MOSCOW - Russian general audit office has accused Chelsea owner Roman Abramovich of driving the region of Chukotka to bankruptcy through financial machinations and gross mismanagement. An audit chamber official told The Russia Journal that the region has been bankrupted through “ruthless milking, various financial schemes and gross financial mismanagement over the past 2-3 years by its elected administration.”
Abramovich has been governor of Chukotka for nearly four years.
The allegations of abuse of power in a report released today could mean the end of gubernatorial immunity enjoyed by Abramovich under the Russian constitution and prompt an investigation into the sources of his enormous wealth.
Releasing the report, Sergei Ryabykhin, the chamber auditor that oversaw the forensic checks, called Chukotka, one of the most economically disadvantaged of all Russia’s 88 regions, a bankrupt territory, while Sergei Stepashin, the Audit Chamber chairman, called the region’s official stewardship a challenge to the whole nation.
Abramovich - Russia's second richest man after jailed ex-Yukos Chairman Mikhail Khodorkovsky, moved to London in 2003 and readily became the richest man in the United Kingdom. He did not attend the Audit Chamber hearing despite public invitations from Stepashin, who even proposed to pay his airfare from London to Moscow.
The report said that as of Jan. 1, 2004, Chukotka’s state debt stood at 6.5 billion rubles, which along with the service cost, climbed higher to peg at 9.3 billion rubles - or, two-and-half times the region’s revenues in 2003. Also, the forensic audit revealed financial misappropriation of the region’s budget to the tune of 547 million rubles, including about 104.5 million from the federal government’s coffers, while illegal use of the region’s finances exceeded 748 million rubles.
Consequently, Chukotka administration has violated the Russian Budget Code, which says a region’s debt should not exceed its cumulated revenues in the previous year. Chukotka earned only 3.9 billion rubles in 2003, while its state debt stood at 9.3 billion rubles, according to excerpts from the report.
On the whole the Audit Chamber experts say they have three main questions for Abramovich - on the issues of the bloated internal debt, gross financial misappropriations, and lastly, the region’s offshore status, which allowed companies affiliated with the governor’s chains of businesses to siphon off more than 13.7 billion rubles from the region. “These companies which do not produce anything or take part in the region’s economic activities were the recipients of the taxation breaks and concessions through their affiliations to structures owned by Sibneft - one of Abramovich’s principal assets in the country,” Ryabykhin noted.
Denouncing Abramovich’s stewardship of Chukotka as a challenge to Russia, Stepashin said money made in Russia should be used to refinance investment projects in the country, instead of being funneled to purchasing foreign-based assets such as the Chelsea Football Club. “Personally, I see such behavior as a challenge to the whole nation, considering the fact that the oil companies, which were built by the whole nation, were obtained free of charge,” Stepashin was quoted by NTV as saying. “I consider the deal a politically demonstrative move. That is why stringent economic measures have to be taken in this case.”
Meanwhile, the chamber has forwarded their findings to the Finance Ministry and Chukotka government and legislative assembly as well as the Russian federal government and the General Prosecutor’s Office, which will take the final decision on the issue, Ryabykhin noted.
Asked by journalists if Abramovich could sleep soundly after the report, Ryabykhin said the onus is now on the General Prosecutor’s Office to take the necessary actions after getting the report and its conclusions. "They have to, because it’s now their problem, and therefore, they have to act.”
Meanwhile, a Chukotka administration official, speaking on behalf of Abramovich, dismissed all three charges as totally unjustified. “Chukotka’s internal debts were accumulated prior to when Abramovich took office in 2001. Part of the debt has been restructured, and the whole restructuring process is slated for completion by the end of 2004.”