreign companies, to Andrei Yakunin — the son of the head of Russian Railways (pictured). Officially, UFS is owned by the Cypriot offshore company Am Ebookers, whose shares are divided between the entities Atlant Services and Verlys Nominees, owned by Cypriot citizens Vera Lissitiotis and Renos Lissitiotis. The Cypriot lawyers, the Lissitiotises, are also the nominal owners of the investment company VIY Management, which was founded by Andrei Yakunin in 2006 — a year after his father was appointed head of Russian Railways. The Yakunins themselves deny any business ties between VIY Management and the state monopoly.

The ACF appealed to the Russian government and the antimonopoly service, demanding that cooperation between UFS and Russian Railways be checked for a conflict of interest. The organization believes that monopolistic intentions are restricting competition in the electronic ticket sales market, leading to inflated prices for consumers.

₽226,000,000

was allocated by the Moscow city government from the city budget for the development of Investmoscow.ru — the official portal for publishing all of the city’s financial information.

₽67,237 — this is the estimated approximate cost of the Investmoscow.ru website, according to the SiteEstimate.ru service*

* http://siteestimate.ru/ investmoscow.ru

A Palace Instead of Hospitals

Money intended for the construction of Russian hospitals was invested in a luxurious resort complex near Gelendzhik, known as “Putin’s Palace.” People from Putin’s inner circle took part in carrying out the fraudulent scheme.

The Reuters investigation is based on information provided by businessman Sergei Kolesnikov, who was directly involved in the fraudulent scheme and was later forced to flee abroad. In 2010, already living in exile, Kolesnikov wrote an open letter to then-President Dmitry Medvedev in which he described the corruption involved in building the mansion near Gelendzhik and referred to it for the first time as “Putin’s Palace” (photos 1, 2, 3). He also reported that the palace was built by Spetsstroy Russia and guarded by officers of the FSO (Federal Protective Service).

Despite numerous reports in the foreign press about “Putin’s Palace” that appeared after Kolesnikov made the information public, the only reaction from the Russian authorities was a statement by the president saying that he had no connection to the palace on the Black Sea.

The Reuters investigation found that the money used to build the elite complex near Gelendzhik had been siphoned off from funds allocated to the national “Health” project. It turned out that the fraudulent scheme — through the purchase of medical equipment — was carried out by two of Putin’s longtime acquaintances from the 1990s: Nikolai Shamalov and Dmitry Gorelov. Shamalov was, together with Putin, a co-founder of the Ozero dacha cooperative, while Gorelov (a retired KGB colonel) created the company Petromed with the participation of the St. Petersburg mayor’s office, where Putin worked in the first half of the 1990s.

To implement the “Health” project, the company Petromed received about $205,000,000 from the Russian state budget to supply equipment for hospitals. Of that, $195,000,000 was transferred to the accounts of the British shell company Greathill Ltd., owned by Shamalov and Gorelov (this was confirmed by their former business partner, Kolesnikov). Greathill spent part of this money on CT scanners, which were purchased from the German conglomerate Siemens and sold to Petromed at inflated prices: $2,700,000–$3,000,000 for each machine, while their average market price was $1,400,000–$1,700,000. The remaining money (about $48,000,000) was transferred to the accounts of companies supplying construction materials.

According to Kolesnikov, the owner of one of these companies was the Italian architect Lanfranco Cirillo, who designed the palace near Gelendzhik. In 2011, when it became impossible to conceal the misuse of funds from the national “Health” project, Prosecutor General Yury Chaika announced that 68 criminal cases had been opened based on the investigation into Petromed’s activities. Then-President Dmitry Medvedev called the price inflation on medical equipment “brazen theft of state money” and said that all those involved should face “harsh, serious punishment.” In the run-up to this and afterward, several officials and businessmen were convicted. The names Gorelov and Shamalov were not even mentioned in the criminal cases.

