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Surname: Makhlai Biography Born on June 9, 1937, in the town of Gubakha, Perm Region, married, has two sons (Sergei and Andrei). Has lived in London since 2005. Capital: Controlling stake in Togliattiazot. Togliattiazot was one of Russia’s first entities to undertake privatization (in 1992). The plant was detached from the government and put into the hands of Vladimir Makhlai for next to nothing and with obvious breaches. Later, full control of the unique enterprise allowed the former “red director” to hide away from taxes dozens of millions of U.S. dollars. Consequently, Vladimir Makhlai first openly violated the laws as early as 20 years ago. Knowing that federal law enforcement agencies drew attention to tax dodging, Makhlai attempted to cover up his traces. 1999 saw a mysterious fire in the regional Department of the Interior (UVD) office, leaving 16 people dead and 36 seriously injured. The room where the documents concerning the case of Togliattiazot and Vladimir Makhlai was destroyed in the fire more than the rest – a strange coincidence. Understanding that the origin of the money which bought the shares in Togliattiazot could be questioned sooner or later, the businessman acquired a Hungarian passport, subsequently allowing him to escape urgently to Europe from justice. In 2005, Makhlai went to London to hide away from prosecution for large-scale tax evasion. He was put on the international wanted list but the London court, traditionally, refused to extradite Mr. Makhlai to the Russian courts. In 2005, the efforts of the “army” of Makhlai’s attorneys and lawyers put an end to the prosecution. In May 2011, the position of the Togliattiazot Corporation President, which had been held irremovably and remotely by Vladimir Makhlai, was eliminated. The businessman engaged his two sons (Sergei V. Makhlai and Andrei V. Makhlai), who also live abroad, in managing Togliattiazot. His eldest son Sergei Makhlai, living in North Carolina, took over as the Chairman of the Board of Directors of Togliattiazot and keeps record of the U.S. customers buying more than half of the enterprise’s ammonia. Sergei also controls Togliattikhimbank (sole shareholder, 100% of shares) through which all financial flows go. Andrei Makhlai obtained an MBA degree from Duke University, United States, lives in Switzerland and controls the delivery of Togliatti Azot trade contracts. Source: Wikipedia.org, Forbes, Compromat.ru
Personal File:
London Is Better than Prison It would be wrong to say that Messrs. capitalists’ habitual daily routine and addiction to luxury were somewhat undermined by their escape abroad. For years, they have lived in luxuries hotel apartments in a prestigious district of London. A monthly account worth dozens of thousands of British pounds is unable to undermine the wellbeing of the traditional member on the Forbes list. Besides, there is a regular cash inflow from the Togliatti integrated chemical plant: most of its products are popular abroad and exported using highly dubious schemes. Instead of returning to Russia in the form of taxes and investment in the maintenance and development of Togliattiazot, profits settle in the offshore “laundries’” accounts. In order to live well “in exile” you need to leave at home a knowledgeable administrative manager. Yevgeny Korolyov, a trustee of the “chemical” Makhlai family, was the right choice. The extent of “closeness to the body” and the involvement in all most secret schemes of the family also prove that Mr. Korolyov combines the prestigious post of the plant Director General and the position of the director of the depositary which keeps the register of the Togliattiazot Corporation shareholders. In other words, Yevgeny Korolyov, in fact, fully controls both the entire enterprise and all decisions of its shareholders. The history of Russia abounds in the examples of not very scrupulous registrars who became richer after certain changes in the shareholder records, as was the case with EuroToaz, an Irish company which suddenly lost ownership of an 8-percent stake in Togliattiazot. Currently, this unexpected trouble (which caused EuroToaz, according to its own estimates, to lose USD 200 million in unpaid dividend alone) is thoroughly investigated by the courts in Russia and Ireland. It is not the only trouble suffered by the profitable Toaz. For many years in a row, environmental protection authorities indefatigably have made claims against the integrated chemical plant. The quantity of breaches has gone above and beyond any imaginable norms and the environmental situation in the town has become a real concern for