Bronka bros

How Russia’s justice system ordered the seizure of a major seaport built with stolen public funds — all without criminal charges against the ex-security officials who bought it

When is corruption enough to warrant felony prosecution? The Russian Attorney General’s Office says a businessman in St. Petersburg overcharged the Federal Protective Service vast sums of money for construction work and used the cash to build a multipurpose sea cargo complex. Last month, in a Civil Code ruling, a Moscow court ordered the state to seize the port as public property from its new owners: the families of two former senior security officials. RBC reporter Margarita Alekhina took a long, hard look at the case materials behind the court order. Meduza summarizes what she found.

According to evidence presented by the Attorney General’s Office and Russia’s Federal Financial Monitoring Service, a businessman named Dmitry Mikhalchenko leveraged his connections inside the Federal Protective Service (FSO) to win overpriced construction and remodeling contracts worth 43 billion rubles ($581.3 million). After the authorities arrested Mikhalchenko in early 2016 for alleged alcohol smuggling and later charged him with embezzlement, he “sold” Port Bronka to two people: the wife of Evgeny Murov (the FSO’s director from 2000 to 2016) and Nikolai Negodov (a retired Federal Security Service general). Though journalists have tied Evgeny Murov’s resignation from the FSO in 2016 to Dmitry Mikhalchenko’s arrest, Murov faces no criminal charges and he wasn’t even a witness in the Port Bronka case.

According to witness testimony, the FSO’s leadership personally consented to Mikhalchenko’s companies overcharging the agency for contract work. The case documents also show that Mikhalchenko invested some of these corrupt profits directly into Port Bronka’s construction while laundering the lion’s share of the money through a chain of offshore and shell companies, plus a Latvian bank. The port’s 3-billion-ruble ($40.6-million) sale to Murov’s wife and Negodov was “fictitious,” concluded the court, and Mikhalchenko never actually received any money.

The Moscow court determined that Mikhalchenko used his contacts among the FSO’s former leadership to engineer the promotion of friends to senior positions in the FSO department responsible for contracting construction work. Mikhalchenko’s businesses overpriced their services by 20–40 percent, and the FSO’s contracting department itself funneled roughly 15 percent of these payments into a hidden account controlled by Mikhalchenko.

Journalists at Fontanka previously claimed that Mikhalchenko transferred Port Bronka to the Murovs and Negodovs as compensation for past support and payment for continued patronage. Reporters at Republic, meanwhile, said Murov and Nedogov had always owned the port and were merely “stepping out from the shadows.” The Moscow court, however, determined that Mikhalchenko acted out of desperation and merely turned to old personal friends to protect his assets against possible seizure. State officials put Port Bronka’s current value between 6 billion and 15 billion rubles ($81.1 million and $202.8 million) — a hefty sum, though Mikhalchenko’s companies spent more than 40 billion rubles ($540.8 million) to build it.

And here’s some more funny business: The court order to seize Port Bronka is based on a Civil Code statute against government corruption. The Attorney General’s Office has not brought any criminal charges against the Murovs or the Negodovs. In fact, the families of the two former senior security officials will retain their rights to several of Mikhalchenko’s old factories and restaurants because the government is only seizing Port Bronka’s operator, “Phoenix” LLC, which doesn’t own these other businesses.

Summary by Kevin Rothrock

Cover photo: Port Bronka / Instagram