This is a very important post for me. My colleagues and I have been working on this case for many months. I will be very grateful to everyone who reads this and helps. But before you start reading, check your wallet. You may not have noticed, but about 1,100 rubles (roughly $35 at the time) has gone missing. Not much for each of us individually, but that amount was stolen from every adult resident of Russia. In total, by our estimate, at least $4 billion was stolen over the course of this story. So. The ESPO pipeline — Eastern Siberia–Pacific Ocean. Length: 4,188 km. It is intended to carry oil from Eastern Siberia to the Russian Far East.
A massive construction project. One of the biggest since the Soviet Union. A real national project. Quite recently, the first phase of the project (Taishet–Skovorodino), 2,694 km long, was ceremonially launched. All this magnificence was built by OJSC AK Transneft. The de facto monopolist in oil transportation. 100% of its common shares are owned by the state. Only preferred shares may be privately owned (I own some myself, for example).
No one really knows how much the construction cost. Even officials give different figures. Sechin claims it was 420 billion rubles. Then they recalculate and say 491 billion rubles. Then they say ESPO needs to be expanded, and that will cost another 170 billion rubles. Obviously, such vague but enormous numbers are irresistible and fire the imagination. Everyone close to this sector of the economy knows that something unimaginable was going on at the construction site. Try this experiment: ask anyone connected to the oil or pipeline business, so tell me, how exactly was ESPO built? I did this many times, and every time the effect was the same: the person’s face would take on a dreamy expression, their eyes would glaze over: “You know, Alexei, they skimmed off so much there that a calculator wouldn’t have enough zeroes to count it. If only I’d gotten in on that — even for a day, even for an hour — even my great-nephews would have ended up rich.” Naturally, such a unanimous reaction from the professional community pushed me to look for something more concrete. As a Transneft shareholder, I am deeply depressed by the size of the dividends, and the story I am already investigating about billions spent on ‘charity’ suggests that if Transneft people are funneling these billions into the security services as disguised bribes, then there must be a reason. I won’t bore you with the details; I’ll briefly describe the general logic of our investigation: During the golden age of construction, Transneft was headed by a legendary little man named Semyon Vainshtok. One of the country’s most “Effective Managers.”
He sat in the company from 1999 to 2007. He was shipping out cash by the truckload — literally by KamAZ truck — which is why he became such a legend. Then the Kremlin decided that the share of those cash-filled KamAZ trucks heading in their direction needed to increase, so they started pushing Vainshtok out. And bringing in another little man in his place: Nikolai Tokarev.
A former colleague and crony of Vladimir Putin (I won’t post a photo of this little man — you know what he looks like). Since Vainshtok was paying everyone around him, removing him was not easy. For several months after his departure, he continued to control the company. So, in order to purge Transneft of unfriendly elements unwilling to send the cash-filled KamAZ trucks in the proper direction, the Highest Political Order was given: conduct a detailed, honest audit of the holy of holies — the construction of ESPO. That is why the Accounts Chamber of the Russian Federation was brought in as well. The audit was carried out. But there was apparently something in it that led to the results being classified immediately. The Accounts Chamber also hid its report, limiting itself to a vague statement that “there were many violations, but nothing serious.”
Our chief man from the Accounts Chamber, the “real officer” Sergei Stepashin, flashed his glasses mysteriously but kept silent. You don’t have to be a genius to understand the task: find the audit materials. So that’s what we did. For a long time. It wasn’t easy. Everyone seemed to know they existed, but no one had actually seen them. From time to time, bits of information appeared on various websites referring to these materials, but how could you tell whether it was nonsense or the real thing? As the Russian saying goes, the tale is told quickly, but the deed is not done quickly. We found the papers. Not all of them, but an important part. Then it took several more months to confirm that the papers were authentic and not a setup or a “leak” planted for effect. I won’t say where we got them, but I will note that both the Accounts Chamber and Transneft employ many people, and not all of them are crooks. Today I present these documents to you. They exceeded all our expectations. They are titled: "Materials prepared by OJSC AK Transneft in response to Accounts Chamber request No. ZI-11-03-69/11-03". It is a thick folder in which, under the signatures of real senior Transneft employees who served on the audit commissions, one thing is described in dry bureaucratic language: THEY STOLE EVERYTHING. They stole. They inflated prices. They rigged contractor arrangements. Then they destroyed documents. And so on and so forth. Everything is backed by figures and facts. Each section is signed by several experts. The entire report was approved by Transneft’s first vice president. As I read it, I literally dropped the report from my hands several times. They stole 10 billion rubles from design and survey work alone. In essence, all the contractors on this mega-project were intermediary shells used to siphon money out. “This is a bombshell,” I thought. After this, Vainshtok and half of Transneft’s management should have gone to prison for so long and so firmly that Khodorkovsky’s sentence would look like a light stretch by comparison. But memory is a stubborn thing. And it kept reminding me that after this wonderful audit, Semyon Vainshtok went to the famous anti-corruption fighter Vladimir Putin, who sent him in the direction exactly opposite from the Republic of Mordovia (a region associated with prison camps), where crooks and thieves are usually sent. Specifically: Semyon Vainshtok was appointed the first head of the newly created Olympic Corporation, responsible for building the facilities for the Sochi Olympics. A lot of people laughed that day.
