Cracks in Putin’s Corrupt Foundation in Russia

The Times of London‘s ace Russia reporter Mark Franchetti reports on the second high-profile refugee from the Sochi disaster in as many months (remember Sergei Volkov back in April?).  Those cracks in the foundation are getting pretty nasty, and it’s early yet.  How soon before this edifice comes crashing down?

A wealthy businessman involved in preparations for the 2014 Winter Olympics has blown the whistle on corruption at the heart of the Kremlin.

Valery Morozov, 56, a Russian construction entrepreneur, says he paid £4m in bribes to a senior official to secure a lucrative state contract for the games. His claims raise questions about Russia’s efforts to compete with England to host the football World Cup in 2018. Critics say that awarding the tournament to Russia would expose it to the country’s endemic corruption.

Morozov revealed that he had taken part in a police sting operation to expose the official. He later arranged for one of his employees personally to hand a letter of complaint to Dmitry Medvedev, the Russian president. Documents show that prosecutors in Moscow are now examining his claims. However, the Kremlin bureaucrat remains in place, raising concerns about a cover-up.

To protect his evidence, Morozov came to Britain earlier this year to lodge documents with his British lawyers and make a statement to this newspaper. “I turned to The Sunday Times because I understand that if the information I have stays only in Russia I am running a serious risk,” he said this weekend.

Russia is spending an estimated £9 billion on the Winter Games in Sochi — more than six times the cost of this year’s event in Vancouver.

The games are the pet project of Vladimir Putin, the prime minister. He and Medvedev see them as an opportunity to showcase modern Russia to the world.

Their bid for the 2018 World Cup, competing against England, Spain and Portugal among other western nations, aims to build on that ambition.

Morozov’s decision to go public with his allegations will embarrass the Kremlin. It was stung recently by claims from Lord Triesman, then chairman of the Football Association, that Russia was planning to bribe referees at next month’s World Cup to help its bid.

Morozov, a former Communist Party apparatchik whose business career included running a firm in Essex, owns 74% of Moskonversprom, a construction company that is part owned by the city of Moscow.

Four years ago the firm won a state contract to build a 700-room luxury residential complex on the shores of the Black Sea. It will house state officials during the 2014 Games.

The award of the contract upset the senior official, who had been on holiday when the tender was given to Morozov.

According to a statement Morozov made to Moscow prosecutors, the official summoned Morozov and allegedly demanded a 12% cut of the £33m state contract. It was to be paid directly to the bureaucrat in cash split into several instalments.

“Twelve per cent was way above the norm but I had no choice. I either paid or waved goodbye to the contract,” Morozov said last week.

“Between mid-2007 and June 2009 I paid him nearly 20 times. Usually I’d hand over the cash in a shopping bag or a small briefcase at his office close to the Kremlin. A couple of times the handover took place in a car. In all, I paid him around 180m roubles [£4m].”

In desperation he turned to the police, reporting the official to the powerful economic crimes department of the interior ministry.

Corruption in Russia is rampant. The country ranks 146th out of 180 countries on a corruption index compiled by Transparency International, the respected auditing body.

Most Russians would expect influential state bureaucrats to take bribes. What is rare is for an insider such as Morozov to speak out.

To secure evidence, police arranged for Morozov to carry out a series of stings. In one, the businessman says that he paid the official some £60,000 in cash at his office.

In a second meeting, detectives provided him with a bright purple tie fitted with a hidden camera and strapped a recording pack on his back.

However, the equipment set off security alarms at the building where the meeting was to take place and Morozov had to ditch it.

Then the businessman met the official at a Moscow restaurant, the Slivovitsa. Morozov had a camera in his belt; as a back-up, a microphone was hidden in a bowl of flowers on the table between the men.

Interior ministry agents sat at tables nearby. One had a camera concealed in a book.

He filmed the official being handed a shopping bag containing roubles and euros worth £90,000. At the end of the meeting the bureaucrat left with the cash.

To Morozov’s anger the evidence was buried. The day after the sting an interior ministry officer told him his bosses had decided not to open a case against such a senior figure.

Morozov went on the offensive. He arranged for a letter denouncing the bureaucrat and the police officers to be handed on a ski slope to Medvedev to avoid it being intercepted by the official’s people. He also wrote to the prosecutor’s office, accusing the bureaucrat of large-scale corruption.

He has already paid a price for speaking out. Morozov said that his company had been kicked off the Olympics hotel building site and had its machinery confiscated. He claims he is owed large sums of money by the state.

A letter from the prosecutor’s office to Morozov last month confirmed that the sting against the official took place. It said the police had broken the law by failing to pass on the evidence to prosecutors.

The Olympics bribes case is now with the powerful prosecutor’s investigative committee which is assessing whether to bring charges against the official and the officers.