the locals. The plant has lost count of minor accidents and the issues caused by the collapsing equipment. This is no surprise: the plant was built in the 1970s and not a single unit has been replaced or properly rehabilitated ever since. The plant’s occupational injury rate and an ever-growing death rate make the ordinary plant workers murmur quietly. While the “domesticated” trade union has attempted to do a snow-job on them, salaries, however, have never been raised since 2009. Such a challenging situation at a large and hazardous enterprise has caught the attention of the federal authorities. In late March, the Ministry of Industry and Trade held a meeting devoted totally to Togliattiazot. Yevgeny Korolyov had to carry the can for the destructive policy of robbing the enterprise for the sake of the Makhlai family’s personal gain. Immediately after the ministerial reprimand, Mr. Korolyov went to London to seek direction from his bosses. They say that only the Makhlai family & co but also his old Togliatti friend Boris Berezovsky attended the meeting. According to the available information, BAB holds a stake in the offshore profits of Toaz for certain sensitive services dating back to the time of his Russian reign and is always ready to help away from home with all his might. Although the outcome of the family gathering is kept secret, there is another illustrative sign. After a series of negotiations at one of the most reputable hotels in London, Yevgeny Korolyov went to Knight Frank, a famous London-based realtor agency. To the best of our knowledge, Mr. Korolyov intended to purchase an apartment or a house in London within the price range of 25-30 million British pounds (USD 40-50 million). Apparently, the decisions made at the secret meeting somehow caused the purchase of such expensive real property. Given that Yevgeny Korolyov obtained a five-year UK investor visa, it is safe to conclude that some time later such an obedient and trustworthy asset manager will also settle in the Albion. To stay out of trouble and further away from the Russian justice. Source: Век-online, April 24, 2012
Makhlai, Berezovsky’s Student Although Vladimir Makhlai was the so called “red director,” he clearly understood that mineral fertilizers and ammonia would be sought after abroad irrespective of the Russian regime, be it socialism or capitalism. Makhlai withdrew the profits from the sale of these products using a similar scheme. Berezovsky is highly likely to have shared his talent generously with Mr. Makhlai, whose entrepreneurial spirit appealed to him. However, Mr. Berezovsky was also talented at identifying and “domesticating” a promising character, who could be of use to him in the future. Certain events have shown that Mr. Makhlai was almost a perfect choice. Therefore, since 1992, the U.S. company IBE Trade has been the primary buyer of Togliatti-azot’s (Toaz’s) products. Toaz has delivered its goods to IBE Trade at their production cost or below and the sales delta has been forwarded by the partners, never burdened by any ethical doubt, again to Switzerland (to the firms controlled by Makhlai). IBE Trade was co-funded by the Hungarian Imre Pak and Alexander Rovt, a U.S. citizen and a partner of Boris Berezovsky in the above-mentioned Forus company. Source: the Nasha Versiya newspaper, April 16, 2012
Berezovsky’s and Makhlai’s Files Destroyed in Fire Radik Yakutyan, head of the Investment Department of the Prosecutor’s Office of the Samara Region, was killed in 1994. At the time, he investigated the case concerning organized crime at AVTOVAZ. In 1997, the Ministry of the Interior carried out the Cyclone operation: several functions jointly attacked organized crime at AVTOVAZ. The raid, in which 3 thousand operatives of the Ministry of the Interior, the Prosecutor’s Office and tax police simultaneously locked all exits from the premises of the giant plant and seized all computer files, became the largest operation of law enforcement agencies in the Yeltsin epoch. The raid resulted in obtaining the evidence proving that the gangsters connected with AVTOVAZ murdered at least 65 enterprise managers, dealers and business rivals. Dozens of people were arrested, criminal lawsuits were filed. Simultaneously, Vladimir Makhlai’s stake in Togliattiazot grew like a weed. The government did not get started on the Makhlai case until the late 1990s. In 1999, the Main Office of the Department of the Interior (GUVD) of the Samara Region initiated a criminal case against the owner of Toaz. What happened next was really terrible. Once investigative action was initiated, Mr. Makhlai urgently went to hospital. On February 10, 