‘Family nest’: Clan of Head of Udmurtia makes good money on bridges and roads
Bribe-taking charges are only the first blow delivered by law enforcement structures to Aleksander Soloviev, the Head of the Udmurt Republic. The case can be reclassified under more grievous Article 210 of the Criminal Code (creation of a criminal community (criminal organization) and participation therein) – because relatives and friends of the regional head have, in fact, monopolized the road industry in the republic. Would the entire clan Soloviev be prosecuted in the framework of a large-scale criminal case?
On April 4, 2017, the Investigative Committee of the Russian Federation (ICR) announced that the Main Investigations Directorate for Special Cases of the ICR has initiated a criminal case against Aleksander Soloviev, the Head of the Udmurt Republic. The politician who had been working in the road construction for his entire life, has been charged with two extremely grievous crimes stipulated in part 6 of Article 290 of the Criminal Code of the Russian Federation (bribe-taking by a functionary who holds a government post of the Russian Federation on an especially large scale).
On the morning of April 4, 2017, the official was arrested in the apartment of his older daughter and escorted to Moscow handcuffed.
Aleksander Soloviev in court
On the same day, the President of Russia has signed an order dismissing the Head of Udmurtia “due to loss of trust”. By the way, it was Vladimir Putin who had appointed Aleksander Soloviev the Acting Head of the Republic in February 2014.
At the session of the Basmanny District Court of Moscow, the judge has satisfied a motion brought by the investigation and remanded Aleksander Soloviev in custody for two months. The investigation has requested to commit the suspect to pretrial detention facility because the ex-Head of Udmurtia had threatened witnesses testifying against him. In addition, relatives of Soloviev own real estate abroad and the official, who has a foreign travel passport, might flee the country and abscond. According to the Federal Security Service (FSB) of the Russian Federation, the Head of Udmurtia owns a luxury seaside mansion in Spain located in a prestigious township in Alicante province.
The defense asked to place Soloviev under home arrest because he suffers from high blood pressure and a kidney disease that he had treated in Germany in 2016. But the judge has made a decision in favor of the prosecution. During the court session, Aleksander Soloviev has denied any guilt and refused to testify.
The Udmurt media outlets, citing their sources, have reported that the ‘case of road builders’ investigated by the Regional FSB Directorate since fall 2016 had been submitted to Moscow prior to the arrest of Soloviev.
According to the investigation, in 2014–2016, Soloviev received a bribe in the amount of 139 million rubles ($2.4 million) and a share in a commercial organization worth 2.7 million rubles ($47.5 thousand) from companies building bridges across the Kama and Buy Rivers near the town of Kambarka in the Udmurt Republic. In exchange for the bribe, the Head of the Republic had promised to patronize the concessionaires and transfer payments for works performed by them from the federal and regional budgets on a priority basis. In addition, Aleksander Soloviev had promised to assist them in obtaining licenses for geological studies of subsurface, exploration surveys, and sand and sand–gravel mix mining.
Aleksander Zabarsky and Aleksander Soloviev at a bridge construction site
Our sources have provided details of the case. Soloviev had received a major part of the bribes from Aleksander Zabarsky, General Director of Mostostroy-12 Limited Liability Company. A number of companies affiliated with Zabarsky are mentioned in the criminal case: Regional Investments Company (RIC) Limited Liability Company (concessionaire in the construction of bridges across the Kama and Buy Rivers), Mostostroy-12 Limited Liability Company (general contractor in this construction project), Udmurtstal’most Limited Liability Company, Resurs-Invest Limited Liability Company, Dom-Invest Limited Liability Company, and Stroy-Invest Limited Liability Company – participants in the implementation of the concession agreement. A criminal case has been initiated against Zabarsky under part 5 of Article 291 of the Criminal Code of the Russian Federation (bribe-giving).
Sergei Polevikov, Director of Udmurtstal’most Limited Liability Company and cofounder of SP Fonika Limited Liability Company (100% founder of SP Mostostroy-12), had acted as an intermediary in the handover of the bribes. Rustem Valeev, owner of Tektonika Limited Liability Company specializing in architectural, construction, and finishing works, has also been charged with bribe-giving. Valeev owns a number of enterprises in addition to Tektonika. One of those was mining sand and sand–gravel mix for the construction of the bridge across the Kama River, and Valeev had been paying for assistance in obtaining the required licenses. His close friendship with the younger daughter of the Head of the Udmurt Republic had enabled him to hand over the money to Soloviev.