The official said this weekend of the allegations: “It’s all rubbish, that’s all I can say, total rubbish.”

Against the background of Russia’s 2018 World Cup bid, Medvedev has vowed to wage war against rampant corruption, seen as one of the country’s greatest problems. Morozov’s case presents Medvedev with the chance to show the world he is serious.

15 responses to “Cracks in Putin’s Corrupt Foundation in Russia

  1. Jeremy Putley

    Who was the un-named bribe taker, does anyone have any idea? Certainly he will be identified in court proceedings if the Russian authorities should ever try to extradite Morozov from London in the future – from which it follows that they will be unlikely to do so.

  2. England and Russia are going head to head in a bid to host the world cup in 2018.And to be honest you can’t compare these bids. England already has the infrastructure in place, We have the finest football stadiums in the world, Wembley is a brand new state of the art all seater stadium it cost over a billion pounds to build, on top of that every stadium in the premier league and most in the league below are all seater modern stadiums, many can hold over 40 thousand and some like old Trafford 75 thousand.

    We have the Airports, road networks, hotels all in place plus the experience when it comes to holding these events (European championship).FIFA have been advised by independent annalists that by holding the world cup in England the event will generate a profit of 2.7 billion pounds,

    Russia on the other hand has to start from scratch, at the moment the stadium where the national team play is one of the ugliest carbuncles I have ever seen in my life, where most fans still stand, the pitch is artificial the facilities third world.

    The Russians plan is to build 16 brand new stadiums across Russia plus build the new infrastructure, hotels, roads, rail links and so and so on,

    The Russians think the fans will flood in; – a word of warning to our Russian friends south Africa who are hosting the world cup this year have struggled to sell tickets to foreign visitors out of nearly 2 million only some 365 thousand have been sold outside Africa the remaining bulk have been sold on the cheap to locals to help fill up the stadiums, this world cup will generate little profit (if any).

    FIFA know people from around the world will flock to England for the world cup 2018, people want to go to old Trafford in Manchester, the emirate stadium in London and of course Wembley and big sponsors will queue up to invest, who in the hell wants to flock to some god forsaken place in Russia. Large sponsors knowing this will keep the cheque book firmly in the pocket.

    Only bribery and corruption can bring this event to Russia. Let’s see how bent FIFA really are!!!!

    • Voice of Reason

      R John,

      Sorry to inform you but eNGLAND has already hosted the World Cup – in 1966. All the other countries should get to host it once before England gets it for the second time.

      Get in line!

      England already has the infrastructure in place

      Of course it does. It already hosted the World Cup. Time to let the other countries build their own World Cup infrastructure.

      • Why should Russia, who spectacularly failed to even qualify for the current world cup, and is a notoriously corrupt mafia state, a severe terrorist risk, and incapable of even basic standards of behavior, be awarded the world cup?

        As for “England hosted the world cup in 1966” being the reason for its excellent infrastructure, wrong as usual ReTaRd, that would be because England is
        1. The birthplace of Football.
        2. A democracy that actually spends money on infrastructure projects that benefit the public rather than stealing the money and sticking it in Swiss bank accounts
        3. Actually capable of building modern infrastructure, unlike Russia

  3. VOR you make a daft argument; –

    England hosted the world cup nearly fifty years ago, the football world has moved on England can offer the standards now required by a far more sophisticated global audience, at the moment Russia can’t even offer the same standards that England offered in 1966, that’s why they have to start from scratch with no guarantee they can achieve their lofty ambitions.

    I know FIFA wants to assist third world countries like Russia, but after the South African experience (I refer to lack of ticket sales to foreign fans) they need to make a profit from the event; also the fans must be taken into consideration people have shown they have no wish to go to unsafe third world nations.

    Also you argument stating; England has already had its “turn” doesn’t hold water, let me point out that Mexico hosted the world cup in 1970 and again in 1986 also Germany in 1974 and 2006.

    • Voice of Reason

      Well, it is indeed bizarre that South Africa and USA got to hold the World Cup finals ahead of USSR/Russia which has accomplished infinitely more in the World Cups and European championships than SA or USA, and Mexico got to host it twice!

  4. Francis Smyth-Beresford

    “…Documents show that prosecutors in Moscow are now examining his claims. However, the Kremlin bureaucrat remains in place, raising concerns about a cover-up.”

    Well, in highly-respected democracies it is apparently normal for persons to be presumed innocent until proven guilty, even when the evidence against them looks pretty solid.

    http://www.cnn.com/2005/POLITICS/11/28/cunningham/

    Randy “Duke” Cunningham, for example; an eight-term Republican congressman who served on the influential defense appropriations subcommittee. Eventually convicted of taking $2.4 Million in bribes and gifts, he was nonetheless allowed to retain his seat in Congress while the investigation proceeded – a period of nearly two years.

