“We aren’t from this place”: Yamal officials siphoned governmental funds off for years through lease of real estate
The Yamal Government spends dozens of millions of rubles every year on the lease of elite Moscow real estate from the Center for Investment Projects Development belonging to the region.
The Yamalo-Nenets Autonomous District has recently been rumbled by numerous corruption scandals. In the episode with multibillion embezzlements in the Development Corporation, the region seems to be a victim forced to pay Czech Export Bank for unbuilt Polyarnaya (Polar) thermal generating station. However, the autonomous district has its own analog of the Development Corporation that has adopted its main feature: the passion for embezzlements and risky schemes. The Center for Investment Projects Development (CIPD) has been established in 2008 by the by the Department of Property Affairs of the Yamalo-Nenets Autonomous District. CIPD had no luck with crazy financial projects, like the Center for Arctic Tourism for 7.5 billion rubles ($125 million) – but it managed to create a scheme to siphon off hundreds of millions of governmental funds and has been openly running it for more than five years.
The corruption scheme is a simple stroke of a genius, it is based on fictitious deals with real estate amounting to hundreds of millions of rubles. This is why the Center for Investment Projects Development, instead of the perspective business development and creation of clusters, started acquiring real properties. At that time, the company had charter capital over 2 billion rubles ($33.3 million) and it was doing things in a big way. In 2010, CIPD has purchased a mansion in Moscow located at 5 2nd Spasonalivkovsky lane where famous artist Vasnetsov had lived and worked. The Yamal budget has paid 280 million rubles ($4.7 million) for the home with the living space of 1.5 thousand square meters. A year later, the region has ‘invested’ 219.9 million rubles ($3.7 million) into another mansion with the living space of 1.2 thousand square meters adjacent to the first one and located at Building 1–3 2nd Spasonalivkovsky lane. Both homes form a single architectural ensemble.
Mansion located at 5 2nd Spasonalivkovsky lane
It is hard to say what was the condition of the mansions at the time of their acquisition, but the state company has immediately started renovations looking rather like a complete reconstruction. According to the CIPD annual report for the year of 2011, the company had spent 19.5 million rubles ($324.9 thousand) on building stone for the renovation of the home at 5 2nd Spasonalivkovsky lane. The cost of furniture purchased in the framework of the program “Replanning of the Building of the Center for Investment Projects Development Limited Liability Company” was 14.8 million rubles ($246.6 thousand). The funds spent on the renovations have been disbursed through dozens of tenders; some of those were not even initiated by CIPD. The total amount of the tenders can be illustrated by the balance-sheet value of the buildings that considerably exceeds their purchase cost. The balance-sheet value of the mansions located at 5 and 3 2nd Spasonalivkovsky lane is 490.7 million rubles ($8.2 million) and 188.6 million rubles ($3.1 million) respectively. First of all, it is obvious that the building at 3 2nd Spasonalivkovsky lane was put on the books below its market value (which hasn’t alerted the Yamal tax authorities in any way). Secondly, by deducting the purchase cost of the building at 5 2nd Spasonalivkovsky lane from its balance-sheet value, we conclude that the total cost of its renovation was over 210 million rubles ($3.5 million).
The company managers were also pretty generous with spendings for the renovation of the adjacent building at 3 2nd Spasonalivkovsky lane. According to the official CIPD reports, the value of the mansion (originally purchased for 219.9 million rubles ($3.7 million)) has increased to 280 million rubles ($4.7 million) in one year: in 2012, the Center for Investment Projects Development has sold it at the that price to another governmental company – the Yamal Regional Innovation and Investment Fund. The fund has been established in 2010 upon an initiative of Dmitry Kobylkin, Governor of the Yamalo-Nenets Autonomous District. Its Management Board consists of regional Ministers and Deputies. The primary goal of the fund is investment activity with the purpose to introduce innovations and new technologies into the branches of economy and social spheres of the Yamalo-Nenets Autonomous District. How does the mansion in Moscow contribute to this?.. In fact, the Yamal Regional Innovation and Investment Fund has found a way to make some money on the elite real property in the historical center of Moscow: in 2014, the fund sold the home back to its previous owner at the price of 288.9 million rubles ($4.8 million).
In the meantime, the Center for Investment Projects Development had continued its acquisitions of historical buildings. Its next purchase was a mansion in St. Petersburg located at 62 Kamennoostrovsky avenue (the country residence of Voronikhin). The building was bought in 2011 for 118.3 million rubles ($2 million). As usually, after the acquisition, the home has been renovated. Based on its subsequent sale price, CIPD has spent over 88 million rubles ($1.5 million) on the reconstruction of the country residence of Voronikhin – i.e. more than half of the cost of the mansion itself. In theory, this could be possible – provided that the building was purchased in poor condition. But according to the web site of LSR company, the deal facilitator, the country residence of Voronikhin had been fully commissioned back in 2008. An obvious conclusion offers itself: the so-called ‘reconstruction’ was a blatant embezzlement scheme – just one of the many ways to make money on the elite real estate.
Country residence of Voronikhin in St. Petersburg
The ‘investments’ continued generating revenues: a year later, CIPD has sold the country residence of Voronikhin to the Yamal Regional Innovation and Investment Fund whose Management Board consists of colleagues of the CIPD management. But the main component of the embezzlement scheme implemented concurrently by the Center for Investment Projects Development and Yamal Regional Innovation and Investment Fund hits all the records in its cynicism. It turned out that the Yamal Administration has representation offices in Moscow and St. Petersburg. The purpose of these offices is unclear, the results of their work are not encouraging, but the representatives of the region have accommodated comfortably in the above-mentioned mansions that had undergone luxury renovations. At the first glance, this seems logical: CIPD belongs to the Yamal Government through its Department of Property Affairs, while the Yamal Regional Innovation and Investment Fund is closely linked with the regional administration.
But the point is that the Government of the Yamalo-Nenets Autonomous District is leasing its own real properties and pays for those dozens of millions of rubles every year. The lease agreements are signed on behalf of the directorates for the regional representation offices operation support. The total amount spent on the lease of the home located at 5 2nd Spasonalivkovsky lane in Moscow (that belongs to the Yamalo-Nenets Autonomous District) amounts to several hundreds of millions of rubles. Its ‘lease price’ has increased from 25.9 million rubles ($432.6 thousand) in 2012 to 93.1 million rubles ($1.6 million) in 2016. The country residence of Voronikhin in St. Petersburg is leased according to the same scheme – although the Yamal Regional Innovation and Investment Fund is a noncommercial organization and can not run profit-generating activities. Contrary to the law, the fund has earned over 57 million rubles ($952.1 thousand) in the last two years on the mansion lease. Not a single regulatory authority had ever questioned the deals made by the Government of the Yamalo-Nenets Autonomous District with itself. Therefore, the show is going on.
On Malta, on October 14, journalist Daphne Caruana Galizia, who accused the family of Prime Minister Joseph Muscat of corruption on the basis of Panama Papers materials, was killed. She was 53 years old.
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