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. Last Updated: 07/27/2016

City Gets $500M To Fund Hospitals

Moscow city officials Thursday confirmed an agreement by two obscure Swiss companies to donate around $500 million to the city administration for the improvement of medical facilities, news of which has raised questions about motivations behind the deal.

Interfax-Moskva reported Friday that Moscow Mayor Yury Luzhkov signed an agreement with Terra Humana foundation and Treuhand AG Zurich under which the two companies are to give the capital around $500 million for medical equipment and building and reconstruction work at four medical establishments.

According to the Interfax report, the money will go toward equipment for a children's medical center for head and facial injuries, the construction of a complex at the Botkin Hospital, reconstruction of an infectious-disease hospital and reconstruction of a gastroenterological center.

Luzhkov said Friday that joint organizations would be set up to control disbursement of the donated money. The project would be "absolutely transparent," Interfax quoted him as saying.

But a front-page article in Kommersant newspaper Thursday alleged the agreement was anything but transparent and most likely a case of money laundering. "It's a grandiose event. And the sum is also grandiose f even for the capital," the paper said. "It's possible to say with a high degree of certainty that the mayor was caught up with dubious businessmen and will probably not receive the money."

City officials confirmed the agreement was signed Friday, but evaded questions about details and would not say which city department is handling the matter. "Officially, we don't know anything about it," said Igor Lebedev, adviser to city Finance Minister Yury Korostylov, adding that the finance department does not have a signed copy of the agreement.

"We need to have a signed copy of the contract before we can register it and act accordingly," he said. "And we don't have a signed copy. Moreover, since the agreement doesn't concern money from the city budget, it's entirely possible the contract may not go through us at all.

"But we know the agreement exists," he added.

Asked who might have a signed copy of the agreement, Lebedev deferred to the City Duma.

But Mikhail Vyshegorodtsev, chairman of the City Duma's budget committee, said the capital's legislature was not involved in the matter. "If the agreement is signed, then it is a matter for the city administration, and the legislature doesn't have to be informed about it," he said.

Kommersant said the cost of the projects outlined in the agreement would come to no more than $35 million, much less than the agreement's $500 million.

Under a separate plan drawn up in the 1990s, the entire projected sum to build the unfinished 90,000-square-meter, 250-bed Children's Oncology Center came to $110 million.

The paper also reported that the city's medical authorities knew nothing of the agreement, nor did they know of any other agreements about hospital reconstruction.

Moscow City officials declined to give any information about the two Swiss organizations.

A search for one of the companies f reported as Treuhand AG Zurich by Interfax f brought up Finanz-Treuhand AG Zurich on a Swiss Internet corporate registry. Kommersant reported that the company's owner is Fritz Leibundgut and said he also is commercial director, marketing director and director of technical development. The company office is reported as not having its own telephone or fax numbers.

Kommersant also said Leibundgut owns or directs 17 additional small companies that list the same address and telephone numbers.

Terra Humana turned up on no corporate registry lists.

Kommersant opined that similar companies are usually set up for the purpose of laundering money, adding that even were that not the case this time, it is unlikely such small entities could give Moscow $500 million.

The city administration played down the report. Mikhail Solomentsev, deputy head of the administration's press center, said a number of the country's papers are out to smear the mayor's office. "Any harmless piece of news can be used unobjectively," he said.

Kommersant is controlled by Boris Berezovsky, a Kremlin insider who has used his extensive media holdings in the past to smear political opponents.

Luzhkov became the Kremlin's most bitter foe last year ahead of elections to the State Duma in December. But the mayor's Fatherland-All Russia political organization was relegated to the sidelines after suffering a humiliating defeat by the pro-Kremlin Unity Party, which Berezovsky helped organize just months ahead of the election.

The victory buoyed then-Prime Minister Vladimir Putin's chances of election to the presidency. He won the office in early elections in March.

Luzhkov, whose once-towering political standing crumbled with Putin's rise, has since been seen as anxious to make peace with the Kremlin.

Another article in Kommersant on Thursday headed "Luzhkov Rehabilitated" said Putin has decided to improve relations with the mayor, who flew to Italy with the president earlier this week.

Luzhkov said Wednesday that he approved of Putin's plans to bring the regions into line by enacting a series of measures curtailing the power of regional leaders such as himself. But Luzhkov added that he was against the creation of an authoritarian state, something the bills' critics say Putin is aiming to bring about.