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. Last Updated: 07/27/2016

Don't Bite Off More Than You Can Chew

Last week, the Sverdlovsk district court in Perm froze 25 percent of the shares in the joint-stock company Aviadvigatel (formerly Perm Motors) belonging to Pratt & Whitney in response to a lawsuit filed by Sergei Permyakov, a board member of Aviadvigatel.

In the suit, Permyakov requested compensation to the tune of $10 billion in damages from Pratt & Whitney Russia. Permyakov, who maintained in his suit that Aviadvigatel would lose $10 billion over the next 15 years as a result of Pratt & Whitney's investment, is also chairman of a company called Tekhnologii Motorov. The president of this company is the Montenegrin Sava Kujundzic, the vice president Andrei Khovanov. Kujundzic is considered an intimate of former Gazprom chief Rem Vyakhirev and Moscow Deputy Mayor Iosif Ordzhonikidze. Kujundzic's insider status allowed him to get in on a swindle even bigger than that of Beghjet Pacolli, the chief executive of Mabetex, whom Swiss prosecutors suspect of laundering money connected with the renovation of the Kremlin.

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The scam took advantage of Moscow's law on profit tax breaks. Under this law, businesses investing in programs approved by the Moscow city government can deduct the sum invested from their tax bill. Moscow taxpayer Gazprom made full use of this loophole. It spent some $60 million on construction of a water park on Aminevskoye Shosse and $500 million on construction of the Moskva-City business center.

All of the Moscow companies that received money from Gazprom had one thing in common -- they were all headed up by Kujundzic's partners, Khovanov and Yevgeny Yankovsky. The construction of the water park, for example, worked like this. The money was paid to the project's general contractor, Assotsiatsiya Zamoskvorechye. The contractor transferred the money to another firm, Spetsstroiservis-2000. Yankovsky was the general director of both companies. The money was then spent on buying equipment from the Russian representative office of German company USI Universal GmbH, run by Yankovsky's wife. USI then transferred the money directly to a Swiss company, Taurus Holdings, whose president was none other than Kujundzic. USI then disappeared, the equipment was nowhere to be found and the water park was never built.

One can only guess how all the money that found its way to Taurus Holdings was divvied up, but it seems reasonable to assume that this was the source of the money that Kujundzic and his team used to buy their stake in Aviadvigatel.

All of the contracts, documents and receipts in this case are in the hands of the Prosecutor General's Office because the management of Legprombank, through which Kujundzic and Khovanov laundered the money, had a falling out with their owners. As the two sides concentrated on battling each other, crucial documents found their way to the prosecutor. But the case never went public.

The Kremlin was right to adopt a hands-off approach when Tekhnologii Motorov moved to snuff out Legprombank in the courtroom. The two sides deserve each another. But the Kremlin ought not to stand and watch when a major player in the international aviation industry is booted out of a Russian plant simply because a handful of people who had got fat laundering Gazprom tax money suddenly decided to enter the world of big business.

High and mighty Pratt & Whitney will not go running to pay off the judges in the Sverdlovsk district court in Perm. The company's execs will simply voice their concerns to the head of the FBI over breakfast. Then Swiss prosecutors will go after Taurus Holdings. The U.S. Congress will kill a couple bills favorable to Russia. And the interest rates at which our law-abiding companies borrow money in the West will jump a point or two.

I have one thing to say to our Russian adventurists: Stick to working scams on your own street corner. Don't go after Pratt & Whitney, and don't think they can't give as good as they get, just because they don't settle their business disputes by hiring hit men.

Yulia Latynina is a journalist with ORT.