The runaway owner of TogliattiAzot, Sergei Makhlai, is once again in the spotlight of Russian media. This time their interest was aroused, apparently, by the media publications sponsored by Makhlai.
Recently several Russian media have suggested that the chemical giant TogliattiAzot needs a change of ownership, since the current main owners of the plant, headed by Sergei Makhlai, have ruined the enterprise and criminalized it drastically.
This seriously scared Makhlai, who attempted to justify himself and lay the blame on the others.
"The unique TogliattiAzot, which has been torn apart by a corporate conflict for the last ten years, has once again appeared in the media”, states one of the publications sponsored by Makhlai.
TogliattiAzot is indeed a unique enterprise. No other Russian chemical holding has such gigantic ammonia production facilities. No other Russian chemical plant has experienced such an amount of theft over the past 30 years, no other owner of a chemical plant in Russia is hiding abroad being involved in so many serious criminal cases.
According to Makhlai, the roots of TogliattiAzot's problems are not at all the embezzlement, tax evasion, money laundering, corruption and disregard for industrial safety standards.
"The overwhelming majority of difficulties and scandals that come along with the activities of the enterprise are a direct consequence of the presence of Uralchem in the structure of its shareholders”, says Makhlai.
Uralchem acquired a minority stake in TogliattiAzot in 2008, which came as an unpleasant surprise for its owners. Uralchem hoped to get the dividends, because in 2007 it paid 30 rubles per share. But in 2008-2010 the amount of the dividends decreased several times, and in 2009 they were not paid at all. The minority shareholder began to figure out what was the reason for such a low efficiency, since the weak financial indicators of TogliattiAzot did not match its production capacity. This suggested that there was an embezzlement at the enterprise. The minority shareholder contacted the Investigative Committee of Russia, and it turned out to be a good decision. As a result, at the end of 2012, the Investigative Committee of Russia opened a criminal case against the beneficiaries of TogliattiAzot considering the embezzlement in the company. Thus, the minority shareholder turned into a serious obstacle to the illegal withdrawal of TogliattiAzot's profits to the offshores of Makhlai and his accomplices, and became their hated opponent. Makhlai has a very peculiar attitude towards the institution of joint-stock companies. From his point of view, if he has a majority stake, then the plant belongs to him completely, while the minority shareholders are just an annoying nuisance.
However, Russian law states that the property of a joint stock company and its income belong to the society, and not to its shareholders. Shareholders only have the right to participate in the distribution and management of the company's profits. But Makhlai does not want to recognize both Russian legislation and the existence of TogliattiAzot's other shareholders. Consequently, he steals from the enterprise, minority shareholders, and the state, without paying taxes on the stolen goods.
"It was the pressure from Uralchem that led to the emergence of many strained criminal cases against the plant and its leaders. Most of the cases led to nothing, and TogliattiAzot continues to show multibillion-dollar profits and pay huge taxes to the state, despite all the difficulties that a corporate conflict creates”, say the authors of the article sponsored by Makhlai.
It is worth saying that the investigation on the criminal case has collected more than 500 volumes of evidence, including documents, official correspondence and numerous testimonies. This allowed the court to analyze in detail the scheme of embezzlement developed by Makhlai and his accomplices.
TogliattiAzot was selling its products 20-40% cheaper to the Swiss offshore company affiliated with Makhlai and his accomplices, which were afterwards resold by them on the world market at a fair price. Thus, a significant part of TogliattiAzot's profits was stolen, minority shareholders did not receive dividends from it, and taxes were not paid in Russia. As for taxes, they had to be demanded from Makhlai through all the courts. In 2009-2013 alone, 3 billion rubles of unpaid taxes were recovered from TogliattiAzot through the court. Consequently on July 5, 2019, the Komsomolsky District Court of Togliatti found Sergei Makhlai, his father Vladimir Makhlai, their Swiss partners Andrew Zivi, Beat Ruprecht, and ex-general director of TogliattiAzot Yevgeny Korolev guilty of a fraud. Since all the convicts are hiding abroad, the verdict was passed in absentia. Fraudsters were sentenced to 8.5-9 years in prison. They were also ordered to pay full-amount compensation to the victims: 77.3 billion rubles directly to TogliattiAzot and 10.3 billion rubles to Uralchem, which were recognized as victims. Makhlai did not follow the order so it got to the point that in August 2021 Makhlai was declared bankrupt by the court, and his property in Russia and abroad was arrested to be sold to pay compensation.