Still, he did not remain in charge for long. Sochi is not Eastern Siberia — it is easier to uncover fraud there — so Vainshtok left that post as well and now lives in London, where he has bought up a fair amount of elite real estate, and in Israel, where he does business. Now to the materials themselves. The most curious and meticulous among you can download them from my website (17.5 MB). You can inspect them, handle them, check the signatures, and so on. There are several hundred pages, but the text is quite readable. Update. Too many requests. The site is down. So here are mirror links: the report can be downloaded here or here. If you have a couple of free hours, I highly recommend it. A great deal becomes clearer: about the country, about the “vertical of power,” about the brave chekists (security-service officers) and police, about the distribution of national wealth. For everyone else, I am posting some excerpts. Let me stress once again: this is not my report, and it is not the opinion of analysts or experts. These are official materials from Transneft, prepared and signed by dozens of its employees. Excerpts from materials provided to the Accounts Chamber of the Russian Federation in 2008: Inflation of the cost of design and survey work carried out by OJSC VNIIST for the “Eastern Siberia–Pacific Ocean Pipeline System” projects.
The cost-estimate documentation for construction of the “Eastern Siberia–Pacific Ocean Pipeline System” (hereinafter, ESPO Pipeline System) does not comply with the project requirements.
Inflation of estimated construction costs due to design errors and deficiencies.
Tender procedures for selecting contractors, equipment suppliers, and service providers for the ESPO Pipeline System project were conducted with numerous serious violations of the law, including unlawful refusal to hold tenders.
Illegal destruction of tender materials.
Not one of the general contractors was capable of completing the construction and installation work in full and on schedule.
For example, as a result of the general contractor ZAO Krasnodarstroitransgaz failing to fulfill its contractual obligations, OJSC AK Transneft unjustifiably suffered losses totaling 2,444,033.98 thousand rubles.
Most of the general contractors were established by sham offshore companies. In a number of cases, companies were registered in the names of front persons using forged signatures.
Numerous instances of falsified completion documentation and the use of forged documents.
The contracts with the general contractors lacked any economic rationale. All of the general contractors were intermediary shell companies.
Numerous violations related to the engagement of contractors (example).
Numerous violations related to the construction of the oil pipeline and oil-loading terminal in the city of Skovorodino.
And so on. They stole on a massive scale. At every stage of design and construction. So where is the unprecedented investigation? Where are the dozens of investigative task forces traveling around the country? Where are the hundreds of dejected people sitting in the dock? None of that exists. The money has been stolen. Putin pressed the button and launched the project.
The Effective Managers are smiling contentedly. The KamAZ trucks full of cash are still rolling out of Transneft’s gates and disappearing in unknown directions. The Russian diaspora in London and Zurich keeps growing — in people, in real estate, and in red sports cars. Russia and its multiethnic people have been made to swallow it. Can we do anything about this? We can. In any case, we are obliged to try. We MUST. Because new mega-projects are planned — or already underway. Here are just a few: 650 billion rubles allocated to Nord Stream and South Stream 400 billion for the second phase of ESPO 300 billion for the APEC summit 100 billion for Skolkovo 1 trillion rubles for the Olympics and so on. AND THEY WILL STEAL IT ALL AGAIN. All the oil dollars pumped out of our country are being poured into gigantic construction projects with no real oversight. And the thieves’ gang takes its fat 35% cut from everything. The Transneft case is unique because we managed to find proof. Documents, signatures, seals. Using the Transneft example, we have every reason to demand: 1) a large-scale investigation, 2) punishment for those responsible, and 3) a fundamentally different system of oversight and transparency for these “super-projects.” What we are going to do first: 1**. Spread the information. You understand, of course, that getting on television is not going to happen. Probably not in the newspapers either. Help spread this post, the report itself, and excerpts from it as widely as possible. We will make special videos, and so on. If you control ANY platform at all, even one with an audience of one person a year, I will be very grateful for links and reposts. You don’t have to link to me if you don’t want to — just repost the report itself. ICQ, emails to friends and acquaintances. Twitter. Facebook. VKontakte. Every day, 45 million people in Russia use the internet. We need to make sure that within a month, 10 million of them know about this scam. Our journalists and foreign journalists — every contact and connection should be used. Send it even to Rabbit Breeding magazine. Let them write that Vainshtok and Tokarev robbed Russia’s rabbits. To make things easier: Here is the press release in Russian. Here is the press release in English. 2. Legal action. **We have already filed complaints everywhere we can. As usual, I ask you to support us a) by filing complaints with the Prosecutor’s Office Go here - Click “I agree” Enter your details Paste in the text, which you can copy and paste from here. (The complaint is long, so I didn’t post it here. The link is to a Google Doc file; just download it to your computer and it will be easy to copy and paste.) U**pdate. The Google Doc is down too. So h****ere you can get a template appeal to the Prosecutor General’s Office.