A court arrested former CEO of Novik Industrial Group Alexey Lyashchenko in absentia. The story we are going to tell is both typical and surprising. Nowadays, shell companies that take large financial orders without being able to fulfill them are commonplace. Unfortunately, we often see them. However, the emergence of such a firm in the military-industrial complex of the country is a rare occurrence because of strict admission rules.
We will try to puzzle out how Novik Industrial Group was established and what led to its bankruptcy and the in absentia arrest of its head.
Alexey Lyashchenko was born on September 3, 1974. He graduated from the Leningrad Nakhimov Naval Academy in 1991 and took a degree in international law from the Moscow Border Institute of the FSB in 2010. Border guards need specialists in different fields. Alexey Lyashenko made his career working as a head of the procurement department at Promindustriya Industrial Group, as an assistant to the CEO at the Sosnovoborsk branch of the St. Petersburg Institute of Mechanical Engineering and as a department deputy head at the Gubkin Russian State University of Oil and Gas. Lyashchenko was also making a career in politics. He became a deputy of the Murmansk Regional Duma in 2011. In 2016, he won a seat in the 7th State Duma as a candidate from the “United Russia” Party. He co-authored eleven bills. It was an ordinary successful career of a contemporary activist. Strange things began to happen in 2008, when Lyashenko founded the Novik Industrial Group.
Novik Industrial Group
Everything was odd about this holding, starting with the name. It was clearly invented by people who knew the Russian Navy well. Novik was the name born by several warships of the Russian Imperial Navy. The last Novik was a new generation lead destroyer which went into series production. These ships were truly remarkable. The former destroyers had two 100-mm guns, three torpedo tubes and a speed of about 20-22 knots. Noviks that were built in several slightly different series carried four to five 100-mm guns, 8-9 torpedo tubes and had a speed of about 35 knots. The lead destroyer of the Novik series reached a speed of 38.5 knots (71 km/h) during the tests in 1914. For some time, Novik was the fastest ship in the world. Alexander Rosenbaum's famous song ‘38 knots’ is about Novik. The word Novik spoke volumes for navymen.
However, its name was not the main oddity. The military-industrial complex is very conservative due to many restrictions and clearances. A newly formed company cannot get a contract to work with military equipment by definition. First, it must prove its competence in this segment and get many clearances and permits to work at military facilities. To make a long story short, a newly established company may theoretically receive an order, for example, to repair a house, but practically never to repair a warship. This is why the list of Soviet military-industrial complex enterprises, located in Russia, is the same list of the Russian military-industrial complex enterprises.
The offices of the new industrial group also seem suspicious. All the enterprises of the military-industrial complex have solid buildings and beautiful signs. They can afford it as they are the shield and sword of the country. But Novik's head office was located in an unsightly building on Central Street in the town of Pushkino in the Moscow Region. There were a lot of consumer service firms at this address. As for the production branches located in large coastal cities, the situation looked even more deplorable. When the regional channel of the All-Russia State Television and Radio Broadcasting Company ran stories about salary arrears in 2016, everyone had a chance to see Novik Production Group offices. They were located in the basement of residential buildings which is not typical for an organization that repairs warships. It is not clear how this company received repair orders.
The production process was a follows: as Novik Group did not have specialists, it subcontracted existing ship repair enterprises. This could not happen given all the legislative norms in this sector. There is one more circumstance. Today's Russia's needs in armament systems are less than in the Soviet Union, so there is a certain oversupply of companies in this market. Some even had to start working for the civilian sector. How a newcomer managed to secure a foothold on the market in such difficult conditions is a big question. We assume that it became possible with the help of interested people in uniform.
Novik Group was registered on July 30, 2008. The production branches, the same ones that were located in the basements of residential buildings, were opened at the Baltic production and technical base in Baltiysk, at the Northern production and technical base in Murmansk, the Northern scientific and production center in Severodvinsk, at the Black Sea production and technical base in Sevastopol, and at the Far Eastern production and technical base in Vladivostok. All branches were located near naval bases. There was the St. Petersburg Production and Technical Base and the Design and Development Bureau in St. Petersburg. Until recently, this information was available on the Novik website. Originally Alexey Lyashchenko was Novik founder and CEO. According to the Kompromat website, the group had two shareholders, Ekaterina Balaeva and Vladimir Shevchenko, with 75% and 25% shares respectively. Balaeva was on the board of directors of a small company not related to the defense industry, and Shevchenko is the founder of a housing co-op in Stavropol Territory which suggests they were straw persons. Lyashchenko appointed himself as CEO.
