Mutko Vitaly Leontievich, Minister of Sports, Tourism and Youth Policy
«Russia's Power Families - 2011» / Mutko Vitaly Leontievich, Minister of Sports, Tourism and Youth Policy
Employed at: RF Government
Positions held: 1992-1996: Deputy St. Petersburg Mayor; City Council for Social Issues chairman. 2001-05: Russian Premier Soccer League president. 2005-08: Russian Soccer Union president. 2003-08: Member of Federation Council representing St. Petersburg; Committee on Youth and Sports chairman. From May 2008: RF Minister of Sports, Tourism and Youth Policy.
Business involvement: 1997-2003: President of Zenit Soccer Club CJSC. After Vladimir Putin started his Moscow career, Putin helped Mutko finance Zenit Club with Taimuraz Bolloyev’s Baltika Brewing Company OJSC funds. Subsequently, a 25.01% share was sold to LenTransGas (a Gazprom branch), and 12% was sold to Petrovsky Bank OJSC. In 2001, MDM-Bank absorbed Petrovsky Bank, and Bank-owned EuroChem Mineral and Chemical Company CJSC obtained a 10% share. Another 2% was bought by former Petrovsky Bank head Yuri Golovin, who became first deputy chairman of the MDM Bank board. In 2003, 26% of Zenit Club shares were sold to Vladimir Kogan’s St. Petersburg Bank, whereupon the Bank’s first Vice President David Traktovenko replaced Mutko as Zenit Club chairman. Other shares were controlled by Vyacheslav Kantor’s Akron OJSC and the St. Petersburg-based Karavai OJSC. In 2005, LenTransGas and St. Petersburg Bank shares (51.01%) went to Gazprombank OJSC (essentially owned by Russia Bank main shareholder Yuri Kovalchuk); and Sergei Fursenko became Zenit Club president. Fursenko (Kovalchuk’s closest partner) is former head of LenTransGas. Fursenko subsequently also replaced Mutko as head of Russian Soccer Union.
Vitaly Mutko was also Zenit Club owner: as of March 1999, he held 2.59% of Zenit Soccer Club CJSC. Currently there no publicly available information as to whether the Minister of Sports is a Soccer Club shareholder.
While Mutko headed Zenit Soccer Club CJSC, the team (thanks to the tremendous increase in funding) attracted quite a few well-known players and coaches. Zenit was able to achieve significant success (2nd place at 2003 Russian Championships, 3rd place at 2001 Russian Championships; Russia Cup wins 1998/99). However, there were allegations that some match outcomes were pre-arranged. Such controversy plagued Zenit and the RF national team under Mutko as Russian Soccer Union head. The greatest controversy was in 2008, when Zenit made the UEFA Cup finals. El Pais newspaper said that, prior to the match, the Spanish police wiretapped and recorded a conversation between mob bosses Gennady Petrov and Leonid Khristoforov, both in Spain at the time. In that conversation, Petrov said he bought Zenit’s 4:0 quarter-final victory over Munich Bavaria. Petrov also suggested Khristoforov call his bookie and bet on the St. Petersburg team. Although (according to the newspaper) this conversation took place prior to the game, there was no investigation.
Together with Alexei Vladimirovich Blinov, Mutko co-owns Nash Zenit (Our Zenit) Newspaper LLC which, in turn, founded Zenit Club team’s weekly bulletin.
In 1994, Mutko, then St. Petersburg Deputy Mayor for Social Policy, together with Nikolai Fedorovich Ivlev, Sergei Lvovich Rogozhin, Alexander Vasilievich Sylko, Yuri Victorovich Golovin and other individuals and companies, founded Golden Pelican – a St. Petersburg Non-Profit Charitable Movement. The Movement’s main declared areas were assistance to disabled children, orphans, wheelchair users, the elderly, war veterans and those disabled in wartime, the poor, and promoting corporate charity and social responsibility.
Founder Nikolai Ivlev is currently president of ZhilSocStroi CJSC, a large construction company in St. Petersburg. Ivlev also founded numerous entities, including the Russian Icon Foundation (co-founded, per SPARK-Interfax, by St. Petersburg entrepreneur Alexander Ebralidze’s companies (Ebralidze was prosecuted twice).
