There is no such thing in Russia as a get-out-of-jail-free card. Everybody can get there. Not easy to get out. As the founder of the KGB Felix Dzerzhinsky used to joke, "Lack of criminal records is not your merit, but just our fault." The sword of Damocles hangs over almost every successful domestic entrepreneur.
On April 5, the court martial of the Moscow garrison opened the hearings of a case against the former chief of the banking sector at Department K of the Federal Security Service (FSB), Kirill Cherkalin. In April 2019, during a search operation of Cherkalin’s apartment, held in connection with an insignificant case involving a pawnshop protection, the operatives found 12 billion rubles in cash (roughly 200 million U.S. dollars). An extreme record setting case for the current top brass at the FSB. Therefore, it's not a mystery that they decided to tell others, first and foremost Putin, that this was neither their fault nor responsibility.
The heads of the FSB deployed a massive cover up operation with the full support of the state controlled media.
Days after the search, on April 25, Cherkalin's former colleagues, Dmitry Frolov and Andrei Vasiliev, both of whom are former counterintelligence officers, were detained. This detention was due to another unrelated small case following a petition filed by murky FSB affiliated businessman, Sergei Glyadelkin. But in the official public statement it was declared that they were acting together as a group with Cherkalin.
Later investigators established the large sum of money had been stolen from the State Deposit Insurance Agency (ASV) without the help nor the involvement of Frolov and Vasiliev.
Cherkalin admitted that half of the money was his own criminal proceeds and agreed that all his assets including a pair of gold cufflinks, which Cherkalin in a theatrical manner removed, could be confiscated by the state. Reports also indicated that half of the sum belonged to the former deputy chief of the ASV, Valery Miroshnikov, who soon after left Russia and submitted a dismissal notice from all his positions in the ASV. This half, for some yet undisclosed reason, has remained unconfiscated though it is now viewed without a doubt as illegal after Cherkalin’s explanations. The military court neither mentioned these facts nor where the money was at the beginning of the hearings. Furthermore, nothing was reported on the investigation of the huge record setting looting. Even names of DIA and Miroshnikov were failed to be mentioned during the court proceedings.
Cherkalin agreed to the court proceedings in a simplified mode without going into any substance of the case. Based on his plea this simplified mode means that no evidence is to be considered in substance by the court. Such a procedure was made possible because he agreed to provide information about other criminal offences. He gave information, which was not publicly discussed or disclosed. It is very difficult to understand if this information was of true or of any value. He will get a private sentence so there will be no public discussion about what he is actually being sentenced for and without the right to appeal. Everybody is happy with such a deal: FSB, DIA, Cherkalin, Investigative Committee and finally the judge, for him it's the easiest possible job.
Everyone except Frolov and Vasiliev..
Why?
Investigators found out that neither Dmitry Frolov nor Andrei Vasiliev, who had resigned from active FSB duty six years prior to the events, could be qualified as Cherkalin’s accomplices in DIA affairs.
Frolov and Vasiliev are probably not angels at all as FSB officers dismissed on the basis of the lack of trust but have nothing to do with this DIA case and still have been kept in cells for two years.
Now to justify that unjustness to two ex-officers, the FSB has to find another reason to incriminate them. It should not be a big deal. That is how system works with Russia. As proven by the country's 99.8% conviction rates in criminal cases.
Why the FSB needed to arrest Frolov and Vasilev in the first place will be explained soon.
Meanwhile, experts believe that the case overshadows the struggle for a major oil industry asset worth more than $ 2 billion and businessman Glyadelkin is a mere proxy acting for the werewolf law enforcers.
Frolov, and in a lesser degree, Vasiliev are the link FSB needed just to reach the owners of that oil asset. And the public story regarding their involvement into the Cherkalin-Miroshnikov DIA looting was created to at least temporary distract attention from real accomplices of Cherkalin at the top of the FSB and/or those in the FSB and the Central Bank of Russia who are responsible for such a failure of supervision. This simple trick has given them the benefit of two years in order to invent a better defence by sabotaging the investigation. They have managed to stay under the radar and the FSB general Tkachev in charge of the case was even promoted by Putin. Also a top investigator Krasnov, who started the case, was appointed to the position of the General Attorney of Russia. Before this he led a questionable investigation into the fatal shooting of opposition leader Boris Nemtsov.
