Who ‘contracted’ innovative businessman Dmitry Trubitsyn? 

Who ‘contracted’ innovative businessman Dmitry Trubitsyn?
Has somebody ‘contracted’ Dmitry Trubitsyn? Photo: The CrimeRussia

How to ruin a successful business? The story of Novosibirsk-based TION company – that used to be a leader on the medical air cleaners market a year ago – is a model algorithm for those eager to get rid of competitors. A series of consequent steps – and voila: the products are banned, while the business founder is criminally charged and arrested.

In the first decade of June 2017, Dmitry Trubitsyn, founder of Novosibirsk-based TION holding, has been placed under home arrest. A criminal case has been instituted against the 35-year-old businessman under item (a), part 2 of Article 238.1 of the Criminal Code of the Russian Federation (Production and Sale of Unregistered Medical Products on a large scale committed by a group of person by previous concert). In other words, Trubitsyn is accused of producing counterfeit air cleaners for hospitals. The criminal case has been initiated because Aeroservis Limited Liability Company – a member of TION Group and one of the oldest residents of the Technopark of Novosibirsk Akademgorodok – in the last years had been shipping to medical institutions air cleaners inconsistent with the documentation issued by the Federal Service for Surveillance in Healthcare (Roszdravnadzor) in 2011. According to the investigation, since 2015, the medical air cleaners had been sold without a required catalyst. The investigation believes that the owner of Aeroservis had developed such devices himself on the basis of high-quality air cleaners TION-A and TION-B approved for sales in 2011. Three years later, in 2014, the Aeroservis owner decided to boost his profits by making the products cheaper and started producing devices not equipped with the required catalyst. The charges are based on the assumption that the ‘redesigned’ products fail to fulfil their main function – eliminate viruses and bacteria from the air. The investigators believe that for 1.5 year (since January 2015 and until June 2016), the counterfeit air cleaners were shipped to clinics located in more than 100 cities and districts of Russia. The sales revenue for each air cleaner had varied in the range of 45–98 thousand rubles ($757–1648). The investigators also believe that back in 2014, prior to this fraud, Trubitsyn had taken measures to avoid liability for the product counterfeiting and appointed a dummy person the Director of Aeroservis. Although, according to focus.kontur.ru, Trubitsyn had directly managed Aeroservis only until 2013. In the middle of 2013, Pavel Naumov had become the Director of Aeroservis, while in 2014, Ilya Polyakov has superseded him.

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TION laboratory

Representatives of the holding deny all the allegations against the company and its head and accuse the Investigative Committee of the Russian Federation of a premeditated operation against a market leader. “We consider the decision to remand the General Director in custody as a pretrial restraint ungrounded and aimed at the disruption of company operations – such actions were typical in the 1990s, – says the statement issued by the company. – Still, the company operations continue in the normal course: we fulfil our commitments to the employees, contractors, and clients. Non-medical businesses of the company are not affected”.

Our
notes

TION company has been founded in 2006 by graduates of the Department of Physics of the Novosibirsk State University. The group of companies currently unites 18 legal entities. The total staff exceeds 200 employees. The company has offices both in Russia – in Novosibirsk, Berdsk, and Moscow and abroad – in China, United Arab Emirates, and Slovakia. The company headquarters are based in Novosibirsk Akademgorodok. As of today, over 50 thousand units of equipment have been produced and assembled. The company is a resident of Skolkovo and Novosibirsk Academpark. The innovators position themselves as a group of research, production, and trade enterprises providing the full production cycle for modern high-tech products in the sphere of smart and energy-efficient ventilation and air cleaning and disinfection. In 2015, their ‘smart’ climate control system MagicAir has won a prestigious international Red Dot Design Award. The company produces ventilation and air cleaning systems for residences, hospitals, restaurants, and industrial facilities.

