Second wind in Garyugin’s case
In July 2016 the Arbitration Court of St. Petersburg and Leningrad Region took a landmark decision in this story. The Court rejected the statement of claim of the Saint Petersburg Metro State Unitary Enterprise, confirming the legitimacy of the Chamber of Control and Accounts’ claims for compensation for damage in the amount of 466 million rubles caused to the budget of St. Petersburg.
The Arbitration Court stand-off between the Saint Petersburg Metro State Unitary Enterprise and the representatives of the Chamber of Control and Accounts, which lasted for two years, ended with the victory of the latter. This means that the claim for reparation of damage to St. Petersburg in the amount of 466 million rubles is about to break the ice in the suspended criminal case, in which the Head of the Saint Petersburg Metro Vladimir Garyugin has been the leading figure since 2015.
Absence of previous convictions
Claims on the part of the law enforcement officials against the first person of the Saint Petersburg Metro emerged in January 2015. They were based on the inspection conducted by the Chamber of Control and Accounts in 2014. According to the investigation, the Head of the Saint Petersburg Metro State Unitary Enterprise Vladimir Garyugin had used his authority when concluding the investment agreement with SovetniK company (Petromir Holding) on the construction of a commercial facility, namely, the ground lobby complex at Admiralteyskaya metro station. As reported by the investigative agency in its official press release on the website, it was “contrary to the legitimate interests of the organization and with a view to reap the benefits and advantages for other persons.” As a result, according to the Investigative Committee of the Prosecutor’s Office, the budget of St. Petersburg suffered a damage amounting to at least 466 million rubles; in addition, “a substantial damage was caused to the legally protected interests of the State.”
As a result, a criminal case was instituted against Garyugin under Part 2 of Art. 201 of the Criminal Code of the Russian Federation (Abuse of Authority). It was followed by searches in the Saint Petersburg Metro offices, the investor’s offices, as well as in the apartment of Vladimir Garyugin and several other officials. Investigative actions were widely covered by the Head of the Media Relations Management of the Russian Investigative Committee, the Major-General of Justice Vladimir Markin.
The senior official reported to the public that the defendant was dispossessed of 31 million rubles, three certificates amounting to 2.4 million rubles, and some large amounts of foreign currency during the searches. The Investigative Committee official did not specify the exact amount, however. In addition, the investigators seized three land plots in the Leningrad Region, a residential house, and Toyota Land Cruiser belonging to the family of Vladimir Garyugin.
Today, the Saint Petersburg Metro comprises of sixty-seven stations and five metro lines with a length of 113.6 km. Seventy-four station lobbies are daily visited by 2.3 million passengers. Twelve metro stations are adjacent to the railway junctions and stations. 14,500 employees service the underground line around the clock.
This story was set in motion by the inspection carried out by the Chamber of Control and Accounts in 2014. According to the agency, in adopting the scheme aimed at attracting private investment for the construction of ground lobbies at the new stations (Mezhdunarodnaya, Bukharestskaya, Zvenigorodskaya, and Admiralteyskaya) in 2011-2013, the Saint Petersburg Metro State Unitary Enterprise allowed investors to receive plots above the stations at a low price and under favorable conditions for their privatization. As a result, the city budget short-received 9.23 billion rubles. It is worth mentioning that the revision conducted by the Chamber of Control and Accounts was, so to say, selective.
According to the terms of cooperation between the Saint Petersburg Metro State Unitary Enterprise and the investors, the latter had to pay certain amounts to the budget for the right to construct shopping centers above the station lobbies. It appeared, however, that the numbers were far from the ones the city had to receive. For example, there was allotted 2.6 million rubles for Bukharestskaya station, 7.7 million rubles for Mezhdunarodnaya, and 70 million rubles for Admiralteyskaya metro station. Auditors decided to check the construction scheme.
As reported by RBK-Peterburg, according to the auditors, the city had suffered damage on these investment contracts. The Saint Petersburg Metro State Unitary Enterprise actively denied the existence of any financial fraud, while the Head of the State Unitary Enterprise Vladimir Garyugin told the press that “no 9 billion ruble plundering or damage to the budget has taken place.”
The findings of the Chamber of Control and Accounts was of great concern to the law enforcement agencies; particularly, they took a keen interest in the details of investor agreements concluded during the construction of the last station, Admiralteyskaya. However, after deciding to defend its positions, the Saint Petersburg Metro State Unitary Enterprise filed a lawsuit against the Chamber of Control and Accounts to the Arbitration Court in 2014, challenging the audit results and, most importantly, the damage in the amount of 466 million rubles caused to the city during the Admiralteyskaya station construction.
The basics of the Saint Petersburg Metro business projects are simple. Investor helps to build the lobby, assuming some of the costs, and in return, receives a possibility of constructing commercial retail space above the stations. Investors’ interest in the construction of stations was understandable. Multifunctional shopping centers under the same roof with the metro are a financial cornucopia. Funds invested in such projects pay off very quickly, and the income is fairly impressive. It would seem that the city budget gets a direct benefit and profit from the cooperation between the shopping and entertainment complex and the metro. Vladimir Garyugin is not the first to come up with the partnership of business and city administration. The idea was originated by Vladimir Yakovlev, while Valentina Matvienko was the one to implement it.
The concept of investor cooperation program first emerged in 2002, when the then-Mayor Vladimir Yakovlev signed a decree “On the metro station ground lobby reconstruction.” This decree was a “ticket to ride” for attracting business companies to the metro stations reconstruction. In 2004, the investors were enabled to reconstruct the lobbies and use the state budget in the construction of inclined tunnels. In 2008, Valentina Matvienko signed an order outlining the tender procedures for the selection of investors. After that, the participation of businessmen in the construction was extended; it was made possible to attract investment not only for the reconstruction, but also for the construction of lobbies.
