Deputy Director of Russian Federal Penitentiary Service awards multimillion contacts to his friends
Oleg Korshunov, the new Deputy Director of the Federal Penitentiary Service of Russia and experienced financial manager, was supposed to restore the reputation of this governmental agency marred by corruption scandals. His top priority was to establish a trade house of the Federal Penitentiary Service in order to put all financial operations of the organization to order. However, the new federal state unitary enterprise established for liaison with businesses has awarded governmental contracts for the total of 770 million rubles to a single person.
On October 18, 2006, the 20th International Exhibition of Means of State Security Provision INTERPOLITEX-2016 was held in Moscow. The event was organized by the Federal Security Service (FSB) of the Russian Federation and the Ministry of Internal Affairs (MIA) of the Russian Federation; it has demonstrated technical achievements in such fields as special equipment, weapons, protection means and supplies for the army and other structures responsible for the state security.
Booths of the Federal Penitentiary Service (FPS) of the Russian Federation have demonstrated over 1.5 thousand items produced in penal institutions of Russia. Oleg Korshunov, the Deputy Director of the FPS, proudly presented achievements of the prison labor. According to him, in 2016, structures of the penitentiary system have already signed contracts to supply various goods for the total of 50 billion rubles. Clients of the FPS include the MIA and the Ministry of Telecom and Mass Communications of the Russian Federation; the Federal Protection Service and National Guard of the Russian Federation are considering collaboration with the FPS as well. Korshunov also noted that a specialized exhibition of goods produced in penal colonies is planned for 2017.
As it appears from the speech of the Deputy Director of the FPS, the volume of the prison business and its profits are growing. From the other side, the FPS has already been involved into numerous high-profile corruption scandals – take, for example, the suspected embezzlement of 2.7 billion rubles by Aleksander Reimer, the ex-Head of the agency, or possible larceny of 360 million rubles by Pavel Belikov, the ex-Director of the Canning Plant of the FPS of Russia Federal State Unitary Enterprise.
Pavel Belikov and Aleksander Reimer are currently under investigation
Therefore, doubts arise whether the profits generated by the prison labor are being distributed fairly. Oleg Korshunov, the Deputy Director of the agency, has come to the system from business; he had no previous connections with penitentiary institutions and was supposed to root out corruption in the FPS. However, an investigation carried out by the CrimeRussa shows that multimillion contracts are still being awarded by the governmental agency through personal acquaintance or cronyism.
In the military slang coat means an officer or high-ranked manager, who joined the army after a civil university. This characteristic is fully applicable to Oleg Adolfovich Korshunov, the Deputy Director of the Federal Penitentiary Service, who has come to the penal system from business.
The official has graduated from the Moscow Finance Institute with a major in Finances and Credit (Anton Siluanov, the Minister of Finance of the Russian Federation, was his course mate), was the head of Sinektika Bank and member of the board in the Moscow Bank of Reconstruction and Development (currently MTS-Bank). In 2004–2006, Korshunov was the Deputy Chairman of the Inter-Regional Fund of Presidential Programs under auspices of Igor Zubov, currently, the Deputy Minister of Internal Affairs. Then the future Deputy Director of the FPS was the Head of the Administration for Economic Development and Trade in the Ryazan Region and has later become an Aide to Rifkat Altynbaev, member of the Council of the Federation representing the Ryazan region.
In 2013, Korshunov has become the Head of the Financial and Economic Department of the Federal Penitentiary Service of Russia and in 2014, he was appointed the Deputy Director of the FPS by a Presidential Decree – thus, becoming the first senior executive in the agency without a military rank. It was decided to introduce an absolutely new person, having no connections with interior clans and elites, into the agency whose reputation was marred by numerous corruption scandals. Assuming the office, Korshunov has promised to root out corruption in the organization and call on the carpet heads of all subdivisions of the federal state unitary enterprise for performance review. High hopes had been put on Korshunov: an experienced financial manager was supposed to put an end to embezzlements in the agency. It turned out soon that the hopes were groundless.
