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. Last Updated: 07/27/2016

Audit Chamber Ends UES Review

The Audit Chamber has completed its legal review of national power grid Unified Energy Systems and will soon make its findings known to the government and the Prosecutor General’s Office, officials said Friday.

The chamber reviewed UES’ financial activity for the past 18 months, its use of federal property and its 1992 privatization.

Last month, the Audit Chamber, parliament’s budgetary watchdog, accused UES of several financial irregularities — chiefly that the company illegally sold 15.2 percent of its shares to foreigner investors in exchange for privatization vouchers meant for Russian citizens.

While Audit Chamber officials said Friday that the financial status of the utilities monopoly is "sound," it intends to have the Prosecutor General’s Office make a final ruling on the privatization matter.

"We have turned to the prosecutor’s office so that they can carry out the final legal examination. We really need to dot all the i’s," said Sergei Stepashin, head of the Audit Chamber, in remarks reported by Interfax.

The lower house of parliament, the State Duma, ordered an audit of UES in June 1999 and its findings of impropriety were presented to the chamber’s board last month, prompting a full legal review.

UES head Anatoly Chubais vehemently denies that the power grid’s privatization was illegal.

The privatization "was legal from beginning till the end," Chubais was quoted by Interfax as saying.

"We do not agree with the [Audit Chamber’s] claims and are ready to take our position to the Prosecutor General’s Office, arbitration court, government, anywhere."

Valery Meshalkin, the Audit Chamber’s inspector, said the State Property Committee violated a 1992 presidential decree that stated that 20 percent of the company’s shares had to be bought by Russian citizens through vouchers before foreign investors could buy in. Russian citizens only got 2 percent, while 10.5 percent went to foreigners and 4.8 percent went to Russian companies.

"We are not against vouchers being sold to foreigners in auctions, but it should have been only after the presidential decree, which prescribes the sale of 20 percent of shares to Russian citizens, was complied with," Meshalkin said.

The chamber was careful to point out on Friday that its challenge to the legality of the UES selloff was not directed at the company itself.

"There are no claims against UES. They are directed at the officials from the State Property Committee and the State Property Fund that orchestrated it," Meshalkin said.

Chubais, the architect of former President Boris Yeltsin’s controversial privatization plan, was the head of the State Property Committee in 1992.

Foreigners now hold 38 percent of UES shares, but according to the federal law on foreign investment, foreign ownership in federal properties should not exceed 25 percent.

UES has previously turned to the government in an effort to abolish this law through the Constitutional Court.

Stepashin said that if the law violates the Constitution, then it should be reviewed by the Constitutional Court.

"As the company’s management is concerned about the rights of shareholders, we are glad that the Audit Chamber took notice of legal disparities," said Alexander Pinchuk, a UES spokesman.