The Real Russia. Today. Origins of the Russian mafia, speculation about the Calvey case, and key questions about the Soviet-Afghan War

Tuesday, February 19, 2019

This day in history: 65 years ago, on February 19, 1954, the Presidium of the Supreme Soviet of the Soviet Union issued a decree transferring the Crimean Oblast from the Russian Soviet Federative Socialist Republic to the Ukrainian SSR.

• How ‘the Russian mafia’ came to be
• Five business associations ask Russia's top investigator to move American investment manager to house arrest
• These are Russia's charges against American investment manager Michael Calvey, and here's why he says it's all baloney
• Economist Andrey Movchan says liberals' responses to Calvey's arrest reveal the fundamental flaw in their thinking
• Human rights activist Olga Romanova thinks the FSB is trying to save face with Calvey's arrest, and it's serendipity for his enemies
• 30 years later, Meduza answers key questions about the Soviet-Afghan War
• After enormous fight in Moscow café, Chechen and Azerbaijani officials suspect foul play
• Russian anti-corruption leader releases a report about unsanitary school catering in Moscow, but a fake image spoils the big reveal
• Meduza's roundup of top news reported at BBC Russian Service, The Bell, Mediazona, and Kommersant

From Stalin’s camps to Putin’s laws ⚖️

On February 14, Russian President Vladimir Putin introduced a bill into the State Duma that aims to combat the country’s unofficial criminal hierarchy. Among other measures, the proposal includes new penalties for those who are known in Russia as vory v zakone (VOR-ee v za-KON-ye), a term for powerful organized criminals that translates literally as “thieves in the law.” Putin’s bill describes them as “individuals who hold a high rank in the criminal hierarchy.” The proposal would also penalize participation in “gatherings of organizers, leaders, or other representatives of criminal organizations,” more commonly known as skhodki in the criminal community. Under the new bill, “criminal authorities” deemed to be the direct leaders of a group of organized lawbreakers could face a life sentence.

Most Russians have likely heard a variety of legends about the criminal hierarchy in that country, but even they may have difficulty telling fact from fiction in those tales. Meduza asked journalist Tatiana Zverintseva, who worked on the organized crime beat for many years, to answer a few basic questions.

Read the article here: “How ‘the Russian mafia’ came to be”

The Michael Calvey case

👔 Friends in businessy places

Five business associations have appealed directly to Russian Federal Investigative Committee Director Alexander Bastrykin, asking him to transfer American investment manager Michael Calvey from pretrial detention to house arrest, according to the magazine RBC.

Calvey, the founder of the Baring Vostok investment firm, was detained last week and formally arrested over the weekend. The letter to Bastrykin bears the signatures of the leaders of the American Chamber of Commerce in Russia, the German-Russian Chamber of Foreign Trade, the Association of European Businesses, the Franco-Russian Chamber of Commerce and Industry, and the Russian Union of Industrialists and Entrepreneurs.

On Monday, Russian Business Commissioner Boris Titov condemned Calvey’s arrest, calling it “clearly unlawful.” Calvey has also received public support from Yandex CEO Arkady Volozh, Sberbank head German Gref, and Tinkoff Bank founder Oleg Tinkoff.

⚖️ They said, he said

What prosecutors say: First Collection Bureau (PKB), a company owned by the American investment manager Michael Calvey, borrowed 2.5 billion rubles ($37.7 million) from Vostochny Bank. Instead of repaying that loan, Calvey transferred his shares in another company called International Financial Technology Group to Vostochny Bank in February 2017, telling the bank’s board of directors that the shares were worth nearly 3 billion rubles ($45.3 million). In February 2019, Vostochny Bank board member Sherzod Yusupov went to the Federal Security Service (FSB) and accused Calvey and the other participants in the deal of deceiving him. The FSB says it then verified these allegations, finding an audit assessment allegedly stating that IFTG was worth just 600,000 rubles ($9,050), not 3 billion rubles. Prosecutors say this is how Calvey and his accomplices committed fraud.

IFTG’s audit assessment: In court on February 15, investigators stated that PricewaterhouseCoopers carried out the audit, but the judge noticed that the materials submitted by the prosecution did not contain this assessment. PricewaterhouseCoopers, meanwhile, has refused to comment. Previous audits publicly available support Calvey’s claims that IFTG was worth more than 2 billion rubles around the time he sold his shares to Vostochny Bank.