1999, about 5 p.m., the operator's desk in the Office of the Department of the Interior (UVD) received a fire alarm signal from the GUVD building where the evidence gathered against Mr. Makhlai was stored. Although it was getting close to the end of the working day, there still were many people in the regional GUVD office. That evening, the firemen evacuated from the burning building about 200 policemen and 50 detainees held at the detention center. As the ammunition stored in the building was exploding all the time, it was a heroic deed. All documents concerning the cases of AVTOVAZ and Toaz were destroyed by fire. At least 50 employees of the Ministry of the Interior and investigators, including those who dealt with the cases of Toaz, were killed in that horrible fire... All papers as well as the records of investigators, burnt to ashes. Shortly afterwards, Makhlai suddenly recovered, left his hospital ward and actively resumed doing business. At the same time, Boris Berezovsky said in his interview to an English periodical: “We witness property redistribution of unprecedented scope. Nobody’s happy – neither those who became millionaires overnight (they complain that their millions are not enough) nor those who gained nothing and, naturally, are unhappy. That’s why I think that the scope of criminal activity exceeds the transformation level.” Apparently, during the “primitive accumulation of capital” in Russia in general and Togliatti in particular, not a single “businessman” could do without professionals in problem solving using force. To our knowledge, at the beginning of the 1990s, when the sites and offices of LogoVaz regularly shot back in response to the rival groups’ attacks, Vladimir Makhlai, too, started a multiskilled security team. According to our sources, Berezovsky and Makhlai had the so called “front organization” to oppose the other OCGs’ gang-ups. In 1997, the paths of Berezovsky and Makhlai diverged: after the Ministry of the Interior’s operation, the Chechen group sharing common interests with Mr. Berezovsky made itself at home at AVTOVAZ. Makhlai, on the contrary, remained loyal to its “Slavic” roots. Furthermore, according to certain information, by the end of the 1990s, the greedy Makhlai became dissatisfied with the IBE Trade alliance led by Berezovsky and Rovto that resold Togliatti fertilizers and, in keeping with the best traditions of the then partnerships, he tried to “give them the wind.” By the time, Vladimir Makhlai was not a “villager” anymore, he put on expensive tailor-made suits and found new partners to pump money overseas. Source: the Nasha Versiya newspaper, April 16, 2012
Makhlai’s Hazardous Production It was a state-of-the-art plant whose construction was sponsored by Mr. Hammer, a U.S. billionaire, boasting advanced technologies and equipment – simply a must-have and so he did! Having “captured” the shares, Makhlai hid the register of shareholders and has not shown it to anyone ever since, even when required by court judgment. He fine tuned the scheme of asset withdrawal through offshore, minimized budget taxes, abandoned investment in upgrading, environmental protection and occupational safety. Life in London is not cheap at all! As for Togliatti, Makhlai does not care. Meanwhile, the Togliattiazot situation is getting heated. Last-year’s audit by the Federal Service for Environmental, Technological and Nuclear Supervision revealed more than 500 occupational safety breaches. The breaches identified at the enterprise signal high likelihood of an accident, which in a chemical and explosive production business can cause a man-made disaster throughout the Samara Region. But Makhlai seems to have little care for the whole story. Who would withdraw money through offshore to spend it on the salary of workers or equipment upgrade? Neither court claims nor prosecution, due to which Makhlai escaped from London and was wanted by the Interpol, produced any result. Source: the Argumenty Nedeli newspaper, April 4, 2012