When Golden Pelican was created, its founder Yuri Golovin chaired Petrovsky People’s Bank JSCB’s board. In August 2001, Golovin became first deputy chairman of MDM Bank board, but was relieved of his duties in March 2002 and left the Bank’s board of directors. He was elected to the St. Petersburg PromStroiBank’s supervisory council and the St. Petersburg Bankirski Dom (Bank Company) Financial Group board of directors.
Golden Pelican was dissolved in 2010.
Vitaly Mutko is founding president of a non-profit charitable foundation that supports and promotes soccer in St. Petersburg.
Business influence: In 1992, per Mutko’s suggestion, St. Petersburg Mayor Anatoly Sobchak signed Decree No. 389-r permitting City Hall Committee on Social Issues chairman (Mutko) to transfer privatization checks (vouchers) unclaimed by Russian citizens to voucher investment funds. It was declared that the checks will be used to buy shares of profitable companies, and that dividends will be used to help the poor. These vouchers were transferred to the voucher investment funds en masse, but the investment funds failed to fulfill their obligations to either the investors or the poor.
Most of these vouchers (almost 3.5 Bln. Rub.) went to the Veteran Fund, controlled by Tambov mob boss Vyacheslav Shevchenko (killed in Cyprus in 2003). Vyacheslav Shevchenko has a brother, Sergei Shevchenko, who was convicted of extortion. Sergei Shevchenko’s father-in-law Alexander Sokalsky became Veteran’s formal head. The vouchers were later invested in Nord OJSC and other companies owned by the Shevchenko family, while Veteran went bankrupt.
In 1994, Vitaly Mutko coordinated (on behalf of St. Petersburg government) Goodwill Games III, paid for by 52 Russian and international companies. According to St. Petersburg legislative assembly documents, part of the funds was stolen, while Kirov Stadium was renovated so shabbily that it had to be re-renovated, and was eventually demolished. After Vitaly Mutko left the St. Petersburg government and became president of Zenit Soccer Club CJSC, he tried to rent Kirov Stadium, but failed due to resistance from the new City Hall headed by Vladimir Yakovlev.
In 2007, Russian Premier Soccer League headed by Vitaly Mutko signed an agreement with NTV-Plus TV company (owned by Gazprom OJSC) to sell exclusive rights to broadcast Russian championship matches. Under the contract, only NTV-Plus subscribers would see the games. After Vladimir Putin intervened, the contract was amended, and the right to broadcast the matches went to free (non-subscription) TV channels.
In 2008, the RF XXIX Beijing Summer Olympic Games team was outfitted with uniforms from Bosco di Ciliegi Company, previously heavily criticized by athletes. Nevertheless, an agreement was signed with Mikhail Kusnirovich, main shareholder of MMD East and West Company Group CJSC (which owns the Bosco di Ciliegi brand) for a total over $13 Mln., not counting a 71,250,000 Rub. bonus.
In April-June 2010, RF President Dmitry Medvedev asked the Accounts Chamber to review spending of federal funds allocated to the XXI Winter Olympics and the X Winter Paralympics in 2010 in Vancouver, Canada. One of the reasons for the audit were disappointing results by Russian participants in the Games. A total of around 6.2 Bln. Rub. (over $221 Mln.) was spent on RF Olympic team training and Games participation, including 5.8 Bln. Rub. for the Olympics and 378 Mln. Rub. for the Paralympics. Thus, one Russian Olympic medal (for the purposes of this discussion) cost at least 388 Mln. Rub., while one Paralympic medal (for the purposes of this discussion) cost no more than 10 Mln. Rub.
The Accounts Chamber audit uncovered numerous violations committed primarily by Mutko-headed RF Ministry of Sports and Tourism, as well as by Mutko’s predecessor Vyacheslav Fetisov (head of the Federal Agency for Physical Education and Sports (Rossport)). Auditors established that financing of works and services to prepare athletes during the 2006-10 Olympic cycle was done by companies that contracted with a federal entity called the Center for Athletic Preparation of Russian National Teams (CAP), which awarded 2-3.5 Bln. Rub. in government contracts. For a fee of around 24 Mln. Rub. per year, the companies essentially acted as agents, signing approximately 4,000 contracts with subcontractors as they saw fit.
