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. Last Updated: 07/27/2016

Pallada Ready to Sue Finance Bureaucrats




Mutual fund Pallada Asset Management is threatening to sue the Russian Finance Ministry over accusations that Pallada mismanaged the assets of a specialgovernment fund set up to compensate fraud victims.


"We don't want to go to court, but we want the ministry to stop discrediting us," Pallada spokesman Vadim Soskov said.


He said the company would take legal action if the ministry did not withdraw allegations that it had mismanaged the Federal Fund for the Protection of Shareholders' Rights.


Pallada says the ministry's conclusions are the result of the "incompetence and bias" of the State Duma's Audit Chamber, which conducted an audit on the fund's finances. A subsequent audit by accountancy firm Price Waterhouse found no discrepancies, the fund said in a news release.


Pallada has managed the fund's investments since November 1996. Created to reimburse victims of bank collapses and pyramid schemes such as MMM, the fund is allocated 2 percent of revenues raised by government privatization. In June it received 207.6 billion rubles ($36 million) from the privatization of telecommunications holding company Svyazinvest. Pallada said that thanks to its investment strategy, 2.3 billion rubles were added to the sum.


However, in September, the audit chamber estimated Pallada had succeeded in amassing only 600 million rubles, not the 2.3 billion the firm claims.


"Audit results have revealed that the fund is not performing its proper role in paying out compensation to fraud victims," the Finance Ministry said in a Dec. 10 news release. "The fund's finances are being managed by nonresidents, and invested in an extremely ineffective manner."


The ministry has recommended temporarily removing the funds received from the Svyazinvest privatization.


Soskov, however, attributed this recommendation to the government's need to find money to pay off wage arrears by year-end.


Bella Zlatkis, head of the Finance Ministry's securities department, said the ministry would be reassured if an independent audit had indeed revealed that the fund's assets were in good hands. She said Pallada had not forwarded the Price Waterhouse audit to the ministry.