“Red Director” Until recently, Vladimir Makhlai was considered an irreplaceable helmsman of Togliattiazot. He was appointed as director general of the enterprise in April 1985 and has never lost control of the plant since then. While he was in the office, the enterprise went public, evolved, expanded, mastered new technologies, new areas of activity, created satellite businesses. The integrated plant’s management quite successfully opposed the government’s attempts to intervene in the enterprise’s activity. However, in 2006, Vladimir Makhlai had to leave Russia and entrusted the plant to Yevgeny Korolyov, who has been a top manager of the company since 2001 and held the post of executive director since 2009. Nevertheless, according to the Expert Online, the "red director" Vladimir Makhlai and his family still control more than 76% of the Togliatti ammonia giant." Since the mid-2000s, Togliattiazot has repeatedly found itself amid scandals. It has been accused of non-transparency, product underpricing, tax evasion, breaches of minority shareholders’ rights. The owners of Togliattiazot’s securities claim to have virtually no leverages to manage the company – even when they disagree in principle with the actions of the enterprise’s management and are in no position to impact the situation. The shareholders also claim to have no access to the information about the company’s financial and business activities. Since the second half of the 2000s, the minority shareholders of Toaz have repeatedly attempted to protect their rights in court. As a result, on February 10, 2012, a criminal case was filed against Yevgeny Korolyov for breaching the shareholders’ rights (Part 1 of Article 185.4 of the Criminal Code of the Russian Federation). Source: Rosbalt.ru, February 17, 2012
The Police Are After Them 15 Most Famous Russian Businessmen on Interpol’s Wanted List Vladimir Makhlai, Togliattiazot The CEO of the Togliattiazot Corporation, the world’s largest ammonia manufacturer. In 2006, he was accused of tax evasion, large-scale fraud and money laundering. The company states that he is undertaking treatment overseas. The maximum length of sentence for the accusations is 10 years in prison. Source: Russian Forbes, March 1, 2010
Source: Compromat.ru, March 18, 2005
Why Vladimir Makhlai Is Being Prosecuted Source: Kommersant Samara, April 29, 2006
Head of Togliattiazot Cheated with Shares and Prices Furthermore, the resolution of the Investigation Committee says that between 2001 and 2003 the corporation manager Alexander Makarov (appointed in 2000) entered into an agreement with Nitrochem Distribution AG (with the consent of Vladimir Makhlai), a company controlled by Mr. Makhlai and the exclusive seller of Toaz’s products in the international market. The total value of ammonia sold by Toaz to the company from 2002 to 2004 exceeds RUB 14.4 billion. In addition, the investigators’ theory is that the selling prices of the plant’s products were 20% below the world average and Nitrochem Distribution AG, in its turn, was already selling ammonia at the international prices. The investigators believe that as a result the Togliatti-based enterprise’s income was understated by more than RUB 1.2 billion and, accordingly, the plant underpaid to the budget RUB 280 million 375 thousand in taxes. For these episodes, Vladimir Makhlai and Alexander Makarov are accused under Article 199 of Part 2 of the Criminal Code of the Russian Federation ("Large-Scale Tax Evasion"). Source: Compromat.ru, December 6, 2005
Head of Togliattiazot Vladimir Makhlai Thrown out of Krasnodar …On March 15, 2005, historic words were spoken at the meeting held by Alexander Tkachov, the Governor of the Krasnodar Territory. Tkachov stated: the Taman port, which is critical to the territorial economy, will be built despite opposition from one of their contractors, Togliattiazot. Makhlai himself was shocked by such outcome. He was called a “dinosaur of the Soviet times.” It is not about his measurements – although Togliattiazot’s owner has been unreasonably overweight for quite a while, people usually describe his height as “five-foot-one.” It is his impunity in all previous years and confidence that bribes still talk that pulled the rug out. For fifteen years, Makhlai was sure that big money let him do whatever he wanted and cheat on whoever he wanted – he would get away with everything. Anyway – who is this person? Where does his enormous wealth come from? The government did not get started on the Makhlai case until the late 1990s. In 1999, the Office of the Department of the Interior (UVD) of the Samara Region initiated a criminal case against the owner of Toaz. What happened next was really terrible. Once investigative action was initiated, Mr. Makhlai urgently went to hospital. On February 10, 1999, about 5 p.m., the operator's desk in the Office of the Department of the Interior (UVD) received a fire alarm signal from the GUVD building where the evidence gathered against Mr. Makhlai was stored. Although it was getting close to the end of the working day, there still were many people in the regional UVD office… That evening, the firemen evacuated from the burning building about 200 policemen and 50 detainees held at the detention center. As the ammunition stored in the building was exploding all the time, it was a heroic