CAP approved budget allocations and was invoiced by subcontractors for work performed. In 2006-07, CAP signed contracts with ASEA SFUP (State Federal Unitary Enterprise) LLC; in 2008 – with Olymp CJSC; in 2009 – with EuroProject LLC; and in 2010 – with Agora IT LLC. Each of these companies (whom the Audits Chamber report called “yearling” companies (as they existed for just one year) merits a special look.
The name ASEA SFUP LLC is not merely similar to the name ASEA FSUP (Athletic and Sports Events Agency Federal State Unitary Enterprise). In 2002, when hockey player Fetisov became head of Rossport, he asked his hockey friend Sergei Makarov (CSKA hockey club VP) to head ASEA FSUP which organized various sports competitions and meets. The entity was dissolved in 2004, and its functions transferred to Athletic Event Management FSU (Federal State Facility), also headed by Makarov.
The same year, Makarov became general director of ASEA SFUP LLC, a for-profit company that organized competitions. As government official, Makarov allocated to his company (ASEA) 188.8 m2 of office space on Athletic Event Management premises (without a lease agreement, as the Accounts Chamber notes). Starting in 2005, Makarov was ASEA SFUP LLC’s sole owner. In 2005, ASEA SFUP LLC (together with Expo-EM LLC and Athletic Russia VDO LLC) founded the International Sports Expo autonomous non-profit. For a while, Emergency Situations Minister Sergei Shoigu’s wife Irina Shoigu was Expo-EM LLC president.
ASEA SFUP LLC received sizeable government funds, primarily through a federal entity called the Russian National Team Preparation Center. For example, just for 2007-08, ASEA received over 2 Bln. 628 Mln. in federal funds (around $87.6 Mln.).
When incorporating Olymp CJSC, its shareholders stated that Olymp’s main activity is “marketing and public opinion research.” In 2008, Olymp CJSC received 3,515,800,000 Rub. (over $118 Mln.) from CAP for services rendered in connection with athletic events. Olymp was founded by Dmitry Sergeyevich Artyukhovsky (also listed as its general director) and Yelena Victorovna Shved. Artyukhovsky and Shved also co-own EuroProject LLC, which received a 3.5 Bln. Rub (around $116.6 Mln.) government contract to hold athletic events the following year, 2009. EuroProject LLC’s primary declared activity is “construction of buildings and facilities.” Artyukhovsky later left as EuroProject founder, and founders now included Yulia Alexandrovna Anufrieva.
Dmitry Artyukhovsky was also participant and director of Converse Sport LLC, the ownership of which was subsequently transferred to the Cypriot KSPT Holding Limited. Converse Sport LLC co-owned OrgLot LLC (47%) – the State Lottery operator.
Another commonality between Olymp and EuroProject is Yuri Pushkarev, who was, first, Makarov’s ASEA SFUP LLC general director, then Olymp CJSC deputy general director, and, finally, EuroProject LLC accountant. Pushkarev is also the sole founder and general director of a company with the unusual name of Financial Technologies Center Athletic and Sports Organization LLC.
Agora IT, which won the 2010 CAP bid to hold around 5,000 athletic training events and meets (contract totaling 3.23 Bln. Rub. ($115 Mln.)), was previously involved in security and fire safety alarm systems. All of Agora’s 2007-2010 government contracts involved alarm system installation. Agora’s largest contract (per government contract monitoring service) was for 6 Mln. Rub. to install fire alarms at the General Prosecutor’s Office.
The Accounts Chamber report notes that athlete training funding by commercial entities resulted in agents receiving sizeable excess federal funds that then revolved, for long periods of time, in commercial bank accounts opened especially [for that purpose] by the agent organizations. The organizations received advance payments in amounts exceeding lawful limits. Furthermore, when government contracts expired, funds remained in the agent organizations’ accounts for months, and only then were returned to the federal government.
According to Account Chamber auditors’ documentation, Olymp CJSC returned unused 191,289,230 Rub. of 2008 federal contract funds only in February 2009. EuroProject LLC had yet to return unused 2009 federal contract funds of around 200 Mln. Rub as of the time of the Accounts Chamber audit (April-June 2010).
