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Sergey Furgal, December 27, 2018

Man of steel ‘Novaya Gazeta’ reports on the backroom business schemes that maybe ruined a Russian governor

Sergey Furgal, December 27, 2018
Sergey Furgal, December 27, 2018

For the past several weeks, Russia’s apparent epicenter of civic activism has moved from its traditional home in Moscow to the Far East, where federal agents recently arrested the governor of Khabarovsk, leading to widespread mass demonstrations. The popular backlash to Sergey Furgal’s ouster has played well in the media, supplying footage of big crowds, colorful slogans, and rare displays of public discontent. Behind the spectacle, however, there’s a convoluted story of cutthroat competition for a steelworks. In an investigative report for the newspaper Novaya Gazeta, special correspondent Irina Tumakova dissected the charges against Sergey Furgal and the business intrigue that may have landed him behind bars. Meduza summarizes Tumakova’s article below in English.

Four killings

Sergey Furgal, until recently the duly elected governor of Khabarovsk, is now suspected of involvement in four murders committed in 2004 and 2005. While many observers have assumed openly that the allegations are plausible, given the rough and tumble of the Far East’s business world at the time, Novaya Gazeta special correspondent Irina Tumakova’s reporting suggests otherwise. 

Evgeny Zorya

In the early 2000s, Evgeny Zorya had a successful food-cart business in the Khabarovsk region. He was so successful, in fact, that he earned enough money to move his family to Canada, where he bought a home and acquired citizenship. For business purposes, however, Zorya periodically returned to Khabarovsk. On October 29, 2004, three days after flying to Khabarovsk on one of these visits, he was shot and killed after a heated argument with a man he apparently knew. A local journalist named Irina Kharitonova told Tumakova that this is the only murder in which Furgal is now implicated that drew any public attention at the time.

Today, federal investigators say Zorya had filed reports with the police about death threats, mentioning a legal battle over a warehouse with a company called “MIF-Khabarovsk” (then owned by Sergey Furgal and his business partner, Nikolai Mistruykov). The authorities say Zorya returned from Canada for another court hearing in this case, at which point Furgal and Mistruykov supposedly had him killed.

It’s unclear why Zorya would have come back to Khabarovsk in October, however, given that he’d already won his arbitration hearings for the warehouse in April and August 2014. Federal investigators now say whole teams of city and regional prosecutors helped cover up murders like Evgeny Zorya’s killing, but he likely wielded more criminal influence at the time than either Furgal or Mistryukov, says Novaya Gazeta.

Alexander Adamov

Five days after Evgeny Zorya’s murder, another businessman named Alexander Adamov was killed in the center of Khabarovsk. Adamov owned, among other things, the bakery that supplied products to Zorya’s food carts. Like Zorya, Adamov lived out of town (in Sochi) and he was only visiting. The authorities initially tried his brother for his murder, but a jury acquitted him. 

According to journalist Irina Kharitonova, theories about the Adamov and Zorya murders were markedly different 16 years ago, when officials suspected the involvement of a mobster named Yuri Maslennikov, known as “The Crab,” who wielded influence in Khabarovsk. Without consulting his syndicate, Maslennikov allegedly gave some of the organization’s money to Zorya and Adamov to help them grow their businesses. This led to tension with the mafia in Komsomolsk-on-Amur, which eventually reached such a boiling point that Maslennikov fled with a sizeable sum of money that didn’t belong entirely to him. His jilted partners in crime then exacted revenge on Zorya and Adamov, says Kharitonova.

Oleg Bulatov

Sergey Furgal is also accused of hiring someone to kill Oleg Bulatov, an ex-cop he employed as a manager at MIF-Khabarovsk. Bulatov quit after a year and started his own scrap-metal business, supposedly creating a rivalry that drove Furgal to order his murder. According to property records from 2004 obtained by Novaya Gazeta, however, Furgal, Mistryukov, and Bulatov all co-owned the firm Bulatov started. Equal shares — 33.3 percent.

Roman Sandalov

Furgal’s supposed fourth victim was Roman Sandalov, who lived in a small town more than 100 miles from Khabarovsk. The man who shot Sandalov was Vladimir Zhuravlev, Furgal’s personal driver. Shortly after Khabarovsk’s gubernatorial elections in the fall of 2018, the local news media reported that Furgal gifted Sandalov’s family 500,000 rubles ($7,000). 