And the luxurious neoclassical palace, with its extensive garden and helipad, still delights its owner’s eye. In August 2014, Vladimir Putin granted Russian citizenship to its architect, Lanfranco Cirillo. PP

HOW MUCH RUSSIANS PAID PUTIN’S FRIENDS

As part of the national “Health” project, aimed at improving Russians’ quality of life, it was decided to build 15 medical centers across Russia — from Vladivostok to Kaliningrad. Its implementation was entrusted to people from Vladimir Putin’s inner circle, which ultimately nearly doubled the cost of the project and reduced the number of medical centers to 13.

Based on information obtained from Sergei Kolesnikov, investigators were able to uncover the following embezzlement scheme: the government allocated $1 billion to build 15 high-tech medical centers under the national “Health” project, launched in 2005. A German company was selected to supply prefabricated modules for seven of the centers, while the remaining facilities were to be built in Russia. That is why the second part of the project was awarded to Rosmedstroy and UK Modul, co-owned by Sergei Kolesnikov and Putin’s longtime associates Nikolai Shamalov and Dmitry Gorelov, each of whom held a 10% stake in both companies.

Health Comes at a Higher Price

In 2011, the country’s long-term development concept, “Strategy 2020,” was drafted. It offered specific recommendations for the government aimed at improving public health, but officials have been in no hurry to spend money on implementing it.

In March 2014, eight employees of Peter the Great Hospital in St. Petersburg went on a hunger strike to protest low wages. According to Novaya Gazeta, an orderly at the hospital earns 10,000 rubles per month, while an anesthesiologist makes 16,000 rubles. These figures are more than twice lower than the official statistics, according to which the average doctor’s income is 43,000 rubles and that of medical staff is 24,000 rubles.

Low salaries and the generally poor condition of hospitals, especially outside major cities, have led to a shortage of doctors. Even Health Minister Veronika Skvortsova (pictured) has acknowledged the problems in Russia’s healthcare system, saying on the Rossiya TV channel that Russia currently has 2 to 2.5 times fewer primary care doctors (district general practitioners, district pediatricians, and outpatient dentists) than required under World Health Organization standards. This has inevitably led to a decline in the quality of medical care.

In Bloomberg’s health ranking of nations, Russia places 97th—below Tonga, Tajikistan, and Bangladesh. Russian men between the ages of 15 and 60 die at five times the rate of men in Switzerland. This is largely because preventive care is almost nonexistent in Russia, and illnesses are treated only once they have become severely advanced. In the view of the authors of “Strategy 2020,” Russian medical professionals need to focus more on prevention by ensuring that citizens have access to affordable medicines already at the outpatient stage of treatment, because the earlier a patient receives the necessary medication, the easier it is to cure the disease.

RUSSIAN MEN DIE MORE OFTEN THAN MEN IN SYRIA

Nigeria 371 Russia 339 Syria 332 Ukraine 297 Brazil 210 Estonia 199 Poland 180 United States 130 China 106 Germany 90 Saudi Arabia 90 Japan 82 Switzerland 67 (Probability of dying between the ages of 15 and 60, per 1,000 people) Source: WHO data for 2012

HOW TO REDUCE DEATHS IN RUSSIA

1. Provide citizens with the medicines they need in the early stages of illness. Improving the quality of outpatient clinics and ambulatory care would reduce the number of advanced cases. 2. Raise doctors’ salaries and reduce their workload. Medical professionals, especially in the regions, often have to work two jobs just to support their families. 3. Promote healthy lifestyles and giving up harmful habits.

10 Success Stories of the Children of Officials and Generals

The main occupation of the children of ministers, governors, and senior security officials is management. As a rule, they run state banks, departments within state corporations, and business entities. Many of them had not even turned 30 when they received their positions.

