Russian Minister of Health and Social Development Russia Mikhail Zurabov
Photo: Dmitry Azarov
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Health Minister in New Scandal
Representatives of the investigative committee of the Russian Interior Ministry carried out searches of at the Pension Fund of the Russian Federation, the Moscow office of IBM and the offices of the major Russian IT companies Lanit and R-Style yesterday. The apartments of Pension Fund officials and company executives were also searched. Investigators suspect that the Pension Fund bought its personal account tracking system at an inflated price. This is the third major criminal case involving agencies answering to Health and Social Development Minister Mikhail Zurabov to arise in the last month.
Secret Operation
Yesterday's operation was prepared for under secrecy. It is known, however, that one of its leaders is Pavel Zaitsev, who is well known from the Three Whales furniture smuggling case. Ten groups of Interior Ministry department of economic security personnel and special forces troops were formed. Each group received a sealed envelope with its assignment at 7:00 yesterday morning. The searches and seizures took the entire day for the groups to complete.
Yesterday's actions were part of a criminal case initiated last week under article 159, part 4, of the Criminal Code of the Russian Federation (“Embezzlement committed by an organized group in especially large volume”). Investigators claim that Pension Fund executives contracts for deliveries of personal computers and other electronic equipment at inflated prices.
The Kommersant correspondent reached Zaitsev at the site of one of the searches. He declined to speak to the paper because he was engaged in an “urgent investigative event.” It was later learned that he was in one of the buildings of the Pension Fund at the time.
Servers, digitalized information and dozens of boxes of documents were seized from the IT companies. Employees were not admitted to their workplaces and those who were already present were sent away. The Interior Ministry reports that “there were no excesses” committed during the operation. No one was taken into custody. According to information obtained by Kommersant, the investigation is based on evidence of crime and there are no suspects yet.
Pension Fund head Gennady Batanov was not present at the search. Head of the Fund's press service Viktoria Tretyakova told Kommersant that Batanov was “in the State Duma until lunch, then he immediately flew to Chechnya on a business trip.” His office and the office of his first deputy, Pavel Averin, have been sealed by investigators.
President of R-Style Vasily Vasin told Kommersant that investigators were interested in documentation of contracts between that company and the Pension Fund, “deliveries of equipment to the Fund and programs and technical complexes developed.” He added that the action left the company “practically totally paralyzed.” When asked if prices in contracts with the Pension Fund were excessive, he replied that “all purchases by state agencies, including the Pension Fund, are made on the basis of a tender. We supplied the Fund with equipment at very low prices in many cases. We frequently lost tenders. Sometimes we won. But that doesn't mean anything.”
In 2004, Lanit and R-Style supplied the Pension Fund with 15,000 IBM personal computers with Philips monitors for 300 million rubles. In November 2005, the Pension Fund bought 900 computer systems from Lanit and R-Style for 303 million rubles (of which 61.7 million went to Lanit and 241 million to R-Style). After that, the Fund bought 547 IBM iSeries 400 servers from Lanit and R-Style for 643 million rubles (with almost 340 million rubles going to R-Style).
Police suspect that the Pension Fund was knowingly overcharged by the suppliers, who expected a kickback. A Kommersant source in an IT company said that kickbacks on PC contracts can range from 10 to 50 percent of the value of the contract. At IBM, documentation of that company's financial dealings with Lanit and R-Style were seized to judge whether the latter companies subsequently inflated their prices or not.
Pension Accounting
Government sources say that the scrutiny of the Pension Fund is related to its system of personal pension accounts, which originated in 1996 when Vasily Barchuk headed the Fund. Mikhail Zurabov became head of the Fund in 1999. He initiated a series of reforms and the system became fully operational in 2003, to much fanfare. The system maintains information about more than 100 million people. “The pension Fund budget is complete nontransparent right now,” a source told Kommersant, “and there is no separate expenses for the accounting system.” A source within the Fund told Kommersant that “the accounting system is perhaps the most vulnerable in the Pension Fund. Expenses on it come to $1-2.5 billion, by various estimates.”
Competitions to supply equipment and develop software for the accounting system went on over a period of several years. The main supplier of equipment was always IBM. The personal accounting system is one of the largest information systems in the world and includes more than 50,000 personal computers and about 1000 IBM servers. An IBM spokesman said that the system is one of the five largest using iSeries servers.
Zurabov behind It
This is the third major scandal in a division of the Health Ministry in the last month. At the end of November, Federal Mandatory Medical Insurance Fund director Andrey Taranov, three deputy directors of that fund and three department heads were arrested on charges of receiving kickbacks from large companies in exchange for their inclusion in the state program to provide supplemental medical aid to recipients of social benefits. That program was one of Health Minister Zurabov's largest projects. After that, the Prosecutor General's Office initiated a criminal case against general director of the Federal Healthcare and Social Development Agency Vyacheslav Prokhorov and his deputy Ruslan Khasanov on charges of negligence leading to a loss of 11 billion rubles to the state. That case is related to purchases of medical equipment under the national health project, which is also being managed by Zurabov.
State Duma member Alexander Khinshtein sees a basic difference in this case, however. “I am certain that [the criminal case involving the Pension Fund] was initiated by Zurabov himself,” Khinshtein said. “That is how he is trying to get rid of Batanov management, which is undesirable to him. Relations between them have been complicated lately. Batanov has even stopped speaking to Zurabov. The thing is that Batanov refused to take Zurabov's orders when choosing winners of tenders. I am sure that, after Batanov, Zurabov's next target will be chairman of the Social Insurance Fund [Galina] Karelova, whom he also does not control.”
The feud between Zurabov and Batanov is talked about in the Pension Fund itself. It allegedly began after Batanov dismissed several workers who had been there since Zurabov headed the Fund. It is also possible that Zurabov wanted to impose order at the Fund before someone else anyone else got around to it. After the arrest of Taranov, Zurabov stated that he had long intended to fire him, but had not completed the necessary paperwork. The Health Ministry declined to make official comments on the case yesterday.
Afanasy Sborov
All the Article in Russian as of Dec. 07, 2006
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