Corruption and Cover-Up in the Kremlin: The Anatoly Serdyukov Case

How Russia's fired defense minister got away

RTR3BLU5-615.jpg A woman holds a placard with a portrait of Sergei Magnitsky during an unauthorised rally in central Moscow December 15, 2012. (Tatyana Makeyeva/Reuters)

At the World Economic Forum at Davos on Wednesday, Russian Prime Minister Dmitry Medvedev was asked the inevitable question about Sergei Magnitsky, the Russian attorney who exposed a $230 million tax fraud perpetrated by organized criminals and Russian state officials, only to then be blamed for the crime himself. He died in prison in 2009, when Medvedev was president, after being tortured and denied medical attention, as Medvedev's own Presidential Human Rights Council concluded. Magnitsky's name has since been woven into US human rights law following the passage and presidential signing of a bill that would sanction and blacklist Russians complicit in his persecution as well as any other individuals credibly accused of "gross violations of human rights," such as, say, Chechen dictator Ramzan Kadyrov. This legislation has driven the Kremlin to paroxysms of anti-American hysteria, culminating in the Duma's recent ban on American adoptions of Russian orphans.

Nevertheless, the Russian prime minister was unimpressed. Although he professed to feel "pity" for Magnitsky, Medvedev described him as no " truth seeker," just "a corporate lawyer or an accountant and he defended the interests of the people who hired him" -- a reference to Magnitsky's former client, William Browder, whose investment fund, Hermitage Capital, was used as the vehicle for transacting the tax fraud. (Browder is almost singlehandedly responsible for turning the plight of his slain lawyer into an international human rights scandal and, consequentially, an American law).

Given that Medvedev was meant to represent the more liberal end of the ruling "tandem" he once constituted with back-again President Vladimir Putin, these comments were telling for two reasons. First, by Medvedev's own admission, state corruption is one of the gravest problems besetting modern Russia and Magnitsky did little more than seek -- and find -- the truth about one of the most encompassing instances of it. Second, since Putin's own belated attempts to address this national pandemic with a cosmetic anti-corruption campaign, focusing on the former Defense Minister Anatoly Serdyukov, the Kremlin has quietly legitimated a major aspect of Magnitsky's findings, rendering its response to the act which bears his name as hypocritical as it is histrionic. It was Magnitsky who first identified Serdyukov as the apex of a Russian pyramid of state and non-state actors who conspired to steal the $230 million.

The Serdyukov downfall, which has been covered extensively in the Russian and international press, broke in November when Yevegeniya Vasileyva, the Defense Minister's blonde and pouty 33-year old mistress, was charged with fraud related to more than $100 million in stolen funds from Oboronservis, the ministry-owned military real estate company owned of which Vasileyva was a director and Serdyukov the chairman up until a year ago. Russia's Investigative Committee, which is tantamount to the Federal Bureau of Investigation, alleges that Vasileyva liquidated state assets at drop-down prices in order to pay kickbacks to government officials. It certainly didn't help that when police raided her 13-room apartment in downtown Moscow, they discovered Serdyukov there, dressed in his bathrobe. Over $1 million in jewelry, cash, antiques and 19th-century artwork confiscated from the Ministry's museum were recovered. Vasileyva is now under house arrest, yet may have had the conditions of her confinement lessened, said now to include occasional visits by Serdyukov. (The Russian press has made the most of its fallen cabinet official's clear tastes, nicknaming the women he surrounded himself with the " Amazons.")

First, by Medvedev's own admission, state corruption is one of the gravest problems besetting modern Russia and Magnitsky did little more than seek -- and find -- the truth about one of the most encompassing instances of it.

The Oboronservis case has so far led to the charging of three of his former subordinates (including Vasileyva), and the firing of Serdykuov and the Chief of the General Staff Nikolai Makarov. But it's also prompted further investigations into the "misallocation" of state funds. In total, the Russian government reckons that close to half a billion dollars went missing thanks to officials who had no difficulties supplementing their meagre public salaries -- though this is still just a fraction of the estimated $300-$500 billion siphoned off the country's $1.5 trillion GDP. According to Transparency International, Russia as tied for 133rd place -- alongside Iran, Honduras and Kazakhstan -- as the most corrupt out of 174 nations. Perhaps owing to what even Putin and Medvedev admit is a national pandemic, Russians polled believe that the Serdykuov case hints at a pervasive state corruption. It is this issue, above all, that the stifled but by no means dead anti-Kremlin protest movement managed to turn into a populist plaint, which is why, less than a year into his new presidential term, Putin has tried to co-opt it albeit according to his own caprice and personal definition of justice.

Already the dragnet had snared some big players. The Ministry of Regional Development, for instance, is said to have skimmed millions from accounts designated to host APEC's annual summit in Vladivostok last year. The state satellite navigation system saw around $200 million disappear from its budget. And recently another high-ranking official has fallen under suspicion: Yelena Skrynnik, the former Minister of Agriculture and chairwoman of RosAgroLizing, who was implicated in an embezzlement scheme in a recent state television broadcast.

Yet Serdyukov is the gift that keeps on giving, with more and more pilfered money turning up with each news cycle. $3 million was allegedly stolen from Russia's Strategic Missile Forces (RVSN), "with high-level Defense Ministry officials and commercial executives suspected of involvement," as RIA Novosti reported Friday. Yesterday, it was disclosed that a dacha belonging to Serdyukov's brother-in-law had extensive renovations projects paid for by the Ministry; according to the Moscow Times, an "entire battalion" of army conscripts was apparently tasked with constructing a road, two bridges and seeing to the attendant landscaping, to the cool sum of $3.3 million. All so the boss had a nice place to visit with his sister on the Volga delta.

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Michael Weiss is the editor of The Interpreter, a journal sponsored by the Institute of Modern Russia.

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