During the two years in the capacity of the Deputy Director, Korshunov managed to become involved into several corruption scandals. In April 2015, the police have started an investigation of embezzlement of budget funds allocated for renovations in the Pretrial Detention Facility № 10 of the City of Mozhaisk of the Moscow Region – and unexpectedly uncovered elements of another crime. The investigators found that Vasily Vozgalov, the former Interim Acting Director of the institutional federal state unitary enterprise, has accepted and paid for works under a contract for capital renovations of the tar-and-gravel roofing and heating systems with the total cost of 17.2 million rubles – that had never been performed. Promotdelstroy company had been retained for these fictitious works; one of its founders was Vasily Vozgalov himself. A criminal case has been initiated against Vozgalov under Article 159 of the Criminal Code of the Russian Federation (Swindling).
During the examination of the case materials, the investigators have stumbled upon another possible swindling episode based on the same scheme. The Construction Administration of the Central Federal District Federal State Unitary Enterprise had been performing renovations in a complex of buildings in Moscow belonging to the FPS. According to the investigation, the works for 2.6 million rubles had not been completed – although paid in full from the state budget. All the contract documents had been approved by Oleg Korshunov – so, a service audit has been initiated against him.
The legal grounds for the investigation was a report by the Audit Chamber of the Russian Federation. According to the auditors, the FPS used to illegally retain commercial structures for construction and renovation of its facilities. The total cost of works performed by the subcontractors was estimated at 7.1 million rubles – while the management of this federal state unitary enterprise of the Federal Penitentiary Service of Russia have supposedly appropriated 250.5 million rubles for intermediary services.
Contracts for friends
As said before, after his appointment to the FPS, Korshunov promised to strictly control operations of each subordinate federal state unitary enterprise. However, the objectiveness of the Deputy Director of the FPS in distribution of governmental contracts among subordinate institutions raises certain doubts. For example, the Kaluzhskoe Federal State Unitary Enterprise, earlier managed by some Andrei Mukhetdinov, has received governmental contracts for the total amount of 2.7 billion rubles.
It turned out that Korshunov and Mukhetdinov knew each other since their joint work in the Ryazan region (where Mukhetdinov was the Head of the Regional Nature Use Administration); furthermore, they were cofounders of several companies.
Media had earlier addressed in detail activities of Mukhetdinov as the Head of the Kaluzhskoe Federal State Unitary Enterprise.
The journalists reported about suspicious contracts signed by this institution. For example, a contract to supply video and audio recorders for the total of 125 million rubles has been awarded to Spetstekhstroy Limited Liability Company who offered older models than other companies – but this fact has not affected the choice of the Kaluzhskoe Federal State Unitary Enterprise.
The further investigation has found that the former colleague of the Deputy Director of the FPS used to be the Director of another penal institution – the Ulyanovskoe Federal State Unitary Agricultural Enterprise of the Federal Penitentiary Service of Russia.
This institution has received contracts for the total of 5.8 billion rubles as a contractor and awarded contracts for the total of 4.9 billion rubles as a client.
According to the media, the Kaluzhskoe Federal State Unitary Enterprise had been frequently awarding contracts to Avers Patrol Limited Liability Company and T-Helper Telecom Closed Joint Stock Company – which were linked with Korporatsia Neftegazopererabotka Limited Liability Company founded by Andrei Mukhetdinov, Oleg Korshunov and his brother Valery.
Another co-founder of Korporatsia Neftegazopererabotka was Denis Igorevich Zubov – a son of Igor Zubov, the Deputy Minister of Internal Affairs and former boss of Korshunov: the financial manager used to work for two years in the Inter-Regional Fund of Presidential Programs chaired by Igor Zubov.
Igor Zubov, the Deputy Minister of Internal Affairs of the Russian Federation
It appears that Zubov and Korshunov had not only work-based relations – but also commercial ones. It can’t be ruled out that the high-ranked MIA officer had lobbied the appointment of his former subordinate to the FPS.
Korporatsia Neftegazopererabotka is not the only company linking the law enforcement officers together. For example, Spetsburstroy Limited Liability Company has been founded by Andrei and Irina Mukhetdinov and some Marina Zubova – presumably, the spouse of Igor Zubov.