Aleksander Soloviev, Deputy Minister of Transport and Public Road System of the Udmurt Republic and full namesake of the Head of Udmurtia (nicknamed ‘Soloviev small’ in the region), has submitted a letter describing corrupt practices of the Head of the Republic. ‘Soloviev small’ was arrested in October 2016; a criminal case has been initiated against him under Article 286 of the Criminal Code of the Russian Federation (exceeding official powers). Currently the Deputy Minister of Transport and Public Road System is a suspect in the criminal case instituted against his namesake. He is suspected of crimes stipulated in part 1 of Article 286 (exceeding official powers), part 1 of Article 285 (abuse of official powers), and part 4 of Article 291.1 of the Criminal Code of the Russian Federation (mediation in bribery). The collaboration with the investigation and written testimony against the Head of Udmurtia allowed ‘Soloviev small’ to get out of jail: after staying two months in the pretrial detention facility, he was released and placed under home arrest.
‘Soloviev small’ and ‘Soloviev big’
Apparently, ‘Soloviev big’ was well aware that the namesake would turn him in. According to the sources, after the arrest of ‘Soloviev small’, the Head of Udmurtia was absent from work for almost a month.
He was seen in public only once – at the National Unity Day on November 4, 2016. According to some sources, during this entire period, Soloviev was drinking heavily. To stop this drinking bout, the daughters had to send their father to a special clinic in Germany – allegedly, to treat a kidney disease.
The sources emphasize the key detail in that criminal case: the FSB had started its inquest, that has ultimately resulted in criminal cases against the two namesakes, after the visit of Vladimir Putin to the region. The President arrived to attend the opening ceremony of the bridge across the Kama River and was very displeased that the bridge was not only incomplete but hadn’t even passed the state expert assessment. Putin has ordered to find out whose fault was it. Then some interesting details pertaining to the construction have popped up. For example, reinforced concrete bridge pillars had been replaced with cheaper metal ones – but the cost of works was not reduced. According to the experts, the cost difference between the projected bridge and the real one is some 1 billion rubles ($17.6 million), and no one can say where is the money.
The Kama bridge project was the first example of public-private partnership in the region under the Federal Law on Concessions. The total cost of the project was some 14 billion rubles ($246.2 million). The concession agreement regulating the bridge construction and further usage is highly disadvantageous for the region and residents of Udmurtia; it was signed during the rule of Aleksander Volkov, the previous Head of the Republic. But Soloviev decided to capitalize on this project and presented the bridge construction as his personal achievement.
During the rule of Soloviev, the Regional Investments Company (RIC) Limited Liability Company had to renegotiate the financing terms with VTB Bank in order to continue the construction. The Head of the Udmurt Republic managed to secure governmental funding for the bridge project at the federal level. The Ministry of Economic Development of the Russian Federation has included it into its Special Support Program, and VTB Bank received a low-interest loan from the Central Bank of Russia to finance the construction on preferential terms. Concurrently, the shareholding structure of RIC Limited Liability Company has changed. Cyprus-based Kelsteno Management Ltd. and Belize-based Tusnelda Corporation remained its major shareholders (51% and 21.25% respectively), while VTB Bank (via Operator of High-Speed Motorways Limited Liability Company) and Narodny Credit (People’s Credit) Bank Open Joint Stock Company have become its new co-owners (15% and 12.75% of shares respectively). It is necessary to note that Narodny Credit Bank has lost its license in October 2014; its management is currently being prosecuted in the framework of an embezzlement case.
The Head of the Udmurt Republic had repeatedly inspected the construction site. Being an experienced road builder, he could not overlook the deviations from the original project. However, not only hadn’t he ever noted those but instead always commended the works performed by Zabarsky. And most importantly, during the construction of the bridge that had no supporting documents, Soloviev had always transferred the budget funds to the contractor in advance, prior to the completion of actual works. At the same time, student construction crews coming to Udmurtia from all parts of the country did not receive payment for their work. The project completion date had been extended several times. In that context, it was obvious that sooner or later, the law enforcement authorities would arrive to the construction site and start asking inconvenient questions. Local motorists were outraged by bridge tolls – light vehicles had to pay 509 rubles ($8.95) to cross the bridge. People had complained that residents of the Kambarka district must pay 1000 rubles ($17.6), not including the cost of gas, to drive to the hospital in Sarapul located on the other bank of the river. Furthermore, should the traffic on the bridge across the Kama River be low, the Republic of Udmurtia has to pay penalties in accordance with the concession agreement. The penalties up to 450 million rubles ($7.9 million) per year are to be paid from the Republican Road Fund. The minimal traffic required to avoid the penalties is 1,700 vehicles per day.
