Quite recently, with tremendous fanfare, Moscow hosted the “Russia Calling!” investment forum organized by the VTB Group.
It was a wonderful event. The highlight of the program was Vladimir Putin, who vividly explained why investing money in Russia is the right and proper thing to do. And, very importantly, investments are protected, while business is run by professionals who will become your reliable partners. A large, beautiful banner behind Vladimir Putin reminded us of the successes of one such partner: VTB Group, the flagship of the domestic economy. It is an excellent, reliable, and responsible company! It is no coincidence that the supervisory board of VTB Bank is chaired by Finance Minister Alexei Kudrin, and that the same Vladimir Putin urged people to invest in the bank’s shares. Eighty-five percent of VTB Bank belongs to the state, which is an additional guarantee. After all, that means the main achievement of recent years—the “vertical of power” (Russia’s centralized system of state control)—is also working for VTB. Once upon a time, the Effective Managers (hereinafter, EM) at VTB Bank decided to do some business. They had plenty of funds, having successfully carried out a “people’s IPO.” Now the money had to be invested well, so it would work. For the benefit of shareholders. “Why don’t we set up a leasing business?” the EM exclaimed. No sooner said than done—they immediately set up a subsidiary called VTB-Leasing. Things moved faster than a fairy tale can be told. The EM decided to get into leasing drilling rigs. It’s an expensive and in-demand business. You buy drilling rigs, lease them to oil and gas companies, and collect the money. Beautiful. They chose rigs from the Chinese manufacturer Sichuan Honghua Petroleum Equipment Co. Ltd., with the romantic name ZJ50DBS. Thirty units. To be clear: 30 units is a lot. That’s 4,500 railcars full of equipment. I saw them myself—they make quite an impression, but more on that later. When the decision on the deal was made, the EM agonized over it for a long time. They lost sleep at night. They wanted to introduce some kind of refinement into the deal, so that it would not be a simple purchase and sale, but a purchase and sale in the best traditions of VTB and state-run business. A solution was found. Here it is in graphic form (don’t judge too harshly—I drew it myself in Paint):
In other words, although the rigs cost $10 million each from the manufacturer, they were bought from a Cypriot intermediary for $15 million each! The total markup on the deal was $156 million. Isn’t that genius?!?! Come on, admit it—you would never have thought of that yourselves! After all, what does Cyprus have to do with China? So $150 million is really the smallest and most modest reward these EM from VTB Bank OJSC deserve. Let me add that $456 million was the contract price. Including customs duties, VTB spent $650 million of shareholders’ money on the deal. If you think that’s all, then you are probably not much of an entrepreneur. At VTB, however, everyone has that entrepreneurial streak. And it pulses. The laundered $156 million was not enough. After all, there was also the second part of the leasing deal. Who would be the logical party to lease the drilling rigs to? “To drilling companies,” you might timidly suggest in a thin voice. “HAHAHA,” the echo from VTB Bank would reply. Two months before the deal, an LLC called Well Drilling Corporation was created. It had absolutely nothing. Yet it was this company that received equipment worth $650 million under a lease. In order to sublease it. Another graphic illustration follows.
Roughly speaking, VTB leases the rigs to Well Drilling at about 200,000 rubles per day. And Well Drilling leases them to drilling operators (say, Tyumenburgaz) for 400,000 rubles. On thirty rigs, the intermediary earns 1.5 billion rubles a year. The lease term is 8 years. That adds up to $400 million. Isn’t this the business of your dreams? Picture yourself lying on a beach in Cancun. Girls in pink bikinis bring you piña coladas. You squint in the sun and smile. Because you know that far away in Russia, grimy Yamal drillers and VTB shareholders’ money are working for you. And every 60 minutes—nights, weekends, Thanksgiving, and New Year included—you become $4,000 richer. In reality, by the way, it is almost like that, but not quite. In reality, you are supposed to hold off on drinking the piña colada right away. Set it aside for a while so you can think seriously about Russia. About development paths. About stability. About the beneficial influence of the vertical of power. It is no coincidence that VTB’s chief Effective Manager, Andrei Kostin, sits on the Supreme Council of the United Russia political party. But we digress. So. In the course of the deal, a whole bunch of additional intermediaries and shell companies were brought in—for everything from unloading and storage to installation. And here greed slightly tripped up our suckers. As often happens, some intermediaries cheated some contractors, and as a result part of the equipment got stuck in warehouses, tied up in lawsuits and conflicts. So the “piña colada scheme” is still working only in theory. And I will do everything I can to make sure it does not start working in practice. My recent trip to Yamal was connected with this case, which I have been working on for six months now. I needed to obtain additional proof of the fraud. I managed to do it all. The settlement of Purpe, Purovsky District, Yamalo-Nenets Autonomous Okrug. Fifteen hectares (about 37 acres) of metal junk buried under snow. I will post photos and maybe even a short film. Now a question for the experts: Do you still think VTB shares fell from 13.6 kopecks apiece (the “people’s IPO” offering price) to the current 6 kopecks solely because of the international financial crisis? Or might the reasons for the decline also lie in, uh... rather specific management methods? And doesn’t it seem highly telling that VTB’s own Effective Managers prefer to invest the money they earn in other banks? Let’s move from lyricism to practice. What is this?