The agency organizations thus controlled significant funds over a significant time period, and used these funds for their own purposes. In particular, on March 3, 2008, Olymp CJSC wired 199.2 Mln. Rub. (received in federal funds from a CAP government contract) to ASEA SFUP LLC to hold training meets abroad. However, a short while later, ASEA SFUP LLC wired the following amounts back to Olymp as “excess funds:” 50 Mln. Rub. on March 12; 30 Mln. Rub on March 25; and 30 Mln. Rub. on June 3 – a total of 110 Mln. Rub. (of the total 199.2 Mln. Rub. that the organization used as it saw fit).
The following year, organizing agent Agora IT LLC used a similar setup with bank account funds manipulations.
All companies receiving billion-Ruble contracts from CAP were dissolved soon after contracts expired. The Accounts Chamber report notes that company dissolution involved filing false information with registry agencies. At time of dissolution, all these companies had debt to CAP.
Based on Accounts Chamber documents, in September 2010, RF Prosecutor’s Office Investigative Division initiated two criminal cases of fraud under RF CC Art. 159(4). According to the investigators, the government sustained damages of over 230 Mln. Rub. The criminal cases apparently involved heads of Olymp CJSC and EuroProject LLC, which owed the government the same amount – around 230 Mln. Rub. No information was found in publicly available sources regarding the outcome of these criminal investigations.
The Accounts Chamber also documented another standard method used by CAP’s contractual partners: for example, in 2009, Pervaya Torgovaya Companiya (First Trading Company) LLC received a 80.9 Mln. Rub. government contract to supply sports equipment and outfitting. According to invoices, equipment was supplied, although in just one day (December 22, 2009), government-procured goods went through invoices of a whole range of companies, including First Trading Company LLC, New Sports Technologies LLC, and Elite Star LLC (and Elite Star is not the last company in this chain). Through this setup, First Trading Company LLC and New Sports Technologies LLC, by just drafting documents, received 2,991,600 Rub. in federal funds in essentially one day. Such profitable documenting did not interfere with First Trading Company LLC continuing to use government funds. In 2010, First Trading Company received contracts totaling 118.5 Mln. Rub., of which 117.5 Mln. Rub. was again from CAP.
The Accounts Chamber audit established that a number of companies that received CAP contracts without bidding used federal funds to sell goods to the customer at a significant markup. For example, Sports Facility Center (SFC) LLC bought fitness equipment for 6,115,940 Rub., then sold it to CAP for 10,126,440 Rub., with the 4,010,500 Rub. (66%) difference paid for with federal funds. From 2007 to 2010, CAP entered into 13 government contracts with SFC LLC totaling over 578 Mln. Rub. (around $20 Mln.).
The commercially successful SFC LLC was founded by Kadia Shamilevna Akhmerova and Victor Anatolievich Isakov. Akhmerova is also director of a government entity called the Moscow Physical Education and Sports Department’s Innovative Sports Technologies Center. Akhmerova is the widow of Sultan Akhmerov, who from 1999 to October 2003 was Saratov Region Minister of Youth Policy, Sports and Tourism while also Tver Region’s vice governor (Akhmerov died in a car accident in 2005). According to Vedomosti newspaper, Victor Isakov was physical education and sports advisor to Tver Region governor Dmitry Zelenin.
RF Ministry of Sports and Tourism sometimes itself issued instructions involving inefficient and corrupt use of federal funds. For example, in 2009, the Ministry deemed it appropriate to procure sports equipment from just one vendor instead of four (who in the past included SFC LLC and Alma Mater Ltd. LLC). That one vendor was an entity the Ministry oversaw: Sport Engineering federal state unitary enterprise, a capital construction company with no sports equipment experience. Thus, based on the Ministry of Sports and Tourism’s decision, there was now a new intermediary between the primary customer and the contract performer. Sports goods procurement now looked like this: First, CAP entered into a government contract with Sport Engineering FSUP; then Sport Engineering FSUP entered into a contract to supply similar goods at a lower price with SFC LLC, and in the end SFC LLC bought goods from Alma Mater Ltd. LLC. As a result of this setup, Sport Engineering FSUP’s intermediary fee for a bobsled procurement contract was 3,796,000 Rub.
In its report, the Accounts Chamber concludes that “the RF Ministry of Sports and Tourism’s practice of exercising its lawful right to award government contracts without bidding essentially means additional income for individual organizations at the expense of the federal budget.”
