Sergei understood that while the people we were fighting had no respect for the law, they had an almost slavish respect for procedure and bureaucracy. Just as he’d rattled the bad guys into moving the companies around, he thought he would rattle the police by inserting more evidence about their own involvement in the crime into the case file. Sergei knew that once something went into the case file, procedure dictated that it would stay there forever. Sergei hoped that, even though the investigation into our stolen companies was going nowhere, in the future an honest investigator might take over and do the right thing. This mere possibility would leave the conspirators constantly on edge.
Sergei set up an appointment at the Investigative Committee for June 5, 2008. When he arrived at its building, he was met by the detective in charge and taken to his office. Just before the detective opened the door, Sergei noticed that the man’s hand was shaking nervously.
He pushed open the door, and it immediately became apparent why. There, sitting at the desk, was Lieutenant Colonel Artem Kuznetsov.
Sergei was startled. He looked straight into the eyes of the detective and said, «What’s he doing here?»
The detective avoided Sergei’s glare and said, «Lieutenant Colonel Kuznetsov has been assigned to assist the investigative team for this case».
First Karpov had been assigned to investigate himself, and now Kuznetsov was doing the same!
«I won’t talk to you in front of him», Sergei said forcefully.
«O'kay», the detective said uncertainly. «Then you’ll have to wait in the hall until we finish our meeting».
Sergei sat on an uncomfortable metal chair for an hour, clutching his files in his lap. Kuznetsov and the detective probably hoped that Sergei would abandon his plan, but he didn’t. When Kuznetsov finally left, Sergei rose and went inside. He sat in the chair, provided the evidence, and gave his witness statement, explicitly naming Kuznetsov and Karpov in the crimes. Following procedure, the detective had no choice but to accept this and put it into the case file.
Sergei left the Investigative Committee’s headquarters and hopped on the Metro. What had just happened was beyond comprehension. Sergei had expected his testimony to go nowhere. He had expected his witness statement to be ignored. He had even expected to be treated rudely. What he hadn’t expected was to find the very man he was giving evidence against to be part of the investigation team.
It took the whole ride back to the office and a couple of laps around the block for Sergei to calm down, but when he returned to his desk at Firestone Duncan, he found something else he didn’t expect. A letter from the Khimki tax office, one of the registration offices he had previously sent a letter to looking for information on our stolen companies.
Sergei tore it open. For once, someone had actually done his or her job. There was information, there were names, but most importantly the letter showed that the people who’d stolen our companies had set up accounts at two obscure banks: Universal Savings Bank and Intercommerz Bank.
This was a huge breakthrough. Why would three companies with $1 billion of fake liabilities and no assets need bank accounts? Sergei immediately logged on to the Russian Central Bank website. He typed in Universal Savings Bank and found that it was so small that it had capital of only $1.5 million. Intercommerz was only slightly bigger, with $12 million of capital. They could hardly even be called banks.
But then he noticed something extremely interesting. Because these two banks were so small, the moment they received any money, he could see the spike in deposits right there on the website. And indeed, there were some big inflows. In late December 2007, shortly after these bank accounts were opened for our stolen companies, Universal Savings Bank received $97 million in deposits, and Intercommerz received $147 million.
It was then that Sergei remembered our question about the tax rebates. The amount these two banks had received was roughly the same amount the Hermitage companies had paid in taxes in 2006. This couldn’t just be coincidence. He quickly gathered all of the judgments and laid them side by side with our companies’ tax filings. At that moment everything crystallized for Sergei.
The Saint Petersburg judgment against Mahaon was for $71 million, and sure enough Mahaon’s profits for 2006 were exactly $71 million. Parfenion’s judgment in Kazan was for $581 million, and the 2006 profits were identical. It was the same story in Moscow with our third stolen company, Rilend. In total, the conspirators had created $973 million of judgments to offset $973 million of real profits.
Sergei called Ivan immediately, and after a few minutes of explanation Ivan jumped up and waved over Vadim and me. «Look at this, guys», Ivan said excitedly, pointing toward his screen.
Ivan brought the Central Bank website up, and we looked at the two spikes in deposits that Sergei had uncovered.
«Son of a bitch», I said.
«Bill, Sergei figured it out», Ivan said.
«This is great, but how can we prove that this money actually came from the tax authorities?» I asked.
Vadim said, «I’ll ask several sources in Moscow if they can verify the wire transfers. Now that we know the names of the banks, we can probably figure out where the money came from».
Two days later, Vadim rushed into my office and laid out several sheets of paper on my desk. «These are the wire transfers», he said with a satisfied grin.
I grabbed the papers, which were all in Russian. «What do they say?»
He flipped to the last page. «This confirms a tax refund payment of one hundred and thirty-nine million dollars from the Russian tax service to Parfenion. This one is for seventy-five million for Rilend. And this is sixteen million dollars for Mahaon. That’s two hundred and thirty million dollars in total».
This was the same amount of money — $230 million — that we had paid in taxes. The same.
We assembled in my office and called Sergei to congratulate him on his amazing detective work, but even though he’d solved the riddle, he was distraught. These people had stolen from the Russian taxpayers — from him, his family, his friends. Everyone he knew.
«This has to be the most cynical thing I’ve ever seen», he said.
It was the largest tax refund in Russian history. It was so big and so brazen that we were sure we had them. This had to be a rogue operation, and we now had the evidence to expose it and bring these guys to justice.
Which was exactly what we intended to do.
27. DHL
In my opinion, Vladimir Putin had authorized my expulsion from Russia, and he probably approved the attempts to steal our assets, but I found it inconceivable that he would allow state officials to steal $230 million from his own government. I was convinced that as soon as we shared the evidence of these crimes with the Russian authorities, then the good guys would get the bad guys and that would be the end of the story. In spite of all that had happened, I still believed that there were some good guys left in Russia. So on July 23, 2008, we started filing detailed complaints about the tax rebate fraud, sending them to every law enforcement and regulatory agency in Russia.
We also gave the story to the New York Times and to Russia’s most prominent independent news outlet, Vedomosti. The articles were explosive, and the story quickly got picked up widely, both in Russia and internationally.
Several days after the story broke, I was invited by Echo Moscow, Russia’s leading independent radio station, to give a forty-five-minute phone interview. I accepted and, in a live broadcast on July 29, methodically went through the whole ordeaclass="underline" the raids, the theft of our companies, the false court judgments, the involvement of ex-convicts, the police complicity, and most importantly, the theft of $230 million of taxpayer money. The interviewer, Matvei Ganapolsky, a veteran reporter who had years of experience with Russian venality and corruption, was noticeably shocked. When I had finished, he said, «If our broadcast hasn’t been switched off, then tomorrow some arrests must be carried out».