What Michael Calvey says: When carrying out the IFTG deal, no one deceived Sherzod Yusupov, who had direct access to all the information involved in the transaction. Yusupov and Artem Avetisyan are shareholders who gained stakes in Vostochny Bank after its merger with Uniastrum Bank in 2017. (Sources told The Bell that Avetisyan is close friends with Dmitry Pastrushev, Russia’s agriculture minister and the son of longtime National Security Council Secretary and former FSB Director Nikolai Patrushev.) Baring Vostok learned that Avetisyan withdrew considerable sums of money from Uniastrum Bank through dummy transactions on the eve of the merger with Vostochny Bank. In response, Baring Vostok filed a lawsuit in the London Court of International Arbitration. Calvey says Yusupov is trying to use false criminal allegations in Moscow to pressure Baring Vostok into withdrawing its lawsuit in London, and prevent the dilution of Avetisyan’s Vostochny Bank shares in a follow-on offering planned this April (to boost the bank’s capital reserves, in accordance with demands from Russia’s Central Bank).

👑 Movchan is ashamed of you, liberals

In a column for Carnegie Moscow Center, economist Andrey Movchan says liberals’ objections to the Michael Calvey’s arrest are largely based on the same mindset that fuels Russian lawlessness. Liberal critics say Calvey has done too much for the economy to deserve prosecution, they complain that the arrest coincided disastrously with the Sochi International Economic Forum, and they argue that the case will scare off Russia’s remaining foreign investment. Movchan says these responses “correspond to the same spirit of arbitrariness” that dominates the country today: the idea that safety is owed only to those deemed “important” and “necessary.”

The only difference between liberals (both in the establishment and the opposition) and security officials, Movchan says, is that liberals think Calvey fits these criteria, while siloviki think Artem Avetisyan’s ties to National Security Council Secretary Nikolai Patrushev make him the more essential figure. (Movchan says Russia’s security agencies are also worried that Calvey might insist inconveniently on minority shareholder rights or go running to Western politicians, like Bill Browder, about tax shenanigans.)

How did Russia get here? Movchan says the chaos of the 1990s was supposed to necessitate the creation of a system of rules and laws safeguarding property rights. This would end Russia’s “feudal pyramid,” where any act that can lead to commercial or political conflict is “toxic” without reliable protection from organized crime or a branch of the siloviki. Instead, the group “most distant from both honest business and society” won this competition and preserved the era’s arbitrariness. Because Russia generates enough wealth from natural resources, Movchan says, the authorities can focus on distributing the country’s wealth without worrying about creating more, meaning that they don’t have to bother protecting any social strata but themselves. Foreign investment is just another resource to grab.

And what about Calvey as an individual? Movchan says he knew what he was getting into and “fell into the trap of his own success.” Faced with losing hundreds of millions of dollars in commissions and a risky withdrawal from Russia that could have meant major losses, fines, and damage to his reputation, Calvey remained in Russia for obvious reasons. Movchan says there will always be businessmen like Calvey in Russia and in other lawless countries. These entrepreneurs aren’t stupid, he argues. They know the risks, but they ignore the dangers.

👮 Romanova says it's all about Department “K,” stupid

In a column for Carnegie Moscow Center, human rights activist Olga Romanova argues that the key factor in Michael Calvey’s arrest was the Federal Security Service’s financial counterintelligence Department “K,” which she says is in need of a “professional success” following a scandal that damaged the new director’s reputation. Before he took over the department, General Ivan Tkachev was caught on tape sharing too much information while threatening Alexander Shestun, the former head of the Moscow Region’s Serpukhovsky District. Romanova says Department K’s institutional needs coincided with the interests of whatever powerful figure is backing Artem Avetisyan. (She doesn’t think Avetisyan’s connections to Nikolai Patrushev are what mobilized the FSB on his behalf.)

Romanova also dismisses several rival conspiracy theories, rejecting arguments that (1) Baring Vostok is being punished for its connections to the Magomedov brothers, (2) the authorities fear Calvey will turn to funding political and investigative work like Bill Browder, and (3) the authorities are targeting Baring Vostok for its assets (she says the company really only has its reputation at stake).

30 years later 🕰️

February 15 marks 30 years since the day the last Soviet soldiers were withdrawn from Afghanistan. The Soviet-Afghan War lasted nine years: it was Russia’s longest war in a century that also included a civil war, two world wars, and a number of international conflicts. Why did Soviet leaders decide to invade Afghanistan despite internal opposition? What role did the United States really play in the conflict? What do present-day Russian government officials think about the war? Meduza answers these and other questions below.

