Russian Railways paid billions to secretive contractors

MOSCOW (REUTERS) - One of Russia's biggest state companies has handed billions of dollars to mysterious private contractors that disguise their ownership or have little or no presence at their registered headquarters, a Reuters investigation has found.

Russian Railways, led by Vladimir Yakunin, an old friend of President Vladimir Putin, awarded about 115 billion roubles (S$4 billion) to 11 such private companies between 2007 and 2013, according to public tender documents and private bank records studied by Reuters.

Two of the 11 firms were the only bidders in 43 tender competitions since 2010 worth up to US$340 million. Though bidding as rivals, the two companies have striking similarities. They were registered on the same day, opened bank accounts on the same day and in two recent years reported exactly the same number of employees.

Of the 11 companies, none of their real owners could be traced and only one had staff at its registered headquarters when a reporter visited. The companies declined to comment or did not respond to inquiries made in writing and by telephone.

The state rail giant awarded US$1 billion to a single contractor that is a type of company not obliged to disclose its owners. Its registered headquarters is a one-room flat in a run-down apartment building in Moscow. No one was there when a reporter called during working hours.

An analysis of a database of 70 million Russian banking transactions obtained by Reuters indicates that much of the money paid to this contractor was rapidly transferred to other companies. Some of those recipients have either been declared bogus by Russian authorities or appear to have nothing to do with railway work.

Russian Railways, also known as RZhD, said there was nothing wrong with its contractors or the way its contracts were awarded. In a letter to Reuters, a spokesman for Yakunin and Russian Railways said: "The procurement activity of OAO RZhD is conducted in strict accordance with applicable law ... An internal review was conducted of documents and agreements with the companies ... No violations were found whatsoever."

In 1990s Russia, after the collapse of communism, individuals bought swathes of state assets at knockdown prices, becoming hugely wealthy "oligarchs." Since then, privatisation has slowed. But the state pays billions of dollars each year to private contractors.

Reuters began examining contracts offered by Russian Railways after learning that several companies winning rail tender competitions of significant value all had accounts at a bank called Capital Commercial Bank (known by its Russian initials STB).

One of the major shareholders in STB, which is now defunct, was a businessman called Andrei Krapivin. Yakunin, the head of Russian Railways, once described Krapivin as an "old acquaintance" and an "unpaid adviser."

Russian Railways told Reuters Krapivin "is not an adviser"to Yakunin; it did not say whether he had been an adviser in the past. Krapivin did not respond to requests for comment. His son, Alexei, said his father had nothing to do with the rail contractors examined by Reuters.

Another former shareholder in STB was Russian banker German Gorbuntsov, who survived an assassination attempt in March 2012 in Canary Wharf, London.

Dmitry Peskov, a spokesman for Putin, said he was unable to comment in specific terms about Reuters findings, but said the information would be examined by "among others, the relevant oversight bodies."