Mayor gets rich selling the capital

Issue 

By Irina Glushchenko

MOSCOW — The period since "democratic" politicians took control of the Moscow city government has been a Saturnalia of official criminality and embezzlement to rival anything in Weimar Germany or ancient Rome. "Democratic" stalwarts trip over former party ideologues in the common rush to get a share of the loot.

Moscow Mayor Gavriil Popov, a few years back the modest editor of an economics journal, is listed by the business weekly Kommersant as one of the five richest people in Russia.

Almost the only way a good scam can come unstuck is if those involved get sprung by a foreign law enforcement agency. It has taken revelations by the French police to bring to light one of the more notorious of recent Russian scandals.

Christian Pellerini, one of the main western business partners of Mayor Popov, is now under investigation for breaches of French law. Pellerini is the head of a company known as SARI. The type of illegal deals this firm appears to have carried on are almost standard practice in Moscow. SARI, however, seems to have come undone through trying the same methods at home.

Beneath the headline "It's incredible — has the Mayor of Moscow been receiving a salary from SARI?" the French weekly L'Evenement du Jeudi in its January 23 issue published an article on links between the Moscow government and deals soon to be the subject of court action in France.

Christian Schwarz, a long-time partner of Pellerini, was involved from 1990 in a string of Moscow property deals. Now in jail, Schwarz helped Pellerini and SARI to pull off an extremely important deal in the Russian capital.

In December 1990 the French-Soviet joint venture TsNIT Centre-Kaluga Gates was formed with a capital of 20 million francs. The Soviet contribution was to take the form of rights to Moscow real estate. Pellerini was a member of the board of directors of the joint venture, and SARI became closely linked with Popov and Vice-Mayor Yuri Luzhkov.

The venture was involved in leasing buildings to foreign firms, in the construction and administration of business centres and hotel complexes and in organising urban development projects. The French partners received an area of 60 hectares around Gagarin Square for a period of 99 years, at a token rent of US$10 per hectare per year.

Under a contract signed in March 1991, TsNIT Centre-Kaluga Gates received the right "without limitation to demolish or renovate buildings and build on allotments for the purposes of creating hotels, offices, business centres and service facilities". The joint venture ghts to the use of land and its rights over any structure it erected.

In effect this contract, signed by Popov and Luzhkov, sold off an entire district of the Russian capital.

Komsomolskaya Pravda correspondent Denis Molchanov, who helped French journalists gather material, noted, "Popov and Luzhkov are prohibited as public office-bearers from disposing of municipal lands to an enterprise of which they are the co-founders and in which they control 40% of the capital". A March 1991 law of the Russian Federation bans representatives of the state administration from engaging in private business dealings.

"Are the Mayor of Moscow and his fellow participants ... acting in the capacity of private individuals with the right to receive dividends?", the French journal asks. "If so, they are making unlawful use of state assets."

Residents of the district have lost the right to receive title under the housing privatisation program to the apartments in which they may have lived for years. Still worse, they can be evicted from their homes at the whim of the joint venture.

"This is an unlawful contract", the French journal concludes, "signed in order to benefit the vested interests of the city's rulers."

But despite reports of the scandal having appeared in Moscow newspapers, including the reputable and widely read Komsomolskaya Pravda, the mayor and his team have not even reacted to the charges. Power is in their hands, and in Russia, no-one has yet worked out a way of forcing the people in power to respect even the laws they themselves introduce.

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