The clouds had started piling up over TION back in the end of 2016 – although the scandal went public only 9 months later. At that time, Roszdravnadzor has instructed medical institutions to stop using a number of TION air disinfectant and cleaner models because the federal agency had found that some company products are offered on the market illegally and are hazardous for the life and health of consumers. The letter from Mikhail Murashko, Head of Roszdravnadzor, dated September 8, 2016 instructs entities using medical devices to abstain from using two models of TION air disinfectant and cleaner – Lam-2S and Lam-1S – because the registration certificate FSR 2010/07645 issued in 2013 does not apply to these models.

A few months prior to that letter, Roszdravnadzor had posted on its web site a similar requirement with regards to two other TION models – A-150 and A-310 – as “posing a hazard to the life and health of citizens during the usage”.

Our
notes

Before the imposition of a ban on a number of TION products, its devices were used in more than 500 medical institutions of Russia and former Soviet republics, including Sklifosovsky Scientific and Research Institute of First Aid, Speransky Children’s City Clinical Hospital № 9, Burdenko Neurosurgical Scientific and Research Institute, Antituberculosis Dispensary № 9, and all infant orphanages of the Federal Penitentiary Service of Russia. In total, the treatment and prophylactic institutions had purchased some 7 thousand units of TION products.

Roszdravnadzor has drawn its focus on TION in March 2016. At that time, the General Administration for Economic Security and Combating the Corruption of the Ministry of Internal Affairs (MIA) of the Russian Federation had submitted to Roszdravnadzor a request to test samples of medical devices A-150 and A-310. The request was made in the framework of an audit of shipments of medical equipment to medical institutions of Moscow under governmental contracts. The All-Russia Scientific, Research and Test Institute of Medical Equipment (VNIIIMT) Federal State Budgetary Institution has performed an expert assessment as per instruction from Roszdravnadzor and issued an adverse assessment report. One inconsistency was identified: the instruction manual had referred to an ozone generator in the filtration system, while the registration documentation had mentioned a photocatalytic filter. The experts have concluded that these devices are two different products.

In the end of July, the Healthcare Department of Moscow had ordered the Moscow medics to stop using these devices, and a number of clinics have promptly fulfilled this order. For instance, in early August, Bashlyaeva Children’s City Clinical Hospital notified the Healthcare Department of Moscow that it has ceased using 89 TION devices, including 68 units in the Department of Infectious Diseases and 6 units in the Neonatal and Premature Neonatal Pathology Department.

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TION laboratory

The holding management had initially considered the Roszdravnadzor claims formal complaints and started correcting the inconsistency in the documentation. The company had explained the inconsistency between the product registration certificate and actual instrumentation of the device by the flawed legislation regulating the registration of upgrades to the already-registered products. The company representatives have stated as follows: “these inaccuracies had been committed during the previous periods of our work due to the flawed legislation. But the inaccuracies have later been rectified in due course and in close collaboration with respective governmental bodies”. Originally, the air cleaning and disinfection devices produced by the company had photocatalytic filters. But then the developers have replaced those with adsorption–catalytic ones produced in TION laboratories. This know how has allowed to reduce the production costs and make the TION equipment cheaper. In addition, photocatalytic filters remove only gaseous molecular pollutants, but not dust or microorganisms. The developers state that adsorption–catalytic filters performing this function in TION products remove molecular pollutants just as well as photocatalytic filters. On the other hand, the investigation claims, citing the results of an expert assessment performed by a Roszdravnadzor center, that after the exclusion of the photocatalytic filtration, TION products stopped killing viruses and bacteria and, therefore, became dangerous for health.

