What construction project put Kuban Vice Governor in trouble? 

What construction project put Kuban Vice Governor in trouble?
Yuri Gritsenko is considered to be the richest governmental official in the Krasnodar krai Photo: The CrimeRussia

Yuri Gritsenko, Vice Governor of the Krasnodar Krai supervising construction affairs in the regional government, is suspected of a major larceny. A number of information agencies reported that the official has become a suspect in a criminal case – but the Vice Governor continues performing his duties as if nothing had happened.

The decision to build a modern perinatal center in Sochi had been made back in 2013; and by now, it was expected to be full of newborns – but this hasn’t happened. Budget funds allocated for the construction have officially got caught up at a bankrupt bank. But the investigation believes that, most probably, the money have ended up in the pockets of Kuban officials.

Criminal case not a reason for dismissal

A criminal case has been initiated against Yuri Gritsenko, Vice Governor of the Krasnodar Krai, under article 286 of the Criminal Code of the Russian Federation (exceeding official powers). On the afternoon of January 30, 2017, some 15 investigators and operatives have arrived in two Gazel minibuses to the regional administration. Around 7 p.m., Yuri Gritsenko has been escorted by three law enforcement officers out of the building and taken to the Regional Directorate of the Federal Security Service (FSB) of the Russian Federation.

The Vice Governor and one of his subordinates had been questioned in the framework of a criminal case related to the exceeding of official powers – this refers to the embezzlement of 200 million rubles allocated for the construction of the perinatal center in Sochi.

The sources in the regional government have noted that the official remains at his workplace and performs his duties as usually. Furthermore, the law enforcement authorities haven’t announced yet any investigative actions preformed in relation to the Vice Governor or charges laid against him. Veniamin Kondratiev, the Governor of the Krasnodar Krai, hasn’t made any staffing decisions in this regard as well.

Gritsenko

Yuri Gritsenko shows Governor Veniamin Kondratiev (in the center) a project under construction

Because of large volumes of construction and high demand on real estate in the resort zone, the construction industry is the key sector of economy in the Krasnodar krai. This market is divided between several major companies closely linked with the regional authorities.

During the rule of Governor Aleksander Tkachev, First Vice Governor Dzhambulat Khatuov – nicknamed ‘Grey Eminence of Kuban’ – had been supervising the construction sphere. In September 2015, Yuri Gritsenko has replaced him; he was instructed to ensure strict control over the development and enforce the moratorium on high-rise construction in resort cities.

Governor Veniamin Kondratiev has noted that his deputy must review master layout plans approved by each municipality, identify existing violations, assess the observance of land use and development regulations, and punish those who fail to comply with the existing standards and rules.

Owner of restaurant and construction businesses

Yuri Gritsenko is believed to be the richest governmental official in the Krasnodar krai. According to his official tax declaration, the Vice Governor has earned almost 17 million rubles in 2015. He owns three cars: Mercedes GL 350, Honda CRV, and an old Zaporozhets-968M. His declared assets include a land lot with the area of 746 square meters and a home with the living space of 289 square meters. The spouse of Yuri Gritsenko has earned 5 million rubles in 2015; she owns several land lots, two homes, and an apartment.

It is necessary to note that prior to the transfer to the governmental service, the Vice Governor was a successful businessman. He had started his business career in the food service industry. Gritsenko was the owner of Aisberg (Iceberg) Limited Liability Company and co-owner and director of Bashnya (Tower) Limited Liability Company. Both companies are incorporated in Krasnodar and specialize in public catering. It is known that Gritsenko used to own Bochka (Barrel) Beer Restaurant and Grand Cafe located in the center of the regional capital.

In 2010, Yuri Gritsenko had been elected a Deputy of the Krasnodar Municipal Duma where he worked in the Committee for Finances, Budget, and Taxes and in the Permanent Commission for Rental Tenders and Auctions.

Yuri Gritsenko had successfully combined his work in the Municipal Duma with business activities, and soon managed to acquire shares in some construction businesses. According to sources, he used to own 45% of shares in Prigorod (Suburb) Limited Liability Company incorporated in Dinskaya Cossack village. The company specialized in general construction works. Former high-ranked officials of the Dinsky district of the Krasnodar krai were the partners of the Vice Governor.

In September 2015, Yuri Gritsenko had been re-elected to the Krasnodar Municipal Duma; he became a Vice Speaker supervising the financial and budget policy, law enforcement, and public order; he also was involved into the legal protection of citizens and local authorities. In addition, he became again a member of the Committee for Finances, Budget, and Taxes.

On October 21, 2015, Yuri Gritsenko has been appointed a Vice Governor of the Krasnodar Krai for Construction, Architecture, Civil Defense, and Emergencies. For many representatives of the regional political elite, this appointment was a surprise. The management of the entire construction industry in a resort region is a task of the highest responsibility; in ‘skilled’ hands it can also be very profitable. But the Vice Speaker of the Krasnodar Municipal Duma and successful businessman managed to surpass other officials eager to be appointed to this post.