These are requests, complaints, and appeals related to the case. Sent to numerous agencies. Each one includes a set of documents fully exposing the crooks at VTB. The basic complaint with details can be viewed and downloaded here. They were sent at the beginning of the month. We are expecting the first replies soon. Can anyone help us somehow? Of course—and more than that, we urgently need help. There are around 150,000 minority shareholders in VTB. These people were brutally cheated and robbed. I am now putting together a pool of shareholders ready to get involved in this case. To continue the investigation. To demand compensation for losses. To initiate a criminal case. To torture and hang them. And so on. A few people are already on board. We need to spread information about this case as widely as possible in order to attract more participants. As usual, links, comments, posts—everything is welcome. If any of your acquaintances is a VTB shareholder, send them this link by email, ICQ, or any other way. It doesn’t matter if only five people read your LiveJournal. One of them might be a VTB shareholder ready to join the fight. I would also like to acquaint as many of our fellow citizens as possible with the working style of a state-managed bank. I strongly recommend following the link and seeing how much state aid VTB has received recently—you will understand that this case concerns not only shareholders, but taxpayers as well. If you have any contacts in any media outlets, send this to them. Today, the newspaper Vedomosti published the first article about the case. Remember: the more publicity, the greater the chance of success. A separate request. Wanted:
Alexei Leonidovich Kudrin, Chairman of the VTB Supervisory Board, Finance Minister
Arkady Vladimirovich Dvorkovich, member of the VTB Supervisory Board, aide to the President of the Russian Federation
Alexei Valentinovich Ulyukaev, member of the VTB Supervisory Board, First Deputy Chairman of the Central Bank
Mukhadin Abdurakhmanovich Eskindarov, member of the VTB Supervisory Board, rector of the Financial Academy.
Olga Konstantinovna Dergunova, member of the VTB Management Board, former president of Microsoft in Russia. All of these people have, on the whole, respectable reputations. If you happen to run into them somewhere—at work, at a roundtable, in a hallway, in a restaurant—ask them: how can you, my dear, allow this? Aren’t you ashamed to take money from a place where shareholders are being robbed? What is it like to work with bandits? I have no doubt that every one of the above-named individuals will read this post. So I address them directly: My friends, you will not be able to wriggle out of this or stay silent. All members of the VTB Supervisory Board and all members of the Management Board have received official letters from me demanding that they initiate an inquiry. I will publish all the replies. As a VTB shareholder, I will regard your refusal or silence as deliberate actions covering up the theft and corruption flourishing at VTB. You can become part of this corruption, or remain decent people. I am sure the other shareholders and citizens will agree with my approach. My colleagues and I have already spent a huge amount of time and effort on all this. We will spend more. But I will do everything I can to send a couple of these EM to a place where piña coladas are made from five tea bags. Because this has gotten completely out of hand. I would be grateful for any help. For shareholders to get in touch: navalny at gmail dot com Or in the comments. And one last thing. The official slogan of VTB-Leasing is: “From achieved goals to new horizons.” Join the fight, my dear friends, or the effective managers at VTB will steal the horizon too and sell it off. Update. From the comments. User slonostop looked up Well Drilling LLC in the database: Co-owners SPARK database update date: 19.01.2009 Name Location Share in authorized capital, rubles Date of update in the Unified State Register of Legal Entities VIERZAN ENTERPRISES LIMITED 22A Agias Eirinis, Limassol, Cyprus 3095 (CYPRUS) 6,400 05.07.2007 VENICON ENTERPRISES LIMITED 30 Karpenisiou Street, Nicosia, Cyprus 1660 (CYPRUS) 3,600 05.07.2007