TION representatives note some interesting details in that expert assessment. There is no semantic chapter there; this allows to suppose that no technical tests of TION products were actually performed – this makes the assessment a meaningless piece of paper. Physical scientist Oksana Trubitsyna, a cofounder of the holding, said that the conclusion that the equipment is hazardous had been made on the basis of an inaccurate matching of the air cleaner mass provided in the instruction manual and its mass indicated in the registration certificate. According to her, the statement that after the exclusion of the photocatalytic filtration, TION products stopped killing viruses and bacteria is wrong. The filtration of viruses and bacteria is based on HEPA-filtration; the captured microorganisms are indeed inactivated by ozone that later degrades on the adsorption–catalytic filter. It is necessary to note that the TION products had earlier passed all the required certification and obtained a medical registration without photocatalytic filters; up until the beginning of 2016, Roszdravnadzor had no complaints against those.

The story has made another twist this summer. In the beginning of the month, searches were performed in TION offices in Moscow, Novosibirsk and Berdsk and in apartments belonging to Dmitry Trubitsyn and his potential – although not identified yet – accomplices. The operatives have seized draft accounting books, computers, and several air disinfectants. A few days later, the company founder has been remanded in custody for the duration of the investigation. Dmitry Trubitsyn denies any guilt. Back in fall 2016, he has posted on his Facebook page an opinion on the buzz around the TION products and the interest of law enforcement structures to the company and himself: “So, we have been attacked and we accept the battle! The time of confusion is over, we know exactly what’s going on and who is behind this. An action plan has been produced, we are mobilized, all fighters are ready, and the evidence base is almost complete. But we are going to keep a relative silence for some time”. After the arrest of Trubitsyn, his comrades have ceased the regime of silence and accused, almost with one voice, the enforcement structures of fulfilling a contract to ruin a perspective innovative business. Boris Titov, the Commissioner for Entrepreneurs' Rights, said that “it is a major overstatement to call the actions of Trubitsyn a crime. The experts believe that the consumer qualities of products shipped by TION haven’t degraded due to the change of their parameters in comparison with those set in the Roszdravnadzor documentation. It is important to bring their stance to the court”. Public activists and politicians of Novosibirsk Akademgorodok submitted a petition to Vladimir Putin (its text is available at Change.org) asking to take the case against Dmitry Trubitsyn and TION under his personal control and develop a comprehensive set of measures “to prevent such disgraceful practices as forcible pressure on law-abiding businesses”. The results of such pressure can be illustrated by many criminal cases against businessmen – some of those had collapsed in court but still achieved their main goal by ruining successful enterprises.

Our
notes

In 2014, only 46 thousand economic criminal cases, out of the almost 200 thousand ones, had reached the court – and 15 thousand out of that amount have collapsed in court. In other words, only 15% of the criminal cases have resulted in convictions. But some 80% or, more precisely, 83% of the entrepreneurs have lost their businesses – either completely or partially.

The TION management believe that the law enforcement structures are currently used in unfair competitive struggle. Vladimir Nikonov, General Director of the Technopark of Novosibirsk, shares this opinion. He was among the first to state vocally that the case against TION may be linked with a raiding takeover attempt. In his comment to a regional media outlet, Nikonov said: “As far as I know, such things happen in Russia from time to time. Therefore, I wouldn’t rule out the possibility that this [seizure of the business] might be of interest for somebody”.

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Vladimir Nikonov

Back in fall 2016, when the scandal with air cleaners was just escalating, a well-informed source from a Novosibirsk medical institution told news.ngs.ru that this is “a foul-smelling story” linked with the “competitive struggle outside the legal environment” for the benefit of another producer willing to supersede TION in Russian hospitals. “Such an aggressive Article of the Criminal Code applied to the Novosibirsk-based developer and producer seems to be an element of the competitive struggle: TION used to be a start-up company and paved the way for the private and commercial use of recirculators in the healthcare; now the way is paved and it is possible to push TION or Aeroservis away of the ‘pie of contracts’... Should the TION products be removed, huge amounts of recirculators from other producers would be required... This is about millions,” – the source in a major Russian medical institution has explained.

In fact, even a brief review of governmental contracts won by companies of TION Group confirms that this business is very profitable. According to Spark-Interfax database, only two legal entities of the holding – TION Limited Liability Company and TION Corporate Solutions Limited Liability Company – had shipped equipment for the total amount of some 20 million rubles ($334.9 thousand) to governmental institutions in the period of 2011–2015.