Mature asset
The story of RNG’s oil business is indicative of this. The company works with hard-to-recover hydrocarbon reserves in Yakutia. A province in Eastern Siberia about the size of the country India. Russia has run out of light oil, and serious investments are required in order to develop the permafrost of the Yakut subsoil, as well as to cope with the huge distances and the lack of roads. JSC RNG was founded in 2003 as a geological exploration company and in 2011, after a few smaller projects in other Russian regions, came to Yakutia. All the necessary infrastructure – roads, wells, grids, pipelines and production facility installations – has been developed in the middle of the Taiga in just three years with development having an active start in late 2015. Exploration and development of oil and gas reserves at seven other big neighboring fields is underway. Billions of dollars of investment have yielded results, oil started flowing steadily for export shipments from the main field in 2019 with revenues of close to 400 million dollars a year.
By the way, how does this relate to Frolov?
It is a very good question and right on time.
For the six years following his stepping down from the FSB, Frolov has been employed as an economic security officer by a subsidiary of that oil company.
He was bored by this job and tired of a small salary, early hours at the office and often trips to Yakutia from Moscow and decided to find a way to get easy money by extorting a big amount in dollars from the owners of the oil business with the threat of a criminal case and for that he needed reliable accomplices and a suitable situation.
Professional victim for hire by FSB
The construction company owner, Sergei Glyadelkin, became known to the Russian public for the first time in 2010 when he informed the authorities that, then Deputy Mayor of Moscow, Alexander Ryabinin was extorting a bribe from him.
Both of them, according to the newspaper Nasha Versija, worked at the multi-billion INTECO group of companies, which were owned, until his retirement, by the family of Moscow Mayor Luzhkov and they had been good friends for 15 years.
It was a high-profile case savored by the media. It ended with a high-ranking official being caught red-handed by FSB officers. In fact, he was later convicted under a different article of the Criminal Code for a different, lesser crime and given a suspended sentence, but there is more on that below.
In 2019, however, Glyadelkin was back in the spotlight, once again playing the victim. At that time he said that he trusted the FSB officers Frolov and Vasiliev, the very ones who had caught the Moscow official in the act in 2010 allegedly misled by them about perspectives of the project. Based on that fortunetelling he sold 49% of the shares that had been pledged to a Russian bank. The company named Yurpromconsulting (YPC) alongside the Moscow Government, had co-financed one municipal development project, for the continuation of which Ryabinin had allegedly extorted a suspiciously small bribe.
However, in 2012, a court found that the project had been cancelled by the government as early as 2009. That is, by 2011 it had become nonexistent. That is why Ryabinin was convicted for fraud, not for bribery, as he could not exert any influence on a canceled project. The project was dead by then. An FSB fortuneteller in fact predicted not a future but a past. It is like predicting in 2011 a football match which, in fact, had been lost by Glyadelkin in 2009. Everybody knows how much the long dead, abandoned and highly indebted pledged project cost. Right? Nothing or close to nothing. By that time, Glyadelkin, who most likely had been informed of the reality of what was happening with the project, was very aware of things like buried projects and hopes. That is exactly why the stake was sold in front of a notary and was paid for in another year at face value.
By 2019, Glyadelkin apparently forgot this episode, as well as the fact that the company had an outstanding loan of 1.9 billion rubles, under which all of the company's few assets and 100% of its shares were pledged. The bank could at any time foreclose the shares out of court, especially since the loan had defaulted a few months before the divestment happened.
