Con construction. Presidential Administrative Directorate to pay 200 million rubles ($3 million) to businessman who had defrauded it

Would the Presidential Administrative Directorate and Smirnov be able to deal peacefully this time?

The Presidential Administrative Directorate awarded a contract to Master Design and Production Group belonging to Vasily Smirnov on a sole source basis. The agency entrusted Smirnov to build governmental country homes. The cost of the first stage of this construction project is 200 million rubles ($3 million). In 2017, Smirnov had already defrauded the Presidential Administrative Directorate of 71 million rubles ($1.1 million) – but the court released him “out of humanitarian considerations”. Would the Presidential Administrative Directorate and Smirnov be able to deal peacefully this time?

Method actors

The Presidential Administrative Directorate has undertaken new duties. The agency assumed some functions of the Ministry of the Russian Federation for Civil Defense, Emergencies and Elimination of Consequences of Natural Disasters (EMERCOM) and is going to deal with technogenic catastrophes and natural disasters. According to the governmental acquisitions web site, at the first stage, 20 governmental country homes will be built. The officials are determined to survive any catastrophe without changing their lifestyle.

The shelters – i.e. country homes – will be erected on the territory of Arkhangelskoe Health Complex traditionally used by supreme governmental functionaries for residency and belonging to the Presidential Administrative Directorate. There are no outsiders there and everything can be done nicely, in a family way.

Typical design of the future country homes a la Swiss chalet 

Arkhangelskoe Health Complex is located on Kaluzhskoe highway 10 km from the Moscow Ring Road. It became one of the favorite recreation places of the Soviet elite a long time ago. Since that period, its vast territory (135 ha) has been used for construction of governmental country homes. After the collapse of the USSR, the state-owned villas have been privatized by their high-ranked occupants – and this caused a new wave of construction. Now the deluxe recreation is available to everybody: it costs 132 thousand rubles ($2 thousand) per month and up to rent a wooden country home in Arkhangelskoe, while the rent of the main manor costs 1.2 million rubles ($18.2 thousand). 

Arkhangelskoe Health Complex

The Presidential Administrative Directorate is going to build 20 Swiss chalets – to remind its owners about their Alpine vacations. The three-storey homes will feature a spacious living room (69 square meters), bedrooms (13–30 square meters), and two large terraces. Three gazebos, children’s playgrounds, and barbecue zones will be established outdoors. The cost of the 20 chalets is 200 million rubles ($3 million) – i.e. 10 million rubles ($151.3 thousand) per home. The Presidential Administrative Directorate believes that this is sufficient to ensure the 4+ star rating. Master Design and Production Group has been retained to build this luxury.

Officials of the Presidential Administrative Directorate intend to survive storms in country homes worth in total 200 million rubles ($3 million) and reminding them of their ‘native’ Switzerland. But what storms are they afraid of? Perhaps, storms of public outrage? The sum already spent on this deluxe project obviously exceeds its official cost. Three years ago, the Presidential Administrative Directorate has already secretly commenced the construction of 20 villas upon the same architectural project. The ‘little Switzerland’ in the metropolitan area was classified due to the excessive interest of journalists to it. As a result, the information pertaining to the respective governmental tender has disappeared from the online portal. Only a minor acquisition pertaining to the Swiss design supervision and dated 2016 still remains on the official web site. According to the document, no claims were brought against the supervision quality and the entire construction project. 

Overall, it seems that the Presidential Administrative Directorate is now launching another cottage construction phase. Apparently, the properties built during the previous stage were not destroyed by natural disasters, and their cost was comparable with the cost of the current phase. Based on the long history of collaboration between Master Design and Production Group and the Presidential Administrative Directorate, the homes of the first phase could be built by the same contractor. In fact, this fruitful collaboration history is full of ‘blank pages’ and it can be the main reason behind the high secrecy enveloping the construction of governmental country homes in Arkhangelskoe.

High business relationship 

Unlike the largely classified Presidential Administrative Directorate, Master Design and Production Group proudly flaunts its business partners. The company’s portfolio includes the renovations of the State Duma, Mayakovsky Theater, House of the Government, and underpinning of the Constitutional Court – Master made it more durable than the Constitution itself. In total, the company has earned over 3.2 billion rubles ($48.4 million) on governmental contracts. The majority of these orders were awarded to it by the Presidential Administrative Directorate. However, the customer wasn’t always pleased with the results. 

In 2017, the Presidential Administrative Directorate addressed the Moscow Arbitration Court to recover from Master Design and Production Group an unjust enrichment received by the company back in 2013. At that time, the contractor has built boiler stations for Gertsen Sanatorium at the price of 2 billion rubles ($30.3 million) – and it is still proud of that work. The sanatorium was also satisfied – but the Presidential Administrative Directorate later calculated that Master had overcharged the project cost by 31 million rubles ($469.2 thousand).

Gertsen Sanatorium

The plaintiff had sought to recover the unjustly received sum and collect a penalty in the amount of 778.9 million rubles ($11.8 million) from the defendant. However, the court dismissed the claim because the respective work acceptance certificates were signed by the plaintiff – i.e. it had to make the calculations prior to endorsing the acceptance documents. The lawsuit filed by the Presidential Administrative Directorate has coincided in time with the increased attention of the law enforcement authorities to the weird habit of the Presidential Administrative Directorate to retain expensive renovation contractors. As a result, in April 2017, the investigators came to Vasily Smirnov, the sole proprietor of Master Design and Production Group. 

The operatives – who had seen plenty of expensive residences – were astonished by the incredible luxury of Smirnov's palace on Rublevskoe highway and his car fleet including an Aston Martin. Interestingly, the majority of real properties belonging to the contractor building Swiss chalets in the Moscow region were located abroad. The investigators have visited the residence of Smirnov in the framework of the ‘Gertsen Sanatorium probe' and concluded that the suspect had embezzled not 31 – but 71 million rubles ($1.1 million) from the Presidential Administrative Directorate. 

Master has it 

On the same day, Smirnov was arrested and put to Matrosskaya Tishina (Seaman's Silence) Pretrial Detention Center. However, his incarceration was not lengthy. The Presnensky District Court has remanded the businessman in custody – but the Moscow City Court released him "out of humanitarian considerations". In addition, the suspect has posted a bail in the amount of 71 million rubles ($1.1 million). Taking that this sum was easily affordable for him, it seems that the investigators had also underestimated the embezzled amount. 

Too bad, but the Investigative Committee of the Russian Federation (ICR) was unable to complete its probe. Further calculations promised to be sensational – shortly before the arrest of Smirnov, Master Design and Production Group has won a tender to reconstruct the complex of buildings on Staraya square worth 6.6 billion rubles ($99.9 million). And this happened in the period when the company was charged with unjust enrichment by the Presidential Administrative Directorate!

If the active phase of the investigation had continued for longer, the ICR could conclude that somebody in the Presidential Administrative Directorate was assisting Master Design and Production Group in its unjust and unpunished enrichments. Otherwise, how the above-mentioned ‘humanism’ could be explained?

But after the release of Smirnov, the investigation got hopelessly stalled – and the Presidential Administrative Directorate, the supposed victim, has done nothing to expedite it. Apparently, the agency decided to outmatch the Moscow City Court in humanism. 

The Moscow City Court has released the suspect and noted that Smirnov won’t be able to put pressure on witnesses or victims in the person of the Presidential Administrative Directorate – which sounds absolutely reasonable. But instead of putting pressure, it is always possible to make arrangements. Based on the new series of governmental country homes, Smirnov has successfully done so. The question is: with whom and for how much? Hopefully, the investigators calculate the embezzled amounts correctly next time.

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