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. Last Updated: 07/27/2016

Official Charged in SBS-Agro Inquiry

The Central Bank official who signed off on a 1998 stabilization loan to now-defunct SBS-Agro bank has been charged with abuse of power.

If convicted, Alexander Alexeyev, the deputy head of the Central Bank's Moscow department, faces up to 10 years in prison. Alexeyev, who was charged this week, has been barred from leaving the country.

The move outraged Central Bank officials and surprised observers of the ongoing fraud investigation by the Prosecutor General's Office into how SBS-Agro management spent the loan.

On Oct. 2, 1998, the Central Bank's board of directors agreed to open a credit line of 7 billion rubles (more than $1 billion at the time) to the floundering SBS-Agro. Alexander Smolensky's SBS-Agro received 5.86 billion rubles guaranteed by 43 regional governments.

The Prosecutor General's Office declined to comment on the case, but a source close to the investigation said the accusations were grounded on two points. First, Alexeyev "assessed the security of these loans insufficiently truthfully," and, second, he released the money before a restructuring plan for SBS-Agro was approved.

"How can they talk about insufficient guarantees when these are regional guarantees? The governors all signed. If accusations are made along these lines, then everyone on the board who voted for this loan should be charged," said an official in Alexeyev's department.

Prosecutor General Vladimir Ustinov promised to become involved in the SBS-Agro case last December during a speech to the Federation Council, which had summoned him in respect of the Audit Chamber's report on the use of this loan. Shortly after, Ustinov initiated proceedings under article 159 of the Criminal Code on "large scale fraud."

The case has no prospects, said Elenora Mitrofanova, an auditor with the Audit Chamber. She said there is nothing to incriminate either Smolensky or the Central Bank. "All that might incriminate the Central Bank is that they didn't ask where the regions' guarantee was coming from," Mitrofanova said.

It is no secret that the money was not allocated to SBS-Agro, but to a soft-loan fund for villages set up under pressure from the government of former Prime Minister Yevgeny Primakov. In other words, the regions were essentially credited via SBS-Agro by the Central Bank for 1999's planting season. Mitrofanova said, "there can be no discussion of the improper use of these funds."

Smolensky's then-press secretary, Eduard Krasnyansky, said the bank "didn't get a single ruble" of the loan. "Alexeyev cannot be guilty of abuses, nor could he have committed any," Krasnyansky said.

SBS-Agro never returned a single ruble of the loan, and of the 43 regions that acted as guarantors, only Chuvashia has acknowledged its obligations.

Though the Central Bank has managed to win 14 court hearings against the governors at various instances, it has yet to recover anything from the regions.

"According to the new Tax Code, if a region has not included a line in the 1999 or 2000 budget regarding this guarantee, then the guarantee will be invalid. Therefore it is rather hard to prosecute the governors," a Central Bank official said.