Loan Dispute Pits Rifle Dealer, Bank

Alexei Matsko sells and services hunting rifles in the Siberian Far East town of Magadan. But unless he can resolve a long-running and acrimonious dispute with his local bank over more than $150,000 worth of unpaid loans, he won't be doing it much longer.

Matsko, who founded the firm Oruzhiye, or Weapon, after leaving military service in 1991, is embroiled in a conflict with a local bank owned by Russia's second largest bank, Vneshtorgbank -- charging it with inflating sums he owes under loan agreements, misdirecting money from his account and forging incriminating documents.

Vneshtorgbank, on the other hand, has sided with its Magadan branch, describing the 41-year-old Matsko as a "malicious debtor" who refuses to repay his loans despite seven agreements to renegotiate the terms. The bank has begun proceedings to seize his property.

The vicious feud illustrates the difficulty faced by both borrowers and lenders in the Russian world of high interest rates, rudimentary contract law and weak courts.

The saga began with three loans totaling $151,000 awarded to Matsko's shop by Magadanvneshtorgbank -- for stock purchases, licensing fees and a burglar alarm system -- between April 1994 and January 1995.

The first and largest loan, granted in April 1994, came with an annual interest rate of 275 percent -- common in a year when inflation ran at 203 percent.

Matsko claimed he repaid one of the three loans, but that business problems forced the firm to request repayment delays on the other two larger loans. According to Boris Sergeyev, a Moscow-based Vneshtorgbank director, the bank agreed on seven occasions to postpone Matsko's repayments before finally imposing punitive interest rates in May 1995.

Precisely what these renegotiations entailed form the crux of the dispute between the gun broker and his bank.

Matsko's first charge against the bank is based on a March 1995 letter from the Magadan branch, which he showed The Moscow Times, in which the bank granted Oruzhiye's request to postpone all interest payments for three months in order to pay off the loan's principal.

A few days later, Matsko said the firm channelled 51 million rubles ($11,000 at the time) to suppliers through its current account. The money never arrived. The bank later apologized in a letter, citing "objective reasons," and said it would pay the suppliers at once. Months later, the bank wrote in another letter that it had used the money to pay interest on the loans.

Through 1995 and 1996, the bank conducted a series of assessments of Oruzhiye's debts. Matsko contested the sums and went to the Magadan regional arbitration court, which merely recommended the parties "calculate mutual debts."

According to documents that Matsko presented to The Moscow Times outlining out-of-court settlements authorized by the bank and the gun broker, Oruzhiye twice reached final agreements with the bank, the latest in June 1996. But following each agreement, bills were sent from the bank that did not match the settlements.

Despite renegotiations, the bank has gone back to the old sum as a basis for seizing Oruzhiye's property, according to documents the bank has filed in a new court bid to gain repayment.

In his most serious allegation, Matsko says the bank in August 1996 forged a document with his seal suggesting that another of his ventures had failed to honor a current account contract, which he says never existed.

The bank, too, has its share of nasty allegations. Vneshtorgbank's Sergeyev suggested that Matsko has hidden his assets after tax police conducted a raid and discovered he had too much cash stashed away at his business.

Matsko has even taken his case to the Russian Central Bank, which licenses all banks operating in the country, asking it in a February 1997 letter to investigate Magadanvneshtorgbank.

Matsko has yet to hear back from anyone at the Central Bank.

In exasperation, Matsko came to Moscow late last month hoping to find a sympathetic ear among the top managers at Vneshtorgbank, the national bank that holds a controlling stake in Magadanvneshtorgbank. Vneshtorgbank was recently rated the most dependable Russian bank by international bank raters, Thomson Bank Watch.

After six days of trying to gain an audience at the bank, Matsko finally met with Alexander Kolpakov, the bank's first deputy chairman. According to Matsko, Kolpakov was shocked by the story and promised to put things straight by calling the Magadan branch.

But Vneshtorgbank's Sergeyev disputed Matsko's story, describing Kolpakov as "unmoved."

"It is not true that Kolpakov agreed to anything with Matsko," said Sergeyev. "On the contrary, he completely supported the position of Magadanvneshtorgbank."