Leaking ‘cover’. Inquest against co-owners of Summa Group affects high-ranked enforcement functionaries
The investigation believes that the criminal community supposedly created by the co-owners of Summa Group – dubbed ‘kings of governmental acquisitions’ not that long ago – could not exist and operate so close to the circles of power without ‘patronage’ of high-ranked law enforcement functionaries. The CrimeRussia has identified the ‘circle of friends’ of ex-Senator Magomed Magomedov, who had used law enforcement structures to ‘cover-up’ financial schemes pulled off by his brother.
According to The CrimeRussia source close to the law enforcement authorities, new suspects are expected to appear soon in the criminal case instituted against brothers Ziyavudin and Magomed Magomedov, owners of Summa Group, for creation of a criminal community, swindling, and embezzlement of budget funds.
Their procedural status is unknown yet – the investigation is now reviewing past and current ‘friendly ties’ of Magomed Magomedov, ex-Member of the Council of the Federation from the Smolensk Region, with a number of high-ranked enforcement officers.
The high-profile case against brothers Magomedov has marked a new ‘oligarch jailing season’ in spring 2018. The vast geography of episodes incriminated to Summa Group (the investigative actions are carried out in 25 regions and affect 209 legal entities) made the experts look for political motives and similarities to the case against Khodorkovsky. Aleksandr Shokhin, President of the Russian Union of Industrialists and Entrepreneurs (RSPP), has noted the indistinct boundary between the legal definition of a criminal community stipulated in part 1 of Article 210 of the Criminal Code of the Russian Federation and business development. According to Shokhin, this makes possible to consider any commercial organization an organized criminal community and charge its leaders, aside from economic violations, with extremely grievous crimes.
The law enforcement authorities disagree with this stance. The investigation considers the seven embezzlement and misappropriation episodes incriminated to brothers Magomedov links in a chain – a series of economic crimes resulting in damages exceeding 2.5 billion rubles ($40.7 million) and pulled off by the family tandem of Summa Group co-owners.
Brothers Magomedov have been arrested by the Economic Security Directorate of the Federal Security Service (FSB) of the Russian Federation and the General Administration for Economic Security and Combating the Corruption of the Ministry of Internal Affairs (MIA) of the Russian Federation on March 30, 2018 after an hours-long interrogation of Ziyavudin Magomedov and several employees of his company and searches performed in offices of Summa Group and residences of brothers Magomedov, their relatives, and partners. Artur Maksidov, Head of Intex Open Joint Stock Company, has also been arrested together with brothers Magomedov. On the next day, the court refused to release Ziyavudin Magomedov on bail of 2.5 billion rubles ($40.7 million) and remanded the suspects in custody. On May 11, the MIA investigators have charged brothers Magomedov under part 4 of Article 159 (swindling), part 4 of Article 160 (misappropriation or embezzlement), and part 1 of Article 210 (creation of a criminal community (criminal organization) and participation therein) of the Criminal Code of the Russian Federation. In addition, Magomed Magomedov has been charged under part 2 of Article 222 of the Criminal Code of the Russian Federation (illegal acquisition, transfer, sale, storage, transportation, or bearing of firearms).
Summa Group Limited Liability Company has been incorporated in Moscow on May 24, 2007. Up until August 2011, its name was Summa Capital. Summa Group is a diversified holding amalgamating assets in port logistics, engineering, construction, telecommunications, and oil and gas sector. The corporate headquarters are located in Moscow. Companies of the holding operate in almost 40 Russian regions; its total staff exceeds 10 thousand people. Ziyavudin Magomedov, Chairman of the Board of Directors of Summa Group, controls the holding. Performance indicators of Summa Group were not disclosed in the last two years. However, according to SPARK-Interfax.ru, the total revenue of the holding in 2016 was 202.371 million rubles ($3.3 million), while its loss was 79.03 million rubles ($1.3 million). The list of subsidiary companies includes United Grain Company (50% less one share); Yakut Fuel and Energy Company (YATEC) (over 90% of shares); NCSP Group (25% of shares) amalgamating Novorossiysk Commercial Sea Port, a large portfolio of shares in Novorossiysk Bread Bakery Complex, and Novorossiysk Grain Terminal; FESCO group (32.5% of shares); Suiproekt; National Telecom federal communication service provider; Stroynovatsiya and Transengineering engineering and construction companies; and Shtandart TT B.V., a terminal operator in the Port of Rotterdam (100% of shares). In addition to pragmatic projects, Ziyavudin Magomedov is actively investing in perspective Western startups. In 2017, Forbes has rated him the 63rd richest person in Russia with a wealth of $1.4 billion.
