Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Vavilov Did Not Break Any Laws, Kudrin Says

First Deputy Finance Minister Alexei Kudrin on Friday downplayed Russia's latest financial scandal involving a former government official and a commercial bank accused of misappropriating state funds, saying the allegations were made hastily.

"It was premature to raise such a hue and a cry about a deal that we don't know enough about," Kudrin said at a news conference.

"I have conducted an in-house investigation within the Finance Ministry and I have found out that there was nothing criminal in what Finance Ministry officials did," he said.

Kudrin was referring to charges lodged earlier this week by Central Bank chairman Sergei Dubinin, who said former first deputy finance minister Andrei Vavilov had violated ministry rules by authorizing a deal to transfer Finance Ministry bonds, called MinFins, to several commercial banks.

The banks were supposed to sell the bonds and use the proceeds to pay the Moscow regional administration and MAPO, producer of MiG fighter aircraft. But Dubinin alleged that the funds ended up with financially troubled Unikombank.

Together, the two deals were worth more than $500 million.

While Kudrin said there were no crimes committed, he said there were "administrative violations ... that must be punished." He said a violation occurred because the advanced financing was contingent upon a signed contract to provide MiGs to India.

Although all payments have been made, no contract has been signed and the MiGs have not been delivered, Kudrin said. He announced that the Finance Ministry will do an audit of MAPO, which says it has received the money, to make sure the funds were properly used.

Kudrin also said that if the fighter jets are not delivered by January 1998, MAPO will have to pay back the funds with a fine amounting to twice the Central Bank refinancing rate.

At a news conference Thursday, Unikombank officials denied any wrongdoing. "There have been no machinations or abuses with any assets on the part of Unikombank," said Nina Galanicheva, chair of the bank's board of directors.

She said Unikombank had made all the necessary transfers to MAPO's accounts and the mistakes that the Central Bank found during its audit were of a broad "technical" nature only.

"A supplement is missing or a transaction has been carried out through a wrong account, or a document has been incorrectly filled in," she said. "These are technical omissions."

Galanicheva also said all payments were made to the Moscow regional administration, which has no debts to the government.

Last year, the Finance Ministry agreed to lend the Moscow regional administration $275 million to pay back wages in the form of MinFin bonds. Galanicheva said the debt was paid in December 1996 with Ukrainian bonds and monetary offsets.