“Such things distract from holidays.” Federal Antimonopoly Service vs. Governor Boris Dubrovsky and his heir
A conflict between the Federal Antimonopoly Service (FAS) and Governor Boris Dubrovsky is escalating in the Chelyabinsk region. The local FAS branch started wondering why most profitable governmental contracts are awarded to companies belonging to miraculously successful businessman Aleksander Dubrovsky. The federal FAS headquarters instituted a case against the Governor. In response, a large-scale smear company targeting the head of the regional FAS branch and involving the Federal Security Service (FSB) of the Russian Federation and law enforcement structures has been launched in the region. However, there are grounds for believing that the recent events in Chelyabinsk are just yet another episode in the ongoing war between the clans of Igor Sechin and Yuri Chaika. Would Boris Dubrovsky and his son fall victims to that confrontation? Or the business of the Governor’s son is going to continue flourishing on budget funds?
Boris Dubrovsky, Governor of the Chelyabinsk Region, is a zealous anti-corruption crusader. He had repeatedly
urged the people to be vigilant and "notice even indirect signs of corruption, for instance, when somebody lives beyond income". Since recently, Dubrovsky himself is clear of suspicion: this year, the regional head got rid of almost all companies belonging to him even after his election the Governor in 2014. This was a tough decision for Dubrovsky; it was made only after a series of high-profile exposures in the media and a scandal with the Panama Papers – his name was mentioned in the leaked database. Currently, Dubrovsky, once a big businessman, is a
cofounder of only two small companies. But what a coincidence: after the withdrawal of the Governor from commercial activities, the business of his son started growing at an exponential rate. The worthy successor to his successful father is now in charge of three companies and
owns, either completely or partially, 19 more organizations.
All companies of Aleksander Dubrovsky are amazingly successful and win governmental tenders on a regular basis. Take, for instance, Sinai Limited Liability Company specializing in construction and architecture. It was established by Boris Dubrovsky after his election the Governor and transferred to his son in early summer 2018. In total, this family business has won 105 governmental contracts. The majority of its clients are structures affiliated with the regional government, including the Ministry of Construction and Infrastructure of the Chelyabinsk Region, municipal administrations of Chelyabinsk and Magnitogorsk, South Ural Housing and Mortgage Corporation, etc.
In August 2018, the company of Dubrovsky junior has won two tenders to renovate apartment buildings carried out by the regional capital renovation operator. The first contract is worth 300 million rubles ($4.5 million), the second one – 115 million rubles ($1.7 million). A month earlier, in July 2018, the capital renovation fund has awarded to Sinai another large contract (320 million rubles ($4.8 million)) on a sole-source basis. In total, Sinai is going to receive 735 million rubles ($11.1 million) – the lion’s share of budget funds allocated to the organization responsible for the preparation of Chelyabinsk to the summits of Shanghai Cooperation Organization and BRICS in 2020. The second largest contractor of the capital renovation operator is RSU (Renovation and Construction Department) Limited Liability Company – it has won contracts worth 151, 61, and 63.2 million rubles ($2.3 million, $923.5 thousand, and $956.8 thousand). The General Director of this Zlatoust-based enterprise is Maksim Dubrovsky, a Deputy of the Zlatoust Municipal Assembly.
The recent successes of Sinai Limited Liability Company have attracted the attention of the regional FAS branch – because the company belonging to Dubrovsky junior was not eligible to participate in these tenders. “In the regional register, the starting maximum price of a contract at an online tender that the above-mentioned contracting organization may participate in (the indemnification fund), is 25 million rubles ($378.5 thousand); in the consolidated register, it is 50 million rubles ($757 thousand),” – the FAS specialists explain. In other words, Sinai Limited Liability Company could not submit bids for tenders with the starting price over 100 million rubles ($1.5 million). But somehow nobody paid attention to such minor details. Furthermore, the company of Aleksander Dubrovsky has won all the three tenders on a sole-source basis. Protests of the regional FAS branch were ignored.
Other companies of Aleksander Dubrovsky are also champions in spending governmental funds. In August 2018, Chelyabstroykomplekt Limited Liability Company belonging 100% to the Governor's son
won yet another governmental contract. The tender to build an access road to a solid waste landfill from Yuzhnouralsk–Magnitogorsk motorway was carried out by Waste Management Joint Stock Company. The amount of the contract was 135 million rubles ($2 million). Officially, Chelyabstroykomplekt had a competitor – Trest Magnitostroy Closed Joint Stock Company. But this enterprise
belongs to Oleg Laknitsky, a businessman from the inner circle of Dubrovsky senior. It would be logical to assume that its General Director let the patron's son win on a friendly basis.