The Accounts Chamber also uncovered a scheme involving athletic clothing purchases from companies affiliated with Rostislav Borisovich Plaksin (previously first deputy director of Athletic Events Organization and Management, a federal entity). Plaksin also co-founded Forward LLC, the official supplier of Russian national teams. Forward’s former co-founders Alexei Borisovich Martinson and Artur Arkadievich Arzumanov are former deputy directors of the federal Center for Athletic Preparation of Russian National Teams. Until 2009, Martinson also chaired the board of directors of OrgLot LLC, which runs the State Lottery.
Russian National Teams Outfitting Center LLC became a Forward subsidiary. In 2008-2009 alone, the Outfitting Center received around 909 Mln. Rub. (over $31 Mln.) in government contracts. The Center is co-owned by SportInVisa LLC, whose main participant is Alim Mustafovich Alimov, who also owns Sportobespecheniye (Sport Supplies) LLC. The Accounts Chamber believes Sport Supplies LLC earns its intermediary fee by surcharging for sports equipment it sells under government contracts. In 2007, this was used to implement a contract totaling over 432 Mln. Rub.
The Accounts Chamber also noted machinations in granting Russian fans access to sports events in Canada. Olympic Panorama CJSC became the official ticket agent and distributor in the Russian Federation for sports competitions in Vancouver. Olympic Panorama bought the Russian quota of tickets at a nominal price from the national organizing committee, then sold around 40% of the tickets with a minimal markup to the Cypriot Hambsello Commercial Limited, which, in turn, started reselling these tickets at a markup. Olympic Panorama sold the remaining 60% of the Russian quota tickets to RF citizens at a price that exceeded 11-fold (and more) the 20% (from nominal price) ticket markup limit set by an international agreement.
Olympic Panorama has been the Russian Olympic Committee (ROC)’s official ticket agent for around 20 years, and, according to the Unified State Registry of Companies, ROC co-founded Olympic Panorama. Notably, as its main area of operations Olympic Panorama cites “cellulose, wood pulp, paper and cardboard manufacturing.” The company was co-founded by individuals affiliated with sports journalism: Alexander Borisovich Ratner (editor-in-chief of ROC’s Olympic Panorama magazine); Vladimir Grigorievich Kuleshov (head of ROC’s visa and accreditation department and member of Russia’s official delegation to the Vancouver Olympics); Yuri Evgrafovich Bykovsky (photo journalist for Olympic Panorama magazine (died in 2004)); and Tatiana Abramovna Kuzmicheva (the magazine’s deputy editor-in-chief and member of Russia’s official delegation to the Vancouver Olympics).
In August 2010, the Federal Antitrust Service (FAS) found that Olympic Panorama CJSC violated Art. 10 p. 1 para. 6 of the competition protection law (unjustified rates charged by monopolists). FAS fined the company (but only for charging different prices for the same tickets).
The Accounts Chamber report also notes Vitaly Mutko’s excessive expenses to attend the 2010 Olympics: for example, Minister Mutko spent 20 nights in Vancouver Fairmont Hotel’s “Courtyard Suite”-type accommodations at 1,499.00 CAD per night. His Vancouver expenses totaled 39,600.00 CAD: 34,500.00 CAD for lodging and 4,800.00 CAD for 97 breakfast vouchers. The Accounts Chamber notes that work-related lodging in Canada is normally reimbursable at no more than $130 per night (CAD=USD).
Aside from Mutko’s wife, the official Russian delegation to the XXI Winter Olympics included Yana Rudkovskaya (Russian figure skater Evgeny Plyuschenko’s wife); Kristina Piseyeva (daughter of Figure Skating Federation head Valentin Piseyev); and other outsiders.
On November 22, 2006, Rossport contracted with OrgLot LLC to hold the State Lottery. The Lottery is currently organized by Rossport successor Ministry of Sport and Tourism, headed by Mutko. State Lottery’s 26.9 Bln. Rub. income was intended to fund a federal target program (FTP) called RF Physical Education and Sports Development in 2006-2015. However, [only] 2 Bln. Rub. was actually paid to the federal budget from 2006-2009 lotteries, of which 184 Mln. Rub. (9%) was from lottery proceeds, and the rest came from GazPromBank funds which essentially covered the FTP’s funding gap.
