Anatoly Chubais, then head of RUSNANO, opened an exhibition of RUSNANO portfolio companies’ products at the Federation Council on April 26, 2017. He talked about investments in new nanotechnologies and presented ELVEES-NeoTek know-how and products to FC speaker Valentina Matvienko as an example of RUSNANO’s successful investment activity.
Chubais told the senators that the ELVEES-NeoTek subsidiary was RUSNANO’s “corporate business incubator,” established “to support research teams and produce high-tech security systems.”
However, this doesn't seem to be entirely true because he couldn’t help knowing that tens of millions of budget dollars were “pumped in” ELVEES-NeoTek which is a joint venture with Americans. Otherwise how could he “successfully run” a large state corporation without knowing what happens with its investments?
ELVEES-NeoTek was established in 2011 by RUSNANO with a 49% percent stake and the American company Senesys (51%). It planned to implement a project to create Russian microchips VIP-1 and ELISE, where Senesys was the managing partner responsible for development. According to the CNews portal, “with a total project budget of 2.81 billion rubles ($39.31 mln), RUSNANO accounted for 1.06 billion rubles ($14.83 mln) worth of investments. Senesys had to contribute $93.7 million.
At first sight, the new RUSNANO venture looked quite decent: big money, capacities for Russian microchips, and reputable American partners. However, RUSNANO's American partner in ELVEES-NeoTek is not exactly American. Senesys is owned by Ilya Kan and Yaroslav Petritschkovich, and this is where the situation begins to look odd.
According to the contract, RUSNANO paid its 1.06 billion rubles, after which ELVEES-NeoTek began to actively buy different software licenses. The contracts totaling $25.5 million were concluded with an intermediary, again, with the American company Sensor Design Association (SDA), which, in turn, purchased licenses from the Russian and Hungarian offices of Synopsys.
A check of the supplier’s prices showed that Sensor Design Association (SDA) to be an unnecessary intermediary which overstated purchase prices for ELVEES-NeoTek up to 800 % (up to 8 times!), “earning” $17 million.
The contracts for ELVEES-NeoTek were signed by its CEO A.N. Rakutin. According to the contract, he “has the authority for the operational management of financial and production activities”, “manages the funds and property of the Company at his sole discretion”, and “conducts transactions on behalf of the Company, performing managerial functions.” This means that Rakutin could not have been unaware of what kind of contracts he was signing and for what purpose.
Interestingly, the Sensor Design Association (SDA) intermediary also belongs to Ilya Kan, a partner of Petrichkovich and co-owner of Senesys, which co-founded ELVEES-NeoTek together with RUSNANO. Furthermore, SDA also bought software worth two million dollars from Biones Israel which is run by Ilya Kan.
It turns out that businessmen Petrichkovich and Kan regularly bought software from themselves at significantly inflated prices withdrawing $17 million worth of RUSNANO's investment received from the state budget.
Most of the money went to SDA, and the rest was transferred from SDA (Kan) to Senesys (Kan and Petrichkovich) under a loan agreement, and Senesys invested the transferred funds in ELVEES-NeoTek as a contribution to the authorized capital. Thus, Senesys made no contributions to the charter capital under the investment and shareholder agreement with RUSNANO. It “pumped up” its input with frequent small transactions from RUSNANO funds conducted through the companies controlled by SDA-Senesys.
As a result of these Machiavellian machinations, million-dollar investments were withdrawn from the company, Senesys never invested in the project under the shareholder and investment agreement, so its goals were not achieved due to underfunding.
There is more to it. The story with the subsidies from the Ministry of Industry and Trade is no less surprising and also requires scrutiny.
Begrudging repayment of state subsidy
In 2016, the above-mentioned ELVEES-NeoTek received a subsidy of almost 300 million rubles ($4.2 mln) from the state, to be more precise, from the Ministry of Industry and Trade of Russia. It was allocated for the implementation of a large-scale project to design and produce a “spherical 4K video camera with a 360-degree view” and the sales volume of not less than 130 million rubles ($1.89 mln). As mentioned above however, ELVEES-NeoTek was unable to design the device and launch batch production due to financial problems.
Then the company showed its know-how with a “sales volume of at least 130 million rubles.”
