Secret Services’ Warfare for Shadow Economy 

Secret Services’ Warfare for Shadow Economy

The scale of security services’ confrontation is truly astounding. One of the most intense battles was for the control over the cash-out market. Until recently, Russia’s Master-bank served as a flagship for this area, issuing about 1 billion rubles [approx. $13.100 million] a day.

Every war is a tragedy, regardless of its cause. The modern Russian history knows many different conflicts including external conflicts and internal criminal showdowns. One of the most enigmatic confrontations unfolded between the security services. In reality it has little in common with a noble war against crime and looks more like petty bickering among neighbors. A striking example of such a titanic battle for leadership is a confrontation between the Russian Federal Security Service (FSB) and General Administration for Economic Security and Combatting the Corruption (GAESCC). Like any war, it has its winners and losers, soldiers and generals, even heroes, probably. However, casualties were also imminent.

The war started when GAESCC emerged as a new administration in the central office of the Russian Interior Ministry. The tasks assigned to the new department, overlapped with those of the FSB, since both dealt with economic and corruption crimes. Yet the newcomers appeared to be quite successful in their line of work. In a short period of time they managed to track down and prosecute a lot of bribetakers among high-ranking officials and politicians, for instance: the head of the Chamber of Accounts Department Alexander Mikhailik (his wife hung herself once she found out that her husband had been arrested), senator Alexander Korovnikov, Smolensk city manager Konstantin Lazarev – the list goes on. Additionally, GAESCC has attempted to take control of the cash-out market, which was previously under the watchful eye of the FSB. The subsidies and VAT (value added tax) also started to slowly drift away from the secret service. Senior FSB officers Oleg Feoktistov and Ivan Tkachev tried to take control of the GAESCC activities, but their offer was kindly rejected by the head of the department Denis Sugrobov. After that, FSB decided to strike back decisively and without delay.

Денис Сугробов

Photo: Denis Sugrobov 

On February 17, 2014, FSB detained a group of senior police investigators of Directorate ‘B’ (an elite unit, authorized to conduct corruption cases against even high-ranking officials) and GAESCC officers on suspicion of malfeasance. Among the arrested were GASESCC Deputy Chief Major General Boris Kolesnikov, head of the Directorate "B" Salavat Mullayarov, his deputies Ivan Kasaurov and Alexey Bodnar, and case officers Sergey Borisov and Mikhail Nazarov. They were all suspected of provoking a bribe (art. 304 of the Criminal Code of the Russian Federation), abuse of office (art. 286 para. 3 of the Criminal Code of the Russian Federation) and the organization of a criminal association or participation therein (art. 210 para. 3 of the Criminal Code of the Russian Federation). In an instant, exemplary state servicemen have turned into bandits with the whole department labelled as an organized criminal group. Investigators claimed that GAESCC provoked officials to bribe for the sake of performance improvement. Following the events, the head of the department Denis Sugrobov submitted a letter of resignation to the Russian President Vladimir Putin.

"It is no secret that the provocation of a bribe (by the way, a totally illegal action) has lately become the main method of work for GAESCC," – claimed the managing partner of the law firm "Musayev and partners" Murad Musayev.

"The head of GAESCC cannot allow his department to employ provocations as its tool, particularly on a systematic basis," - a notable Russian politician Alexander Khinstein said.

"Some people have a theory that his [Sugrobov’s] dismissal is a form of retaliation, that he crossed somebody’s path. It’s possible, but the probability is extremely small," - a Communist Party representative Yuri Sinelshchikov explained.

Lots of similar statements were published in the media. The former fighters against corruption found little sympathy from legislators and lawyers. They caused too much trouble for a large number of officials. At the same time, the former suspects in the GAESCC cases have eagerly posed as victims of police lawlessness. They seemed happy to provide evidence against the former prosecutors, thereby avoiding punishment. One of such "victims" was Vladimir Raizvikh. Once a criminal case against the GAESCC officers had been open, Raizvikh was officially recognized as a victim, despite multiple previous accusations of bribing and kickbacking. Ironically, at present he is once again suspected of corruption. Recently Raizvikh and his wife were detained by the German law enforcement. We may now hope that the bribetaker will receive his due, for the German police will not buy his fabricated accusations so easily.

Владимир Райзвих

Photo: Vladimir Raizvikh

"Based on the evidence obtained by Sugrobov and his accomplices in fraudulent investigative operations, a total of 29 people were illegally brought to criminal liability for bribery, influence peddling and fraud," - said the statement by the Prosecutor General's Office.

As in any war, soon the first victims followed. First was a former deputy chief of GAESCC Boris Kolesnikov.

Борис Колесников

Photo: Boris Kolesnikov

On June 16, 2014, he committed suicide by jumping from the sixth floor of a building of the Russian Investigative Committee. The investigation concluded that this decision was caused by a number of reasons, including the head injury that the major-general received in custody. However, there is also a version that during the interrogation, the investigator Sergey Novikov threatened to charge Kolesnikov’s wife with distribution of narcotic drugs (she allegedly passed the said drugs to her incarcerated husband in sneakers). Unless Kolesnikov cooperates with the investigation and testifies against his former colleagues.

Naturally, the claim to institute criminal proceedings on bringing to suicide (art. 110 of the Criminal Code of the Russian Federation) and negligence (art. 293 of the Criminal Code of the Russian Federation) was denied. Boris Kolesnikov had a wife and three young children.