The Energy Career of Boris Kovalchuk

THE SON OF Vladimir Putin’s longtime friend Yuri Kovalchuk heads the management board of one of Russia’s largest electric power companies, Inter RAO UES, which controls 39 thermal power plants and supplies electricity across the country. Boris Kovalchuk was one of Dmitry Medvedev’s students when Medvedev taught at the law faculty of St. Petersburg State University; he later served as director of the government’s Department of Priority National Projects and deputy general director of the state corporation Rosatom. Yuri Kovalchuk—the successful top manager’s father—is a billionaire and the main shareholder of Bank Rossiya. He was also one of the founders of the Ozero cooperative (a dacha cooperative linked to Putin’s inner circle), together with Vladimir Putin and Russian Railways head Vladimir Yakunin. In March 2014, the U.S. Treasury Department said that Kovalchuk was a close adviser to the Russian president and served as his “personal cashier.”

The Deputy Prime Minister Rogozin’s Son Makes Gunpowder

THE SON OF RUSSIA’S DEPUTY PRIME MINISTER—Alexei Rogozin—became director of the state enterprise Aleksinsky Chemical Plant at the age of 28. The plant produces gunpowder, explosives, and fire-retardant coatings. According to the Kontur-Focus database, in 2013 the plant received a contract from the Ministry of Industry worth 655 million rubles, while Dmitry Rogozin, the gunpowder director’s father, is officially responsible for Russia’s military-industrial complex and defense procurement.

The Sechin Oil Dynasty

IVAN SECHIN, the son of Rosneft chief Igor Sechin, recently took up a senior position at a major oil company. He now heads a department responsible for attracting the largest foreign partners. In his role, Ivan has managed to bring in potential oil buyers from Asia and was included in delegations to an economic forum.

Yulia Shoigu — chief psychologist at the Ministry of Emergency Situations

THE DAUGHTER OF RUSSIA’S DEFENSE MINISTER, Yulia Shoigu, joined the Center for Emergency Psychological Aid of Russia’s Ministry of Emergency Situations immediately after graduating from the psychology faculty of Moscow State University in 1999. Her father, Sergei Shoigu, was then serving as minister of the Ministry of Emergency Situations. Three years later, at the age of 25, Yulia Shoigu became director of the center. And in October 2013, her husband, Alexei Zakharov, also received a prominent appointment, becoming Prosecutor General of the Moscow Region.

The Fradkov bankers

TWO YEARS AGO, the elder son of former prime minister and Foreign Intelligence Service director Mikhail Fradkov, Pyotr (pictured), was appointed head of the Export Credit and Investment Insurance Agency, a wholly owned subsidiary of Vnesheconombank, where he had previously worked as a department director. In an interview with the newspaper Vedomosti, Pyotr Fradkov claimed that while working at the state bank he did not make use of his father’s influence in any way. According to Forbes magazine, Fradkov’s younger son, Pavel, studied at the FSB Academy and the Diplomatic Academy of the Russian Foreign Ministry, and now works as deputy head of Rosimushchestvo (Russia’s Federal Agency for State Property Management).

The FSB director’s son runs VTB

DENIS ALEXANDROVICH BORTNIKOV, the son of the current FSB director and a member of the presidential anti-corruption council, entered the banking business immediately after university, and by the age of 32 had become deputy manager of VTB’s St. Petersburg branch. At that time, his father was head of the Economic Security Service of Russia’s FSB. In 2011, Denis Bortnikov became head of VTB North-West, and soon afterward joined the management board of the parent bank.

The Patrushev family: banks, gas, and a dubious dissertation

Both sons of former FSB chief Nikolai Patrushev are successful businessmen. The elder, Dmitry (pictured), has headed Rosselkhozbank, Russia’s fifth-largest bank, since 2010, and before that spent three years as VTB’s senior vice president. Dmitry Patrushev holds a Candidate of Economic Sciences degree (roughly equivalent to a PhD), but according to an analysis conducted by the Dissernet community, 200 of the 430 pages of his dissertation contain full or partial plagiarism.