deed. Yet 16 people died and 36 were seriously injured. The room where the documents concerning the case of Togliattiazot and Vladimir Makhlai was destroyed in the fire more than the rest – a strange coincidence. All papers as well as the records of investigators were completely destroyed by fire. Shortly afterwards, Makhlai, who looked much happier, successfully left his hospital ward and resumed doing business. Please note: at the same time, a new person appeared in the businessman’s circle. His name was Anatoly Bozhkov, he was a former national intelligence officer in Germany. According to some reports, his colleagues considered him a great expert in sabotage attacks – all kinds of explosions and arsons… Source: Compromat.ru, March 18, 2005
Prosecution of Makhlai Vladimir Makhlai, the Chairman of the Management Board of Togliattiazot (Toaz), and the plant manager Alexander Makarov were reported to have been put on the wanted list by the Investigation Committee at the Ministry of the Interior of the Russian Federation. Mr. Makhlai was accused of large-scale fraud. Moreover, he and Mr. Makarov were accused of tax evasion. Yet Toaz refuses to comment, referring to the lack of information Yesterday, Gennady Melnik, Head of the Press Office on the Investigation Committee at the Ministry of the Interior of the Russian Federation told the Kommersant: "Earlier Messrs. Makhlai and Makarov could only be called as witnesses in the case and now that the formal notice of the charges against them (signed on October 31.–the Kommersant) was given, they have been put on the wanted list. The accused are known to have escaped abroad away from the investigation agencies." To the best of the Kommersant’s knowledge, Mr. Makhlai can now be in Hungary. Toaz, Russia’s largest ammonia manufacturer, occupies approximately 7.6% of its global market. In 2004, its output was as follows: 2.156 million tonnes of ammonia, 361 thousand tonnes of nitrogen fertilizers, 387 thousand tonnes of methanol. In 2004, the plant’s revenue was $413 million; net profit, $62 million. According to the Federal Financial Markets Service, Togliattiazot has about one thousand shareholders. The largest ones are Nitrochem Distribution AG, Tech-Lord SA, PPFM SA, Chimrost AG and Togliattikhimbank, but each of them owns less than 5% of shares in Toaz. Let us remind you that on June 29, a criminal case was initiated against unidentified persons for Toaz’s failure to pay taxes. The investigators discovered that Vladimir Makhlai committed fraud involving the shares in the open joint-stock company. In 1995, Transammiak (exporting ammonia through the Togliatti–Odessa pipeline) spun out of Toaz into a stand-alone entity. The Ministry of Property of the Russian Federation gave the instruction to transfer 51% of shares in the newly established enterprise to Togliattiazot. In exchange, Toaz performed a follow-on offering of its shares in 6.1% of the authorized capital, an amount equivalent in value to the controlling stake in Transammiak. The shares became government property and in autumn 1996 were tendered upon the investment conditions and sold to JV TAFKO (Vladimir Makhlai friendly company). Moreover, TAFKO undertook to upgrade the ammonia pipeline within three years and to build two pipeline branches yet the conditions have never been fulfilled completely. According to the investigators, in 1997, Mr. Makhlai purchased the shares from TAFKO without any conditions concerning the performance of investment obligations, breaching the privatization provision and thus causing damage worth 3.2 billion undenominated Russian rubles to the government. The investigators classify these actions of Mr. Makhlai under Article 159 of Part 3 of the Criminal Code of the Russian Federation ("Large-Scale Fraud"). Source: the Kommersant newspaper, December 6, 2005
Black Ammonia Schemes of Vladimir Makhlai Vladimir Makhlai concentrated the giant plant in his own hands. As he did not know the ammonia and carbamide export market, used cheap pipeline transportation model and sought no expert advice, the ill-advised decisions he made caused huge damage and adversely affected all mineral fertilizer manufacturers in Russia and the CIS. For example, in April 1997, PCS, a U.S. firm, the owner of Occidental Petroleum and the largest manufacturer of ammonia in the United States, whose annual output is more than 3.2 million tonnes, proposed to TOAZ that the long-term contract, effective from 1974 to December 31, 1997, for the supply of 1 million tonnes of ammonia per year to the United States, be prolonged for 5 more years upon the same terms and conditions. Seemingly, TOAZ should have grasped