The episodes incriminated to brothers Magomedov go back to the period of 2010–2013. Three episodes, out of the seven, pertain to embezzlements from Federal Grid Company (FGC) committed in 77 regions of Russia. According to the investigation, Globalelektroservis company, a subsidiary of Summa Group, had supplied equipment to FGC for several years and misappropriated some 650 million rubles ($10.9 million).
Two other episodes resulting in damages of 1.15 billion rubles ($18.7 million) pertain to the construction of Arena Baltika Stadium for the 2018 FIFA World Cup and Khrabrovo Airport in the Kaliningrad region. The investigation believes that structures controlled by brothers Magomedov have falsified documents reflecting the volume of the performed works, thus, enriching participants of the criminal scheme by more than 1 billion rubles ($16.3 million). The sixth episode involves another subsidiary of Summa Group – Intex construction company that was awarded a governmental contract worth 2.3 billion rubles ($37.5 million) to prepare a construction site 16 ha in size near the stadium on Krestovsky Island in St. Petersburg. The contractor added too little sand and installed not all the required poles, thus, ‘saving’ 668 million rubles ($10.9 million). In addition, brothers Magomedov have been charged with siphoning off assets from United Grain Company controlled by the state in the person of the Federal Agency for State Property Management (Rosimushestvo); Summa Group owns 50% less one share in United Grain Company.
Brothers Magomedov deny any guilt. At a session of the Tverskoy District Court of Moscow held to determine his pretrial restrictions, Ziyavudin Magomedov told that he had repeatedly addressed the police and FSB in the past in relation to the embezzlement of assets from United Grain Company identified in the course of an internal audit – but allegedly, the law enforcement authorities have disregarded his submissions.
Magomed Magomedov, ex-Member of the Council of the Federation, claims that he has nothing to do with the brother's business, that he considers it very inefficient, and hadn't communicated with his brother since 2014, except for a single meeting in 2016. According to Magomed Magomedov, their only joint asset at the time of arrest was Novorossiysk Commercial Sea Port – and the brothers were going to discuss particulars of its sale in the nearest future.
In fact, the investigation does not accuse Magomed Magomedov of direct involvement in the fraud schemes. The factual allegations under part 1 of Article 210 of the Criminal Code of the Russian Federation (creation of a criminal community (criminal organization) and participation therein) state that Ziyavudin Magomedov was the leader of the criminal community and handled the economic aspects of its operations, while his brother had provided “political and enforcement cover-up for the illegal operations”.
According to a well-informed The CrimeRussia source, Magomedov senior, who had been working in the Council of the Federation for 12 years, has extensive connections in the circles of power and law enforcement structures and he had indeed ensured ‘high patronage’ of operations pulled off by his brother.
The CrimeRussia source claims that a few years ago, the investigators had nearly uncovered, in the framework of an inquest into swindling in Summa Group, the direct involvement of brothers Magomedov into criminal schemes committed through companies under their control. However, the case was hushed-up at that time.
FSB operatives involved into the investigation of the current case against the co-owners of Summa Group are closely reviewing ties between Magomed Magomedov and Artur Zavalunov, Head of the Legal Department of the Prosecutor General’s Office, who used to work in the Civil Service and Personnel Directorate of the Presidential Executive Office for a long time.
Similarly with brothers Magomedov, Zavalunov is a native of Dagestan. Despite his young age (born in 1976) and humble status of a civil servant, in 2014, the Mountain Jewish Community of Russia has named him, together with billionaires God Nisanov, Zarakh Iliev, and Gavril Yushvaev and businessman and philanthropist German Zakhar’yaev, Vice President of the Russian Jewish Congress, one of the Top 5 most influential Mountain Jews. Gorskie.ru portal has published this rating and noted that Zavalunov was included into it as a governmental servant for “extensive connections in the supreme circles of power” and businessman owning a number of companies “specializing in alcohol production and sales”.