**** **- Send it b) by filing complaints with the President of the Russian Federation. This is an important political moment. Medvedev talks a lot about fighting corruption. Let’s see what he does. If there is no clear response — and there should be, because this is not a stolen vacuum cleaner, this is billions stolen from a national project — then we will regard him as a direct accomplice and protector of the scheme. Go here Click “send a letter” Enter your details and this text: Dear Dmitry Anatolyevich, From reports in a number of Russian media outlets, I have learned of materials from an audit of the activities of OJSC AK Transneft, Russia’s largest oil transportation company, conducted in 2008 by the Accounts Chamber of the Russian Federation. On July 9, 2008, the head of the audit, Chief Inspector A.S. Aleksandrovich, sent an official request to N.P. Tokarev, President of OJSC AK Transneft, seeking information. On the basis of the Accounts Chamber’s request, employees of OJSC AK Transneft prepared official reports. These reports, certified by company officials, contain clear and unambiguous conclusions about numerous economic crimes committed by unidentified employees of various subsidiaries of OJSC AK Transneft and by contractor organizations. These reports are available on the Internet at: http://www.navalny.ru/upload/transneft.pdf In addition, since OJSC AK Transneft is a company with 100% state ownership, this case involves damage to state interests. By even approximate estimates, the total damage to the state during the construction of the ESPO Pipeline System amounted to several billion U.S. dollars. I believe that the actions of employees of OJSC AK Transneft and other organizations in concluding and executing contracts for the construction of the ESPO Pipeline System show signs of crimes falling under a whole range of articles of the Criminal Code of the Russian Federation. In view of the above, and on the basis of current legislation, I ask you to order an investigation into indications of a number of crimes in the actions of the management and officials of OJSC AK Transneft in connection with the construction of the ESPO Pipeline System, with the aim of identifying the guilty parties and bringing them to criminal responsibility. Given the special importance and significance of this case for the interests of the Russian Federation, I ask you to place it under your personal supervision. click “send.” Owners of Transneft preferred shares, I am looking for you so we can act together to defend our rights, both through criminal proceedings and through civil action. 3. Political lobbying. Over the next couple of days, I will prepare and send appeals to ALL political parties and political organizations in the country. From United Russia to the LDPR. From YABLOKO to Solidarnost. Calling on them to demand an investigation. I will publish all responses. We will get a clear picture of how different political forces relate to what is happening. If you are a political activist, a party member (whether in leadership or not), go to your leaders and ask them to make a statement on this issue and send a letter to the prosecutor’s office. The same goes for deputies at every level. Join in, send me scans of your requests, and I will post them so voters can see that you are not just wasting the people’s money. The task is to put the issue of an investigation onto the country’s political agenda. 4**. Pressure on the crooked auditors. Transneft’s auditor is PricewaterhouseCoopers. This is not the first time I have run into the fact that these guys are monstrous crooks who cover up any fraud. Right now we are playing a funny game with them: I send them materials and demand that they take them into account in their work, and they send them right back. As if to say: we don’t want to see any of this. At the moment I do not have a clear idea of what to do with them. I would be grateful for any ideas on how to bury them in complaints to the Finance Ministry (which supervises auditors) or to their U.S. office. We need to figure out how to use the FCPA, which makes it possible to hold American companies accountable for corruption outside the United States. 5. Squeeze Vainshtok, Tokarev, and the other Transneft people where it hurts. We need any information about their real estate and assets abroad, especially in the United Kingdom. We all understand that, formally speaking, all these houses and castles are money laundering. The money was stolen in Russia and invested in the UK. That is a crime. Let’s give the guys at Scotland Yard and Baker Street something to do! A separate appeal to Israelis: Comrades, Jews! Stolen money is being invested in your country. Stolen cash does not bring happiness. We need to find a way to hold these crooks accountable. Think about how local politicians, media, and law enforcement can be brought into this. That is all for now. This is what I have come up with and what I am capable of carrying out, at least in part. Again, I would be extremely grateful for any help — especially informational help at this stage — and for any ideas. The fight will not be easy and, apparently, will be a long one. To add a dose of harsh realism and the truth of life, I will simply post a well-known and highly symbolic photograph: ESPO has been built. In a ceremonial setting, the final weld has been made. Everyone already knows who stole what and how much, but they are smiling. Deputy Prime Minister I. I. Sechin makes a symbolic inscription on the weld. He writes the name of the man who personally oversaw ESPO. The man who knew everything and took part in everything.
I say this so that no one has any illusions. The crooks will not give up either their positions or their money without a fight. But that changes nothing. We have to try.