2008 Russian Procuracy's Investigative Committee


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Corruption, Russia, Procuracy. A law review article co-authored with Mary Holland of NYU Law will be appearing in Columbia Journal of East European Law. The presentation has been given at University of Toronto and elsewhere.

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2008 Russian Procuracy's Investigative Committee

  1. 1. Law as Politics: The Russian Procuracy and its Investigative Committee U.S. Helsinki Commission, November 2008 Ethan S. Burger, Esq. Adjunct Professor Georgetown University Law Center Scholar-in-Residence American University’s School of International Service Washington, D.C.
  2. 2. Preliminary Considerations <ul><li>Corruption only exists in the shadows. This presents methodological issues in its examination. </li></ul><ul><li>94.7% of all information presented in PowerPoint presentations are either misleading or false. </li></ul><ul><li>Corruption exists in all countries, the principal variables are the scale and the form it takes. </li></ul>
  3. 3. Beware of Collective Nouns
  4. 4. Legal Basis for the Procuracy <ul><li>Sources of Law: The Constitution, the Law on the Procuracy (as amended) and the Criminal Procedure Code (as amended). </li></ul><ul><li>Procurator General is appointed to a five-year term, appoints and dismisses all lower ranking procurators; In theory he will hold position longer than the President. </li></ul><ul><li>The Procuracy has multiple functions: </li></ul><ul><ul><li>Investigation, </li></ul></ul><ul><ul><li>Compliance/Protection of Citizens’ Rights, </li></ul></ul><ul><ul><li>Prosecution. </li></ul></ul>
  5. 5. Key Features of the Putin Era <ul><li>Establishment of a “Dictatorship of Law.” </li></ul><ul><li>Re-centralization of the country. </li></ul><ul><li>Gain control over the media (principally television). </li></ul><ul><li>Place loyal individuals in key positions and improve state salaries. </li></ul>
  6. 6. Evolution in the Procuracy <ul><li>Procurator General Yuri Chaika replaced Vladimir Ustinov, who then was made Minister of Justice. </li></ul><ul><li>Procurator General Chaika initially opposed the creation on an “Investigative Committee” (hereinafter the “IC“ ) </li></ul><ul><li>Later, he surprisingly announced that he was an “active proponent” of having the IC as it helps to unite investigative subdivisions at MVD, FSB and other bodies. </li></ul>
  7. 7. Reading the Tea Leaves <ul><li>Some saw the IC’s creation as Putin’s attempt to control investigations of him and his “favorites” since it reports to the President and not the Procurator General. </li></ul><ul><li>Procuracy retains day-to-day oversight over the MVD, FSB and other bodies, but its oversight ability is limited because it no longer controls investigators. </li></ul>
  8. 8. Russia’s Wealthiest Individual? <ul><li>Vladimir Putin is reportedly worth $40 billion, as the beneficial owner of 37% of Surgutneftegaz ($18 billion), 4.5% of Gazprom ($13 billion) and half of a Swiss-based oil trading company, Gunvor ($10 billion) – his official financial disclosure forms don’t reflect these assets. </li></ul><ul><li>If these allegations are true, this fortune would make him the richest person in Europe and one of the ten wealthiest in the world. In a world of shell companies and shills, how can one know? </li></ul>
  9. 9. The Politics of Power <ul><li>Putin signs the law creating the IC in June 2007, which is technically “under the aegis” of the Procuracy. </li></ul><ul><li>IC Chairman is Aleksandr Bastrykhin, who has held a variety of positions within the Ministry of Justice and MVD. A Putin protégé he now reports to President Medvedev. </li></ul><ul><li>The IC is in charge of all preliminary criminal investigations of a major nature, the MVD and other bodies handle routine matters. </li></ul><ul><li>The IC assumed responsibility for 18,000 federal Procuracy investigators and jurisdiction over 60,000 pending criminal investigations, including the murders of Anna Politkovskaya and Aleksandr Litvinenko. </li></ul>
  10. 10. Law as Politics <ul><li>The IC Committee altered the playing field in the struggle for power between rival siloviki groups. </li></ul><ul><li>Former President/Prime Minister Putin seemingly conferred greater resources on the Sechin clan, with whom IC Chairman Bastrykhin appears affiliated. </li></ul><ul><li>This is views as a blow to Cherkesov clan, with whom Procurator General Chaika appears affiliated. </li></ul><ul><li>Chaika’s power grows (perhaps because the IC is not as effective as hoped), he then seeks to coopt Bastrykhin. </li></ul>