Read the full report: “30 years later, Meduza answers key questions about the Soviet-Afghan War”

Meddlesome bullies ⚔️

Adam Delimkhanov, a deputy in Russia’s federal State Duma from the Republic of Chechnya, met with Azerbaijan’s Ambassador to Russia Polad Bülbüloğlu after a massive armed attack on the southeast Moscow café Neolit, Vestnik Kavkaza reported. During the Valentine’s Day attack, dozens of men entered the café and began shooting, sparking a physical conflict. No one in the facility was seriously injured. The establishment’s owner suspected that a grudge between Chechens and Azerbaijanis in Russia’s capital might have been behind the attack.

A video of the meeting posted on the Vestnik Kavkaza website was later deleted. A recording remains available on Twitter.

Delimkhanov, the Chechen Duma deputy, said he believed the fight was staged in order to interfere with Chechen-Azerbaijani relations. Bülbüloğlu agreed, saying, “It would be difficult to break down our friendship. Unfortunately, there are third parties who are making efforts to do just that.”

The phantom toilet 🚽

Alexey Navalny’s Anti-Corruption Foundation (FBK) has published a new investigative report featuring an interview with a woman identified as Natalia Shilova, who says she used to work at a business called “Moscow Schoolboy.” In a video recording, she describes how the company supplies the city’s schools and kindergartens with low-quality food. According to the magazine RBC and anti-corruption researchers at the political party Yabloko, Moscow Schoolboy has ties to catering magnate and Putin ally Evgeny Prigozhin.

Shilova says she worked for the company from December 2016 to April 2017, and claims the business is part of the corporate structure of “Concord,” which Prigozhin owns. She told Navalny’s researchers that she deliberately took the job “to find out what they’re feeding our children.”

At Moscow Schoolboy, Shilova says she was responsible for monitoring the quality of food preparation at 25 catering facilities that served schools, kindergartens, and specialized secondary schools. She told FBK that the company falsified the veterinary certificates on its meats, which were the same low quality products used in dog food. The meats were apparently received without packaging and stored on a dirty floor.

Shilova’s video interview also features several photographs, including an image of a toilet that was supposedly used at one kitchen to store processed fruits and vegetables. As it turns out, however, the photograph in FBK’s report was taken no later than 2011

Spokespeople for Concord wrote on social media that the company has never employed anyone named Natalia Shilova, urging reporters to reach out to Moscow Schoolboy for further information. According to a report by Federal News Agency (which investigative journalists say is the core outlet in Evgeny Prigozhin’s “media factory”), Moscow Schoolboy intends to sue FBK for defamation because of its interview with Shilova. Federal News Agency also published a video where Moscow Schoolboy acting director Nikolai Fateev takes a camera crew on a tour of the company’s warehouse and production floor.

Late on February 18, Natalia Shilova’s interview briefly disappeared from the Navalny LIVE YouTube channel. Administrators later republished the video, this time without the photograph of the toilet. According to FBK attorney Lyubov Sobol, Shilova says she received this image from “another employee at the company” in February 2017. The rest of the photos in FBK’s investigation, Sobol says, were taken by Shilova herself in 2017.

In January, FBK published an investigative report about a mass outbreak of dysentery at nine kindergartens in Moscow, all serviced by Evgeny Prigozhin’s companies. Russia’s consumer protection agency Rospotrebnadzor told the radio station Ekho Moskvy that there were 127 cases of “acute intestinal infections, including dysentery.” Afterwards, Concord invited Lyubov Sobol to visit its facilities and inspect the quality of its food in person. This visit never took place. On February 12, Concord announced that “two parents’ group representatives” inspected its production floor in the city of Lyubertsy, outside Moscow.

Top stories from Russia’s news media

BBC Russian Service

• 🗳️ A presidential working group has endorsed legislative amendments that would reduce the maximum “municipal filter” to five percent in gubernatorial elections. The reform would cut the existing requirement in half, meaning that politicians seeking candidacy would need signatures from half as many city council members in their region. Opposition political parties have demanded the filter’s total abolition, though many politicians have welcomed a lower threshold, which could take effect by this September’s elections, if lawmakers hurry.