Initially, GazPromBank held 99% of OrgLot, but in March 2007, the Bank reduced its share to 50.1% (49.1% held directly and 1% held through its subsidiary FinProject LLC). In summer 2008, GazPromBank sold its controlling share to companies owned by Sándor Demján – president of the Hungarian TriGranit corporation. Another 49.9% of OrgLot is held by the entrepreneur Alexander Varshavsky, who, according to Moscow car dealers, co-owns New York Motors-Moscow and Avilon, which operate Moscow’s largest automobile showrooms.
By 2010, it became clear that Orglot LLC is nearing bankruptcy. At yearend 2009, the lottery owed the government 1 Bln. 973 Mln. Rub., and owed creditors 3 Bln. 230 Mln. Rub.
Wife Tatiana Ivanovna Mutko, homemaker, previously employed at Baltic Marine Shipping (currently Baltic Marine Shipping OJSC) HR department. She was instrumental in introducing her husband to Shipping company director Victor Kharchenko, who, in turn, helped Mutko get close to Lensovet chairman Anatoly Sobchak. After sailing together on the Shipping company-owned Anna Karenina, Sobchak appointed Mutko as head of Kirov District administration.
In 2010, Vitaly Mutko’s income was 6.81 Mln. Rub., while Tatiana Mutko’s income was 0.6 Mln. Rub. The Minister owns a 0.13 ha. land lot and a Mercedes Å 530 automobile. Mutko signed a 49-year lease on a 177.3 m2 country home, and, with his wife and daughters, co-owns two apartments – 252.7 and 150.8 m2.
Tatiana Mutko attended the 2010 Vancouver Olympics with her husband although she was not a member of the official delegation. When the Accounts Chamber looked into this, Tatiana Mutko reimbursed the price of the ticket to Vancouver – 52,000 Rub.
The Sports Minister’s wife co-owned the St. Petersburg-based Levada CJSC, established in 2002 (primary activity is wholesale trade), currently dissolved. One of Levada’s shareholders was Sergei Vladimirovich Gutnikov (president of the St. Petersburg Federation of Disabled Persons’ Physical Education and Sports, and director of the St. Petersburg Special Olympic Committee (Committee President is Vitaly Mutko)). Another Levada CJSC shareholder was German citizen Ernst Hansjörg Leichinger (sp?).
In 2007-09, Tatiana Mutko was general director of Vitalema CJSC, whose main declared activity is building demolition and disassembly, as well as excavation and earthmoving works. In 2001, Vitalema bought a 12% share of Zenit Soccer Club CJSC, and shares of other companies affiliated with Zenit soccer team (Zenit Trading and Industrial Company CJSC; Zenit Trading Company CJSC). Currently Vitalema is the primary owner of just Zenit Equestrian Sports Club LLC.
Daughter Elena Vitalievna Mutko is an entrepreneur. Per SPARK-Interfax, she was general director of Leon Dental Clinic LLC in St. Petersburg, which she co-founded with Mikhail Alfredovich Titov, Sergei Gennadievich Belyayev, and Elena Vladimirovna Pospekhova.
In 2010, she founded (also in St. Petersburg) Vicon LLC, which provides dental and cosmetic services.
Daughter Maria Vitalievna Mutko attended the St. Petersburg State University Law School, from which her father graduated in 1999.
In St. Petersburg, Vitaly Mutko had a good relationship (aside from Anatoly Sobchak and Vladimir Putin) with Valentina Matviyenko: Mutko was her election headquarters chief of staff when she ran for St. Petersburg governor in 2000. Matviyenko then helped Mutko get appointed to the Federation Council.
Vitaly Mutko has a good relationship with Taimuraz Bolloyev who, with Mutko’s support, in 2009, became vice president, then president of OlympStroi government corporation, which manages construction and operation of facilities for the 2014 ÕÕII Winter Olympics in Sochi. The Investigative Committee initiated six criminal cases involving 23 Mln. Rub. in OlympStroi management ghost payrolling. Following this, Bolloyev resigned as OlympStroi president in 2011.
Dmitry Vityutnev (deputy director of the Sports Ministry’s Department of Youth Policy and International Cooperation) is accused of receiving a 6 Mln. Rub. bribe from Renaissance Technology in order to secure a winning bid to supply electrical equipment for Vnukovo-2 Airport. Vitaly Mutko’s advisor Igor Medvedev (Continental Hockey League VP) is suspected of fraud in the amount of 8 Mln. Rub.