Business raids devastate Russian economy, seminar says
Criminal cases have been opened against more than 100,000 businessmen in Russia in the first half of this year over a growing problem devastating the Russian economy, an expert on the matter told an audience from Dublin.
The lawsuits are linked to the ever-growing phenomenon of corporate raids, where the assets of businessmen are targeted for confiscation in a process that often uses forged documents and wrongful court rulings, said Professor Louise Shelley, from the School of Politics and Government at George Mason University, Virginia.
Criminal charges are generally laid “because you can structure your defense better if you are not in jail”.
“Probably over a million people a year lose their jobs or their income,” she said. The phenomenon fuels the flight of capital from Russia and also pushes entrepreneurs, including those highly skilled in new technologies, to engage in unproductive criminal activities, such as cybercrime.
The overall result is long-term decline, with massive underinvestment in the infrastructure and education the Russian people need.
Banks selling information
Often the proceeds of this activity find their way into Western banks and Western real estate, Professor Shelley said at a public lecture at Trinity College in Dublin on Tuesday.
Professor Shelley is the co-author of a recent report on the rise of Reiderstov (asset grabbing) and its implications for Russia and the West.
Neil Robertson, a professor of comparative politics at the University of Limerick and an expert on Russia, said the phenomenon was hampering the modernization of the Russian economy. It was also an indicator of the instability that reigned in Russia.
Vladimir Putin’s power in Russia has often been overestimated. “Putin’s Russia is actually very messy.
Raids were often sanctioned by powerful regional figures over whom Putin had limited control.
Big problem for Putin
Professor Shelley said that “what we are looking at is a long-term decline” as Russia has not invested in areas it knew it needed to grow.
She said even companies that are strategically important to Russia’s defense industry and national security have been subjected to corporate raids.
In his article, Professor Shelley said the scale of corporate raids in Russia undermined its ability to attract foreign investment, limited economic growth and integration into the international economy.
While in the past it was criminal groups that initiated this practice, now more government officials and businessmen have used criminals as part of a comprehensive strategy that included recourse to the courts. Russia’s economy cannot hope to recover without addressing the problem, according to the newspaper.
High Court proceedings
A few years ago Russian and Ukrainian real estate holding companies associated with Seán Quinn’s family came under looting attacks after the state-owned Irish Bank Resolution Corporation attempted to assert legal rights on them.
The state has thus lost tens of millions of euros in rents and legal costs. The overall cost to the state would probably have been well over 100 million euros because BIRC’s stake in the assets is now worth much less than when it sought to seize them.