Boris Dubrovsky and Oleg Laknitsky
It is not surprising therefore that the Governor's son is continuously expanding his business empire. For instance, in October 2017, Aleksander Dubrovsky
established another company in Magnitogorsk – Atolo Elevator Service Company Limited Liability Company – where he owns 70% of shares. In November, the novice enterprise started recruiting staff by posting ads on recruitment portals. Two weeks later, the company became the service operator of the almost entire elevator infrastructure in Akadem Riverside neighborhood of Chelyabinsk. According to Anton Neverov, housing and public utility expert at the All-Russia People's Front, the profitable contract brings Atolo over 2 million rubles ($30.3 thousand) per month. " Normally, elevator works cost pennies – replacing buttons, launching stuck elevators, maintenance, etc. If an elevator requires capital repairs or replacement, such works are covered by the capital renovation fund. In other words, the costs are small, while the fees collected from users are significant," – Neverov
Normally, companies belonging to Dubrovsky get budget funds without public scandals. However, an attempt to carry out one of the tenders quietly has failed. In July, a governmental contract has been awarded to Zhilkomservis Limited Liability Company whose
sole proprietor is Aleksander Dubrovsky. A company specializing in property management has won a tender to repair and replace the elevator equipment in 94 buildings of Chelyabinsk. This time, Zhilkomservis was not the sole bidder – Scherbinsky Elevator Plant Open Joint Stock Company had also participated in the tender. However, after a small price reduction by Zhilkomservis – from 219 to 218 million rubles (from $3.32 to 3.3 million) – the competitor somehow decided to give up without a struggle. Four more companies were not allowed to participate in the tender. Two of those, Russko Lift Limited Liability Company and SKM Limited Liability Company, have filed complaints with the antimonopoly service.
The regional FAS branch has established that the competitors’ bids were rejected illegally and under false pretenses. “The bids were unlawfully rejected – allegedly, due to the absence of information on these economic entities in the registry of qualified contractors. However, the above companies were included into the register of organizations eligible to participate in such acquisitions. The respective information is available on the web site of the Regional Ministry of Construction and Infrastructure; it has been submitted to the Administration for the Chelyabinsk Region of the FAS,” – a source in the local law enforcement authorities told journalists. The regional operator was ordered to annul the tender result and examine two more bids.
However, the customer ignored the requirement of the regional FAS branch and awarded the contract to the company of Aleksander Dubrovsky.
The antimonopoly agency has addressed law enforcement structures for help. Yuri Ponomarev, Deputy Prosecutor General supervising the Ural Federal District, has instructed Regional Prosecutor Vitaly Lopin to carry out a probe jointly with law enforcement and control authorities. However, the watchdog authority failed to identify any conflict of interest or other breaches of the law.
Vitaly Lopin, Prosecutor of the Chelyabinsk Region
In early August, the Administration for the Chelyabinsk Region of the FAS has instituted an administrative case against the regional capital renovation operator and Zhilkomservis Limited Liability Company for bidding conspiracy. The regional operator has been ordered to redeem the violations and annul the signed contract. Administrative cases have been instituted against all members of the tender commission under part 6 of Article 7.32.4 of the Code of Administrative Offences of The Russian Federation (breaching the prequalification procedure, established by the law of the Russian Federation for competitive tendering, mandatory under the law of the Russian Federation, selling state or municipal property).
Then the regional antimonopoly agency decided to clamp down not only on the son of Dubrovsky – but on the Governor as well. This required assistance of the federal watchdog authority. On August 30, the Administration for the Chelyabinsk Region of the FAS has instituted an administrative case for bidding conspiracy in relation to the motorway repairs in the Chelyabinsk region.
