Following the money

Alexey Navalny’s boldest investigation yet describes a vast network of shell companies and frontmen working to build and sustain Vladimir Putin’s supposed seaside getaway

Before Alexey Navalny flew home to Moscow and surrendered himself to Russia’s legal system, the anti-corruption activist lit the fuse on what is perhaps his biggest, boldest investigation yet. Navalny’s 14,000-word report (also a two-hour video) about Vladimir Putin’s supposed “palace” in Gelendzhik on the Black Sea coast is packed with drone footage and colorful images, including artistic visualizations of the mansion’s interior. On social networks and in the news media, the investigation immediately attracted significant attention for its detailed descriptions of the residence’s opulence and endless renovations. Navalny says outright that Putin’s apparent obsession with luxury borders on “mental illness.” But Navalny’s investigation also painstakingly chronicles the ownership and management schemes used to disguise how Russia’s long-time president allegedly came to be in possession of the country’s most valuable private home.

Following the money

The report begins with a trip in time back to the 1980s, when Vladimir Putin was still serving with the KGB in Dresden. Navalny argues that Putin was essentially a nobody in these days, though he was making important personal connections that would lift his career back in Russia and later protect untold riches. Navalny names many of these fateful acquaintances and colleagues, singling out figures like Sergey Chemezov and Nikolai Tokarev, the future heads of Transneft and Rostec, respectively.

Navalny’s team says it acquired faxed correspondence between Putin’s wife and a German companion named Iren Pitch, who wrote a book about this friendship in 2002 that quickly and mysteriously disappeared from bookshelves in Russia. Mrs. Putina’s letters describe European vacations with the Chemezovs and the Shamalovs (future, ex-in-laws), including a trip to France that Putin had to cut short when he was appointed FSB director. (This contradicts public records indicating that Putina had been alone in the Baltic Sea at the time. Vladimir Putin’s unusual tan at his appointment ceremony, however, seems to corroborate the French vacation story in his wife’s letters.)

Mrs. Putina faxed her letters to her German penpal from a machine that stamped the messages “St. Petersburg Sea Port” and “Intercommerz Warnig,” apparently linking the Putins to the mobster Ilya Traber (who controlled commerce at the seaport at the time) and Matthias Warnig (another Stasi colleague from Putin’s days in Dresden who later founded a bank in St. Petersburg and helped the Putins with various expenditures, like travel and medical costs). For this benevolence, the family friend was “rewarded with interest,” Navalny says, referring to Warnig’s current position as the managing director of the Nord Stream AG (which manages the construction and operation of the Nord Stream gas pipeline from Russia to Germany) and his roles as a board member at Rosneft, Transneft, Bank Rossiya, and Rusal, as well as a supervisory board member at VTB Bank and as an administrative council member at Swiss Gazprom.

Navalny says corrupt officials in the Yeltsin administration tapped Putin to run the FSB because they needed someone who would protect them, which is precisely what Putin did. In October 1998, for example, Attorney General Yuri Skuratov started investigating Pavel Borodin (the head of Yeltsin’s Presidential Property Management Department and someone who helped save Putin from obsolescence and possible criminal prosecution in St. Petersburg) for allegedly embezzling money from Kremlin contracts.

Within a few months, Skuratov was ousted with Putin’s help, says Navalny. In these early years in Moscow, a new core principle in Russian politics was supposedly taking shape: If you want to steal from the government or embezzle state funds, you have to share it with Vladimir Putin. Also, nothing gets registered to Putin on paper, any risks need to be diversified, and old friends will always enjoy the greatest favoritism.

Meduza has already summarized many of the luxuries found at Putin’s palace in leaked blueprints and photos, but how on Earth was all this built? Navalny cites an open letter written in 2010 by St. Petersburg businessman Sergey Kolesnikov, addressed to President Dmitry Medvedev, calling for an end to Russia’s “Putinist corruption,” wherein Kolesnikov outlined how the Gelendzhik palace came to be.