Thus, while executing the orders of the city authorities, Vladimir Garyugin signed a contract with one of the Petromir shareholding structures, SovetniK company, in 2012. Under the contract, the investor assumed all costs for the lobby construction. The only exception was the work carried out by Metrostroy. It turned out that the foundation under the Admiralteyskaya station lobby was in use by two economic entities, with only one of them paying for it. And it was not the investor. The Chamber of Control and Accounts, followed by law enforcement authorities, believed it was Vladimir Garyugin who personally exempted the investor of paying for the foundation construction.
As the media later wrote, after the Chamber of Control and Accounts announced the audit results, SovetniK transferred 271 million rubles to the budget, that is, its share in the foundation construction cost.
SovetniK company is part of the Petromir Holding, the president of which is the prominent businessman Mikhail Mirilashvili. Together with his brother Konstantin, Mikhail manages a large St. Petersburg gambling holding known as Konti Group (the casinos Konti, Palas, Astoriya, Indiana, Nevada, the Gigant-Hall concert hall, Olimpiya cabaret, Astoriya cabare theatre, Kolkhida restaurant, and the Jewish restaurant 7.40). In the mid-2000s, the Mirilashvili brothers jointly owned more than 20 companies.
However, the criminal case has stalled pretty much at its beginning. The criminal prosecution under Art. 201 of the Criminal Code of the Russian Federation means that an official caused damage to another person due to the abuse of authority. Moreover, there must be the injured party, who suffered the damage. However, the city administration was stubbornly refusing to avow itself the injured party. According to Fontanka.ru, in early 2015 the Finance Committee of St. Petersburg Administration, who was involved in the case as a third party, presented two different, even polar positions before the Arbitration Court. In late January, the agency recognized that the budget did suffer the damage. However, after a few days the Arbitration Court received a new statement, in which the Chamber did not accept the damage. The same merry-go-round affected the Traffic Committee twice.
Horizons for investigation
There was some serious court battle during the arbitration proceedings. The representatives of the Saint Petersburg Metro State Unitary Enterprise went in depth about the construction and other nuances associated with the Saint Petersburg metro before the judge. In such circumstances, the decision rendered by the Arbitration Court in March 2015 was understandable. The court dismissed the lawsuit filed by the Saint Petersburg Metro. In its decision, the court explained that the plea under appeal of the Chamber of Control and Accounts did not possess the attributes of a non-normative legal act, as it did not contain any authority and administration orders involving legal consequences for the applicant. Therefore, this case was not subject to arbitration. The Chamber of Control and Accounts did not agree with the reasoning provided by the Arbitration Court, and the case was sent back to the trial court. July 1 2015 the North-Western District Arbitration Court cancelled the termination of proceedings in this case and decided to consider it on the merits.
July 2016 the Arbitration Court of St. Petersburg and Leningrad Region took a landmark decision in this story. The Court rejected the statement of claim of the Saint Petersburg Metro State Unitary Enterprise, confirming the legitimacy of the Chamber of Control and Accounts’ claims for compensation for damage in the amount of 466 million rubles caused to the budget of St. Petersburg.
Such turn in the case means only one thing: the Investigative Committee have all grounds to prosecute Vladimir Garyugin, since Art. 90 of the Russian Federation Code of Criminal Procedure provides that the facts established by the Arbitration Court shall be accepted without further verification by law enforcement agencies. That is, the defense will not be able to challenge the investigation’s findings with regard to the damages in criminal proceedings. It is a master card, which the Investigative Committee waited for nearly a half year.
The Saint Petersburg Metro, however, is not going to give up its positions and is already preparing to challenge the July decision in the 13th Arbitration Court of St. Petersburg. Although there is some evidence to suggest that the investigation is not much frightened by the upcoming appeal. Insiders say the investigators have received entirely different evidence of Vladimir Garyugin’s abuse of authority. It is for good reason that the Head of the St. Petersburg and Leningrad Region Department of MIA Sergey Umnov informed the deputies of the Legislative Assembly that there is no reason to believe “the case will sink into oblivion”.
This statement is implicitly confirmed by other law enforcement agencies, which also have some issues with the Saint Petersburg Metro and its staff. For example, in March 2016, the offices of Metrostroy company were searched by the Russian Federal Security Service in St. Petersburg and Leningrad Region. The visit was associated with the pre-investigation checks. The security forces seized the documents to figure out the details of the agreements concluded with Metrostroy in 2014 for the preparation for construction of the two St. Petersburg Metro lines extension, i.e. Krasnoselsko-Kalininskaya and Nevsko-Vasileostrovskaya. In June 2016, the Federal Security Service once again raided the Saint Petersburg Metro State Unitary Enterprise, as well as the apartments of the company employees, as part of the corruption case investigation.
The law enforcement agencies’ actions indicate only one thing: the activities of the Metro management and its employees will be studied with great care and no one will escape the punishment.
Rosfinmonitoring (Federal Financial Monitoring Service) analyzed the data of the Panama Papers and the Paradise Papers and discovered thousands of offshore companies through which the Russians laundered billions of rubles. Materials on deputies and governors were handed over to law enforcers.
A spokesperson of the Prosecutor's office said that the ECHR had not studied all the materials of the criminal case, so they were offered not to overturn the verdict, but to send the case for a new review in court.