Devastation Corporation: Why General Director of Development Corporation arrested and who is next? 

Devastation Corporation: Why General Director of Development Corporation arrested and who is next?
Stolen Industrial – Stolen Polar (Ural is replaced with Ukral (Russian for stolen)

This year, the Development Corporation (formerly Urals Industrial – Urals Polar) celebrates its 10th anniversary. Its accomplishments to date are: 30 billion rubles spent, no projects implemented, and Sergey Maslov, the General Director, arrested.

On October 20, 2016, Sergey Maslov, the General Director of the Development Corporation (formerly Industrial Urals – Polar Urals), and his deputy Vladimir Karmanov have been arrested and detained. The top managers have been charged under part 4 of Article 160 of the Criminal Code of the Russian Federation (Misappropriation or Embezzlement on an especially large scale). According to the investigation, the suspects have siphoned at least 1 billion rubles to offshore companies. This refers to funds deposited by the state corporation in the Narodny Credit Bank in summer 2013. In November 2014, the Central Bank revoked the license of the Narodny Credit Bank – and the funds have been lost. Law enforcement authorities, however, think differently. According to the investigation, 1 billion rubles had been siphoned to offshore companies. The total calculated amount of damages sustained by the state budget and the number of suspects in this case would, most probably, increase over time.


Photo: Sergey Maslov, the General Director of the Development Corporation

Stolen Industrial – Stolen Polar (Ural is replaced with Ukral (Russian for stolen)

Apparently, Maslov has played the key role in this crime. The current General Director of the Development Corporation is well-known for his unfortunate investments and management decisions. The investigation still has to deal with these misfortunes in detail. In all fairness it has to be noted that Maslov had only continued the existing tradition. It is not a coincidence that Urals residents had nicknamed the Development Corporation "Stolen Industrial – Stolen Polar". 


The Urals Industrial – Urals Polar project had been initiated by a decision of the President Vladimir Putin on May 16, 2005. The main purpose of the project was to ensure the economic availability and feasibility of incorporation of mineral and primary resources of the Nether-Polar and Polar Urals into Urals-based industries. On August 30, 2006, the Urals Industrial – Urals Polar Corporation Open Joint Stock Company has been established to manage the project and synchronize all its components. By 2012, the project was renamed into the Development Corporation; while in July 2015, a decision has been made to change its form of ownership. The company was renamed into the Development Corporation Joint Stock Company.

The construction of a bridge across the Nadym River had started during the rule of Aleksander Beletsky, the previous General Director. Initially, Mostostroy-12 company was the contractor. The construction was ongoing since 2011, but only in 2014, when the project completion degree was 75%, the corporation has inquired about the quality of works. It turned out that the bridge had been constructed using low-quality materials and on the basis of an unapproved project. The Nadym Bridge was an excellent opportunity for Maslov to develop a perfect reputation for himself by contrast with questionable decisions of Beletsky. Ultimately, the contract with Mostostroy-12 was terminated. The tender for completion of the troubled construction project has been won by Mostostroy-11 company controlled by Rotenberg brothers; it has completed the construction in 2015.

The state corporation rushed to announce the completion of its first major project – although the railroad component of the bridge hasn’t been constructed. The motorway component had not been gratifying the Yamal residents for long as well: this summer, the bridge has been washed out considerably by rainstorms; some sections of the fencing have been destroyed. So, what was the reason to change horses in the midstream? In addition, the first tender for completion of the bridge – won by Mostostroy-11 – was found illegitimate by the court, which has resulted in further procrastination of the construction. It is also necessary to note that the termination of the contract with Mostostroy-12 was performed poorly from the legal point of view – and the former contractor has a real chance to collect 1.8 billion rubles from the Development Corporation for works that had been done but not accepted. Taking the huge cost of the bridge (14 billion rubles), the Pyrrhic victory of Maslov seems too expensive for the state budget.


Photo: the Nadym Bridge after summer rainstorms 

During the rule of Maslov, the Urals regions faced a threat of much larger losses as well. The most unfortunate potential loss is Polyarnaya Thermoelectric Power Station that might fall under Czech control. The construction of the thermoelectric power station has started in 2011, and it was planned to launch it in two years. Currently the investment project is on hold. A few piles driven at the construction site are the only indication of the future station. 10.7 billion rubles provided by the Czech Export Bank against guarantees of the Government of the Yamalo-Nenets Autonomous District have dissolved in the Corporation – together with promises of glorious future. 