So, who can potentially supersede TION? The main competitor of the Novosibirsk-based innovative company is Moscow-based Potok-Inter. In the end of May 2014, Marat Zagidullov, a former co-owner of Motovilikha Plants living permanently in Kazan, has purchased 50% of the company shares. At that time, Zagidullov had announced his intention to invest some $200 million into the company and propel it to the international level by expanding its products assortment and sales markets. Zagidullov is a well-known figure in the business and politics – mainly because of his family ties and a number of high-profile scandals, including financial ones. It is necessary to note though that he managed to get out of these scandals with minimal ‘casualties’ – perhaps, thanks to his family and friendly connections. Zagidullov is a nephew of Tatar oligarch Rafael Gimalov; rumors had circulated about his high-ranked patrons, including almighty Boris Berezovsky. Zagidullov had started his career in Rus’ (Russia) finance house belonging to Gimalov. In 1996, Gimalov had appointed his 22-year-old nephew, a fresh graduate of the Department of International Economy and Finance of the University of California in Los Angeles, the General Director of the finance house. Despite the official position of Zagidullov, Gimalov had, in fact, ruled everything in Rus’. The notorious finance house was a ‘front’ for shady schemes of Gimalov and late oligarch Berezovsky. The work in Rus’ was an excellent starting point for Zagidullov.

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Marat Zagidullov is a nephew of Tatarstan oligarch Rafael Gimalov

The most recent scandal involving Zagidullov was linked with a defense enterprise. In 2013, Nikolai Bukhvalov, General Director of Motovilikha Plants Open Joint Stock Company, had submitted a letter to Alexander Bastrykin, Chairman of the Investigative Committee of the Russian Federation (ICR), asking to examine the actions of Marat Zagidullov, ex-Deputy of the State Duma and ex-City Manager of Kazan, involved into the management of Motovilikha Plants in the period since 2002 and until 2009. According to the shareholders, Zagidullov had affected the decisions of the Board of Directors to provide loans to third-party companies, which has resulted in losses of some 1.268 billion rubles ($21.3 million). The scheme was simple: in the period of 2004–2006, Motovilikha Plants had granted loans to a number of legal entities; most of these loans were not repaid. But 1.5 year later, the General Administration of Criminal Investigation of the MIA General Administration for the Perm Krai has terminated the criminal case regarding the damaged sustained by Motovilikha Plants Open Joint Stock Company owing to the absence of elements of a crime in the actions of the suspects.

The financial and market situation of TION looks more preferable in comparison with Potok-Inter. In 2012, the net profit of the company was 1.86 million rubles ($31.2 thousand). Prior to the arrival of Marat Zagidullov to Potok-Inter, the company had mostly produced space equipment. Zagidullov decided to expand the ‘medical component’ by boosting the sales of air disinfectants in Russia and abroad. There are two ways to pierce into an already-occupied market niche: either offer the consumers cheaper and higher-quality products, or eliminate the competitor. People familiar with the situation around TION incline to the opinion that the Kazan manager is getting rid of the competitors by all means.

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They say that Marat Zagidullov is getting rid of the competitors

The Novosibirsk business community believes that the most likely scenario for this story involving law enforcement structures is as follows: Dmitry Trubitsyn is to spend some time in custody and then he would be released. While the General Director remains under home arrest, the investors of TION may refuse to invest funds into a business associated with a criminal case – even a framed-up one. As a result, the company may sustain losses even greater than now, when a number of medical institutions have received an order to terminate their contracts with the Novosibirsk-based company. The next most likely step can be the bankruptcy of TION or acquisition of the company assets for next to nothing by third parties. Most probably, these ‘third parties’ would be the main competitors of TION – and Potok-Inter is currently the only such major rival on the market.

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