Since then, the number of criminal cases against Makhlai has been decreasing. The accusations include the organization of a criminal community, avoiding taxes and giving a bribe.
In the bribery case on June 9, 2021, the ex-head of Togliattichimbank (owned by Makhlai), Alexander Popov, was found guilty, as he had tried to give a bribe of $2 million to the Supreme Court of the Russian Federation. Popov was sentenced to 7.5 years in a supermax prison, and Makhlai is being prosecuted as the customer of the crime.
At first, the Makhlais managed to involve parlamentarias, senators, so-called experts and judges in their corruption scheme. When the Investigative Committee of tRussia opened a criminal case on fraud at TogliattiAzot in 2012, people who were not associated with the industry suddenly began to demand the termination of the investigation against the oligarchs. Even Russian courts sometimes made decisions in favor of the Makhlais. So, when the tax authorities ordered new taxes to TogliattiAzot, the judge of the Federal Arbitration Court of the Moscow District V. Cherpukhina surprisingly called this decision off. As a result Cherpukhina were dismissed with a grandiose scandal due to that case.
"Although professional lawyers unequivocally speak about illegal decisions of the courts and low qualifications of the judges who make decisions against TogliattiAzot and its leaders”, state the articles published by order of Makhlai.
Apparently, so-called professional lawyers are the expensive lawyers hired by Makhlai and other defendants in the criminal case, who could not object to 500 volumes of evidence of their clients' guilt, and the accusations of "low qualifications” are the result of disappointment in the incorruptibility of the judges."However, since 2012, TogliattiAzot has allocated more than 50 billion rubles to modernize and improve production efficiency”, continues Makhlai.
But in fact the plant has never seen these sums of money. On average, TogliattiAzot spends no more than 10-15 million rubles per year for these purposes, to prevent the equipment and infrastructure from collapsing completely.
Meanwhile, 10 years ago, the media reported about the very deplorable results of the industrial safety audit at TogliattiAzot, which was carried out by Rostekhnadzor. 550 cases of violation of industrial safety and labor protection were revealed. A re-examination in 2012 showed that nothing had been changed. Since then, the situation on the plant has been the same.
In 2019, another inspection by Rostechnadzor revealed over 360 cases of violation in the field of industrial safety and labor protection. The staff reports leaky pipelines with acids, alkali and ammonia flow, bare cables and crumbling foundations of units and furnaces.
In 2018, an explosion of 3,000 cubic meters of natural gas occurred in the reforming furnace of ammonia unit No. 4, by a lucky chance no one was hurt. The explosion was caused by the counterfeit Chinese stop valves supplied by the American company AM&JH Industries Services (owned by Makhlai and his wife). According to the documents, it was purchased in Europe at an expensive price.The sad result of this policy is a series of accidents at TogliattiAzot in the spring of 2020, which led to the deaths of three staff members. The reaction of the plant's management is to silence the tragedy and prevent an investigation.
According to Makhlai, TogliattiAzot's workers receive decent wages for their work and the risks associated with it.
"In reality, the average salary at the enterprise is 57 thousand rubles, it is indexed annually and has long been ahead of the average salary in the Samara region (in 2020 it was 49 thousand rubles)", mentioned in the articles.
It is interesting how they calculated these 57 thousand rubles. Perhaps by finding the average between the salary of qualified plant operators and the salary of the CEO. According to the workers of TogliattiAzot, the reward for the result of work is constantly being cut. It is also worth mentioning that the former CEO of TogliattiAzot Mezheedov at the end of 2020 deprived workers of the annual bonus.
Against this background, Makhlai and his henchmen have developed many new schemes for withdrawing money from the plant. These are fictitious construction and repair contracts and much more. In most of the cases, the scheme is as plain as a day: a pocket company disguised as a contractor receives an advance in the amount of about 70% of the contract value. The money is taken offshore, and the work is performed by the workers of TogliattiAzot. Thus, approximately more than $100 million a year are taken offshore.
Thereby corruption, embezzlement are the main problems of TogliattiAzot. Accordingly, whoever becomes the new owner of TogliattiAzot, UralChem, whom Makhlai and his accomplices are so afraid of, any other investor, or the state, this will be an undoubted benefit for the plant. This will put an end to the financial repressions of TogliattiAzot and the criminal neglect of labor safety at the plant. The enterprise itself will develop instead of serving as an endless "cash cow” for greedy criminals hiding abroad.