Video: Presentation: Bridge construction across the Kama River near Kambarka. v.2 (2007)
Searches and seizures of documents have already been performed in the Ministry of Transport and Public Road System of the Udmurt Republic, Ministry of Natural Resources and Environmental Conservation of the Udmurt Republic, offices of companies involved into the construction of bridges across the Kama and Buy Rivers, Permanent Mission of the Udmurt Republic in Moscow, and residence of Yulia Bashkova, the younger daughter of Soloviev and concurrently a Deputy Minister of Transport and Public Road System of the Udmurt Republic. In addition, a search has been performed in a spacious four-room apartment belonging to Evgenia Sirik, the older daughter of Soloviev, where the Head of the Republic used to live.
It is not surprising that the entire family of the ‘road king’ of Udmurtia has attracted the attention of law enforcement structures. Clan Soloviev has been firmly controlling the construction industry in the republic for a long time; relatives and friends of Soloviev are in charge of almost all road construction enterprises in the region.
Since 2012, Evgenia Sirik, the older daughter of the Head of Udmurtia, has been a co-owner of Nerudprom Limited Liability Company specializing in quarry mining of gravel and sand for road construction. In December 2016, Soloviev has understood that it is time to cover up traces, and Nerudprom Limited Liability Company was liquidated. Currently Evgenia Sirik owns only three companies: Evgenika (Eugenics) Limited Liability Company, Rodnik (Spring) Limited Liability Company, and Hottei Limited Liability Company specializing in grocery sales and mineral water production. The total cost of these companies was estimated in 2015 at 32.2 million rubles ($567.2 thousand).
Zakhar Milostivenko, common law partner of the older daughter of Soloviev, is a Deputy of the Izhevsk Municipal Duma and Member of its Permanent Commission for Territorial Development, Urban Planning, Land Use Planning, and Environment. In the recent past, he was the General Director of Avtodormostproekt Limited Liability Company, one of the largest enterprises in Udmurtia specializing in road and bridge design, engineering surveying, and expert assessment of project documentation. In the last year, the company managed to win 45 governmental contracts, thus, becoming a monopolist in this sphere. According to the governmental acquisitions web site, Avtodormostproekt had acted as the sole bidder in most tenders, while the maximum starting price of the contracts either remained unchanged or was reduced insignificantly. The total revenue of Avtodormostproekt Limited Liability Company gained under the contracts signed in the last year was over 166 million rubles ($2.9 million). In 2015, the company had won 76 governmental contract for the total amount of 138 million rubles ($2.4 million); in 2014 – 88 governmental contract for the total amount of 150 million rubles ($2.6 million).
The Ministry of Construction and Public Road System of the Udmurt Republic, whose deputy head is the younger daughter of Soloviev, was the customer. Yulia Bashkova is also a member of boards of directors in a number of road construction enterprises of the republic: Mozhginskoe Road Enterprise, Izhevskoe Road Enterprise, Uvinskoe Road Enterprise, Glazovsky Dormoststroy, and Sarapulskoe Road Enterprise. In the period of 2004–2010, Yulia Bashkova was the director of Avtodormostproekt and apparently, she hasn’t forgotten about her ‘home enterprise’ – that was not so prosperous prior to the appointment of Soloviev the Head of the Republic. Currently Bashkova is a member of the board of directors in this company. As of 2015, the total assets of the enterprise controlled by the younger daughter of Soloviev exceeded 1.8 billion rubles ($31.6 million).
Yulia Bashkova, Deputy Minister of Construction and Public Road System of the Udmurt Republic
The duties of Bashkova in the Ministry include project design, pricing, and acceptance of completed works. In the last few years, over 2,000 governmental contacts have been signed with her involvement to perform various works related to the construction and repairs of roads and road infrastructure. The total cost of these contracts is 22.8 billion rubles ($400.9 million). More than half of the tenders have been carried out on the sole-source basis; while some 400 contracts have been signed without reducing the maximum starting price. In the last year, only one electronic tender had involved two bidders – but one of those, a major contractor, was excluded for failure to provide information on the work experience. All the tenders had been won by enterprises whose boards of directors included Yulia Bashkova. By a strange coincidence, in the past, all these companies used to be structural subdivisions of Udmurtavtodor State Unitary Enterprise managed by Soloviev for more than 10 years. The pricing of the contracts supervised by Bashkova is also pretty interesting: in most cases, winners of the tenders retain subcontractors to perform the required works at a lower cost.