Before he was killed, Sandalov worked as a railway serviceman in Bikin. He bought a truck and moonlighted as a delivery man, often helping friends move scrap metal to a collection point operated by MIF-Khabarovsk. One time, Sandalov delivered a friend’s scrap metal and wasn’t paid by the collector. The friend was naturally disappointed and then asked Sandalov to retrieve the metal (presumably so he could take it somewhere else), which is what Sandalov did. In retaliation, the collectors sent a team of thugs to “deal with him.” When Sandalov saw them coming, he ran and Vladimir Zhuravlev shot him in the back

Zhuravlev remained at large for four years, until he suddenly turned himself in, saying that he never meant to shoot Sandalov and only hoped to scare him. The case then got a new investigator, who lowered the charges to reckless homicide. Zhuravlev ended up serving a year and nine months in prison, and he was ordered to pay 500,000 rubles to Sandalov’s family.

Sandalov’s mother says she wrote an angry letter in 2016 to Vladimir Zhirinovsky (knowing that he heads Sergey Furgal’s political party, LDPR) where she complained that she wasn’t even being paid the damages for her son’s murder in a case linked to Furgal’s business. Soon thereafter (in 2016, not 2018, she maintains), Zhuravlev showed up at her home and handed her 1 million rubles. 

Winning the steelworks

“Amurmetall” is one of four factories that sustains the city of Komsomolsk-on-Amur; it is the Russian Far East’s only active steelworks. For its raw material, the factory relied on a company called “Torex,” which Nikolai Mistryukov and Larisa Starodubova, Sergey Furgal’s wife, acquired in 2007. Though Amurmetall had plenty of customers, mismanagement led the enterprise to bankruptcy in the summer of 2013, when the factory went offline after investor Vnesheconombank refused to issue a new loan.

Yuri Trutnev, Vladimir Putin’s newly appointed envoy in Russia’s Far Eastern Federal District, was ordered to prevent the factory’s closure by finding new investors. This led him to Sergey Furgal, who helped out as a local intermediary, boosting his own political profile considerably in the process.

Though Amurmetall was bankrupt, the factory itself was intact, and the regional government tried repeatedly to sell it. Meanwhile, Mistryukov and Starodubova decided to branch out from raw supplies and get into the steelworks business itself. After they obtained a license to build their own factory, Trutnev approached them about buying the Amurmetall building.

Mistryukov and Starodubova didn’t have enough money to buy the factory on their own, so they were encouraged to find another partner who could secure a loan from Vostochny Bank. The bank, in turn, required this new partner to own at least half of their holding company. As a result, Mistryukov and Starodubova combined their businesses into the “Torex-Khabarovsk” holding company and 50 percent of all its assets were registered either to Pavel Balsky or to a firm called “Armada,” which is owned entirely by Balsky.

Enter Pavel Balsky

According to Novaya Gazeta, Balsky once ran a business selling top-quality men’s suits, which put him in contact with the Rotenberg brothers — two billionaires who enjoy a notoriously cozy relationship with President Putin. In 2006, Balsky was elected president of the National Union of Judo Veterans (one of the Rotenberg brothers’ passions and major links to Putin), and four years later he joined the board of directors at SMP Bank, which Arkady Rotenberg controls. In November 2012, Balsky also became the first deputy president of the “Dynamo” professional ice hockey team, serving under president Arkady Rotenberg.

With Balsky involved, Vostochny Bank issued a loan to Torex-Khabarovsk, allowing the holding company to buy Amurmetall’s asset portfolio in 2016 for 2.47 billion rubles (now about $34.4 million). Novaya Gazeta suggests that Balsky was able to secure a generous loan thanks to Oksana Misona, a beauty salon magnate and board member at Vostochny Bank whose children supposedly bear a striking, perhaps suspicious, resemblance to Balsky. Misona even put up 280 million rubles ($3.9 million) of her own Moscow real estate as collateral to secure the loan.

The new owners restored the factory’s original name, “Amurstal,” and incorporated it into their business chain, resuscitating the enterprise, thanks in no small part to Yuri Trutnev’s apparent behind-the-scenes lobbying for export restrictions on scrap metal, which made Amurstal the region’s only buyer. Trutnev also reportedly promoted tax cuts on railway shipments that benefited Amurstal.

Between 2017 and 2019, Amurstal’s profits gradually rose.

As the business flourished, Sergey Furgal reaped the political rewards. Though his quarter of the factory technically belonged to his wife, the public recognized that he was the true owner of the shares. He became so popular in Komsomolsk-on-Amur that United Russia didn’t even field a candidate against him in the 2016 State Duma race.

