Don’t make his Iskanders laugh! Deputy Umakhan Umakhanov ruins military plant working for Strategic Missile Forces 

Don’t make his Iskanders laugh! Deputy Umakhan Umakhanov ruins military plant working for Strategic Missile Forces
Umakhan Umakhanov disrupted the State Defense Procurement and Acquisition Photo: The CrimeRussia

Umakhan Umakhanov, the Deputy of the State Duma, has disrupted the State Defense Procurement and Acquisition of Yars ballistic missiles by ruining Podolsk Electromechanical Plant (PEP). On the other hand, the personal business of Umakhanov thrives both in Russia and Finland.

Nuclear security flaw

The disruption in production of Yars missile complexes and bankruptcy of a key defense plant could become a plot for an espionage fiction. However, this is a sad reality. In January 2017, media have reported the pre-bankruptcy of Podolsk Electromechanical Plant (PEP). The enterprise produces hydraulic components for Yars mobile missile complexes. Although 80% of the works were prepaid, the plant failed to fulfill the governmental order. As a result, Sergei Nikulin, Director of the Moscow Institute of Thermal Technology also involved into the production of Yars complexes, had to ask Rostec Corporation to launch a reserve production in Kovrov. According to Nikulin, this requires at least six months. Taking that Podolsk Electromechanical Plant produces components for all the key elements of the Strategic Missile Forces, including Tor, Buk, Iskander, and Topol-M missile systems, the crisis at the enterprise does, in fact, undermine the national security.

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The plant is on the verge of bankruptcy

What could happen with a defense plant to make it unable to fulfill the governmental order, while Rostec activates reserve production capacities? In fact, the collapse has been caused by a sole Deputy of the State Duma of the Russian Federation – Umakhan Umakhanov. The people's choice representing the Republic of Daghestan and his wife own 68.42% of Podolsk Electromechanical Plant, while Rostec supervising a considerable part of the military industrial complex owns only 20.5% of the enterprise. Umakhanov neither has a military profession nor financial education. Umakhan Umakhanov is a zootechnician who has acquired an agrarian education in 2003. His main asset is wife Naida Magomedova, sister of Ziyavudin Magomedov, owner of Summa (Sum) Group. 

Podolsk Electromechanical Plant has been in distress for a while. The enterprise had to withstand raiding attacks and illegal land deals, but Deputy Umakhanov became the last straw for the troubled factory. The first step of Umakhan Umakhanov was the transfer of PEP assets to a subsidiary company – PEP-Spetsmash. PEP-Spetsmash is the formal contractor retained in the framework of the disrupted State Defense Procurement and Acquisition. In addition, an observation procedure has been introduced at PEP-Spetsmash, while claims of Sberbank against the company exceed 1.38 billion rubles ($24 million).

Despite the billion-ruble indebtedness, the Deputy could save his plant from the collapse. Umakhanov and his wife own Zhukovka***** company; Sberbank has filed a bankruptcy claim against it as well. Zhukovka***** owns a number of commercial structures. Furthermore, Zhukovka***** is the formal owner of the controlling block of shares of Podolsk Electromechanical Plant Joint Stock Company. In addition, it owns Labirint (Labyrinth) Trade Center in the town of Zhukovka of the Moscow region. Real estate experts estimate Labirint at 1–1.3 billion rubles ($17.4–22.6 million). Labirint hardly withstands competition with other trade centers on Rublevskoe highway. However, neither careful thought nor patriotic sentiments can push Umakhanov to part with a troubled asset.

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Labirint Trade Center in Zhukovka

Family affairs

Instead the Deputy has acquired long ago, jointly with Naida Magomedova, Finn Zhukovka Oy company in Finland. Umakhanov had even planned to build a five-star hotel there. The plans have changed when Akhmed Bilalov, another member of clan Magomedov, got access to funds allocated for Olympic facilities and North Caucasus Resorts Project.

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According to the Finnish Database of Legal Entities, Finn Zhukovka Oy belongs to Umakhan Umakhanov and Naida Magomedova

All the numerous real properties of Umakhanov, including a luxury villa in Spain, officially belong to his wife. The close-knit Umakhanov family is also running an agrarian project where he may apply his professional knowledge and zootechnical talents. AgroDagItalia Agricultural and Technological Cluster belongs, via In-Invest Group Management Company, to Naida Magomedova. The same structure controls the creation of Saratovsky Agricultural and Technological Cluster. Investments into AgroDagItalia amount to 14 billion rubles ($243.7 million), while investments into Saratovsky exceed 2 billion rubles ($34.8 million). Both agricultural and technological clusters are created using the budget funding closely supervised by Deputy Umakhanov. 

While Umakhanov was busy with Italy and Spain, the primary structure of the enterprise – Podolsk Electromechanical Plant Joint Stock Company – has become riddled with debt. Back in fall 2016, Podolsk was on the verge of emergency due to mass heat and hot water outages. The outages were caused by the indebtedness of PEP Joint Stock Company to Gazprom in the amount of 17 million rubles ($296 thousand). However, many ‘sins’ were forgiven to the defense enterprise. The situation has changed after the disruption of the State Defense Procurement and Acquisition of Yars missiles. No further budget funding could be expected, and the plant management started moving towards the state border. 

Murman Zakaradze, the ex-General Director of PEP, was the first to flee abroad. The Investigation Committee of the Russian Federation (ICR) has immediately instituted a criminal case against him under part 4 of Article 160 of the Criminal Code of the Russian Federation (Misappropriation or Embezzlement by an organized group on an especially large scale). Zakaradze has been officially charged with embezzlement of more than 30 million rubles ($522.3 thousand), but according to some sources, he has siphoned off over 500 million rubles ($8.7 million) from the enterprise. Then Umakhan Umakhanov has followed the steps of Murman Zakaradze and left the country due to family circumstances. 

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Searches in the residence of Murman Zakaradze

In June, operatives of the General Administration for Economic Security and Combating the Corruption of the Ministry of Internal Affairs (MIA) of the Russian Federation have performed searches in GlobalElektroServis company subordinate to Summa Group. GlobalElektroServis, the general contractor retained for the construction of Baltika Arena, is controlled by Ziyavudin Magomedov. According to the investigation, the company has overrated the construction cost by more than 500 million rubles ($8.7 million), missed the completion deadline by more than a year, and performed the works with substandard quality. 

The 2018 FIFA World Cup is upcoming and clouds are piling up over clan Magomedov. Their relative Umakhan Umakhanov, who was apparently involved into the embezzlements during the stadium construction, decided to wait out the storm in Europe. The extensive connections of the clan allowed to put on hold the investigation against GlobalElektroServis. While PEP is moving towards the bankruptcy administration and subsequent sale, Umakhan Umakhanov, who has ruined the enterprise, still remains a Deputy of the State Duma of the Russian Federation.

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