Frolov, Glyadelkin and Vasiliev decided to use this old story to attack ex-bankers and extort money from former managers of the lender who by that time had stepped down from the bank and became owners of the successful oil exploration company. They all knew that Glyadelkin was a good friend of FSB general Feoktistov since he had received state protection in the Ryabinin case that was literally provided by the division headed by Feoktistov. Feoktistov was a companion in arms with FSB general Tkachev, a top boss of department K of the FSB that covers all financial market activity including real estate, banks, customs and state regulatory bodies from the Central Bank of Russia to the President Administration. Feoktistov and Tkachev had both known Glyadelkin since 2010. More important Tkachev is a relative of a former Deputy Head of the Investigative Committee of Russia and now a General Attorney of Russia, General Krasnov. A dream team to every successful extortion in Russia. So Glyadelkin, Frolov and Vasiliev, met in a cafeteria in Moscow in April of 2019 and agreed to extort from two owners of the oil exploration company 20 million dollars and split the profit 50/50. As a formal cause for attack they decided to challenge the value of an old deal. Not in a civil case but via a criminal case. Glyadelkin told to his new accomplices that he could take care of the criminal case. And he did.
How do we know that?
The answer is easy. The entire conversation was taped by an FSB sting operation and is now well documented in the criminal case file.
A few days later, Glyadelkin reported the story to Tkachev and Feoktistov, and most likely officered to them share proceeds as the conspired attack is clearly baseless and unlawful. But acting FSB generals do not need ex-FSB junior officers to be an equal partner in a such simple extortion operation. They need only targets. So they took the idea for themselves. Now they needed to somehow get rid of the annoying Frolov and Vasilev with their ideas.
A few more days after the immediate subordinate of Tkachev, Cherkalin, was arrested with a huge amount of money as we have mentioned above on the unrelated case.
The life of FSB officers is full of adventures and opportunities. Not all of them are successful. Tkachev was focused on his career all his life and for him this situation became life or death as he may be dismissed from the head of department K position and lose all chances to became the Head of the FSB Economic Service or even First Deputy Head of FSB, which he wanted to take in the future. So Tkachev was assisted by Feoktistov to find team members for Cherkalin in order to avoid the accusation that he was involved himself. It was clear that Cherkalin was not alone and need for a team of bad guys to present to public was indeed essential for the general. So he decided to get rid of his unwanted partner Frolov, conceal the tape and ordered turning the idea of Glyadelkin into a criminal case against Frolov and those two businessmen in quite a successful attempt to draw attention away from himself. It was very easy as all they needed for that was the signature of Tkachev’s relative Krasnov to proceed with the investigation. Less than 24 hours later a preliminary investigation came out with accusations against Cherkalin, Frolov, and Vasiliev, as they were responsible for 200 million dollars from DIA and with a smaller Glyadelkin episode with two ex-bankers being accused as well, just to link them together somehow. Normally preliminary investigation requires up to 30 days in such cases a lot more. 24 hours is the registered record for this case.
Furthermore, in 2019 top FSB officials began helping Glyadelkin overcome the expired statute of limitations. It is a new and very promising method used by the FSB where they can ensure any decision can be taken against anybody on financial matters without any involvement of civil courts or even the consideration of the civil status of limitation. Glyadelkin acts as the so-called professional victim with close ties to the government and law enforcement agencies, hired by the FSB to stage an attack on privately owned oil assets and at the same time distract public attention from the root source of Cherkalin’s money. Investigation against businessmen goes easy. At the initial stage of the investigation Krasnov appoints a tamed brought from the periphery investigator major Ovchinnikov. Tkachev assigned a trusted colonel Smirnov to assist him and supervise the “independent” investigation. Those two do just two key simple things: as a first step they concealed the FSB’s tape record with the alibi of businessmen. Secondly, they conceal true financials of the YPC including data about old debts from a personally hand-picked unknown inexperienced valuator. The respected state-owned expert agencies one by one refused to make valuations of the business without such vital data. But that is the case when the smallest and weakest wins as they are ready to just confirm everything they are asked for by the criminal officers: the duet of Ovchinnikov and Smirnov. Actually, this constitutes a severe crime by itself but not when your former boss is now a General Attorney in Russia. The cooked criminal case based on the fraud of the investigators moves forward endorsed by the head of the Investigative Committee, Bastrykin, a law school class mate of Putin. He is known for many strange acts which include authorizing an old Stalin era NKVD style uniform for his service men. By the way we are not even going to compare them with the Gestapo or SS units but it would be very strange if nowadays Germany would reintroduce their uniforms.