The case has been instituted not only against the Governor of the Chelyabinsk Region, but also against the Ministry of Road Infrastructure and Transport of the Chelyabinsk Region and Yuzhuralmost Limited Liability Company. Violations of the antimonopoly legislation were identified in 29 tenders worth in total over 8 billion rubles ($121.1 million). Yuzhuralmost won all the above tenders. The antimonopoly authority has established that in order to secure the victory of the ‘right' company, the lots were artificially amalgamated, while bids submitted by competitors rejected under false pretenses. As a result, the maximum contract price was reduced by no more than 1.5%. The orders to revise the tender results issued by the regional FAS branch were blatantly ignored. "After receiving evidence that an anti-competitive agreement had been made in order to monopolize the above market, the FAS has instituted an administrative case for breaches of the antimonopoly legislation," – Andrei Tenishev, Head of the FAS Anti-Cartel Department,
has emphasized that the watchdog authority possesses evidence of the Chelyabinsk Governor's involvement in the anti-competitive agreement.
Andrei Tenishev, Head of the Department for Combating Cartels of the FAS
The Governor has been charged under part 7 of Article 14.32 of the Code of Administrative Offences of The Russian Federation (conclusion of an agreement on limitation of competition, the commission of coordinated actions that limit competition and the coordination of economic activities). The minimal penalty for governmental officials stipulated in this article is a fine in the amount of 20 to 50 thousand rubles ($303–757); the maximum punishment is disqualification for a term of up to three years. In other words, the court may prohibit Boris Dubrovsky from holding the Governor’s post.
After the institution of this case, Governor’s Press Secretary Dmitry Fedechkin told journalists that the regional government considers the claims brought by the FAS ungrounded and intends to defend its stance. Then Boris Dubrovsky has personally commented on the situation. He abstained from accusing the antimonopoly service of twisting the facts: “We have an opinion, and they have an opinion”. However, the Governor hadn’t tried to conceal his displeasure: “On the other hand, prior to making this story public, it would be reasonable to discuss it in detail first. We all have been suffering from that recently. I don’t think that this is right. Because such things distract from work and holidays as I can see”. The Governor made this statement on September 1 and added that it would take them three years to gain insight into his case.
VIDEO: Dubrovsky comments the administrative case initiated by the FAS
A counterblow to the antimonopoly agency has been delivered pretty soon. A criminal complaint against Anna Kozlova, Head of the Administration for the Chelyabinsk Region of the FAS, was filed with the FSB. She was accused of lobbying interests of certain road construction companies, including Uralmostostroy. The watchdog authority was also blamed for making decisions in the interests of the ‘Armenian diaspora' and destabilizing the situation in the region. However, the attempt to involve secret services in this confrontation was a bad idea. "The law enforcement authorities have promptly notified the FAS about the plan developed to discredit the Head of the Administration for the Chelyabinsk Region of the FAS for her principal stance against the monopolization of the road construction and repairs sphere. The above plan included submission of complaints to law enforcement structures and allegations of having ties with ‘Caucasian mafia’ and abuses of official powers,” – the federal watchdog agency stated on September 8.
Anna Kozlova, Head of the Administration for the Chelyabinsk Region of the FAS
However, there are grounds for believing that the recent events in Chelyabinsk are just yet another episode in an ongoing large-scale war. The question is: why had Boris Dubrovsky lobbied the interests of Yuzhuralmost? According to one of the versions, this company belongs to structures controlled by businessman Artem Chaika, son of the Prosecutor General of the Russian Federation. It was repeatedly reported that Chaika junior is a beneficiary of Yuzhuralavtoban Joint Stock Company owning a portion of Yuzhuralmost Joint Stock Company. Many experts believe that this is the true reason behind the crackdown of the FAS Russia on Dubrovsky. Igor Artemiev, Head of the FAS Russia, is believed to be a henchman of Igor Sechin, Head of Rosneft, who has a longstanding conflict with Yuri Chaika.
In that context, it becomes clear why Governor Dubrovsky had swallowed the attacks of the antimonopoly agency against companies belonging to his son but started fighting back after the encroachment on the interests of more high-ranked figures. The regional head may reasonably expect to gain their support and patronage – for instance, the Arbitration Court of Moscow has already recognized illegal the FAS order obliging the Ministry of Road Infrastructure and Transport of the Chelyabinsk Region to split a road tender worth 15 billion rubles ($227.1 million) into several smaller ones. Surprisingly for the antimonopoly officials who had won plenty of such cases in the past, the case involving Yuzhuralmost has fallen under an exception from the rules. Therefore, the attempts of the FAS to distract “from holidays” the Governor and his son have likely failed.