The System of Putin

State-sponsored raids

As a result of a sinister alliance between the intelligence service and the Prosecutor General's Office, hundreds of thousands of business people are in prison. This is one reason for the disastrous state of the Russian economy

von David Crawford , Marcus Bensmann

© Nick Böse

“What we really have here is a state-sponsored system of extortion“, said Boris Titov, the Russian president’s business commissioner, in a Russian newspaper in 2011. Titov was appointed in the brief springtime under interim President Medvedev. He also mentioned another number: every year around 70,000 companies fall victim to „raids“.

In Russia, a „raid“ denotes the forced takeover of a company, sometimes by masked men. The takeover is often justified with forged contracts. Or by fabricated criminal offenses. The rightful owners land in prison, and later corrupt justice officials recognize the forged contracts as authentic. The management of Hewlett-Packard was aware of the danger of raids. Records presented to the State Court in the German city of Leipzig detail bribe payments that were allegedly paid to Russian officials. The payments began in 2004 after the American computer giant signed a contract to deliver IT infrastructure for the Russian Prosecutor General’s Office. Court records show officials of the spy service and public prosecutors were also taken into account in order to prevent raids against HP partner firms. According to German investigators, HP managers arranged the payments because the firm’s partner companies in Russia were also targeted by the Russian spy service.

Only after HP paid bribes to the intelligence service could the companies feel halfway safe. In this sense, it was a kind of protection money. A press spokesman for HP declined comment in responce to questions from CORRECTIV about the case, citing the ongoing investigation. The State Court in Leipzig has yet decide whether it will allow the prosecution to bring the case to trial. In 2014, A US court convicted HP’s Russian subsidiary on corruption charges related to this business deal in Russia and sentenced the firm to a fine.

A different „raid“ case is well known in Germany: the Bavarian businessman Franz Sedelmayer is one of the very few people who successfully defended himself against a „raid“. In the mid-1990s, Sedelmayer failed to pay protection money, and he lost his company in St. Petersburg.

Mr. Sedelmayer spent twenty years fighting in Swedish and German courts for compensation. For example, he showed up at a Berlin air show with a bailiff to have an Aeroflot airplane impounded. The Russian pilots took off early and prevented the plane from being seized. In the end, Mr. Sedelmayer had the building which once housed the former Soviet Union trade office in Cologne – and a former KGB base – auctioned off to his benefit. Sedelmayer received around 5 million Euros.

Foreign business people can at least leave Russia if they have to. But Russian business people risk facing complete destruction. Not only could they lose all their belongings. They also face being taken into custody. In prison, they have little protection against violent attacks.

Alarmed by the shocking figures, the Russian interim President Dmitry Medvedev tried reform. A law was passed in 2011 that prohibited pre-trial custody for people accused of economic crimes.

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But little has improved since then. In an October 2014 study, Andreij Yakovlev from the Moscow Institute for Industry and Market Studies came to a sobering conclusion: it was not only junior officials who were thwarting efforts at reform. Above all, it was the leading officials in the state authorities who held on to the Soviet ideology of fighting any type of business activity. First and foremost the Prosecutor General’s Office and the intelligence service FSB, the study found. CORRECTIV has asked the Russian Presidential Office, the FSB and the Russian Prosecutor General’s Office for comment on these allegations. As of publication, there was no response.

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Putin Week at CORRECTIV.

This is the third story in an investigative series. All our stories:

German-English Translation: Noah Walker-Crawford

Copy Editor: Ariel Hauptmeier

In Cooperation with RTL und Mediapart.