It was the first attempt. According to ELVEES-NeoTek, it partnered a Fargo company which allegedly supplied the software necessary to design a super camera, and for that, they paid 59,145,778 rubles ($827,354.8), apparently at the expense of the subsidy of the Ministry of Industry and Trade. However, Fargo’s CEO Andrei Mizerov, who was questioned as a witness during the tax audit, testified that he was not familiar with ELVEES-NeoTek’s management. According to him, the contract was brought by a courier and he signed it. Moreover, the contract was not executed in full, but only in the amount of ... 10.5 million rubles ($146,878.2), that is, by less than 20%.
As follows from the tax audit act, “ELVEES-NeoTek deliberately tried to hide this discrepancy by filing a revised 48,651,194-ruble ($680,552.36) VAT return for 2018 and partially replacing the contractor company management with Kaps-Story’s.”
Now let’s pay attention to the fact that a certain Alexander Vodyany, CEO of Kaps-Story, which allegedly supplied ELVEES-NeoTek with unique software, told the auditors that “the company bought and sold all kinds of things.” Vodyany had worked at Sheremetyevo Handling as a baggage handler until July 2020.
As a result, the tax authorities discovered tax arrears of almost 30 million rubles ($419,652) and another 16 million rubles ($223,814.4) in fines and penalties.
The second attempt. The inspection authority then zeroed in on the GC-M company as the purchaser of products designed by ELVEES-NeoTek at the expense of the subsidy received from the Ministry of Industry and Trade of Russia. ELVEES-NeoTek tried to convince the Russian Ministry of Industry and Trade that the business was a success and that it had a court ruling to recover money from G.C.M. Ltd.
The new version was as follows: GC-M purchased unique products from ELVEES-NeoTek for 137 million rubles ($1,911,807.6) but did not pay the money and, therefore, the company is now in litigation with them. However, a decision was made in September 2020 to exclude GC-M from the Unified State Register of Legal Entities due to “the presence of false information about the address and company executive.” A Vadim Salikhianov was allegedly GC-M CEO and sole owner.
Subsequently, after receiving the act of an on-site tax audit, which uncovered violations by ELVEES-NeoTek such as the use of “fly-by-night companies,” companies, ELVEES-NeoTek began its third attempt to submit documents to the Russian Ministry of Industry and Trade on closing the received subsidy.
For example, ELVEES-NeoTek sent statements dated April 12, 2021, and June 2, 2021, to the Russian Ministry of Industry and Trade asking to count in the earnings in the amount of 237,687,100 rubles ($3,316,875.94) from the sale of similar products with equal technical specifications designed as part of the comprehensive project ‘Development and organization of batch production of the spherical camera for recording, transmission, and publication of video images in 4K with a 360-degree view.
Supply Contract No. 291119(01)D with Concern Sozvezdiye was shown to the Ministry of Industry and Trade as proof.
Fortunately, the Ministry's Expert Council found that the implemented “similar” products, allegedly developed based on the ELISE microprocessor of ELVEES-NeoTek's design, do not meet the technical specifications and are not similar.
Finders keepers, losers weepers
There is one more story about this genius of commerce. RUSNANO spent millions of dollars on the development of Russian VIP-1 and ELSE microchips. The projects were brought to a high degree of readiness but were not carried through due to insufficient funding. A solution was founded however. The design and technical documentation, the product design, and the team of developers were transferred to the company with the same name, the Elvis Research and Production Center, which is successfully selling the VIP-1 chip labelled as 1892BM14R. Independent technical expertise confirmed the identity of VIP-1 and 1892BM14R.
Of course, the Elvis Center also belongs to Yaroslav Petrichkovich.
One might wonder if RUSNANO state corporation has not seen what has been happening with the investment millions and state subsidies over the past decades. It seems like they tried very hard not to see it until the new leadership of RUSNANO came and tried to bring this story to a close. Incidentally, Nail Ildarovich Gubayev, RUSNANO's investment director, who was in charge of ELVEES-NeoTek, changed his job right after the RUSNANO management reshuffle and Chubais' dismissal. Since April 2021, Nail Gubayev has held the position of NeoTek’s CEO, a subsidiary of ELVEES-NeoTek.
Alexander Bastrykin, Head of the Investigative Committee of the Russian Federation, has repeatedly said that there are still people around who “create complicated schemes to mislead the authorities and who go unpunished for a long time. However, law enforcement agencies expose various violations and stop them.”
Judging by the facts reported by the auditors, the government watchdog has already paid attention to this situation. We will follow the course of events.