  11. 11. Renationalizations and Control by the Siloviki – Examples from Marshall Goldman <ul><li>Yuganeftegaz -- December 2004, 100% owned by Rosneft (will be reduced to 70% after IPO). </li></ul><ul><li>Sibneft Oil -- October 2005, 51% now owned by Gazprom. </li></ul><ul><li>Federal Law “On the Procedure for Making Foreign Investments in Economic Companies Which Are of Strategic Importance for Ensuring the Country's Defense Capacity and State Security,” April 29, 2008. </li></ul>
  12. 12. Siloviki in Business – Examples from Marshall Goldman <ul><li>S. Ivanov, Chairman, United Aviation, 1st Dep. Prime Min. </li></ul><ul><li>D. Medvedev, Chairman, Gazprom, 1st Dep. Prime Min. </li></ul><ul><li>S. Naryshkin, Vice Chair, Rosneft, Dep. Prime Minister. </li></ul><ul><li>I. Sechin, Chairman, Rosneft, Kremlin Staff. </li></ul><ul><li>Y. Shkolov, Board of Directors TransneftOil Pipeline, Pres. Aide. </li></ul>
  13. 13. Russia’s Billionaires <ul><li>Until 1997, Russia had no billionaires according to Forbes Magazine; in 2008 87 are identified. </li></ul><ul><li>Russian billionaires did not fit the typical categories of “inherited” or “self-made” wealth. </li></ul><ul><li>Russia’s billionaires are the youngest of any major country, having an average age of 46 (vice 64). </li></ul><ul><li>A majority of Russia’s billionaires accumulated their wealth in a very short time, primarily in the natural resource sector -- which raises many questions. </li></ul><ul><li>According to Interfax , Some 100,000 Russian govt officials are unlawfully involved in business activities. </li></ul>
  14. 14. Investors Be Careful ! ! ! <ul><li>BP-TNK – Russian gov’t created obstacles to JV, SH dispute apparently resolved (but will the second shoe fall?). </li></ul><ul><li>Norilsk-Nickel - Mikhail Prokhorov was forced to sell his 26 percent stake in Norilsk Nickel to Kremlin ally Mikhail Potanin. </li></ul><ul><li>Royal Dutch Shell PLC – was forced to sell a portion of its rights to oil and natural gas in the Sakhalin II Project to Gazprom, as well as to make certain other major financial concessions. </li></ul><ul><li>RUSSNEFT – the principal owner of Russia’s 7th largest oil company is likely to lose control of the company due to alleged tax violations. </li></ul>
  15. 15. Medevedev’s War on Corruption <ul><li>On July 31, 2008, President Medvedev issued the National Plan Countering Corruption. The Plan consists of four sections: </li></ul><ul><li>1.   Measures for Legislative Support for Counteracting Corruption. </li></ul><ul><li>2.   Measures for the Improvement of State Administration for the Purposes of Preventing Corruption. </li></ul><ul><li>3.   Measures for Raising the Professional Level of Legal Cadres and Legal Education 4.   Sequential Measures for the Realization of the Present National Plan </li></ul><ul><li>**** HAVE WE NOT SEEN SIMILAR DECLARATIONS BEFORE. </li></ul><ul><li>ACTION NOT DECLARATORY POLICY MATTERS. </li></ul><ul><li>ARE WE IN STORE FOR MORE OF THE SAME? **** </li></ul>
  16. 16. Medvedev’s Draft Anti-Corruption Laws <ul><li>4 Draft Laws: (i) Federal Law “On Counteracting Corruption,” (ii) Federal Constitutional Law &quot;On Amending Article 10 of Federal Constitutional Law &quot;On the Government of the Russian Federation, (iii) Federal Constitutional Law &quot;On Guaranteeing the Rights of Citizens and Organizations to Information on the Judicial Work of the Courts of General Jurisdiction in the Russian Federation,&quot; and (vi) Federal Law &quot;On Amending Separate Legislative Acts of the Russian Federation in Connection with the Ratification of the United Nations Convention on Countering Corruption, October 31, 2003 and the Convention on Criminal Liability for Corruption, January 27, 1999. </li></ul><ul><li>What is the significance of Article 5(5) of the first law (the centerpriece of the program)? </li></ul><ul><li>Статья 5. Организационные основы противодействия коррупции 5. Генеральный прокурор Российской Федерации и подчиненные ему прокуроры в пределах своих полномочий координируют деятельность по борьбе с коррупцией органов внутренних дел Российской Федерации, органов федеральной службы безопасности, таможенных органов Российской Федерации и других правоохранительных органов и реализуют иные полномочия в области противодействия коррупции, установленные федеральными законами. </li></ul><ul><li>Has the Investigative Committee Lost its Importance (Chaika has consolidated his position)? </li></ul><ul><li>How will the Law on the Procuracy and the Russian Criminal Code be amended? </li></ul>
  17. 17. Anti-Money Laundering and Things to Ponder <ul><li>ML has 3 stages (i) placement, (ii) layering and (iii) integration. </li></ul><ul><li>Know you client and Politically Exposed Persons (PEPs) may give rise to money laundering violations. </li></ul><ul><li>Real estate is an excellent way of laundering money, as are related-party transactions. </li></ul><ul><li>Will the West have the will to enforce its own laws? </li></ul><ul><li>What will be the impact of the current financial crisis? </li></ul>