The fact that 75% of the Urals Industrial – Urals Polar Energy Company supervising the quartz project belong to Galileo Investments SA (Luxemburg) leaves little chances to ever return the funds to the state treasury. It can’t be ruled out that in the current economic situation the region is unable to pay out the loan, and the perspective project would be completed by the Czech investors – who may gain control over all the Yamal power industry.

The Polar Quartz plant – intended to become an advanced producer of quartz concentrates on the basis of nanotechnologies – faces a similar fate. Its construction started in 2003. Six years later, Urals Industrial – Urals Polar became interested in the capital-intensive enterprise. At that time, virtually all assets of the Polar Quartz State Unitary Enterprise had already been pledged. The advent of the Urals Industrial – Urals Polar to the project has worsened the situation further. Five years after this, the Polar Quartz was still not completed and needed investments. Only law enforcement authorities can estimate the total amount of funds spent in the framework of this project.

Father’s daughters

The Development Corporation used to imitate a frenzied activity with a huge number of subsidiary companies – daughters. The number of such daughters is much higher than the number of corporate projects. Officially, the subsidiary companies were responsible for financing and management of projects assigned to them. The true role of the subsidiary structures can be illustrated by the acquisition of the Chelyabinskaya Poultry Factory in 2014.

Such a weird selection for investments has raised lots of questions. A poultry factory looks curiously, to say the least, among projects related to energy and manganese processing. However, the amount paid for it by the Development Corporation was not funny at all – 1.4 billion rubles. A year later, the factory was sold with a profit of 300 million rubles – which was declared a success. Daughters of the Development Corporation played a key role in this deal. It was not announced, though, whose success it was.

So, in 2014, Ovomir company, a subsidiary structure of the Development Corporation, acquired the Chelyabinskaya Poultry Factory. A year later, Ovomir has sold the agrarian asset of the Yugorskaya Industrial Corporation for 1.7 billion rubles. However, according to the terms of this deal, the sale proceeds had to be transferred to another daughter of the Development Corporation – Construction Company Development. The closure of the deal mysteriously coincided with an enforcement proceeding against Construction Company Development. The parties have postponed the payment. The enforcement proceeding has finished – but no funds had been transferred to the company’s account. After the request of Ovomir financial documentation by the investigation, the corporation press service has immediately announced that the funds had been received from the Yugorskaya Industrial Corporation in full. The further story of the poultry factory is pretty interesting: it was bought and sold several times and ultimately has been purchased by Orion company. The owner of Orion was Pavel Kadushin, Deputy General Director for Economy and Finances of the Development Corporation.

Self-Development Corporation

So where are all the billions from unfinished plants, roads, and bridges? Hobbies of Development Corporation top managers can provide an answer. Sergey Maslov used to combine the position of the General Director in a state corporation with a representative position in KPM INVEST LIMITED (British Virgin Islands), thus, violating Article 17 of the Federal Law “On State Civil Service” prohibiting civil servants from running business operations.


Photo: Power of Attorney for Sergey Maslov to represent KPM INVEST LIMITED 

Maslov was defying legislation of other countries as well. He acquired the taste of dolce vita and ordered a luxury yacht 1331 Victoria (ex Baltika). Initially, Vegamarine Ltd., an Estonian company, was finishing the yacht project. The official customer was Julesburg Corp. (British Virgin Islands) that provided Sergey Maslov with a Power of Attorney to represent KPM INVEST LIMITED. But according to, citing Vyacheslav Rybalchenko, a representative for Julesburg Corp., the name of the true owner of the yacht was not a secret for anybody. Apparently, Julesburg Corp. would never forget this name, because the performed works had not been paid. Currently the yacht is at rest in Turkey. 

According to some sources, Aleksander Beletsky, the previous General Director of the state corporation, also owns an offshore company – Redcloud Traders Limited (Cyprus) – that was used to control deals with subsidiary structures of the Development Corporation and with Hungarian real estate.


Photo: Scan of the contract between Julesburg Corp. and Vegamarine Ltd. to complete the yacht 

Maslov was arrested in his manor located in an elite Akhangelskoe settlement near Moscow. The operatives found a collection of luxury brand-name watches, collection of paintings of Russian artists, and monetary funds equal to €100 thousand. Maslov has not got used to measure money with bags and shoe boxes yet – so he kept the funds in an old-fashioned manner in a strongbox. Other assets of the former General Director include real estate in Moscow and abroad, a fleet of luxury cars, and a Swiss citizenship. Apparently, the Development Corporation lives up to its name. The investigation has to find out who else managed to develop with it. 


Contract between Julesburg Corp. and Vegamarine Ltd
 Power of Attorney for Sergey Maslov to represent KPM INVEST LIMITED



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