The successful business of Governor Tkachev’s niece

ANASTASIA KRATTLEY (the niece of Kuban Governor Alexander Tkachev and daughter of State Duma deputy Alexei Tkachev) became co-owner of two tourism companies that received major state contracts. The combined revenue of her businesses in 2011 amounted to 1.4 billion rubles. In addition, according to Forbes magazine, Anastasia owned 30% of the company developing the Moskovsky residential district in Krasnodar. Until recently, Anastasia also owned half of Delta, a company involved in road and bridge construction.

STATE PROCUREMENT

Elite cognac • 11,000 rubles per bottle

THE SOCHI SANATORIUM "RUS," owned by the Presidential Property Management Department and intended for government officials, spent 2,835,704 rubles on elite alcohol purchases in late 2013. Six weeks before New Year’s, a contract was posted on the state procurement website under which the sanatorium bought Beluga vodka at 710 rubles per bottle, absinthe at 1,476 rubles, 18-year-old Chivas whisky at 4,407 rubles, and Hennessy XO cognac at 10,835 rubles.

A car with a flashing beacon and leather interior • 6 million rubles

IN MAY 2013, the Prosecutor General’s Office of the Russian Federation bought a car with a flashing beacon and black leather interior for 6,000,000 rubles. The make of the car was not specified in the contract, but according to the RIA Novosti news agency, the stated specifications match a long-wheelbase BMW 7 Series sedan with a 450-horsepower engine. Yabloko party leader Sergei Mitrokhin filed a complaint about the purchase, accusing officials of restricting the number of auction participants. The complaint was found justified, but the car was bought anyway.

A conference hall decorated with mammoths • 95 million rubles

THE STATE HOTEL COMPLEX "YAMALSKY" in Salekhard used budget funds in 2013 to furnish two halls. According to the technical specifications published on the state procurement website, the conference hall was finished in dark wood, natural stone, and white carved panels. Handmade mammoth figures were used as decorations. The project cost 95,500,000 rubles. According to Znak.com, the complex became the most prestigious and expensive in Tyumen Region.

Photos © PhotoXPress, Fotolmedia, motorboatsmonthly.co.uk

The art of living in luxury

“Hennessy” for employees of the Presidential Property Management Department, a black leather interior for the Prosecutor General’s Office, gold watches as gifts for Yakut officials, and other luxury items purchased with public money.

Gold watches • 53,000 rubles apiece

IN FEBRUARY 2014, the State Assembly of Yakutia ordered 152 sets of men’s and women’s gold watches worth a total of 5,709,400 rubles (about $160,000 at the time) — this information was published on the government procurement website along with a list of the required specifications. According to the technical brief, the watch case had to be made of 14-karat gold (585 fineness) and decorated with the republic’s coat of arms, while the dial was to be protected by mineral glass with a sapphire coating. The watches were intended to be presented to distinguished Yakut deputies together with an honorary certificate.

Furniture with bull leather inserts • 7.2 million ₽

IN SEPTEMBER 2012, the Office for Administrative Affairs of the Government and President of the Chechen Republic purchased a furniture set for 10,750,000 rubles. According to documents from the government procurement website, the tables and chairs were to be made of natural walnut and linden wood and decorated with red bull leather inserts. Additional requirements included inlays of valuable wood species and gold leaf finishing.

Patrol yacht for the FSB • 22 million ₽

ACCORDING TO INFORMATION PUBLISHED BY GAZETA.RU, in July 2011 the FSB placed an order for a leisure yacht costing 22,000,000 rubles, calling it a “patrol boat.” The cabin of the “patrol boat” was to be equipped with a 19-inch LCD television, a CD player with four speakers, and illuminated wardrobes and beds. “This is a leisure yacht intended for recreation,” the manufacturer’s press service told Gazeta.ru.

Photo © ITAR-TASS, PhotoXPress, Kommersant

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