The Main Directorate on Major Crimes Investigation of Russia’s Investigative Committee has completed a probe into a criminal case against Xenia Balashova, the CEO of “Kontaz LLC”. Balashova stands charged with evasion of the profit tax for year 2008 (p.p. a, b of Article 199.2 of the Criminal Code of the Russian Federation). Earlier, Balashova pleaded guilty to the crimes charged declaring she acted under direct instructions of Vladimir Makhlai.
Investigators believe that in 2008 President of the managing organization “PJSC Togliattiazot” – “Korporatsiya Togliattiazot LLC” – and “Kontaz LLC” beneficiary owner Vladimir Makhlai directly ordered Xenia Balashova to sign a contract envisaging sale of shares in “Togliattiazot” to Borgat Investments ltd, a Cyprus-based company controlled by Makhlai.
According to the case materials, Balashova sold more than 860,000 shares in “TOAZ” for one million rubles ($13,600 at the current exchange rate), although their market value at that time made almost 577 million rubles ($7.9 million).
After the sale, the “Kontaz LLC” CEO submitted to the tax authorities a profit tax declaration containing knowingly false information about the taxable profits. Thereby, Balashova and Makhlai incurring a 91 million-ruble ($1.2 million) loss to Russia’s budget.
Earlier, the Investigative Committee had detected that a similar scheme was applied in 2008, when “Rodnichok LLC” affiliated with the Makhlais sold its share in “TOAZ” with the estimated market value of 1.15 billion rubles ($15.7 million) to a Cyprus-based offshore firm for 1.7 million rubles ($23,170).
As established by investigators, Balashova was a member of an organized criminal gang created in 2007 by Vladimir Makhlai, the President of “Korporatsiya Togliattiazot LLC”, acting together with his son Sergey, then a vice-president of the company, with the aim to systematically embezzle products of the enterprise (ammonia and carbamide).
For this purpose, corporate and foreign exchange accounts of “Togliattiazot” were opened with “Togliattikhimbank”, 100% owned by Sergey Makhlai, on these accounts arrived proceeds from sales of products of Swiss offshore company Nitrochem Distribution AG headed by Beat Ruprecht and owned by Ameropa AG of Andreas Zivy. Some profits remained with the defendants and were not returned to TOAZ. At the same time, the prices of the products were being significantly understated in order to evade taxes. In this way, members of the organized criminal gang had embezzled about 85 billion rubles ($1.16 billion) belonging to TOAZ and its shareholders.
Balashova was arrested in April 2020. She pleaded guilty. Investigators could establish a robust evidence base as to the charges against the woman; therefore, the case was forwarded to the Prosecutor General’s Office, which is to decide on the indictment’s approval and referral of the case to court for consideration.
Nevertheless, the probe into the criminal case over embezzlement of money, products, and main production units of “Togliattiazot”, as well as other grave and especially grave crimes committed by the organized criminal gang headed by Vladimir and Sergey Makhlais, is still underway.
In 2019, a court sentenced Vladimir and Sergey Makhlais, as well as Andreas Zivy, to 9 years in a penal colony; their Swiss partner Beat Ruprecht and ex-CEO of the plant Yevgeny Korolev were sentenced to 8.5 years in a penal colony and fines. They were found guilty under Article 159.4 of the Criminal Code of the Russian Federation (especially large embezzlement committed by an organized group). The convicts were ordered to compensate 77.3 billion rubles ($1 billion) in damages to “Togliattiazot” and 10.3 billion rubles ($135 million) to JSC Uralchem”, a minority shareholder in “TOAZ” (a 9.97% share).
According to investigators, members of the criminal gang headed by Vladimir Makhlai have committed several grave crimes as to economic activities against the state, assets of Togliattiazot, and other corporate entities in 2005 through 2013.
Moreover, using controlled firms, among them Swiss-based Ameropa AG, the members of the criminal gang embezzled certain components of the Togliattiazot single property complex, that is a methanol unit with production capacity of 450,000 metric tons a day and a plot of land under the unit; the respective damages made over 200 million rubles ($2.7 million).
A similar scheme employing understated sale value was used to strip the enterprise of ammonia unit No. 7. The respective damages made over 1.9 billion rubles (about $26 million). In both cases, these assets were transferred to the name of “Tomet LLC” owned by a Hong Kong offshore firm and affiliated with the ex-top managers of “Togliattiazot”, a statement of “Uralchem”, a victim in the embezzlement at “Togliattiazot”, reads.
All these actions related to illegal alienation of “Togliattiazot” assets were carried out in violation of Russian laws (Articles 48 and 83 of the federal law on joint stock companies), TOAZ Charter, without shareholders consent, the minority shareholder alleges.
The money siphoned off by the ex-managers of the enterprise were transferred to “Togliattikhimbank” headed by Alexander Popov. Besides, this credit organization was used to settle payments between Togliattiazot and Swiss company Nitrochem Distribution AG for the products the enterprise supplied to this foreign company.
In 2008 through 2011, Togliattiazot was selling its products to Swiss-based offshore company Nitrochem Distribution AG affiliated with Sergey and Vladimir Makhlais, the major owners of the enterprise, and their co-conspirator Andreas Zivy. The latter, in turn, was selling these products to other buyers at market prices. The amount of funds embezzled in this way made 84 billion rubles ($1.15 billion).
In 2008, investigators allege, a methanol unit with production capacity of 450,000 metric tons a day and a plot of land under the unit were stolen from TOAZ. In the framework of that transaction the value of the asset was significantly understated: while at that time the market price of the asset was 13.5 billion rubles ($184 million), the enterprise could receive only 132 million rubles ($1.8 million).
There has been also found that the Makhlais inflicted damages to the state. As finally established by commercial courts, in 2008 through 2012 the total amount of taxes underpaid by the enterprise because of the understatement of its taxable base in the framework of illegal transactions made 2.5 billion rubles ($34 million).