AUS DEM SPIEGEL
Ausgabe 35/2007

An Offer You Can't Refuse Russia's Very Hostile Takeovers

In Russia a "hostile takeover" isn't just a turn of phrase. Ruthless businessmen are employing armed thugs to intimidate their rivals and force them to hand over their companies -- backed by corrupt policemen and courts.

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A model of a new mall in Moscow. Land is at a premium in the Russian capital, and businessmen are increasingly using very hostile methods to grab land to make a killing.
AFP

A model of a new mall in Moscow. Land is at a premium in the Russian capital, and businessmen are increasingly using very hostile methods to grab land to make a killing.

The video images may resemble scenes from a civil war, but in fact they come from the factory floor. Armed troops in gray uniforms are seen storming the facilities of the Angarzement cement factory in Angarsk, near the Siberian city of Irkutsk. The attackers smash windows and then lock out the management.

It has become an all too familiar scene in today's Russia. In Moscow 150 strong young men entered the headquarters of the Rasvitiye construction company using baseball bats and metal bars. Although the thugs retreated when a squad of policemen arrived, the company -- which controls more than 25 percent of Moscow's housing construction market in Moscow -- miraculously ended up in the hands of a financial tycoon a short time later.

And in Chimki on the outskirts of Moscow, not far from Sheremetyevo International Airport, a real estate firm suffered a surprise attack by a company with the exact same name. Once again musclemen were used for the scare tactics. They barricaded themselves behind a barbwire fence and displayed a sign as their calling card: "Very Evil Guard Duty."

These cases show just how literally the terms "hostile takeover" and "corporate raider" are often taken in Russia. And unlike in Western Europe, the attackers are normally not even interested in the business itself but only its premises. Many of these land grabbers build luxury apartments for Russia's nouveaux riches on the premises they have seized -- one way of making a fast buck in the country's booming big cities.

Since what matters most is the speed of the take-over, when it comes to the transfer of property rights in Russia muscle takes precedence over money. The brawny mercenaries are dubbed "landsknechty" in Russian jargon. Their employers convey them by bus or train from small provincial towns to the scene of the crime.

They usually have orders to do little more than intimidate their victims. Avoiding bloodshed, they usually overpower the company's security guards, tie them up with duct tape and throw them into a store room, as one Ukrainian mercenary reports. The police only arrive 40 minutes later, probably bribed to take their time, at which point the new well-dressed company owner is already sitting at his desk, equipped with fraudulent company papers.

The Moscow journal Ogonjok has already published lists of prices for the semi-legal services of the landsknechty. Spying on a business costs between $5,000 and $20,000, tapping a mobile phone is $1,500 per day, while "neutralizing" the police and prosecutor's office costs between $30,000 and $60,000.

Raiders are becoming increasingly bolder, especially in the provinces, where bribes are lower than in Moscow. Russia's Interior Ministry, headed by Rashid Nurgaliyev, has estimated that one in seven company takeovers in Russia are carried out by illegal means.

Business Is Booming

And business is booming for these bandits. The number of investigations relating to forced company takeovers has doubled over the last three years to a total of 354, according to the Interior Ministry. Experts at the ministry estimate the financial volume involved in 2005 alone to have been somewhere between $4 billion and $7 billion -- as much as 17 percent of all Russian company takeovers that year.

Just like in the mafia thriller "The Godfather," businessmen are often made "an offer they can't refuse." If the offer is not accepted, the gangsters then bribe arbitration courts and forge share registers or sale contracts.

In the Chelyabinsk region north of the Ural Mountains, a land registry office's hard drive containing company data disappeared temporarily. When it showed up again, the steelworks in Magnitogorsk suddenly had a new list of shareholders -- and new owners. Such maneuvers are made easier by the fact that most share registers in Russia only exist as electronic files, as required by the law.

More than 170 raider teams operate using these kinds of tricks, according to official estimates. Some of them work freelance while others are even employed by companies.

"They're highly professional," says Vladimir Ovchinsky, the former director of Interpol in Russia. According to the retired major general, gangs like the Tambov Group in St. Petersburg function "like Cosa Nostra in Italy" -- complete with their own analysis center, team of lawyers and headhunters for the recruitment of young members. Underpaid intelligence officers are particularly in demand.

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© DER SPIEGEL 35/2007
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