School for oligarch
Evgeny Prigozhin is one the news due to yet another scandal. Many Moscow schools are suing Prigozhin’s Konkord for not supplying food for school children. Schools are losing the legal battle to the oligarch’s lawyers, having to pay for food that has never been supplied to them.
It has been a long time since Prigozhin thought of getting into the catering business. He opened his food plant in Yanino outside of St. Petersburg in 2010. His main goal was to produce food for St. Petersburg schools and other educational facilities, eventually growing his business to be nation-wide. He used the latest technologies when building the plant. It was a large-scale construction; Vladimir Putin even attended the plant grand opening.
The project ended up being short-lived and was abandoned despite the scale. Parents ran a massive campaign against the plant in 2011; they did not want their children to eat convenience food. The food could be stored for a long time; this meant that it was full of preservatives. The issue made the headlines. In 2011, the Rossiya National TV channel ran a Vesti newscast revealing that several St. Petersburg school ended up without food whatsoever due to the poor quality of Konkord products. Prigozhin suspended operations at the plant following this newscast after a mere year after the grand opening.
$53 million was invested in the school food plant; $43 million out of the sum was loaned by Vneshekonombank. The Konkord Kulinarnaya Liniya Plant opened in Yanino in 2010. The plant supplied food to 20 St. Petersburg and 30 Leningrad region schools. Prigozhin wanted to open 260 similar plants in 10 years.
Moscow parents and schools did not have as much fighting spirit as St. Petersburg residents. Prigozhin hit the jackpot; he was able to basically monopolize food supply to Moscow schools, signing a 3-year 10-billion-ruble ($159.5 million) contract with the Moscow Administration. So, what is the deal with it, one would think? Prigozhin has experience in customer service; he had opened a restaurant on the first floor of the famous St. Petersburg Museum of Anthropology and Ethnography in the 90s. He needed a storage area for that; the area was rebuilt and reequipped. Staraya Tamozhnya soon became popular with locals and visitors, even becoming the most popular elite St. Petersburg restaurant. St. Petersburg Mayor Sobchak and Vladimir Putin reportedly visited the restaurant to try its sturgeon caviar and gold mango salad.
Businessman Evgeny Prigozhin
He is said to have laid the foundation for his success there, making friends with all influential people and even earning the trust of such notorious people as Roman Tsepov, a Malyshevskaya OCG member.
Some very influential people would visit the restaurant, including George Bush and Jacques Chirac. The dishes served to them made it to the culinary history. That is not the case for the school food Prigozhin would supply, however.
Food is not served
The litigation began in 2015. It continues to this day. It all began with food supply contracts. Konkord signed such contracts with 17 schools. It signed contracts with even more schools later. There were more than 100 such schools in 2017. However, school cafeterias stopped receiving the necessary amount of food at some point. Supplies could easy lack as much as 28 servings. The number of such incidents grew. Dozens of schools experienced this issue. Schools eventually filled official complaints and refused to pay for some services due to “Konkord’s failure to perform under contracts,” as the media put it.
In 2015, Konkord signed contracts for the total of more than 6 billion rubles ($95.7 million). In 2017, the number grew to 10 billion rubles.
The billionaire’s lawyers fought back, filing lawsuits against schools whose lawyers had to fight with red tape. Six schools managed to stand their ground. For example, one court ruled that “the defendant did not produce any evidence of his claims.” 27 schools lost and now have to pay Prigozhin anywhere from 800 thousand to 1 million rubles ($13 to 16 thousand) for food he had failed to supply. Prigozhin filed 67 million rubles ($1 million) worth of lawsuits against schools.
This is not oatmeal porridge, sir!
However, it is not the only strange story that has to do with the catering business and that Prigozhin is associated with. It is worth mentioning that there was a case when 207 cadets of the EMERCOM Ural Firefighters Institute suffered food poisoning. They were hospitalized in critical condition in April 2011. It was obvious their condition was due to food poisoning from the git-go. The cadets had eaten fish with eggs and chicken supplied by MedStroy from St. Petersburg. Novaya Gazeta later discovered that MedStroy is affiliated with Konkord. The scandal was swept under the rug; not many people remember it.
Meanwhile, people still remember what happened when Konkord was responsible for food supply to troops. Former Minister of Defence Anatoly Serdyukov was the inspiration behind the idea. The army has always cooked its food itself, having its own cooks aided by soldiers. Such food does not taste good but is fresh. However, the Russian government reformed the army, and one of the decisions was to outsource cooking to catering companies. Prigozhin reportedly supplied his food to the Army HQ and the Ministry of Defence to showcase it. That is a standard but effective move. Generals and ministers liked the food; Konkord signed a 92-billion-ruble ($1.4 billion) catering contact, one of the largest such contracts.
Konkord became one of the largest catering companies in the Western Europe after signing contracts with the army. It also became the first catering company to be features of the Forbes list of non-public companies. Prigozhin’s company signed government procurement contracts for 200 billion rubles ($3.1 billion) over the last five years.
However, this was also the time Prigozhin ran into some troubles. Army began receiving complaints about the food quality; soldiers would refuse to eat Prigozhin’s food. There were reports of expired food and even cockroaches in the food.
Prigozhin’s business stopped advancing in the fall of 2013. Sergey Shoygu canceled the decision to outsource cooking. Konkord’s beneficiary did not get another contract and was only paid for half a year. However, 46 billion rubles ($734 million) made in 2013 is still good money. Then, it was the time for military towns to have a taste. Prigozhin made 26 billion rubles ($414 million) selling food to them. However, he eventually stopped this project, too. Rumor had it the army did not like the fact that he basically had a monopoly on government procurement contracts. It is worth mentioning that the Federal Antimonopoly Service proved that Prigozhin and his affiliates had entered a 1.8-billion-ruble ($28.7 million) price-fixing agreement.
Prigozhin has plenty of new ideas. For example, rumor has it that the project for development of elevated areas next to the Olgino and the Lakhty Rivers (200 hectares) to be his idea. The islands are to be shaped into flowers and palm trees akin to those of the UAE. This is a full-fledged project for some town with residential and commercial real estate. Rumor has it Prigozhin wants to reign at least an island since he did not manage to reign entire Russia; even if such an island is an artificial one. The main objective is for such an island to be profitable; no one cares that geologists warned that such a project could increase the risk of St. Petersburg being flooded due to decreased volume of the Neva River. The St. Petersburg Administration is skeptical of the project – for now. It will be discussed no sooner than 2021. However, one thing is for sure – Prigozhin plans well.