    Four million quid is almost $6 Million USD – that’s a pretty steep bribe. I guess that explains why Morozov – the majority shareholder and 74% owner of Moskonversprom – hasn’t paid his workers for months and brought some to the brink of starvation. I believe you wrote a scathing article on this yourself some time back.

    https://larussophobe.wordpress.com/2010/03/18/russias-sochi-builders-starving-living-in-swill/

    Of course, back then Morozov was a greedy corrupt bloodsucking oligarch, whose mendacity made you sick. Now, in an astounding transformation, he is a whistleblowing altruist. Must be something about the English air.

    http://www.sptimes.ru/index.php?action_id=2&story_id=30978

    I note the Russian Criminal Code (yes, they do have one) specifies in Article 145.1 that “…if a company has funds and willfully does not pay salaries, its executives can be punished by up to two years in prison”. That might provide an alternate explanation for Morozov’s fleeing to England.

  5. This corruption taking place in Sochi will come as know surprise; even those with only a very basic knowledge of Russia understand that corruption is systemic and operates at every level of society right from top government officials who receive the multi million dollar “kick backs” all the way down to the regional school teacher who grades their students work by the size of the “cash gift” given by the parent instead of the quality of the work presented.

    This is a really sad situation and only a problem the Russians can resolve themselves, this must be done as the cancer of corruption is killing this nation from within, here are a few brief facts.- Out of 180 countries only 34 were judged to be more corrupt than Russia.

    Start up companies in Russia are advised to add 20% to their budget to pay for the corrupt “job worth’s” that descend on them all wanting to be paid for stamping this endless stream of official documents, they get this windfall every year as the poor old business man has to re-register on an annual basis. This type of corruption could be ended by simplifying the system but still the “penny” hasn’t dropped for Putin and Medvedev.

    If Russians want to exist in country where it’s the survival of the fittest with the strong feeding off the weak then lets be honest we can’t change that with outside pressure, but when their cultural corruption seeps out and affect the bids of the potential world cup hosts well..Pardon the pun…that’s a whole different “ball game.”

    Lord Triesman was given the role of leading the English bid because of his love and knowledge of the game and his great personal integrity, Lord Triesman knew our bid was rock solid, as Andrew pointed out football is a game we created it is our national game our stadiums and facilities are second to none the English premier league is watched and enjoyed in every corner on earth, fans from around the globe would flock to watch the world cup being played in England. Bribery and corruption is abhorrent; especially to a man like Lord Triesman.

    When Lord Triesman saw the corrupt activities of the Russians he was not prepared to get down in the dirt and compete on their level, instead he blew the whistle he knew the Russians would accuse him of “mud slinging” so to stop this in its tracts and to add weight to the allegations he resigned, his personal sacrifice has ensured that this bribery and corruption has been exposed; and now the corrupters will find it harder to achieve their objective.

  6. If Russians want to exist in country where it’s the survival of the fittest with the strong feeding off the weak then lets be honest we can’t change that with outside pressure, but when their cultural corruption seeps out and affect the bids of the potential world cup hosts well..

  7. When the Berlin wall came down the west germans were shocked to discover that 50 years of socialism had a negative biological effect on the east germans.

    The same problem is being experienced by the Russian people. They just are not fighting hard enough for their freedom.

    • They are not fighting for freedom because they don’t want any (when I say “they” I mean a majority of course, not 100 % of population). They have no use for freedom. All they want is cheap bread, plenty of vodka, and an opportunity to stage a pogrom once in a while

  8. Greenpeace decries Russia’s environmental record
    Today at 18:59 | Associated Press MOSCOW (AP) — Russia’s environment has worsened considerably in recent years, with many unique nature reserves, including the world’s biggest freshwater lake, coming under threat, Greenpeace officials said Friday.

    Activists highlighted an increase in forest fires and oil spills, and a decline in environmental spending, as part of what they called Russia’s destructive environmental legacy over the past decade.

    “Ten years ago we predicted the situation would get worse,” Ivan Blokov, Greenpeace’s program director in Russia, told a news conference. “The results are very saddening, but for the time being the situation is not catastrophic.”

    The period in question coincides with the leadership of Vladimir Putin, who served as president for eight years until 2008, when he became prime minister.

    http://www.kyivpost.com/news/russia/detail/68675/

  9. How very nice. Where’s the proof?
    You know, the stuff that makes all this real?

    I recall a certain book in which a certain man by the name of Winston depicted a heroic matyr for the party, his name was Private Oglive. Except Oglive didn’t exist, he was made up, but the newspapers in Airstrip one said that he was.

    How do I know your Morozov isn’t another Mr. Oglive?

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