Sergey Khoroshavin
In the Morning - Elections, In the Evening - Contracts
Who pays for the political success of United Russiaand how
Parliamentary elections in Karelia in 2016 ended in a triumphant victory for United Russia, which received full control over the Legislative Assembly of one of the most opposition-minded regions of the country.
This laid the foundation for the victory in the gubernatorial elections in 2017 of a candidate from this establishment political party. But the success of the “party of power” was determined not only by administrative resources and the tricks of political strategists. An important role was also played by financial resources.
What was the participation of millionaire Nikolai Makarov's Karelstroymekhanizatsiya (KSM), the region's largest construction company, in this process? How are the billion-dollar contracts received by the firm related to the needs of the “party of power?” Sergei Khoroshavin investigates.
The Wallet of the Party
As a rule, at any election headquarters there are both non-cash and cash funds. The first ones are obtained legally, their sources can be traced, and they are spent for official pre-election needs: payments for advertising, print space and airtime in the media, and so on. The second set of funds are hidden, they go to the organizers and agitators for salaries and other needs of the election campaign. The amount of these “shadow” moneys in many ways determines the final result of elections.
As the Karelian political scientist Oleg Reut put it in an interview with the newspaper Argumenty i Fakty-Karelia, according to the results of election campaigns in recent years, it can be assumed that for every ruble that parties and candidates officially receive they get about three rubles unofficially. However, nobody can state the exact figures, since the secret of payments at electoral headquarters is sacred and such financing is punishable. For sure there are candidates who conduct their campaigns without any financial violations, but we are not referring to them.
Data on the expenses of United Russia in the 2016 elections are published on the website of the Central Electoral Commission of Karelia. The main part of officially spent funds comes from the proceeds of the party's treasury.
United Russia as a parliamentary party is officially funded from the state budget. According to the final financial report of the party candidate Valentina Pivnenko, she received 4.5 million rubles. In the 2016 elections, there were also revenues from the Karelian Fund for the Support of Regional Cooperation and Development. Nine hundred thousand rubles went to organizing the elections of deputies to the Legislative Assembly.
In 2014 this fund was called by another name - the Karelian Regional Public Support Fund of the All-Russia Political Party United Russia. After it was renamed, the function of the fund stayed the same and its support of United Russia is still listed in its charter.
At the head of the fund were well-known businessmen in Karelia.
From October 2011 to December 2012 the fund was led by Oleg Zobin, the creator and head of the largest auto dealership company in the region, STK. Later he was replaced by Aleksandr Pereplesnin. From December 2012 to May 2014 the fund was chaired by the head of a branch of the private pension fund Lukoil-Garant, Konstantin Khonkanen, and on the eve of a decisive battle for votes, the fund was headed by Igor Zubarev, the owner of a fishing business who according to official figures is one of the richest people in Karelia.
Immediately after parliamentary elections, in which the United Russia won the absolute majority of mandates, the Legislative Assembly of Karelia voted for Zubarev as a regional legislative branch representative to the national Federation Council.
Now the fund is headed by the deputy and businessman Vitaly Krasulin. His candidacy was one of three from the executive branch of the region on a candidate list vying for the position of regional Federation Council representative.
How many businessmen and exactly who donated is difficult to check: the fund does not reveal the rosters of its donors and experts from the Ministry of Justice did not find anything illegal in the course of its inspections.
From the organization's accounting reports it appears that its funds are the “property of public political associations” with the money going towards targeted activities, including social assistance.
Karelian political analyst Anatoly Tsygankov calls this fund the “legal purse of the party.”
According to the financial reports of the Central Election Commission of the Russian Federation, it appears that there is some kind of money circulation process going on in United Russia. Regional enterprises send money to the general party treasury in Moscow. From this federal treasury United Russia, if necessary, assists regional branches.
In other words, the regional sponsors of the “party of power” do not officially back their local branches and the politicians who participate in local elections – otherwise the conflict of interest would be obvious – but instead support the federal party. Moscow decides who to support financially in local elections.
About the Sponsorship
Sources to our publication 7x7 (including those from the staff of the electoral headquarters of United Russia) named Makarov, the well-known businessman, construction business owner and general director of the company KSM, as one of the main sponsors of the election campaign of the party in 2016.
To find official traces of the personal participation of Makarov in financing the regional office was not possible (perhaps he was one of the donors to the Fund for the Support of Regional Cooperation and Development). But on the website of the Central Election Commission in the final financial United Russia report for 2016 it says that his company Karelstroymekhanizatsiya transferred 10 million rubles to the party account.
The history of the company is as follows: in 1963 the largest construction group called Stroymekhanizatsiya was created in Karelia, in the early 1990s it was privatized and turned into Karelstroymekhanizatsiya, initially headed by its former manager who had a controlling stake. Now the CEO is Makarov. The enterprise has not changed its specialization. It has continued to be engaged in construction throughout Karelia and in the mid-2000s it occupied one of the leading positions in the housing construction market in the republic. Makarov himself was in the ranks of the local branch of United Russia and was elected to the Karelian parliament several times. He had the status as the richest deputy of Karelia and was friends with regional governors. Makarov did not participate in the 2016 election despite attempts to persuade him.