Yulia Bashkova was appointed to oversee the volume and quality of performed works by Viktor Vakhromeev, the Minister of Construction and Public Road System of the Udmurt Republic and old friend of Soloviev. The Head of Udmurtia had worked in the republican road industry for 24 years and advanced from a mechanic to the Head of Udmurtavtodor State Unitary Enterprise. During all these years, Vakhromeev had been working together with Soloviev as his deputy or subordinate; their relations became informal; their families maintain friendly ties; they totally trust each other. It is not surprising that Soloviev had appointed Vakhromeev the Minister of Construction and Public Road System immediately after taking the office – although many people had expected the 60-year-old ‘honorary road worker’ to retire on a pension.
Similarly with his high-ranked friend, Vakhromeev cares well about people close to him: Valery Zavalin, co-father-in-law of Vakhromeev, owns two companies: Dorstroymash Limited Liability Company and Avtodormoststroy Limited Liability Company.
Aleksander Korepanov has been the Head of Udmurtavtodor, the largest regional road construction enterprise, since May 2015. He has close ties to Bashkova – this allows Udmurtavtodor to win 150–200 tenders per year; not a single company in the republic gets so much money from the budget. In 2016, the total revenue of the enterprise was 4.5 billion rubles ($79.2 million). The Ministry of Transport and Road Construction of the Udmurt Republic is the founder of Udmurtavtodor State Unitary Enterprise; it is also its main customer. Similarly with Avtodormostproekt, Udmurtavtodor normally acts as the sole bidder at governmental tenders and wins contracts without reduction of the maximum starting price and 100% advance payment. In order to eliminate potential competitors, tenders are combined into a single lot. For example, tenders for the road maintenance in the republic for 2017–2018 have been separated into five large lots; each of these lots included several districts. This enabled the customer to set additional requirements to the bidders, including their capacity and work experience. In addition, high tender security was required. As a result, all the contracts have been won by the enterprise managed by the close friend of Bashkova.
The third major player of the Udmurt road construction industry, Baikonur Limited Liability Company, belongs to Aleksander Murashov, a confidant of Soloviev. Currently he is a Deputy of the Regional State Council, but in the past, when Soloviev was a member of the Council of the Federation, he was the official Aide to the Senator and still maintains close friendly relations with the former boss. Baikonur Limited Liability Company is the parent organization of Avtodormostproekt. After the appointment of Soloviev the Head of the Republic, this asset became so lucrative that it was decided to privatize the joint stock company and transfer it under direct control of clan Soloviev. The company was included into the forecast privatization plan for 2015, and the republican asset with a turnover of millions of budget rubles has become a private property for only 29 million rubles ($509.9 thousand). Aleksander Murashov, the close friend of the Head of Udmurtia and his companion in hunting and fishing trips, has become its owner.
Baikonur Limited Liability Company specializes in sales of industrial chemicals, including road salt, and has, in fact, monopolized this sector. In the period of 2014–2016, it has signed more than 20 governmental contracts to supply Galit mineral concentrate for the total amount of 170 million rubles ($3 million). In addition, Andrei Trubitsin, son-in-law of Murashov, is the Head of the Road Repair and Operation Enterprise Municipal Unitary Enterprise – the largest in Izhevsk road maintenance company.
Aleksander Soloviev, ex-Head of Udmurtia; Denis Agashin, ex-Mayor of Izhevsk; and Aleksander Korepanov, Head of Udmurtavtodor
Taking that the clan of Aleksander Soloviev has seized the full control over the road industry in Udmurtia, it can’t be ruled out that the law enforcement structures indict not only the former Head of the Republic but also raze his entire ‘family nest’. On April 4, 2017, immediately after the arrest of Soloviev, a search has been performed in the office of Korepanov. The close friend of Bashkova has already been questioned as a witness in the framework of the criminal case against ‘Soloviev small’. The Udmurtavtodor offices had been searched last fall in relation to the same case.
Most probably, the case against the ex-Head of Udmurtia would be merged with the case against ‘Soloviev small’ and several other cases instituted earlier, while the offences committed by the defendants would be reclassified under more grievous Article 210 of the Criminal Code of the Russian Federation (creation of a criminal community (criminal organization) and participation therein).
Interestingly, one of the last public appearances of Soloviev as the Head of the Udmurt Republic was his speech at a session of the Commission for Coordination of Anti-Corruption Activities. Soloviev has commented the anti-corruption rallies held in many Russian cities, including Izhevsk. He admitted that the problem exists: “There are plenty of examples when top-rank federal officials, governors have been prosecuted”. He also promised to “oppose the corruption to the fullest extent of the law, regardless of the personalities”.
The sources believe that since fall 2016, Soloviev could be detained any moment – there were plenty of evidences against him. Therefore, the timing for his arrest was so important: a wave of anti-corruption rallies has swept through the country, and the President decided to demonstrate that only the state has the right to prosecute bribe-takers and can do this effectively.