In the same New York building where Magnitsky uncovered tax fraud, PM Mikhail Mishustin’s brother-in-law owned multiple apartments, investigation finds

Russian entrepreneur Alexander Udodov, who is the husband of current Prime Minster Mikhail Mishustin’s sister, has already been accused of illegally recovering value-added tax payments from the Russian government’s budget. Now, it has also become clear that he used to own six apartments in central New York City. The apartments are in the same building where entrepreneur Denis Katsyv purchased real estate. The U.S. government accused Katsyv, who owns Prevezon Holdings and is the son of a former Russian Railways vice president,of taking part in the tax fraud case uncovered by Sergei Magnitsky, whose 2009 death in a Moscow jail led to the passage of the Magnitsky Act. The connection between Katsyv and the prime minister’s family forms the center of a new report from opposition politician Alexey Navalny’s Anti-Corruption Foundation (FBK).

Who is Alexander Udodov?

Before Mikhail Mishustin became Russia’s prime minister, Alexander Udodov rarely appeared in the news. In 2011, when Mishustin took the helm at the Federal Tax Service (FNS), Kommersantand RBCmentioned Udodov as an acquaintance of Mishustin’s and a suspect in an attempt to embezzle two billion rubles through fake VAT returns. At the time, Kommersant described the businessman as “officially unemployed but a major decision-maker in the tax world.” Both outlets as well as Open Media reported that investigators believed Udodov to be involved in the crime itself, but he was nonetheless designated as a witness, not a defendant, in the case.

When Mishustin exchanged the top spot at the FNS for the prime minister’s seat, journalists once again turned their attention to Udodov. Some wrote about his business dealings: He owns a company called Gribnaya Raduga (Mushroom Rainbow) that produces edible champignons as well as a mineral water bath resort called “Thermals” in the Krasnodar region. Other journalists looked into the entrepreneur’s ties with Mishustin: Udodov is still a fixture in the prime minister’s circles; he gave Mishustin’s sister Natalia Stenina luxury real estate for free; he and Stenina co-own the Sportim hockey club (where Mishustin plays); they also co-own a restaurant called The Not-So-Far East.

Amid that burst of interest in Udodov, the tabloid newspaper Moskovsky Komsomolets ran a story titled “Alexander Udodov: A biography of an investor who’s developing our country’s economy.” Three weeks later, Udodov gave an interview about his work to the national newspaper Izvestia. In that piece, he also denied any involvement in the illegal VAT returns and clarified the nature of his connection with Mishustin: “The truth is that since 2008, I’ve been married to his sister, Natalia. […] We don’t live together anymore, but I still have a good relationship with her family, and our moms are friends,” Udodov said.

What did the FBK find out about him?

Udodov previously owned six apartments at 20 Pine Street in New York City. The building is a short walk away from Wall Street. City real estate records cited by the FBK indicate that in December 2009, Udodov acquired five apartments in the building, buying a sixth in June 2010. The purchases cost the businessman $6.4 million. In every case, the properties were first registered to commercial firms with a series of similar names (PINE 2315, PINE 2401, PINE 2407), and Udodov subsequently purchased those companies. The FBK’s report indicates that Udodov rented out at least some of the apartments. By 2018, he had sold all of them.

The FBK noted that Udodov bought real estate in the Pine Street building just three weeks after a Cyprus-based firm called Prevezon Holdings, owned by Denis Katsyv, had done the same. In 2013, Prevezon was targeted in a U.S. federal investigation. According to American officials, Prevezon Holdings used real estate purchases in New York City to embezzle money received from Russia via a tax fraud scheme discovered by Sergei Magnitsky.

The federal investigation led government officials to freeze four of the five apartments Prevezon Holdings had purchased in the Pine Street building over the years. In 2017, however, the company settled with the government out of court, and the charges against it were dropped in exchange for $5.9 million. That is approximately three percent of the sum the U.S. government initially demanded from Prevezon Holdings, and Katsyv celebrated the end result of the case as a victory for him. “It’s practically an apology on the government’s part,” Faith Gay, an attorney for the company, told RBC. She predicted that all of the company’s frozen assets would be released.

In its report on Udodov, the FBK expressed suspicion at the fact that he and Prevezon Holdings had purchased real estate in the same building in New York at about the same time. “Here’s how the situation looks at this point: Government funds were embezzled on an unprecedented scale through the Federal Tax Service of the Russian Federation (‘Magnitsky’s case’). The embezzlement has been thoroughly, fully demonstrated, and a dozen countries have opened criminal cases (though Russia hasn’t, of course). Some of the stolen money was given to Denis Katsyv, who immediately used it to buy apartments in New York. Three weeks later, the brother-in-law of the head of the Russian Federation’s tax service buys five apartments in the same building in New York. In fact, the apartments are legally co-owned by his wife, Mishustin’s sister. And then, there are the aggravating circumstances: This brother-in-law (Udodov) has been cited in the news media many times […] as somebody who has organized embezzlement schemes using VAT returns,” the FBK report declared.

Summary by Olga Korelina

Translation by Hilah Kohen