Picture it...
Glyadelkin overlooked something but FSB is always ready to help
On April 25, 2019, the Investigative Committee accused entrepreneurs Alexander Bondarenko and Vladimir Stolyarenko of causing damage by misleading Glyadelkin on the value of 49% of the shares of YPC, which was a debtor of the Eurofinance Mosnarbank in 2011 for an unpaid, defaulted loan. Although Gliadelkin on the one side and Bondarenko and Stolyarenko on another have neither even met or talked on the matter or had any legal ties to the ownership or management of the company in question. The bank was run by the businessmen at the time. Shares were pledged to the bank as well as all company’s assets. This accusation is based on the hypothesis that the buyer was affiliated either with the bank or to them personally. These are both in strong contradiction to public register records. The size of the losses was bluntly faked by investigators which we are all now aware of. A clear document with an alibi was ignored.
Novaya Gazeta in 2019 expressed the opinion that the purpose of such pressure could have been to gain control over the successful profitable and export oriented companies under their private ownership, which they had created from scratch and had not merely ‘inherited’ during the period of total privatization in Russia.
The entrepreneurs, of course, categorically deny the accusations. They informed the Prosecutor General's Office of the Russian Federation and the Investigative Committee of Russia about all the circumstances in full details submitting for the last two years about 100 petitions and complaints prepared by Russian leading law firm specialized in criminal defence, Egorov Puginsky Afanasiev and Partners (EPAM). They explained to Novaya Gazeta that those who want to take possession of others' property (their oil and gas assets in Yakutia with more than 2 billion dollars of investments) may be behind the fictitious 7 million USD case. “Those who expect that we will lose our nerves and sell our oil and gas assets in Russia for nothing will fail”.
There was no damage
The investigation proceeds from the fact that in selling a stake in the company, the "professional victim" Glyadelkin miscalculated the price and lost the chance to take part in its operations. However, according to the ex-bankers, the builder had no direct or indirect relationship to YPC or the sale of the 49% stake, and therefore did not suffer any damage, since as of December 31, 2010, YPC had debts of 3 billion rubles, according to Stolyarenko as quoted by RBC.
According to the Unified State Register of Legal Entities, other legal structures were part of the authorized capital of the company, namely: LLC Ecostok and LLC M-Holding. The entrepreneurs claim that Glyadelkin did not own them either, but was listed as a co-owner of Avenue Group, which also was not a shareholder of YPC. It can be confirmed by publicly available data as Avenue has filed disclosure documents to authorities and the stock exchange when they registered bond issue in 2008 that did not happen but full procedure was passed. The documents were prepared by Ernst and Young and Raiffeisen bank based on the documents provided by Avenue.
So if somebody had to lose, clearly it was not going to be Glyadelkin. But there were no losses or damages.
Confusion could have been created by the fact that his enterprises were construction contractors engaged contractually with the city administration and fully paid for that. YPC invested funds directly in the city owned development within the framework of municipal construction programs, and the city, in turn, hired by their own decision various contractors, including Glyadelkin's companies and paid them.
The investigation believes that by the time of selling the 49% stake, YPC had 1 billion rubles on its accounts; hence the estimated damages of 490 million or 7 million USD. However, according to Kommersant, there is reason to doubt the quality of the financial and economic expertise of the company involved in the investigation. “The defence believes that the lack of experience of ANO Expertologia (the first share valuation ever) and its low quality led to gross errors in the examination: when determining the value of the disputed company, they took into account only its assets, while stating that it was impossible to calculate its debts and other obligations,” as the Kommersant daily states. The Russian Federal Center for Forensic Studies of the Justice Ministry rejected the findings of Expertologia since none of the company’s debts were considered when assessing the shares. It was easy to produce a mistaken valuation due to the pure qualification of the private unknown expert which at the time of getting such a mandate were not even admitted for such a role and also as the investigator Ovchinnikov faked and/or concealed some evidence.