Perhaps this is due to the fact that the overall economic situation in the country and the region has changed dramatically and businessmen have more pressing things to worry about than politics. Since the end of 2014, after the introduction of sanctions and the depreciation of the ruble, the purchasing power of the population has plummeted. People began taking out fewer housing loans and construction campaigns have had difficulties with the sale of completed housing and raising funds for new construction. Well-established businesses “started to fail,” so it was necessary for owners to look for options to ensure their survival.
The most natural, common, and simple option for many kinds of businesses was to get state contracts.
On December 25, 2015 during a festive ceremony in the hall of the Musical Theater, the former head of Karelia, Aleksandr Khudilainen, presented Makarov with the award “Man of the Year 2015.” Having received it, Makarov, quoting one of the oldest workers of his enterprise, promised to work hard to justify his award and kept his word.
Working Hard
Judging by the data on public procurement, KSM was not very active in receiving state contracts in the 2000s. It can be assumed that the purely commercial schemes of the enterprise were quite sufficient for prosperity. On the site Goszatraty, which collects, analyzes and makes information about state contracts publicly available, you can see that over the course of six years from September 2008 to September 2014, Karelstroymekhanizatsiya won only six tenders. The largest state contract was for the repair of 20 kilometers of the Kochkoma highway, to which nearly a billion rubles was allocated. But the situation changed beginning in December 2015.
From December 2015 until the present, KSM has won 214 state contracts for a total of more than 4 billion rubles.
The amount that the private construction firm received in almost two years is comparable to the entire annual budget of the republic's main city, Petrozavodsk. The preparation for parliamentary elections in Karelia began at the end of 2015. United Russia held primaries among candidates for deputies, activities at the electoral headquarters gained momentum, and the party did not complain about a lack of funds. Money came to them from several sources, including through the party line. KSM contributed to the United Russia treasury at the federal level.
The Government is Keeping Watch
Many of KSM's contracts were secured without much difficulty for one reason - the company turned out to be the only participant in the competition.
For example, this happened with the contract for the design and construction of residential apartments in a number of districts of Karelia as part of the emergency fund resettlement program. The amount totalled 434 million rubles. There are several large construction companies in the region, but none of them were interested in the competition, so the Karelian Capital Construction Administration decided to recognize the open tender as failed and, in accordance with parts 1 and 7 of the article of Federal Law No. 55, organize a purchase from a single supplier.
A similar situation occurred when the Ministry of Education of Karelia needed to purchase new premises for kindergartens for a total of 232 million rubles.
The agency invited five building companies to participate in the tender, however, only KSM responded, which by sheer chance was just completing a kindergarten at the time of the competition. The result was the same - a purchase from a single supplier.
A Kindergarten in a New District
It would not be fair to say that KSM won all of its tenders without any effort. However, when serious difficulties arose, the state came to Makarov's firm for help. So it was, for example, with the competition for the construction of the Gogol Bridge in Petrozavodsk.
The largest overpass, connecting the crowded residential districts of the Karelian capital to the city center, was closed due to deterioration. It was necessary to demolish the bridge, resettle people from several nearby buildings in bad shape, and build a new bridge. The state allocated 1 billion rubles for the first stage of these works, and on October 3, 2016 KSM won a tender for the construction of the bridge.
It turned out to be not so difficult, as the firm was again the only construction company in Karelia that participated in the auction. However, there was an unforeseen complication: after complaints, the Federal Antimonopoly Service canceled the result of the auction, set the date for a new one and on October 24, 2016 a little-known Petrozavodsk company, Stroitelnye tekhnologii komforta won. They convincingly won the tender.
While KSM hoped to receive 1 billion from the budget, St. Petersburg was ready to build the bridge for 810 million rubles - almost 200 million cheaper. Makarov was disappointed to put it mildly, and disregarding his usual restraint, stated that it was “very sad news for Petrozavodsk,” and that he believed that the new firm would not be capable of successfully building the bridge.
The supervisory authorities carefully examined the competition and three days after the second auction canceled the results. It turned out that both KSM and its competitors had mistakes in the documentation submitted for the tender.
And finally at the third auction, which took place on November 16, 2016, KSM again won. The company from St. Petersburg did not participate this time. KSM reduced its price and undertook to build the new bridge not for 1 billion rubles and change, but for a slightly more modest amount of 999,998,000 rubles. It was 2,000 rubles less than the psychologically significant mark of a billion rubles, but 200 million more expensive than its competitors offered at the second auction. We tried to get a comment from the St. Petersburg company, but the only thing we managed to learn on the phone was that all questions would be resolved in the courts. They wouldn't be commenting to the media.
This story has not yet ended. KSM completed work on the site, the bridge was built, but at the end of September it became known that the Federal Antimonopoly Service still found a violation in concluding a contract with a single supplier. The St. Petersburg company filed complaints against KSM. However, the maximum punishment that officials would face if they were accused of these violations of the law was an administrative fine of 50,000 rubles.
Close Partnership
United Russia in Karelia, which has received significant financial assistance, maintains and increases its influence in the state authorities, having received full control over the Legislative Assembly of Karelia.
The organs of power organize and conduct the auctions.
KSM participates in these auctions and often wins, proving to be the only supplier in a number of cases.
An official request for the above facts was sent to Makarov in fall 2017. However, an answer was not forthcoming.
This investigation was carried out with the support of SCOOP Russia - a network of investigative journalists.
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