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. Last Updated: 07/27/2016

Tax Police Zero In on Saatchi & Saatchi

A month after a tax raid on the Moscow premises of British advertising agency Saatchi & Saatchi, federal authorities are shifting their attention from a German subsidiary to the parent company, a tax police spokesman said.

A continuing probe could lead to a criminal prosecution, Moscow tax police spokesman Alexander Borisov said in an interview. He did not say when the investigation might conclude nor estimate the likelihood of pursuing a criminal case.

"Before criminal proceedings can be started, it has to be established that the concealment of taxes was intentional," Borisov said.

A tax police statement in early November said prosecutors would bring a case against a German company, Zoom Media, on the basis of documents found at the Saatchi & Saatchi office. The statement said Zoom had failed to pay around $7 million in tax as well as fines for non-payment of tax.

The tax police and Saatchi & Saatchi representatives refused to comment immediately after the raid on the connection between the advertiser and Zoom Media .

But a tax police statement obtained by The Moscow Times this week said that three advertising companies -- including Saatchi & Saatchi, Bates and Zenith Media -- had used Zoom Media as a trade name for their Russian business in 1994-95. The three companies are part of a U.K. holding, Cordiant plc.

Alexander Yerofeyev, deputy head of Saatchi & Saatchi in Moscow, and representatives of Zenith Media in London referred all questions about Zoom to Cordiant. Cordiant spokesman Alex Sandberg refused to make any comments on Zoom or the situation in Saatchi & Saatchi's Moscow office.

"All I will say at the present time is that we are negotiating with the authorities and hope to reach a resolution soon," he said.

Managers and executives with other foreign advertising agencies in Moscow relayed their assessments of the Saatchi & Saatchi situation, though none wished to have their names used.

"The cocktail talk is that there was a big difference between the accounts Saatchi showed to the income tax authorities and their real accounts," said one.

"It is rumored that all Saatchi's business will be up for grabs, because they won't exist any more," said another.

Saatchi & Saatchi has had an office in Moscow since 1993 and has $55 million worth of accounts, a source close to the company said.

The firm's run-in with the tax police may reflect greater fiscal vigilance by Russian authorities, now under strong pressure to close the gaping budget gap.