According to this text, in the early 1990s, Kolesnikov and a retired KGB colonel named Dmitry Gorelov founded a medical supplies company based in St. Petersburg called “Petromed.” The Petersburg municipal government acquired a stake in the firm and Deputy Mayor Vladimir Putin dutifully represented the city’s interest. In early 2000, Nikolai Shamalov (whose son would later marry and then divorce one of Putin’s daughters) later proposed that oligarchs like Roman Abramovich and Alexey Mordashov donate money to Petromed. Kolesnikov says 35 percent of these funds were funneled through a special offshore firm owned (de facto) mostly by Putin, in part to finance the construction of a fabulous mansion on the Black Sea coast.

In 2005, Presidential Management head Vladimir Kozhin signed an investment agreement to build what was supposed to be a children’s recreation center in Gelendzhik. For the project, the Kremlin joined with “Lirus,” a firm co-owned by Shamalov, Gorelov, and Kolesnikov.

Years later, when the construction site started attracting too much media attention, the site was sold to businessman Alexander Ponomarenko, one of President Putin’s old judo buddies who co-owns Sheremetyevo Airport with Arkady Rotenberg (another old judo friend). Ponomarenko later told reporters that he bought the property for $350 million through a Cypriot offshore, intending to turn it into a hotel. Navalny’s researchers, however, say they discovered records showing that the palace was sold for a measly $350,000. Suspiciously, despite the sale to Ponomarenko, Nikolai Shamalov’s “Nogata” LLC remained the property’s management company.

In light of this arrangement and others like it, Navalny argues that the management designated to oversee Putin’s palace is what really matters, not the property’s formal owner.

Shamalov eventually transferred management to something called “Investstroi,” led by people with no apparent Putin connections, though Navalny’s team was able to tie three senior administrators to the Kremlin. The palace itself was registered to an offshore company represented by a proxy named Ivan Serditov, a lawyer who worked for Nikolai Egorov (the man who got Putin his job with Anatoly Sobchak in St. Petersburg). Serditov now works directly for the Kremlin, as well. Several of these individuals (or their relatives) now own neighboring seaside homes in Gelendzhik.

The bulk of the Gelendzhik palace, however, isn’t the mansion but the grounds: 19,275 acres of land, including almost 740 acres of vineyards. In 2011, Alexander Ponomarenko sold these wineries to the politician Boris Titov. For posing as a winemaking industrialist, Titov was rewarded with a presidential appointment as Russia’s business ambassador — a position created just for him.

According to Navalny’s research, Putin’s interest in winemaking grew from a hobby into a fixation. With Boris Titov acting as his frontman, a company called “Divnomorye” (which rents facilities and space from Titov’s “Lazurnaya Yagoda” Gelendzhik vineyard) sells wine under the brand “Usadba Divnomorskoye.” Despite relatively low sales volumes, Divnomorye received a loan for 7.5 billion rubles ($101.7 million) in 2018. It so happens that Divnomorye belongs to Vladimir Kolbin, the son of Petr Kolbin (one of Putin’s childhood friends who reportedly acted in the past as a secret shareholder for Gennady Timchenko’s “Gunvor” trading company, allegedly holding Vladimir Putin’s stake in the venture).

The construction and remodeling work at the palace and the vineyards falls to a network of seemingly disconnected firms that ultimately feed money to a business called “Top Art Construction,” which is registered to the son of Asya Borisova, a woman whose name echoes infamously inside the Kremlin, says Navalny. Borisova regularly flies to Gelendzhik on very short visits, and her firms employ 634 people in the area. In the past two years, more than 10 billion rubles ($135.7 million) have flowed to her local businesses in Gelendzhik. Navalny says it’s all for Vladimir Putin’s palace and wineries.