Denis Zubov is a businessman specializing in oil production; he was mentioned in the Panama Papers – since the age of 22, he has been a co-owner the Monumental Property Company registered in the British Virgin Islands. In 2004, Zubov junior has sold a share in the offshore company to well-known businessman Igor Khudokormov – owner of Prodimex Group (a leader in the Russian sugar industry) and one of the largest landowners in the country.
Irina Mukhetdinova and Marina Zubova also own shares in Leader Limited Liability Company specializing in the taxi business.
Prison trade house
The principal idea brought to the FPS by Korshunov was to establish an institutional trade house to handle all commercial liaisons between businesses and directors of penal colonies. The Deputy Director of the FPS has described this project in detail in his interview to Kommersant. The new structure was supposed to create a unified hierarchy of financial relations and eliminate corruption elements – situations when directors of penal colonies, so-called local kinglets, could demand additional personal preferences from businessmen. In addition, the FPS was expected to gain a considerable cash flow from new orders, which used to be procured via intermediaries – who were winning governmental contracts and then retained penal institutions as subcontractors for their implementation. The Deputy Director of the FPS has wisely concluded that “the commerce and contracts must be handled not by men in uniform, who don’t know how to do this, but by civil specialists”.
The idea seemed pretty reasonable, and the previous banking and business experience of Korshunov could be very useful for its implementation. So, how was this plan implemented?
A new enterprise has been established on the basis of the Central Base of Material and Technical Supplies Federal State Unitary Enterprise of the Administration of the Federal Penitentiary Service in the Stavropol Krai; it was named the Production and Trade House Federal State Unitary Enterprise of the Federal Penitentiary Service of Russia. Korshunov told media that some orders have already been procured via the new structure, although it still continues recruiting experts.
It appears however that, speaking of a structure “for liaison with businesses”, the Deputy Director of the FPS meant only businesses of a certain person – because all contracts of the new federal state unitary enterprise have been awarded to companies belonging to some Smbat Arshaki Arutyunyan.
A review of governmental acquisitions made by the new institution allows to make several conclusions. First, the new federal state unitary enterprise awards contracts on a sole source basis – i.e. without tender procedures. Second, the majority of acquisitions made by the Production and Trade House can be divided into two groups: production of goods and purchases of materials. Contracts of the first groups are expectably being signed with penal colonies, while contracts of the second group are being awarded to several affiliated structures. According to the Consolidated State Register of Legal Entities and official governmental acquisitions portal, the following companies are being retained as suppliers by the new federal state unitary enterprise: Lesopostavka Territorial Production Complex Limited Liability Company; Promtorgobuv’ Limited Liability Company; Datse Group Territorial Production Complex Limited Liability Company; Individual Entrepreneur Arutyunyan Smbat Arshaki; Multishvey Group Limited Liability Company; and Obuv Trest (Shoe Trust) Limited Liability Company. In addition to the supply of materials, the contractors also lend equipment and produce semi-finished products for shoe production. The total amount of the contracts awarded to these companies and the individual entrepreneur is 767,925,628 rubles. We would like to remind that all these contacts had been awarded on a sole source basis.
See, for example, a link to a contract signed between the Production and Trade House and Promtorgobuv’ Limited Liability Company to supply materials for shoe production; the cost of the contract is 374,460,730 rubles.
Further review shows that all the contractors of the new governmental structure are somehow affiliated with one person – Smbat Arshaki Arutyunyan. According to Focus.kontur.ru, he is/was the founder and/or general director of Datse Group Territorial Production Complex Limited Liability Company, Lesopostavka Territorial Production Complex Limited Liability Company, Promtorg Obuv’ Limited Liability Company, and Datse Group Limited Liability Company.
Interestingly, Arutyunyan owns Promtorg Obuv’ – while the Production and Trade House signs contracts with Promtorgobuv’ (different spelling). But Promtorgobuv’ belongs to Mikhail Anatolyevich Dudkin – who is the General Director of Promtorg Obuv’. Such tricks have been used to complicate and confuse potential checks and audits.
Multishvey Group Limited Liability Company belongs to and is managed by Irina Imomnazarovna Shatova – who is the General Director of Datse Group.