Money goes missing

In February 2020, acting as the controlling stakeholder, Pavel Balsky’s “Armada” called a shareholders meeting and ousted Sergey Kuznetzov as Amurstal’s CEO. Three days later, Kuznetzov filed a police report accusing Balsky of telling him to confess publicly to being part of an embezzlement scheme at Amurstal that Kuznetzov denies is even possible. In the same statement, Kuznetzov also said that Balsky brought a delegation of Chinese businessmen to the factory, supposedly hoping to sell them the business.

A few months later, in July, Kuznetzov was arrested along with Amurstal’s former deputy head of security for allegedly plotting to defraud the company.

On February 28, Amurstal appointed Grigory Freidin as its new CEO. Only 34 years old and educated as a lawyer, Freidin’s resume includes executive positions at more than half a dozen other companies, all of which have gone belly up. (When Irina Tumakova asked him about these failed endeavors, Freidin answered: “I can tell you that I don’t like your work, either.”) 

Freidin told Novaya Gazeta that the steelworks was in terrible shape when he took over. He says production was stalled and there were more than 150 million rubles ($2 million) in unpaid heating and electricity bills. The power and hot water had actually been shut off, he says. According to Freidin, an external audit discovered that most of the factory’s assets were pledged as collateral to companies owned by Larisa Starodubova and her daughter, beginning in the summer of 2019. When he showed up, he says the factory was 2 billion rubles ($27.8 million) in debt, supplies had run out, and the business accounts were bone dry. Freidin says he brought back clients with the help of Pavel Balsky, who attracted new investors. 

Since Freidin became CEO, he says the factory has paid down its debts by about 75 percent, starting with the unpaid utility bills.

Novaya Gazeta, however, found that Feidin’s account doesn’t line up with accounting records in the company’s financial disclosure for 2019, which show that Amurstal paid 1.6 billion rubles ($22.3 million) in taxes that year and exported 64 percent of its production to the South Korean car manufacturer Daewoo (the rest went to domestic clients). Additionally, profits in 2019 were up 7 billion rubles ($97.6 million) on the year. On December 31, 2019, the factory’s inventories, work in progress, finished goods, and prepared shipments were valued at 819 million rubles ($11.4 million). The company had even paid off more than half of Vostochny Bank’s loan, leaving just 945 million rubles ($13.2 million).

The endgame

Vostochny Bank’s loan in 2016 to Torex-Khabarovsk provided enough capital to buy Amurmetall’s assets at auction, but the steelworks still needed cash to operate. This was a problem because all of the factory’s assets were pledged to Vostochny Bank as collateral and no other banks would issue loans. Pavel Balsky solved this by raising 700 million rubles ($9.8 million) from close friends and colleagues, leaning once again on Oksana Misina’s generosity. 

In the summer of 2019 (when Freidin says the factory’s money started disappearing), these private investors suddenly demanded their money back. Not prepared for this, Amurstal had to use its cash accounts and profits to cover the debt. Vostochny Bank (where Oksana Misina is a board member) then got involved and used technicalities in the loan paperwork with Torex-Khabarovsk to impose two fines, each 78 million rubles ($1.1 million), though an appellate court later struck down one of these penalties.

In October 2019, federal agents arrested Nikolai Mistruykov for his supposed role in the murders described above. As part of the bust, investigators raided Amurstal’s offices, even though Mistruykov acquired the business 11 years after the killings in question. Three months after the arrest, by which time Mistruykov had gone half-blind in jail and been diagnosed with cancer, his wife acted as his legal proxy and sold his 25-percent stake in Amurstal to Pavel Balsky at four times below the offering price. 

Sergey Furgal’s wife, Larisa Starodubova, now finds herself in similar circumstances and it is virtually assured that she will lose her stake in the steelworks by the end of the year. Even when he was governor, Furgal never wielded the administrative clout needed to protect his wife, who’s lost multiple arbitration hearings in Khabarovsk.

Two days before Sergey Furgal was arrested, Pavel Balsky’s “Armada” bought the remaining debt Torex-Khabarovsk owes to Vostochny Bank, which means Starodubova’s quarter stake in Amurstal is now pledged to Armada. All Balsky has to do now is tell the company he controls to skip one loan repayment and Starodubova’s shares will be his.

Summary by Kevin Rothrock

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