Our project on the Sochi Olympics drew interest not only from Russian citizens, but from foreigners as well. In particular, from Finnish citizen (and Swiss resident) Mr. Timchenko. The very same Timchenko who is Putin’s friend and Russia’s main oil trader, a role that helped him amass a modest multibillion-dollar fortune.
Timchenko did not like the fact that we listed him among the “winners of the Olympics before they even began” in the “classic budget siphoning” category. So the key company in his empire issued a lengthy press release intended to rebut the “claims of certain public figures.” Once again, this is about the combined Adler–Krasnaya Polyana road and rail line. It is the most expensive Sochi 2014 facility (costing as much as the entire 2010 Vancouver Olympics) and the most expensive road in the world. I mention it often, so here are a couple of photos so you can see what diamond-studded roads look like and where they run from and to.
In essence, the argument meant to “answer the claims” boils down to two points: 1. Timchenko was not involved when the contract was awarded. 2. The engineering solutions were so unique that any comparisons are invalid. In many ways, Timchenko’s statement repeats that of his accomplice Yakunin—the owner of the infamous “fur storage” mansion (a reference to a scandal involving a lavish estate)—with whom he was “developing” budget funds. Boris Nemtsov thoroughly and convincingly demolished Yakunin’s letter, so I will not repeat that and will instead focus on the main points: 1). - “Gennady Timchenko became a co-owner of the SK MOST group of companies in 2012 (he acquired 25% of USC Most, the parent company of SK MOST Group). At the same time, Stroy-Trust, a company within the SK MOST group, became one of the contractors and began work on the Adler–Alpika-Service project substantially earlier, in 2009.” No one denied that fact. That is exactly what is stated on the website http://sochi.fbk.info/. But it is absolutely irrelevant when SK MOST performed the work. What matters are the contract terms—namely, when the company was paid for its work and how the profits were distributed. I do not believe for a second that SK MOST received ALL the money for the road BEFORE Timchenko came in and managed to promptly distribute it all as dividends. 2). - “Companies within SK MOST Group carried out work on the section from kilometer 14 to kilometer 46 of the route. Three contractors were engaged for the project on a competitive basis (Setstroy CJSC, Stroy-Trust OJSC, and Transyuzhstroy Management Company LLC).” The main multibillion-ruble contracts awarded to Stroy-Trust and Transyuzhstroy are not publicly available among the tenders. What is available, however, is a 25 billion ruble contract for “preparatory work” (about 25 billion rubles) that SK MOST received without any tender. An RZD (Russian Railways) representative confirmed this back in 2010, citing the fact that “the urban planning code allows it.” Oddly enough, that point is omitted from the press release. Moreover, the supposedly competitive basis for selecting contractors raises a number of questions in itself. But we will return to those a little later. 3). - As RZD executives previously stated, virtually all railway construction capacity available in Russia was mobilized for these projects, including companies created on the basis of construction units from the Baikal-Amur Mainline (BAM, a major Soviet/Russian railway). SK MOST Group is among the five largest Russian companies involved in transport infrastructure construction. The company owns the largest and most modern fleet of specialized equipment in Russia, including sixteen tunnel-boring machines. Companies created on the basis of BAM construction units really were brought in by RZD. Their owners, besides Timchenko, are former BAM builders Vladimir Kostylev and Yevgeny Sur. In addition, the SK MOST group includes Bamtunnelstroy, which built 10 BAM tunnels. Sur and Kostylev bought that company in 2006. SK MOST is indeed one of Russia’s largest construction companies. Until 2008, it was a solid mid-tier company, and then, by decree of one bacterium-breeder Medvedev, it became the builder of the bridge to Russky Island and SUDDENLY shot into the top ranks. Coincidentally, in 2008 Kostylev and Sur, through Bamtunnelstroy, which is part of SK MOST, bought 67.4% of Millennium Bank. This bank has long-standing and close ties to RZD. In 2005, Natalya Yakunina, the wife of the president of Russian Railways, served on the bank’s board of directors. Today, railway insiders, through affiliated firms, own 33% of the bank’s shares, and the chairman of the bank’s board is Oleg Toni, RZD’s vice president for construction. In other words, Kostylev and Sur (through Bamtunnelstroy) acquired nearly 70% of Millennium Bank, where Vladimir Yakunin’s wife, Natalya, was a board member. The same bank, controlled by BAM veterans, is the main partner of numerous charitable projects and foundations run by the Yakunin family. RZD also places its spare funds on deposit in this bank. As for point 2, about “the incomparable nature of the incomparable,” one could argue about it endlessly, constantly running into dead-end claims about difficult terrain and terrible conditions. In our calculations, we did not use average global prices for such facilities, but examples of very specific projects, including unique ones. For example, a 34.6-kilometer tunnel in Switzerland built through Alpine rock. In our analysis, we broke the road down into smaller components—highways, railway track, road tunnels, rail tunnels, bridges (including overpasses), stations—and compared each element separately. In principle, one could cite many examples of the invalid comparisons made by RZD, but it is better simply to read the detailed analysis of the project and come to that conclusion independently. The Anti-Corruption Foundation thanks citizen Timchenko for his initiative in public outreach and his desire to clarify a number of facts that concern many people in our country. However, we would like to note that we did not receive answers to the key questions. Here is a short list of what interests us based on the above: - How much did SK MOST earn from building the combined road and rail line (its margin)? - How much did Gennady Timchenko personally earn from the construction of the combined road and rail line as a shareholder? As a responsible European businessman, Gennady Nikolayevich could certainly disclose at least the rough order of magnitude of these figures. There can be no commercial secret here. This is budget money allocated for construction and distributed by a company with 100% state ownership (RZD). Further, we are somewhat puzzled by the “competitive basis” in the case of the aforementioned Transyuzhstroy: - How exactly did the Cypriot offshore company APELSINO HOLDINGS, with nominee owners in the British Virgin Islands, provide guarantees and meet the other contract requirements? If the sections of road contracted to Transyuzhstroy were to crumble, collapse, or simply prove substandard before, during, or after the Olympics (God forbid, of course), who would bear the financial and legal responsibility—the nominee owners in Cyprus or in the BVI? - How does this competitive selection process square with the fact that Anatoly Antipov, the former owner of 73% of Transyuzhstroy and now its director, together with RZD vice president Oleg Toni, are co-founders of Transstroibank? Did this joint business venture influence RZD’s choice of general contractor? Is this not an obvious conflict of interest (and, most likely, corruption)? We also do not quite understand the wording regarding Stroy-Trust OJSC. Could you please explain: did SK MOST, on a competitive basis, hire its own subsidiary as a contractor? And finally, one last little bonus question: - Could you also please comment on why, at an address exactly matching the Geneva office of Volga Advisors, the son of the president of RZD, Viktor Yakunin, his wife Darina, and their then two-year-old daughter were registered? Many thanks in advance for your reply. P.S.: You can help Gennady Timchenko answer our questions more quickly if you take this image with entirely truthful calculations and share it on your social networks.
Many thanks in advance