Money laundering accusations reach the aerospace industry with Sukhoi named

Published: 9/15/1999

As the focus on Russian money laundering and corruption increases, the Sukhoi design bureau appear to have been drawn into the debate courtesy of their relationship with major aerospace bank Inkombank (www.concise.org 19th June 1998). The Inkombank relationship with the Bank of New York, reputedly B of NY's largest Russian customer, has started various investigations looking at possible money laundering which now involve the Russian Federal Security Service (FSB), the Ministry of the Interior, and the Tax Ministry. According to reports in the New York Post, representatives of these departments were due to visit the US on the 13th September 1999. Joining a US investigation by an unspecified agency that has already started. The New York Post also reports that the US investigation has uncovered a direct Sukhoi involvement in what could be an even larger plot according to the Post's sources. The reports however, offer little but speculation about what may be the nature of Sukhoi/Inkombank's illegal activities, beyond a suggestion that part of the funds earned by Sukhoi through its exports of military aircraft may have been siphoned of through the Bank of New York for the benefit of unspecified persons. The report also suggests that Inkombank's 25% holding in Sukhoi, which was transferred to the bank by presidential decree in August of 1996 may have been illegally transferred from the bank's balance sheet to three offshore Cyprus companies called Brasset, Footnote, and Bridge Investment, reported to be controlled by the former management of Inkombank. While not wishing to be overly disparaging of the New York Post's investigative zeal this is an old story and one that probably does not deserve the attention it is being given in the context of Russian business. The fact that a large hard currency defence exporter that controls its own sales, (which only MAPO besides Sukhoi can do, all other defence exports passing through the Rosvooruzheniye or Aviaexport export agencies) has been subject to skimming by their own management or bankers is certainly not a unique situation. In fact it is all to common and an unfortunately accepted part of business in Russia. The only surprise would be if the skimming was of extremely large amounts of money in terms of the value of Sukhoi sales. The reports relating to the transfer of shares however, seem a curious move on the part of the Inkombank management, if they do indeed control the Cyprus companies, as the shares are not particularly marketable and the shares to be voted, have to be registered in the name of a legal 'person' or entity. Given the rules governing ownership of defence plants, which restrict foreigners to 25%, holding it in the name of a Cyprus company would immediately breach the 25% limit, as Sukhoi has other foreign shareholders. Inkombank has however, according to reports, not been beyond a little asset redistribution in other cases post the August financial crisis. They may therefore be following the old adage 'possession is nine tenths of the law' and look to slug out the merits of their ownership at a later date. There have recently been reports of potential buyers of Sukhoi stock, suggesting that certain parties are looking for control, but in the current Russian atmosphere of intrigue one has to be careful of finding conspiracy where none exists. The investigations will no doubt reveal more of the affair over the next few weeks and we will hopefully see more clearly what has been done and by whom.

Article ID: 858