Мастер-банк

Photo: Master-bank

The scale of this confrontation between the security services is truly astounding. One of the most intense battles was for the control over the cash-out market. Until recently, Russia’s Master-bank served as a flagship for this area, issuing about 1 billion rubles [approx. $13.100 million] a day. As Forbes reported, in the course of last year the bank had cashed out a total of 200 billion rubles on questionable grounds, violating current legislation more than 100 times. Over 40% of the whole cash-out market belonged to Master-bank.

It was in essence a holding structure that managed a network of smaller partner banks with the accounts of more than 200 companies. Certain employees were entrusted with opening and maintenance of personal accounts used for unidentified money transfers by some short-lived companies. The money could allegedly appear as "salary", "credits", or "proceeds from security sales".

The above mentioned cash-out operations performed via Master-bank were made possible due to its extensive network of 3.500 ATMs (third place in the country). Short-lived companies transferred funds to the accounts of Master-bank customers under the loan agreements. Then, at the end of the day, they cashed-out these funds at ATMs. The GAESCC officers halted this seemingly reliable way of cash-out transfers.

29fcb1f67ab232127ed0a5e68bacb349.jpg

Photo: Serezha-two-percent's case

One of the suspects in the case had a meeting with the FSB staff, during which he was asked to testify against the GAESCC operatives and tell that they had solicited a bribe for the termination of criminal prosecution. It remains unknown, what connections the Master-bank’s administration has with FSB.

One of the other major stumbling blocks between the two organizations was the Magin’s case. This was the largest operation conducted by GAESCC in the summer of 2013. About 400 people had been working through banks and hundreds of fly-by-night companies for about 5 years. During this time, the criminals were able to illegally cash-out some 36 billion rubles, keeping about 575 million for themselves. The investigators claimed that these shadow bankers worked as follows: a client transferred money to a fly-by-night firm, then received this sum in cash minus 2%. Then the bankers offshored their share in the Baltic States and Cyprus. The gang worked only with large sums, with main suppliers being major consumer goods marketplaces in Moscow.

An acquaintance of one of the investigators in charge of the case was contacted by a certain Valery Kruglov, once the commander of the Special Operations Group "Vympel" (FSB), and now head of the Vympel charity fund. The theory goes that he accepted donations from businessmen and granted them "assistance" from security services in return. A great way to legalize the money for the protection racketeering indeed. Kruglov wanted the Magin’s case transferred from the Interior Ministry to the Investigative Committee. He then planned to contact Magin and promise him a lighter sentence in exchange for his testimony against the police, in which he would say that GAESCC had protected him. This situation once again raises the question of the mysterious connection FSB has with the cash-out market. This was another case when the police stumbled upon their colleagues, challenging their right to have a place in the sun.

Kurglov’s name has repeatedly appeared in this case. In his address to the Prosecutor General of the Russian Federation Yuri Chaika and Chairman of the Investigative Committee Alexander Bastrykin, Kolesnikov informed the officials that GAESCC was investigating a group of swindlers who claimed to be senior officials and stole money. The money came from citizens who were in need of certain services, including the purchase of public offices and protection from unwarranted inspections of law enforcement agencies. In essence, this was the protection racketeering services. As a result, GAESCC initiated a proceeding against certain Igor Leonidovich and Valery Aleksandrovich. During one of the interrogations in the middle of March, investigator Sergey Novikov told Kolesnikov, that "an unidentified person named Valery is actually one of the leaders of the public fund that unites former employees of the Russian FSB".

Value Added Tax was another field of confrontation. In February 2013, the Directorate "B" of GAESCC detained a few businessmen on suspicion of fraud with VAT – Yevgeny Ignatyev, Oleg Kabanov, Alexander Kruchinin, and Ilya Budiansky. After that the Investigative Committee wanted to take the case materials from the Interior Ministry. At that time, the committee already had an open case on the theft of 9 billion rubles under the guise of VAT refunds. FSB provided the necessary support, but the process halted after a member of the Board of Directors of open joint-stock company «Mosvtortsvetmet» Andrei Bruevich was shot to death in Moscow. Bruevich was considered one of the main witnesses in the cases supervised by the Interior Ministry. Some reports stated that he had even been placed under state protection of FSB. At the same time, FSB representatives came to the Investigative Department to check the relevant materials. Law enforcement sources said that the counterintelligence officers had been particularly interested in the role GAESCC had played in the VAT case. The Investigative Department, being in confrontation with GAESCC, gladly helped the FSB visitors.

ГУЭБиПК

Nowadays GAESCC is headed by Dmitry Sevastyanov, who began his heroic career in the department for combating organized crime of the Interior Ministry’s Directorate in Central Administrative District. It is at this stage of his career that he was recruited by a then-FSB officer Gavryushkin. And now he continues to cooperate honestly and in good faith with FSB. Most likely it explains why Sevastyanov did not share the fate of his predecessor, though he had been investigating the same cases. FSB could not find common ground with Sugrobov, but gets on well with Sevastyanov.

So while the war of the special services is raging on, high-profile corruption scandals have ceased to shake the media outlets. Ordinary citizens are but one of the many victims, they lost the support of both agencies sworn to protect the country. These agencies are aiming at each other and using their power to solve their own petty problems. The competition for the money from the shady business is not finished yet. The Sugrobov’s case already exceeds 350 volumes. Looks like the war of the special services is not going to stop any time soon.

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