According to his biography published on Gorskie.ru, during the service in the Presidential Executive Office, “Zavalunov was responsible for the legal regulation of the state civil service in the Russian Federation and legal regulation of the judicial system, judges’ status, and service in the prosecution and law enforcement authorities”.
It is not surprising therefore that Artur Zavalunov has ties with many functionaries of the Prosecutor General’s Office and law enforcement structures (e.g. his name was mentioned in the Novaya Gazeta’s inquest into the confrontation between the FSB and MIA in the context of the criminal case against lieutenant general Denis Sugrobov, ex-Head of the MIA General Administration for Economic Security and Combating the Corruption), including major general of justice Yuri Alekseev, Head of the MIA Investigation Department in the period of 2012–2014.
It is surprising however how powerful should be the levers pressed to suspend the investigation of several criminal episodes supposedly involving brothers Magomedov.
Gazera.ru wrote in relation to the termination of Yuri Alekseev that such ‘miracles’ had occurred in the MIA Investigation Department at that time. On February 18, 2014, Vladimir Putin has removed Alekseev, who used to work in the Prosecutor General’s Office for a long time, from office – and no official comments were provided by the Ministry of Internal Affairs.
According to the Gazera.ru source in the MIA, general Alekseev, named a henchman of Dmitry Medvedev by the media (the general has graduated from the Faculty of Law of the same Zhdanov Leningrad State University a year apart from the Prime Minister), was ‘strongly urged’ to leave his post. This occurred after a scandal in the MIA Investigation Department where an entire system designed to release suspects from criminal liability was uncovered. Reportedly, “there were identified plenty of cases supposedly transferred to courts but, in fact, not received by those, as well as cases with altered names of suspects or other details – as a result, these people had remained on the loose”.
After the exposure of this criminal scheme, a large-scale review of criminal cases has been launched in the MIA Investigation Department, including reconciliation of case files with courts.
This information was never confirmed officially – but after the dismissal of Alekseev, business operations of Summa Group, so closely linked with the governmental structures, started declining.
According to Forbes, after the return of Vladimir Putin to the President’s chair, politicians from the team of Dmitry Medvedev, including Arkady Dvorkovich, who used to study in the Moscow State University together with brothers Magomedov, began fading. Apparently, the scandal involving Akhmed Bilalov, Vice President of the Olympic Committee and cousin of brothers Magomedov, who was charged with abuse of official powers and fled the country, has factored as well. Since 2016, Summa Group has disappeared from the “Kings of Governmental Acquisitions” Forbes list.
A year later, a number of companies subsidiary to the holding of brothers Magomedov started experiencing serious problems – from a very negative assessment of the Khrabrovo Airport construction progress by Vice Premier Igor Shubalov to a corporate conflict between Novorossiysk Commercial Sea Port and Transneft.
In spring 2018, criminal charges have been added to existing problems of Summa Group – and the Moscow Arbitration court became overwhelmed with bankruptcy claims filed against various structures of the holding. In fact, banks started questioning the financial solvency of Summa Group approximately six months earlier. In fall 2017, VTB Bank has requested additional securities to be pledged for a credit in the amount of $680 million granted to Summa Group and intended for FESCO Transportation Group. As a result, Summa Group had to pledge its 50% less one share in United Grain Company.
According to The CrimeRussia source, the investigation may also have some questions to another former law enforcement functionary – Mikhail Kiiko, General Director of United Grain Company and ex-Head of the Federal Drug Control Service of the Russian Federation, who was in charge of the agency up until its disbandment in 2016.
The number of suspected members of the gang led by brothers Magomedov is about to increase soon.
According to a number of sources, the investigators are going to charge with membership in an organized criminal group several persons involved into the ‘Kaliningrad episode’ of the ‘Summa Group case’ – Hachim Eristov, Head of the Eastern Construction Directorate of Globalelektroservis Open Joint Stock Company; Amir Kukhshov, ex-Minister of Construction of the Kaliningrad Region; and Sergei Tribunsky, Deputy Head of the Capital Construction Department of the Kaliningrad Region. All of them have been earlier remanded in custody on suspicion of swindling.
The strait ferry line workers are accused of violence against law enforcement officers. Their lawyer charges that the video that has been put online is cut in such a manner that is profitable for the Investigative Committee.