at such proposal as it was beneficial to TOAZ and other domestic ammonia manufacturers alike but gave no benefits to Vladimir Makhlai personally and his U.S. advisor Alan Spiritus, who used to work for Occidental Petroleum for many years. He misinformed Mr. Makhlai of the real market situation for the sake of his personal gain, persuaded him that he would be able to sell the ammonia manufactured by TOAZ in small batches without long-term contracts and be paid substantial commission fees. Based on these promises, Vladimir Makhlai rejected the proposal of PCS and 4 months later, in August 1997, confirmed to PCS only 420 thousand tonnes for just one year. It was a blow under the belt The rest of the amount of ammonia to the U.S. company sells Makhlai "Koch Industries", with the supply of only 35,000 tons in the quarter and the Company "Ai-M-C" with a shipment of 35,000 tons every 45 days. These firms are not producing ammonia and are not interested in maintaining the market. At the same time, in late 1997, Makhlai sells ammonia in the Mediterranean markets on the price of U.S. $ 5 cheaper than other Russian and Ukrainian producers, thus inflicting the final blow to the market. On this he was formally protested by Ukrainian producers at an expanded meeting in the Ministry of Industrial Policy of Ukraine in December 1997, however, he continues, as before, to sell at dumping prices, but not through the firm "AMOTOAZ", which will be discussed below and after that he started investigative journalism in the American press began to break up quickly, and through the newly created Swiss company "Naytrokem Distribushions", whose president is the president of the same company "Ameropa" and an agent appointed by the U.S. firm "Altus", owned by is the notorious Mr Alan Spiritus. Consequently, Vladimir Makhlai’s behavior distorted the rhythmic operation of the ammonia pipeline and the ammonia balance in the international market, causing a fall in ammonia prices. This is a real benefit to the Western trading companies and not the slightest benefit to domestic manufacturers. However, explaining his behavior to his ignorant team, Mr. Makhlai said it was result of the intrigues of his enemies, Ukraine was allegedly preventing him from piping to the Port of Yuzhny and other Western firms were allegedly capturing TOAZ’s markets, shipowners and their contracts were an obstacle too. He has invented many other bedtime stories. But the real-life story is different. PCS is not only the manufacturer of ammonia but also a large consumer. More than 600 thousand tonnes of ammonia transported from the Port of Yuzhny are necessary to satisfy the individual needs of PCS alone. PCS sold the remaining quantities of the Russian ammonia in a common pool with its own ammonia, seeking to maintain the market price at the highest possible level. Therefore, after its long-lasting attempts to reach common understanding with Makhlai failed, in late December 1997, the company had to enter into a contract with the trading firm IBI for the supply to the United States of not more than 420 thousand tonnes of ammonia (by the way, of the Russian and Ukrainian origin). So, in January 1998, more than 23 (out of 35) thousand tonnes of the Russian ammonia, but not produced by TOAZ, were dispatched by the first vessel under the contract with IBI. Source: the Rossiyskaya Gazeta newspaper, February 26, 1998 Family Lesson On September 24, the official website of the Samara Region Prosecutor’s Office reported that Rodnichok had been audited with regard to non-payment of salaries to its employees. A co-founder of the company is VALENTINA SEMYONOVA, the “common law wife” of Togliattiazot’s CEO Vladimir MAKHLAI (see the photo). The Investigation Committee (IC) initiated a criminal case for non-payment of salaries. Presumably, a criminal case will also be filed against the entity’s management after the information is gathered and verified. Rodnichok is fairly close to Togliattiazot. The co-founders of Rodnichok are Tatiana Petrunina and Valentina Semyonova, the “common law wife” of Vladimir Makhlai (see Khronograf # 30 (294) of September 14, 2009). Tatiana Petrunina, apart from membership in Rodnichok, is also a founder of Vladimir Makhlai’s backbone firms such as Vasma and Kontaz. Typically, Rodnichok is positioned as a construction entity. However, its possible activities according to OKVED (Russian Classification of Economic Activities) include the operation of freight motor vehicles, packaging, pesticides and other agrochemicals wholesale, fertilizers wholesale. Source: the Khronograf Weekly, September 28, 2009
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