Arbat Prestige Boss Arrested for Taxes

MTAn Arbat Prestige store on Leningradsky Prospekt. The cosmetics chain reported turnover of $472 million in 2007.
Vladimir Nekrasov, owner of leading cosmetics retailer Arbat Prestige, was placed under arrest Thursday on suspicion of large-scale tax evasion.

Around 50 police commandos took part in an operation to detain Nekrasov as he exited the World Trade Center in central Moscow late Wednesday following a business meeting, lawyer Alexander Dobrovinsky said.

The Ostankinsky District Court sanctioned Nekrasov's arrest late Thursday, Moscow City Court spokeswoman Anna Usachyova said, Interfax reported.

"There is reason to believe that [Nekrasov] could flee and pressure witnesses, which would hinder the investigation," Usachyova told Interfax.

Nekrasov, 47, has dual French-Russian citizenship, Usachyova said.

Nekrasov is suspected of evading around 50 million rubles ($2 million) in taxes from January 2005 to December 2006, Dobrovinsky said.

Anzhela Kastoyeva, a spokeswoman for the Interior Ministry's Central Federal District branch, confirmed Nekrasov's detention but said she could provide no further details or comments. But Usachyova confirmed that he was suspected of large-scale tax evasion, Interfax reported.

Interfax cited an unidentified investigator working on the case as saying Nekrasov had orchestrated a tax evasion scheme in which Arbat and Co. -- a company set up by Arbat Prestige -- made payments for nonexistent shipments to fly-by-night companies and then filed returns on nonexistent taxes.

Itar-Tass cited an unidentified police source as saying preliminary evidence shows that the purported scheme allowed Nekrasov to avoid paying just under 50 million rubles in taxes.

Dobrovinsky said Nekrasov was innocent and called the sum involved in the allegations "ridiculous" given the annual turnover of Arbat Prestige.

Arbat Prestige officials could not be reached for comment Thursday. But the cosmetic chain's turnover in 2007 was $472 million, up from $346 million in 2006, according to the company's web site.

The cosmetics chain was valued at $1 billion as of February 2007, Vedomosti reported at the time, thanks primarily to surging property prices in Moscow. At the time, the company's property accounted for most of its value, or about $600 million, after prices more than doubled over the course of two years, the Vedomosti report said.

Nekrasov owns 100 percent of Arbat Prestige. Last March, Troika Dialog investment bank said it sold 40 percent of the chain to Nekrasov for $400 million.

Dobrovinsky said he believed Nekrasov was being targeted "with the help of law enforcement agencies" by someone seeking to benefit from "a redistribution of the market -- either cosmetics and perfume or real estate."

The Interior Ministry could not be reached for comment to respond the claim, which Dobrovinsky made after working hours.

Officers from the Interior Ministry's Central Federal District branch and the tax crimes department of city police's central district branch participated in Nekrasov's detention, a police source said, Itar-Tass reported.

Nekrasov's office and apartment had been searched as well, Prime-Tass reported. If charged and convicted with large-scale tax evasion, he could face up to five years in prison.

Reached by telephone Thursday afternoon, city police spokesman Vladimir Korobkov referred all questions to the Interior Ministry, which subsequently referred all questions to the ministry's Central Federal District branch.

Nekrasov had hoped to list the company in 2006 but later postponed the IPO until 2008, according to Troika, which remained the company's IPO consultant.

A Troika spokeswoman said the bank executives were at the World Economic Forum in Davos and unavailable for comment.

The cosmetics chain was established in 1989, first as a distributor of cosmetics and perfumery, including Jean Paul Gaultier, Paco Rabanne and Dolce & Gabbana. It opened its first retail store in 1998.

Many industry observers appeared to be caught off guard by the development.

Sergei Bolshakov, executive director at the Moscow-based Association of Perfumery, Cosmetics and Household Chemicals Manufacturers, was hard pressed to say to what extent Nekrasov's arrest would affect Arbat's business. If the chain were to shut down completely, its competitors would only be happy to fill the void, he said.

"Competition is very tough," Bolshakov said. "Everybody competes against everybody."

Staff Writer Anna Smolchenko contributed to this report.