The Bell

• 🚧 The Bell has identified 395 residential buildings in Moscow that were slated for demolition and renovation by order of Mayor Yuri Luzhkov. Moscow officials could begin remodeling work on these homes almost without consulting residents, if they wished. Deputy Mayor Marat Khusnullin says Mayor Sobyanin has no such plans, but The Bell reports that the Luzhkov-era paperwork is being cited as grounds for demolition in “targeted cases,” such as two five-story brick buildings in the Kuntsevo District, where residents are in a dispute with the PIK Group real estate company. Khusnullin says only three developer contracts under the Luzhkov plan are still active, and one of them is the notorious Kuntsevo site. Generally speaking, Luzhkov’s renovation program was more legally cumbersome for developers and more costly for the city, which is why Mayor Sobyanin launched his own campaign.
• 📰 State Duma Speaker Vyacheslav Volodin wants to make the owners of mass-media outlets personally responsible for publishing soon-to-be illegal “fake news.” Volodin’s anger stems from a story that appeared at Ura.ru on February 16 citing a source in the Duma who claimed that regional authorities are lobbying lawmakers to ban people who don’t own garage space from buying cars. After the story was published, Volodin said he’d like to invite Ura.ru’s proprietor to a committee hearing to discuss the mass dissemination of false information. Ura.ru chief editor Ivan Nekrasov says he’s willing to accept Volodin’s invitation.
• 📈 Kaspersky Lab is blaming its 25-percent sales drop in North America last year on “the complex geopolitical situation.” Despite the struggle in America and Canada, the company’s revenues grew 4 percent in 2018 to $726 million. In May 2017, six U.S. intelligence and law enforcement agency chiefs said in an open Senate hearing that they would not let their networks use Kaspersky software because of concerns about its links to the Russian government. According to Bloomberg, Kaspersky Lab has maintained a “much closer working relationship” with the FSB than it has publicly admitted.

Mediazona

• 👮 Anastasia Yasenitskaya reports from Irkutsk, where Sergey Struchinsky filed a report against three police officers who tortured him when investigating his stepbrother for murder. Struchinsky later disappeared, and in April 2016 his body washed up on a local beach, showing signs of further torture. Relatives says the now former police officers convicted of torturing him repeatedly threatened him and continue to threaten the family, but the investigation into Struchinsky’s death was suspended in February 2017. On February 19, 2019, the three now former officers who tortured Struchinsky in late 2015 were convicted of using excessive force. Two officers were given prison sentences of three and a half and four years, and the third was sentenced to probation.
• 👮 In 2004, forty-three-year-old Ulyana Khmeleva was sentenced to 14 years in prison on various drug charges. She says police framed her after she discovered a group of corrupt cops involved in the heroin trade. While behind bars (where she says she experienced freezing cold temperatures and endless sewing work, and witnessed the deaths of fellow inmates), Khmeleva filed 770 complaints with prison officials, who rejected almost every one. In roughly 11 years at two prisons in Mordovia, she says she saw officers from the regional public monitoring commission visit the facilities only twice. Mediazona published a 3,000-word “monologue” by Khmeleva.

Kommersant

• ⚖️ State prosecutors have reportedly asked a court to impose the maximum 20-year prison sentence on former FSB Information Security Center agent Sergey Mikhailov and former Kaspersky Lab cybersecurity expert Ruslan Stoyanov, who are accused of committing treason by selling confidential case files from a felony investigation in 2013 against Pavel Vrublevsky, the former head of the payment services company Chronopay. Sources told Kommersant that Mikhailov and his three accomplices allegedly received $10 million for sharing the classified data with the FBI. Vrublevsky told Kommersant that 20 years in prison is an appropriate “symmetrical response” to the punishments imposed on Russian citizens accused of cybercrimes in the United States. In April 2018, journalists reported that Dmitry Dokuchaev and Georgy Fomchenkov (Mikhailov’s other two suspected accomplices) signed plea bargains.
• ⚖️ Moscow’s Basmanny District Court has arrested Vladimir Grekov in absentia. A former board member at the “Moskva” department store chain, Grekov is now considered by police to be a top figure in the Taganskaya mafia. In late January, the same court previously jailed the group’s two presumed leaders, Igor Zhirnokleev (“Greasy”) and Grigory Rabinovich (“Grisha Tagansky”). Grekov’s arrest in absentia is intended to expedite his extradition to Russia, if and when he is apprehended.