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Samara’s regional department of Investigative Committee of Russian Federation, a state watchdog inspecting into economic crime in the country, issued a statement informing that Eugeny Korolev, General Director of ZAO “Togliattiazot” has been put in the wanted list. Investigative Committee probes into the Togliattiazot’s activity in 2008-2011 when, according to the investigators, several economical crimes of the large scale were commenced. Prosecutors were not able to identify Eugeny Korolev’s location since January 2013, while Russian media citing Togliattiazot lawyer Sergey Zamoshkin reported that Korolev is probably in London in an extended business trip.
According to the investigators, Togliattiazot executives developed the export scheme for their production — ammonia and urea. The plant’s production was initially sold at knock-down prices to the Swiss companies affiliated with Togliattiazot majority shareholders – Ameropa AG and Nitrochem Distribution AG led by Andreas Zivy and Beat Ruprecht. Afterwards they were selling the production at market prices. Profit taxes in this case were paid in Switzerland, where the tax rate is just 2% while in Russia it is as high as 20%. Thus, a large part of Togliattiazot’s profit never really made it to the company’s budget and stayed offshore.
Under this scheme Togliattiazot was understating its profits cutting dividends for minority shareholders and leaving the taxes to various level budgets unpaid. Minority shareholders, including Uralchem who filed the claim, sustained an estimated loss of $550 million, while the amount of ToAZ unpaid taxes totaled $100 million.
Samara’s prosecutors believed that Korolev has been connected to the scheme, as he stayed on the position of general director and executive director for the last 12 years, much longer than the investigated period.
We already reported in our earlier piece that the conflict around Togliattiazot dismays fertilizers industry.
Uralchem bought the minority stake in Togliattiazot from Viktor Vekselberg and had no idea what a problem-maker it is getting. Uralchem tried to put its man in a nomination to the board and failed. It has tried to participate or at least understand what Togliattiazot is doing and where its production goes, and was refused to.
Being displeased with the effectiveness of its investments, Uralchem started the attack on Togliattiazot with criminal complaints. The situation develops in three major directions — first is the criminal complaint against Togliattiazot’s management for the denial of access to corporate information. Uralchem was planning a deal with Belport Investments Limited to sell its Togliattiazot stake. The deal failed due to reluctance of Togliattiazot to provide the registry of shareholders in August-September 2011. In relation to that Uralchem on Feb, 10 2012 initiated a criminal investigation where describe its losses to be compensated in the amount of $203 million, plus $1 million fine Uralchem had to pay Belport when the deal fell.
Second criminal complaint of Uralchem had much stronger claims than the first one. Company accuses Togliattiazot in assets stripping. According to Uralchem, Togliattiazot sold assets worth 30 billion roubles ($1 billion) for a ludicrous price and to the affiliated company.
The third complaint, or the hat-trick if you wish, accuses Togliattiazot in transfer pricing. Uralchem supported the claim with custom clearance documents listing the export of Togliattiazot’s production and independent study of Russian Market Research Institute, which highlights that Togliattiazot was selling its production abroad at the prices much below the market. In connection to this case Eugeniy Korolev is wanted by Samara’s officials.
The surprising statement of Togliattiazot lawyer gives us a hint where Korolev may be located. We all very well remember that London is the habitat for Vladimir Makhlai, the original owner of Togliattiazot, who’s son is managing the plant now. Probably Korolev hides not far from his ex-Togliatti boss. Furthermore, Russian media with reference to its sources reports Eugeny Korolev has recently received long-term UK’s investor visa.