Aleksander Yakovlevich Shkuratov, a business partner of Arutyunyan and the former Head of Datse Group, is the founder of Obuv Trest Limited Liability Company.
Currently, Obuv Trest is managed by a dummy director – some Amir Linarovich Sharafullin. This person is the head of 451 (!!!) companies at once. Apparently, this trick was supposed to conceal the affiliation of structures controlled by Arutyunyan.
In addition, business interests of Shkuratov and Arutyunyan had been overlapping in Afrodita Limited Liability Company. Its founder was Smbat Arutyunyan, while the post of its General Director had been held in different years by Ani Smbatovna Arutyunyan (based on the last name and paternal name, she might be a daughter of the entrepreneur) and Aleksander Shkuratov.
Then a dummy director was appointed for this company as well – Lyudmila Nikolaevna Kuzikova (manages 326 companies).
During the five years of its existence, the company has received governmental contracts for the total of 1.1 billion rubles.
It is necessary to note that it is very difficult to find any information about links between Shkuratov and Datse Group. The businessman is not listed in databases as the head of this company. However, the web site of the Administration of the City of Kuznetsk – where the shoe factory of Datse Group is located – still indicates that Shkuratov used to hold a senior position in the company. Shkuratov is also mentioned as a manager of Datse Group in a report by K.N. Makarov, the Head of the Administration of Industry and Energetics in the Penza Region.
At the first glance, Aleksander Shkuratov has no links with high-ranked law enforcement functionaries. However, the membership
list of the Financial University (Moscow) Alumni Club Areopagus includes – in addition to Oleg Korshunov – a namesake of Kuznetsk businessman Aleksander Shkuratov. It could be a coincidence, and the former student of the Financial University might have no relation to the businessman whose company is funded so generously by the Federal Penitentiary Service of Russia. But the membership list includes several other names identical to names of heads of major Kuznetsk enterprises.
If the matching names from the two lists are not a coincidence, this could mean that most important Kuznetsk enterprises are controlled by former members of the Alumni Club Areopagus or their relatives.
The pearl of Kuznetsk
As said before, law enforcement structures often award governmental contracts to Kuznetsk-based Datse Group. The manufacturing workshop of the company is located in the building of the former Kuznetsk Shoe Factory, well-known since the Soviet era. In 2011, the factory was closed due to bankruptcy, but since 2013, works have been resumed there. Sergei Aleksandrovich Zlatogorsky, the Head of the Kuznetsk Municipal Administration, has personally attended the opening of the new enterprise; Aleksander Shkuratov, then-General Director of the company, has been welcoming him. 200 million rubles have been invested in the reconstruction of the factory within three years – but these funds have been repaid a multifold, based on the number of governmental contracts awarded to the enterprise by various enforcement structures. According to Focus.kontur.ru, since 2013, Datse Group Limited Liability Company and Datse Group Territorial Production Complex Limited Liability Company have received governmental contracts for almost 850 million rubles, including 79 million rubles from the Production and Trade House Federal State Unitary Enterprise of the Federal Penitentiary Service of Russia.
In September 2016, the Federal Antimonopoly Service of the Russian Federation has initiated a case against Datse Group; the shoe company was charged with commercial conspiracy and participation in a cartel. The conspiracy scheme involved arrangements made in advance between the companies and determining in what tenders they would participate – as a result, the companies divided wins in various tenders between themselves and prevented any possible reduction of maximal starting prices for the contracts.
Moneyman in uniform
It turns out that a person retained to change the system, has instead adapted to it and started playing by its rules. But this is only at the first glance. When an enforcement structure hires somebody with a totally different background, it normally means that there are some special tasks requiring such an experience. The Federal Penitentiary Service of Russia needed to structure the super-profitable business based on cheap labor of convicts. Perhaps, the main goal of the appointment of Oleg Korshunov to the FPS was to build a rigid financial hierarchy in the agency – and he has got a carte blanche to establish required connections. The CrimeRussia will continue monitoring activities of the Deputy Director of the FPS and operations of his trade house.
Former member of the Federation Council believes that this once again points to numerous violations and falsification of evidence during the investigation of his criminal case on charges of bribe-taking in the amount of 27.5 million rubles ($457 thousand).