Lyashchenko's deputy, Yuri Bailo, is a much more interesting person in the Novik group. Rear Admiral Yury Bailo served as Chief of Staff of the Russian Navy's logistics staff and later as Deputy Commander of the Pacific Fleet for Logistics. He was retired by order of President Dmitry Medvedev in 2011. Apparently, Bailo was the person who secured the orders for Novik. The Moscow Post and Kompromat wrote that some retired rear admiral was the main beneficiary of the Novik Group. This point of view is confirmed by the trial of Yury Bailo in the Novik case.
It is assumed that it was Bailo's connections that helped Novik obtain contracts and outdistance competitors. For example, Novik “won” 40 auctions in 2015 alone and received contracts worth 420 million rubles ($5.4). The most surprising thing is that Novik had a license only to repair fenders only at a certain address which is the fender workshop at Yuzhny district of the fish port of the city of Murmansk. A fender is a rubber-made bumper which is attached to the ship and protects it from collision with the pier or board of another ship. For exam0ple, tugboats with car tires can be used as the primitive fenders. Novik had no license for anything else. This was established by the court in criminal case No. A40-142711/2015.
It is inevitable that the shell firms have situations in their production activities when they receive a contract but are unable to fulfill it. Apparently, it was Yury Bailo who won the contracts for repairs of main engines on Yastrebs, patrol vessels of Baltic Fleet project 11540 Neustarchimy and Yaroslav Mudry and on the large landing ship Olenegorsk Miner of Northern Fleet project 775. This is where the seemingly well-functioning scheme failed. To all appearances, it was not possible to hire well-qualified specialists this time. There is another option. Licensed subcontractors are expensive, and they decided to save money on them. After Novik repaired the Olenegorsk Miner, it had to dock for 12-month repairs in the summer of 2016. Law enforcement authorities launched an investigation but Bailo got away with it. According to Kompromat, this outcome was possible thanks to Bailo's son Alexey, at the time a high-ranking official of the State Investigation Department of the Ministry of Internal Affairs of Russia in St. Petersburg.
The repair of the Baltic patrol ships is a story that is a mix of comedy and farce at the same time. The fact is that these ships are equipped with Ukrainian-made turbines. Prior to 2014, these turbines were repaired and serviced by Ukrainians. Of course, Novik did not have any documentation to repair the turbines. According to Kompromat, it seems that Novik received the technical documentation for these turbines with the help of Yuri Bailo, and the group's engineers adapted it to Russian conditions. Even an error was allegedly found in the technical documentation. In addition, the repair of a gas-turbine unit for Yaroslav Mudry was carried out at a rented site, since Novik had never had its own production facilities.
At that moment, Novik failed to pay wages to employees. The fact is that the economic policy of the group looked like that one of a financial pyramid model. Financing comes mainly from new orders, and after the scandals and courts new orders stopped coming.
The regional branches of All-Russia State Television and Radio Broadcasting Company in the regions where the Novik branches were located aired stories about the group's employees who had not received their salaries for several months. The media in the regions also wrote about it. According to the abireg.ru website, Novik started bankruptcy proceedings in 2019, with a total amount of debts of 1.7 billion rubles ($21.9.) This is the data of the Moscow arbitration. A temporary administrator was introduced in the group. A criminal case was initiated over all the facts and is being investigated by the central office of the Investigative Committee.
Result No. 1. The investigation has brought Yuri Bailo to justice. A court considered a legal action over failed repairs of the Olenegorsk Miner large landing ship in 2017. First, the retired Rear Admiral was fined 150,000 rubles ($19,362), and then he was amnestied and released from punishment (but who helped him?). The will reinvestigate his case.
Result No. 2. Of course, it might be a coincidence, but it was after Bailo’s trials in 2016, that Lyashchenko decided to run for a seat in the State Duma, of course, from the United Russia party. After all, chances are there will be charges of embezzlement of hundreds of millions of rubles in the event of a bad outcome. Therefore, immunity from prosecution could come in handy.
Something changed in the situation, and on January 20 of this year, Basmanny Court of Moscow arrested Alexey Lyashchenko in absentia for non-payment of salaries to employees of Novik Group in the amount of more than 200 million rubles ($2.6 mln). Lyashchenko himself was absent at the trial, having gone abroad. The court decision is necessary in order to put him on the international wanted list through Interpol.
It remains to be seen how this story ends.