Sergei Makhlai’s Accomplices, Offshore Companies May Be Arrested

Sergei Makhlai’s Accomplices, Offshore Companies May Be Arrested

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The main owner of the TogliattiAzot chemical plant Sergei Makhlai and his accomplices were dismissed in the November 2021 company shake-up. It immediately collapsed all his illegal financial schemes he had used for years to transfer profits to shell companies.

The main question is now whether the stolen billions can be returned to the company.

Makhlai and his associates were convicted of grand fraud in 2019. They had been selling all of the plant's export products at an underestimated price of 20-40% to an affiliated offshore company Nitrochem Distribution AG, which then resold them at market prices. The company failed to pay 2.5 billion rubles ($31.8 mln) worth of taxes between 2008 and 2011. The swindlers who had hidden abroad were sentenced in absentia to 8.5 to 9 years in prison. In addition, they were obliged to pay compensation to the victims under the civil claim, 77.3 billion rubles ($983 mln) to TogliattiAzot and 10.3 billion rubles ($131) to Uralchem, a minority shareholder.

The investigation into a similar criminal case over the theft of export supplies in 2012-2013, is about to be completed. A civil lawsuit was filed seeking compensation for damages in the amount of 53 billion rubles ($674.) Thus, due to this scheme alone, the damage to the plant and its shareholders amounted to 141 billion rubles ($1.8.)

According to experts, it might be possible to recover money through litigation. In particular, Makhlai's offshore companies, which are nominal holders of most of the shares of TogliattiAzot, can be arrested. There are international regulations to deal with such cases, and the law enforcement agencies can use them.

The theft of exported products is not the only crime. Thanks to the efforts of former CEO Dmitry Mezhedov and his deputies Viktor Kazachkov and Andrei Bobkov, well-known “specialists” in corporate fraud, there were many options to transfer TogliattiAzot profits to tax havens. In 2015, the enterprise suddenly started paying some foreign companies $60 million a year for alleged freight services, although previously shipping had always been handled by an intermediary.

Makhlai also gave fake contracts to rogue firms such as MCA-Stroi and Interkon which received 70% of the advance payment. They never completed any works while the money was transferred abroad with no closing documents. Thus the plant lost at least $50 million a year.

Another 30-40 million euro a year was withdrawn through the much-hyped Tarsu project, where a homonymous Turkish company was to have reconstructed water-cleaning and water-treatment systems at TogliattiAzot. Tarsu was just an ordinary Turkish house-building company that had no understanding of chemical production technology. In the end, the huge sums of money invested in the “project” were laundered in Turkish banks and transferred to Mahlai.

Mezheyedov received an official salary of 72 million rubles ($915,552) a year. Given the bonus for his “work” on the board of directors his total income was 400 million rubles ($5.1.) Even this sum of money was not enough for him, and the greedy top manager demanded 10% under the table payments for himself from each fictitious contract.

Mezheyedov was ambitious last year. He was tasked with transferring 21.7 billion rubles ($276) to shell companies under the guise of an “investment program,” but he only withdrew 16 billion rubles ($203.5.) After house and office searches in connection with the corruption investigation, Mezhedov hastily quit his job at the plant in spring. Nevertheless, it is highly likely that he will still have to answer for the crimes committed in office.

The Board of Directors also approved suspicious deals, unprofitable for TogliattiAzot but very needed by Makhlai. For example, it approved a series of deals that gave the plant the right to claim more than 737 mln rubles ($9.4) in debt from Technik-Park, owned by Makhlai. When Mezheyedov, financial director Nikolai Neplyuev, and chairman of the board of directors Pyotr Ordzhonikidze approved the transaction, they knew perfectly well that the debtor was insolvent. Uralchem sued the members of the Board of Directors and obtained the seizure of their property worth 737 million rubles as a security measure.

Alexander Popov, another prominent member of the Makhlai & Co and former chairman of Togliattikhimbank, has already been sentenced in a bribery case. He was not only involved in money laundering, cashing at bank and managing an international network of offshore banks, but also supervised the financing of Makhlai's corruption cover-up. He tried to hand over $2 million to Russian Supreme Court judges in exchange for cancelling an additional tax assessment for 2010 against TogliattiAzot on Makhlai’s instructions in 2015. In June, he was sentenced to 7.5 years in a maximum security prison. However, this sentence may not be the last in his career because Popov together with Makhlai and other members of the group are also accused under Article 210 of the Criminal Code (creation of a criminal community/criminal organization and participation in it) and Article 159 on fraud.

Vladimir Chabrov, another accomplice of Makhlai and former CEO of Tomet, which was established right on TogliattiAzot’s premises from the assets withdrawn from it, is a defendant in three criminal cases. When Tomet was found liable as one of the joint defendants in a civil fraud suit, under which Makhlai and his stooges were ordered to pay a total of 87 billion rubles ($1.1 bln), Chabrov tried to bankrupt Tomet, so that Makhlai could avoid paying anything and also hide the firm's assets.

Tomet suddenly began to act as a guarantor for non-performing loans given to various companies by Makhlai's banks, as well as purchasing railroad tanks at inflated prices. Chabrov inflicted 1.9 billion rubles ($24.2) harm on Tomet but his plan failed. The court refused to bankrupt Tomet as it was planned according to Makhlai's scenario, and the authority of Chabrov was terminated early. His property has been arrested as an interim measure.

Shortly before the change of management at the plant, Andrei Bobkov, a former deputy CEO for security, was arrested. He used his foster private security company Almaz to design a mega scheme to remove unaccounted-for products, spare parts, equipment, and other commodities from the TogliattiAzot premises. Law enforcement authorities are still assessing the scope of theft given the fact that Bobkov dispatched hundreds of truckloads of stolen goods. Bobkov is now under arrest on suspicion of fraud and abuse of power.

Although Makhlai and some of his associates are hiding abroad, there are ways to recover the stolen money. The law enforcers have done huge work to help the plant break free from mafia grip. There is no doubt that the experience and professionalism of the investigators, judges, and prosecutors will play a decisive role in the return of the funds taken to shell companies.

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