Transferred funds and bankrupted the bank

Currently the law enforcement authorities are checking the legitimacy of the usage of 200 million rubles allocated for the construction of a perinatal center in Sochi. The funds had been allocated in the framework of the Modernization of Public Health Care in the Krasnodar Krai in 2011–2016 Regional Targeted Program.

Fence instead of the promised perinatal center

Fence instead of the promised perinatal center  

The total cost of the project was over 2 billion rubles. The tender to perform the first phase of the perinatal center construction (a state contract priced over 1.6 billion rubles) has been won by Kuban Construction Company; General Administration for Construction of the Krasnodar Krai State Budgetary Institution was the customer. The commissioning of the first phase of the construction project – initially scheduled to 2014 – has been repeatedly postponed. Furthermore, in the last year, bankruptcy petitions against Kuban Construction Company Limited Liability Company have been filed with the Regional Court of Appeal and 16 enforcement proceedings launched against the company.

According to the investigation, a portion of developer’s (or its subcontractors’) funds had been kept in Kuban Universal Bank Limited Liability Company, whose license was revoked by the Central Bank of the Russian Federation on October 27, 2016. On January 23, 2017, Kuban Universal Bank has been declared bankrupt.

Because the Krasnodar Municipal Administration was the founder of that bank, the investigation has supposed that some officials of the regional government could be aware of the pre-bankruptcy condition of the bank – and used this knowledge to embezzle budget funds. In other words, the money have, in fact, ended up in the pockets of high-ranked public servants – not on accounts in the bankrupt bank.

According to a representative of Kuban Construction Company Limited Liability Company, the funding for the Sochi perinatal center construction project from the regional budget was plagued with issues; up until now, the regional government owes significant amounts of money to the company. To pay one of the installments to the developer, the regional administration had proposed to use funds of Krasnodarkraigosexpertiza State Autonomous Institution of the Krasnodar Krai in the amount of 200 million rubles; this sum has allegedly been transferred to an account in Kuban Universal Bank Limited Liability Company as per instruction from the regional officials.

But the construction company had never received these funds. Instead of the next installment, the bank has provided a loan to Kuban Construction Company against a land lot. Then the financial institution went bankrupt. The investigators believe that this has been done on purpose.

In 2016, Kuban Construction Company was a defendant in 38 arbitration lawsuits; 16 enforcement proceedings have been launched against it. Two bankruptcy petitions against the company have been filed with the Regional Court of Appeal last fall.

Shadow of Olympics

According to CrimeRussia sources, there might be other reasons why Yuri Gritsenko has attracted the attention of law enforcement authorities. The criminal case is based on embezzlements related to Fisht Olympic Stadium. The sports facility that had hosted the opening and closing ceremonies of the 2014 Winter Olympics in Sochi requires a reconstruction to host the 2018 FIFA World Cup. A test play is scheduled to March 27, 2016. According to the local authorities, the reconstruction has officially been completed in November 2016. The total cost of the reconstruction was over 3.8 billion rubles; out of that amount, only 380 rubles have been provided by the regional budget.

Fisht

Reconstruction of Fisht Olympic Stadium

According to the sources, Krasnodar officials have put artificially high prices on cabling and wiring products into the financial documents – while, in fact, low-quality products had been supplied. It can’t be ruled out that Yuri Gritsenko was involved into this scam. In anticipation of the 2018 FIFA World Cup, the reconstruction of the stadium is closely monitored, and it is more important to save face of the ‘sports capital’ rather then build a new maternity hospital.

Non-existent perinatal center

The decision to build a modern perinatal center in Sochi had been made a few years ago. The demographic situation in the resort city is booming, it really needs a new perinatal center because the existing maternity hospital operating under the jurisdiction of the municipal hospital № 9 does not have sufficient capacity for the increasing load. The building of the Sochi maternity hospital located on Dagomysskaya street has been commissioned back in 1974; it does not meet the modern medical requirements.

Construction

Construction of the perinatal center in Sochi  

The six-storey medical complex with the total space of 26.9 thousand square meters had to be erected at Plastunskaya street (the territory of a former infectious diseases hospital). According to the approved project, the perinatal hospital should be able to accommodate 130 patients at once. In addition, up to 150 female patients should be able to attend medical appointments every day.

Two new transformer stations and a boiler station should ensure the continuos operation of the building. In addition, a park zone was supposed to be established for the patients, including trees, lawns, and benches.

However, due to delays with payments from the regional budget – and because these payments had been made via a commercial bank that ultimately went bankrupt – the completion date for the Sochi perinatal center has been repeatedly postponed. Now officials in the regional administration promise that the center would open its doors for expecting mothers by the end of 2017.

It is hard to believe that Veniamin Kondratiev, the Governor of the Krasnodar Krai, was unaware of machinations with budget funds committed by officials of the regional government. The head of the region hasn’t fired Yuri Gritsenko yet – despite his troubles with law enforcement authorities. It is quite possible that not only the Vice Governor for Construction had been exceeding his official powers...

The booming real estate market in the Krasnodar Krai is a great opportunity to make really big money. The value of lands and buildings located in the resort zone is continuously growing. The construction industry is dynamically developing. Any governmental official supervising this sphere has plenty of possibilities to enrich himself. But it is really sad that the money have, in fact, been stolen from Sochi newborns.

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