All money for family: Mikhalkov saves his son-in-law’s business at the expense of Russian Culture Fund 

All money for family: Mikhalkov saves his son-in-law’s business at the expense of Russian Culture Fund
Photo: The CrimeRussia

Nikita Mikhalkov keeps finding new ways to restore his family’s financial health using the Russian budget. This time around, the director offers the state to buy his share in the Fund and give Nikita Sergeevich the Zamyatin-Tretiakov Manor House for free.

Our treasury is empting, my lord!

Director Nikita Mikhalkov is eager to support any initiative by the current authority which returns the favor by giving him money. It seems the Mikhalkovs’ financial health staggered a little bit last year. There are several reasons for that. First, there was a scandal surrounding the Russian Authors' Society. Second, Mikhalkov’s son-in-law Albert Bakov struggles with running his business. Bakov owned 49% of Traktornie Zavodi and still owns 19% of the Chelprom-Daymond Diamond Mining Company.

Chelprom-Daymond is undergoing dissolution. Aside from the 19%, Bakov also owns 10% of Nikita Sergeevich’s group of companies. Bakov had a hand in bringing Chelprom-Daymond to where it is now. The company was suspected of illegal diamonds trade worth $1 million in 2013. This happened after the director and his son-in-law became parts of the company. The FSB Chelyabinsk Department opened a criminal case that went nowhere. The company’s debt burden only increased. Still, Traktornie Zavodi’s debt burden was even worse under Bakov. It ran into more than 62 billion rubles of debt to banks while Bakov owned 49% of the company. 46 billion rubles out of the 62 billion was ought to Vnesheconombank. The Traktornie Zavodi top manager did not specify how the credit money was spent. However, the debt was restructured last December. This led to it passing into ownership of Vnesheconombank. Still, Bakov remains the CEO. One would think it is thanks to his father-in-law’s connections to the government.

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Albert Bakov

Media consistently reported on Nikita Mikhalkov in connection with the Society throughout the last year. The Society CEO Sergey Fedotov was arrested on suspicion of swindling on an especially large scale in the summer of 2016. Fedotov passed ownership of the Society’s real estate worth 500 million rubles to the Society’s subsidiary that later sold it to third parties, according to investigators. Nikita Mikhalkov signed a petition in support of Fedotov even before the latter was taken to pre-trial detention facility. At the same time, Mikhalkov emphasized he had no involvement with the Society’s activities.

Everything for culture, everything for the Mikhalkovs

In all fairness, Mikhalkov is not cunning. He often leaves many things unsaid. The director was one of the originators of Russian copyright collective management system even though, legally speaking, he was not involved with the Society. The system consists of 4 organizations: Partnership for Protection and Management of Rights in the Field of Culture (shortened to “UPRAVIS” in Russian), Russian National Intellectual Property Organization (shortened to “VOIS” in Russian), Russian Copyright Holders’ Union (shortened to “RSP” in Russian), and the Society. The last 3 organizations are the key ones. They are all connected to each other and Nikita Mikhalkov in one way or another.

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Nikita Mikhalkov

Let’s begin with RSP. The Russian Union of Cinematographers is one of its incorporators. Mikhalkov has been the Union Head since 1998. The Union has virtually become his foothold since then. It was Mikhalkov who proposed founding RSP to use it as a tool to levy an optical disk tax and the tax itself. The Society and VOIS are among its incorporators, too. Nikita Mikhalkov is the RSP Board President. Artem Mikhalkov is the RSP Chair of the Board. Nikita Mikhalkov long-time partner Andrey Krichevsky is the RSP CEO. Krichevsky is also the VOIS CEO. He was Fedotov’s Deputy in the Society not long ago, too.

It is not passion for art that these people have in common. The Society levied 4.5 billion rubles in fees for use of copyrighted materials in 2015. At the same time, only 3.5 billion rubles went to authors. RSP takes 1% cut of every audio and visual information storage device sold in Russia, from flash drives to hard drives and mobile phones. The market volume is estimates at 300-600 billion rubles. This means RSP makes at least 3 billion rubles annually.

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Andrey Krichevsky

The Society, VOIS, and RSP are absolutely financially non-transparent. Nothing is known about either authors’ royalties calculation procedure or their financial flow. That is why details of procedures for withdrawing of money from the 3 organizations was the first thing Fedotov agreed to disclose to the investigators once under arrest. Impervious Nikita Mikhalkov was not affected in any way. The system works as usual. At the same time, Nikita Sergeevich is an honorable guest at the anniversary of the General Administration for Economic Security and Combatting the Corruption of the Russian MIA. However, it seems he is going to have to refrain from shady activities for a while and look for another sources of income.

Nikita Sergeevich remembered about the Fund since culture is the breadwinner in his family. The Fund is the successor to the USSR Culture Fund. However, while the later was incorporated by numerous USSR artistic unions and belonged to the state, the former got miraculously transformed into a strictly private organization. One would not exactly call their goals “noncommercial”.

Nikita Mikhalkov’s Tri TE Studio, Nikos Faynes Korporeyshn, Rosmyasomoltorg, and even the Institute for Slavic Studies of the Russian Academy of Sciences are among the Fund incorporators. None other than Albert Bakov who had gained experience in cultural affairs thanks to his father-in-law was appointed the CEO. Nikita Sergeevich has been the Fund President since 1993. No one really knows how exactly the Fund contributes to culture. The Fund redeemed and shipped back from abroad more than 130 000 historical and cultural artifacts, according to the Fund. The Fund points out that it uses the federal budget and donations to achieve its goals, since it is a not-for-profit organization. The list of retrieved artifacts is a riddle wrapped up in an enigma.

Do you want to eat? We will serve you right away!

The Fund lost the ability to hold lotteries - one of its main sources of income – 3 years ago, when a law prohibiting nongovernmental lotteries came into effect on July 1, 2014. Mikhalkov quickly recalled his old idea of passing the Zamyatin-Tretiakov Manor House into ownership of the Fund. The Fund’s HQ is located there. It is worth providing some historical background here. The USSR Culture Fund was allowed to use the Manor House and was later ‘inherited’ by the Fund as its successor. It suffered a violent fire when already owned by the Fund. It cost a lot of money and took many years to restore it. Mikhalkov was not pushing for passing the Manor House into ownership of the Fund during this time. The work was completed eventually. That is when he threw all he had at it.

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In 2015, Mikhalkov asked Vladimir Putin to speed up the process. He argued it was in the best interest of culture, since a Senators’ Club was to be set there. It is worth mentioning that Mikhalkov had discussed the Club with Traktornie Zavodi managers several months before his meeting with Putin. The discussion occurred while Albert Bakov was still among Traktornie Zavodi owners. The Club turned out to be an elite restaurant project. The famous family just so happens to have a restauranteur: the director’s son Stepan Mikhalkov owns a Moscow restaurant chain.

At the same time, the Fund being a nongovernmental organization began interfering with Mikhalkov’s plans. He managed to make use of a last year discussion of censorship in Russian culture initiated by Konstantin Raikin. The favor was to be returned very soon. Russian President Vladimir Putin ordered change of the Russian Culture Fund’s form of incorporation to make it a public organization. What it really means is restructuring of the Fund in its current form; the Russian Ministry of Culture is to be included in it. The new Fund status will result in an unprecedented spike of budgetary subsidies to the Fund, as well as re-entitle it to holding lotteries. No other changes to the Fund are to be made, Russian presidential culture adviser Vladimir Tolstoy pointed out. This leaves the Mikhalkovs in charge of the financial flow. Everyone will be busy doing something.

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