As promised, I’m posting the documents confirming the fraudulent actions of the effective managers at VTB Bank OJSC. Below the cut is a summary memo. The memo includes links to the documents in a light version. In other words, those who can’t be bothered to dig through gigabytes of scanned paperwork can just skim everything. Those who do like digging in also have that option. After the memo come links to the full versions of all the documents. And at the end, there’s a sample request and instructions on how to send it for those who are not VTB shareholders but would still like to poke the Effective Managers with a nail-studded stick. There seemed to be plenty of those. 1. Purchase In July 2007, a contract was concluded between VTB-Leasing OJSC and the Cypriot company Clusseter Limited for the purchase of 30 Chinese-made ZJ50DBS drilling rigs, with their subsequent transfer under a leasing arrangement to Well Drilling Corporation LLC. The total contract amount was US$456,990,000.00; including customs duties and fees, US$650,000,000.00. (Contract K 161/01-07, +, +) By entering into this contract, VTB-Leasing OJSC purchased the equipment not directly from the Chinese manufacturer, but through the services of a Cypriot intermediary company, paying more than US$15 million for each rig, excluding customs duties and fees (US$15,233,000.00). According to an independent valuation report, the market value of one rig, excluding customs payments, was about US$10 million (Valuation Report on the Market Value of the ZJ50DBS Drilling Rig). The financial report of the Chinese manufacturing company contains data that indirectly indicates that Clusseter Limited purchased the rigs from the manufacturer for subsequent resale to VTB-Leasing OJSC, paying approximately US$10 million for each one (Annual report of Honghua Group Limited, +, +). Thus, by using an intermediary, VTB-Leasing OJSC overpaid by more than US$5 million per rig, and the total damage from the purchase amounted to roughly US$160 million. 2. Transfer under lease and subsequent sublease The rigs were purchased by VTB-Leasing OJSC for the purpose of leasing them to Well Drilling Corporation LLC, in accordance with an agreement concluded by the companies on July 26, 2007 (Leasing Agreement DL 161/01-07). Well Drilling Corporation LLC is an intermediary structure, since under an agreement dated December 7, 2007, the rigs were transferred on sublease to Northern Expedition Geological Exploration Company CJSC (Sublease Agreement DSA 06-07). Difference between the payments under the lease agreement between VTB-Leasing and Well Drilling Corporation and the sublease agreement between Well Drilling Corporation and Northern Expedition: according to the schedule of lease and advance payments under the lease agreement, the estimated daily fee for the use of one rig should have been 280,997.32 rubles; according to the sublease agreement, the estimated fee should have been 420,000.00 rubles. Thus, the estimated difference between the payments for all thirty rigs over the course of a year amounts to more than 1.5 billion rubles. (Memo on leasing and subleasing) Appendix: full texts of all documents related to the transaction: 1. Contract K 161/01-07 between VTB-Leasing OJSC and the Cypriot company Clusseter Limited, with appendices 2. Leasing Agreement DL 161/01-07 between VTB-Leasing OJSC and Well Drilling Corporation LLC (Leasing Agreement DL 161/01-07 with appendices) 3. Sublease Agreement DSA 06-07 between Well Drilling Corporation LLC and Northern Expedition Geological Exploration Company CJSC 4. Memo on the lease and sublease agreements 5. Valuation Report on the Market Value of the ZJ50DBS Drilling Rig, + 6. Annual report of the Chinese drilling rig manufacturer Honghua Group Limited (extracts) 7. Statement by A. Navalny to the Economic Security Department of the Ministry of Internal Affairs of the Russian Federation For those who want to take part but are not shareholders: Your help is also very much needed. Let’s start with this: Below is the text of a request that you can send through the website of the Prosecutor General’s Office. Please note that anonymous submissions are not considered. So when filling out the proposed form, don’t forget to enter your name and mailing address for the reply. Including the postal code. This needs to be done properly, not sloppily, but thoughtfully. 1. Go here: http://www.genproc.gov.ru/ipriem/corrupt/ 2. Click the “I agree” button. 3. Enter your name and mailing address. 4. Copy and paste the text below (if anyone wants to edit the text or write their own, you’re welcome). From media reports, (in particular the newspaper Vedomosti of 30.11.2009, No. 226 (2496), article “They Drilled Down into $0.5 Billion”.) and information posted on the internet (in particular (http://navalny.livejournal.com/411199.html)), I have become aware that on July 26, 2007, the Cypriot company Clusseter Ltd entered into an agreement with the Russian company VTB-Leasing OJSC (a 100% subsidiary of VTB Bank OJSC) for the purchase of 30 ZJ50DBS drilling rigs. These rigs were then to be transferred under a leasing agreement to Well Drilling Corporation. The contract amount was US$650 million. VTB-Leasing OJSC purchased the equipment, paying more than US$15 million for each rig excluding customs duties and fees. The annual report of Honghua and a number of other sources give grounds to believe that the rigs cost about US$10 million. Thus, the total damage to VTB Bank OJSC in the course of the transaction amounted to about US$160 million. I draw your attention to the fact that 85% of the shares of VTB Bank OJSC belong to the state. The company’s management includes persons holding state offices of the Russian Federation. The Chairman of the Supervisory Board of VTB Bank OJSC is the Minister of Finance of the Russian Federation. I also know from open sources that as of October 1, 2009, the state had directed substantial funds in the amount of 221,375,000 thousand rubles toward supporting VTB Bank OJSC. Thus, possible facts of corruption within VTB Bank OJSC cause me, as a citizen of the Russian Federation, substantial harm and violate my lawful rights. I believe that the above-mentioned actions of employees of VTB Bank OJSC and VTB-Leasing OJSC in connection with the purchase of the drilling rigs and their subsequent transfer under lease may contain elements of an offense under Part 4 of Article 158 of the Criminal Code of the Russian Federation—fraud on an especially large scale committed by a group of persons by prior conspiracy. I believe that the possible fraudulent actions would hardly have been possible without a corrupt arrangement involving officials of the Russian Federation and representatives of law enforcement agencies. As far as I know, the First Deputy Prosecutor General of the Russian Federation, A.E. Buksman, is currently conducting an inquiry to determine whether the management of VTB Bank OJSC caused damage to the bank’s shareholders in the course of the operations to purchase the above-mentioned drilling rigs. I request that you: 1. Attach my statement to the inquiry materials, if such an inquiry is already underway. 2. Verify the information contained in the Vedomosti article and internet publications regarding fraudulent and corrupt actions in the acquisition of the drilling rigs. If necessary, initiate a criminal case. 3. Inform me in writing, in the prescribed manner, of the measures taken. 5. Enter the verification word. Click the “send” button. 6. Remember the date and time of submission. 7. Write it down on a piece of paper or somewhere else. (Even as a comment on this post.) 8. Count forty days from the date of submission to determine the response deadline. For example, January 15. 9. If there is no response by then, you should contact me, and I will provide a sample complaint for failure to provide a response. Then one for failure to respond to the failure to provide a response, and so on. One way or another, we’ll get there. That’s it. Thanks in advance to everyone who takes part, and sending support to their active civic stance.