“The cash balance on YPC accounts in their bank as of December 31, 2010, was about 3 million rubles. Besides, according to Stolyarenko, by that date the company had debts of 3 billion rubles,” as RBC informs. Balance sheet data of companies are publicly disclosed in Russia, so 3 billion in debts as well as a 1.9 billion loan were mentioned in financial statements for 2011 and similar amounts in earlier periods.
Blame shifting
Obviously, the colonel Cherkalin could not have stolen that much money single-handedly. Actually how much he did steal is still unknown by everyone as we only know about the 200 million dollars in refugee bags found in his private apartment. Public opinion believes there were some accomplices, steady income flows and a reliable cover. On the one hand, there were accomplices for Cherkalin in the public’s perception and now we know that it was neither Frolov nor Vasiliev. On the other hand, they were accused anyway with completely different claims: a far-fetched story with the YPC and accusations evidently are falling apart.
Glyadelkin saw that such merits of the case make it unlikely that he can reach asset of the businessmen.
Now for some reasons he announced an even more extravagant idea that his losses, in fact faked with the help of investigator Ovchinnkov losses, are to be paid out of Cherkalin's money stolen from the DIA, the state agency remained silence not to attract any attention of courts.
The Prosecutor General's Office turned half of the amount found during the Cherkalin search into budget revenue as income unconfirmed by legal sources. The other half of the amount is covered by mystery, officials has issued no comments. There is no criminal investigation about 12 Bio, DIA links and it’s former head Miroshnikov, law enforcement agencies concentrated on the fortunetelling exercise by FSB to Glyadelkin in 2011 to cover the big issue of 2019 and as a by-product create legal grounds of artificial claims in order to get oil assets of Stolyarenko and Bondarenko at the end of the day.
Despite all the trials
Unfortunately, attacks on entrepreneurs are not uncommon and are not an exception to the rule. Often their only fault lies in the fact that they were able to organize against all odds viable enterprises that provide jobs for people and taxes for the state. Domestic and even foreign businessmen fall foul of those wishing to acquire successful companies at a discount. We have seen a similar pattern in the Rolf and Vostochny Bank sagas.
But in the case of Stolyarenko and Bondarenko, something went wrong. According to media reports, in 2019-2020, the Investigative Committee of the Russian Federation tried twice to arrest them through Interpol but Interpol refused, considering the claims of the Investigative Committee against the businessmen to be an unjustified civil dispute with an expired statute of limitations.
It must be said that Interpol was considering taking on Russian businessmen, but here, apparently, there was not enough evidence and a lot of evidences of the opposite. They decided that the case represents a politically motivated investigation of a civil matter with an expiated status of limitation which was never even tried in civil courts.
It is obvious that entrepreneurs who have invested more than to 1.5 billion dollars in Yakutia since 2010 and paid 150 million dollars of taxes only in recent years would have no reason to get themselves involved in a dubious story with 7 million dollars of other people money which never existed, which were not proven to be on YPC’s accounts and which remained unclaimed in civil courts for 9 years until the FSB decided for some unknown reason to attack them. This 7 millions could exist only on paper faked by Ovchinnkov for Glyadelkin and others.
Meanwhile, RNG's business is developing successfully. The company ships almost a million tons of oil for export to Southeast Asia annually. In 2019-2020, more than 10 billion rubles were paid in taxes, despite the crisis. In the coming years, they plan to create an additional 2,500 jobs (in addition to the current 3,000) and invest another hundred billion in Yakutia, so that dozens of billions of rubles will flow to the Russian treasury annually. But this will only happen if the entrepreneurs get justice.