Today, the palace itself is registered to the “Binom” Joint Stock Company, a surprisingly meager operation based in a 100-square-foot office on St. Petersburg’s outskirts. Somehow, this tiny firm owns the most valuable private residence in all of Russia, according to Navalny’s research. Binom’s employees apparently work for another company called “Aktsept,” which is owned by Mikhail Shelomov, Putin’s cousin once removed. The pivot to a family member is significant, says Navalny, who points out that Putin has shifted his palace’s management from individuals associated with the Secret Service and the Kremlin to his own flesh and blood.

Mikhail Shelomov has apparently enjoyed different nepotistic appointments for the past 20 years. In the early 2000s, Aktsept actually acquired shares of the SOGAZ insurance company and Bank Rossiya worth hundreds of millions of dollars. Through Aktsept, Shelomov apparently owns 0.2 percent of Gazprom — worth more than 8 billion rubles ($108.6 million). The annual dividends alone amount to more than 560 million rubles ($7.6 million).

Despite apparently becoming one of Russia’s richest people, Shelomov keeps his day job and continues to live relatively modestly. This is because the wealth in his name really belongs to Vladimir Putin, says Navalny.

A convoluted network of transfers and shell companies facilitates the finances needed to sustain Vladimir Putin’s palace and vineyards, and large chunks of this money come from suspicious rental agreements between state corporations and firms that operate in Gelendzhik. For example, Rosneft has paid 1.7 billion rubles ($23.1 million) to one of Putin’s supposed vineyards “in rent,” shelling out 40 million rubles ($540,000) a month. Transneft has apparently paid 4.3 billion rubles ($58.4 million) to Binom in a similar arrangement. In fact, to legitimize monthly payments of 120 million rubles ($1.6 million), Transneft head Nikolai Tokarev makes annual visits to the area to deliver speeches and pose for photos.

Navalny calculates that these bizarre payments, as well as millions of rubles in questionable loans, amount to roughly 35 billion rubles ($475.3 million). This money is in addition to the $1 billion invested in Putin’s palace before 2017, he says.

The heart wants what it wants

Navalny’s latest investigative report achieved mass appeal almost instantly for many reasons, not least because Navalny himself is now an international political celebrity and world-famous prisoner of conscience. The report also owes its success to brilliant packaging: the most damning evidence presented concerns the property records that tie the palace and the vineyards to Vladimir Putin and his inner circle, but these dry, albeit important, details are bookended by more scintillating content: first, “3D visualizations” of casino lounges and, in the end, information about Putin’s secret lovers.

Navalny’s team says it managed to confirm recent reporting by Proekt about Svetlana Krivonogikh, one of Putin’s alleged lovers, and their child together. Multiple companies registered to Krivonogikh apparently receive large sums of money from Mikhail Shelomov’s firm Aktsept. Meanwhile, Putin’s better-known mistress, retired rhythmic gymnast Alina Kabaeva, has allegedly received even more lavish gifts and favoritism over the years. For example, Gennady Timchenko gave Kabaeva’s grandmother an apartment. Petr Kolbin later treated her to two more homes, and the businessman Grigory Baevsky gifted Kabaeva’s grandmother two whole mansions outside Moscow, which Kabaeva later bought for herself.

Alina Kabaeva was also hired to head the board of directors at the National Media Group, which belongs to Yuri Kovalchuk (allegedly Putin’s main “moneyman”). For an athlete with no special training or experience in the industry, Kabaeva rose far and fast. Two years ago, she was earning an annual salary of 785 million rubles ($10.7 million). Navalny says the registration paperwork for a small apartment in Sochi is the first and only document in known existence that formally links the families of Putin and Kabaeva: Her grandmother sold it in 2011 and Putin’s cousin bought it, a few years later.

Additionally, a former Gazprom subsidiary called “Teploinvest” used to own several luxury apartments in Moscow. Two of these homes later changed hands memorably: One was sold to Kabaeva’s mother and the other to Krivonogikh’s mother (in keeping with the broader trend, Kabaeva’s mother got the nicer one).

Summary by Kevin Rothrock