Billions at stake as auditors sift through Moscow finances

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The Russian Audit Chamber has said that, according to their information, Moscow city authorities have committed violations with a 200-billion-ruble (over US$7 billion) investment into city transport over the past three years.

The chamber promised to complete the audit of the city’s financial management under Mayor Yuri Luzhkov on February 4.

Russian news agencies quoted Sergey Ryabukhin, one of the auditors, as saying on Tuesday that the overall investment into transport sector in Moscow in three years amounted to 500 billion rubles, and half of these funds were used with violations and mistakes. The auditor said that the mistakes are yet to be qualified, but promised that the inspection will be finished before the end of January next year and the final result will be presented on February 4th. However, the head of the Audit Chamber, Sergey Stepashin, said that the audit could be prolonged.

“We saw such a quantity of financial violations that we have to prolong the checks. It is necessary to address the law enforcement bodies. First audit materials will be forwarded to the proper structures,” the Interfax news agency quoted Stepashin as saying.

The Audit Chamber has intensified the checks into the Moscow city economy since Yury Luzhkov was dismissed by President Dmitry Medvedev after 18 years in office. Medvedev blamed Luzhkov for the crisis covering almost all spheres of Moscow life and made some allusions to the former mayor’s possible motives.

“This is unheard of – it’s impossible to get anywhere through fair competition. Who gets all the work contracts and tenders? Who has always won until recently? … But we know what kinds of decisions were made. It needed to be stopped,” the President said recently in the interview to top Russian television channels. The statement clearly pointed at the construction business of Yury Luzhkov’s wife, Elena Baturina, the richest woman in Russia with businesses in Moscow real estate and construction.

Last week, the Interior Ministry’s Main Directorate for MoscowCity started a criminal case against several employees of the Bank of Moscow – a commercial bank with which the Moscow government held a large share of stock and that was used for financing all major government projects in the city. The police said they were investigating the incident in which 13 billion rubles (over USD 400 million) from the city budget was used to pay for a construction project conducted by Inteco – a huge construction and development corporation owned by Baturina.

According to police, some “unidentified individuals” from the bank management allowed a shadow company, Premier Estate, to obtain a 12.76-billion-ruble loan used to buy land plots from Inteko. The money for the loan was taken from the city budget, and independent experts said that the price was inflated by between four and six times its market value. Investigators are seeking to prove that Premier Estate had neither the possibility nor the intention to repay the loan. The company offered its own stock, worth only 10,000 rubles (US$3,300), as a guarantee for credit and the bank accepted it. Further, after the money needed for the deal was wired to the borrower’s account, part of it was immediately paid off as financial aid to the third party.

The Bank of Moscow denies all the charges. It claims that the loan was guaranteed by the acquired land plot and that the list price for the plot exceeded the sum of the loan. The bank’s press service also said that the case had been already checked by auditors and no violations had been found.

Later in December, Russia’s Federal anti-monopoly service announced that it had approved the acquisition of the Bank of Moscow by the state-owned financial corporation, VTB Group. The announcement came as something of a surprise, because VTB has not yet officially announced its intention to buy the Bank of Moscow. However, senior managers of VTB group have voiced the intention to buy the bank in media interviews, giving the first half of 2011 as the possible date.