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. Last Updated: 07/27/2016

$7M Insulin Scam Revived

The Supreme Court of Adygea on Tuesday overturned a stunning decision by a lower court to acquit two top managers of embezzling $7 million in federal funds when setting up a company in the southern republic in the 1990s to pioneer domestic production of insulin.

The court ordered a new trial for Rossiisky Insulin company head Nikolai Anistratenko and executive director Alexander Nartov, who were acquitted by the Maikop city court on June 26. The acquittals of four other company executives who were tried with them were allowed to stand.

The six defendants were charged with the embezzlement of federal funds allocated from 1994 to 1998 to build and launch a full-fledged facility for extracting insulin from the pancreas of pigs, purifying it and producing medicine for hundreds of thousands of Russian diabetes sufferers.

Russia has no domestic production of insulin and spends up to $100 million annually on importing it, according to the Russian Diabetes Association.

Rossiisky Insulin succeeded only in equipping a tiny laboratory for insulin purification in Maikop, while the rest of the production cycle was carried out by the Polfa company in Poland, the prosecutor in the case, Yury Bogus, said Tuesday in a telephone interview from Maikop. The unpurified insulin was brought in from Poland and, once purified, it was shipped back to Poland, he said.

The prosecutor said the Maikop judge who handed down the June 26 verdict, Anatoly Gorgolin, had all but ignored the arguments of the prosecution and had been much more interested in what the defense had to say.

"The verdict does not correspond with the norms of the Criminal Code and the conclusions drawn by the court do not correspond with the presented evidence and facts," Bogus said.

No date has been set for the new trial, which will be held at the same Maikop court but heard by a different judge, he said.

Bogus was not the only official unhappy about the verdict. It also outraged officials at the Interior Ministry's investigative committee who had conducted a two-year investigation and believed they had gathered enough evidence to convict the defendants.

"We were satisfied that at least the case was not closed automatically," investigative committee spokesman Yevgeny Leonov said Tuesday.

The investigators said they found that, with the approval of the Health Ministry, Anistratenko had managed to convince the Economic Development and Trade Ministry to arrange multimillion-dollar loans by submitting a business plan under which Rossiisky Insulin would have the capacity to manufacture at least 26 million doses of insulin per year.

Investigators have evidence that Anistratenko signed several fake contracts with foreign companies that allowed him to turn the ruble loans into dollars, a spokesman for the investigative committee told The Moscow Times in May 2001.

Anistratenko then transferred the money to foreign companies for purchases of technology and equipment but nothing was ever delivered, the spokesman said.

Rossiisky Insulin was granted 26 million rubles in federal money from 1994 to 1998, investigators said. The exchange rate during that period varied from less than 2 rubles to the dollar in 1994 to about 6 rubles to the dollar in 1998 before the ruble crashed in August of that year.

The embezzled money totaled $7 million, Bogus said. The Maikop laboratory still exists but is now bankrupt, he said.

Anistratenko and Nartov could not be reached for comment Tuesday. A man who answered a telephone call to the laboratory on Tuesday afternoon said he was the only person there because all the managers were in court and suggested calling later. Calls later in the day went unanswered.

The managers of Rossiisky Insulin first came under suspicion when the Audit Chamber, parliament's watchdog of budgetary funds, and the southern branch of the Interior Ministry's anti-organized crime unit looked at the company's books in 1997.

Anistratenko and Nartov were arrested in October 1999 and were kept in custody in Moscow at the Butyrskaya pre-trial detention center until the case was transferred to Maikop last fall. Judge Gorgolin then released both men on the condition they did not leave the city while awaiting trial.

Some 2.7 million people in Russian suffer from diabetes, said Vladimir Ignatkov, president of the Russian Diabetes Association. Up to 400,000 of them need daily insulin injections and thousands more need occasional injections, he said.

Investing millions of rubles of federal funds into the production of animal insulin with the approval of the Health Ministry was odd in the first place given that animal insulin is no longer considered the best and the safest relief for diabetes sufferers.

Rossiisky Insulin was a pet project of then-Health Minister Eduard Nechayev, who promised that the government would stop spending millions of dollars every year to purchase imported insulin.

"All experts universally agree that human gene-engineered insulin is the best thing we can offer to patients," Ignatkov said.

He said Russian scientists are working on a procedure for producing the biosynthetic insulin, but it was premature to speak about beginning mass production.

The insulin business in Russia has been marred by controversy and scandal, mainly due to pharmaceutical tycoon Vladimir Bryntsalov. In 2000, Bryntsalov lost a court case to the Health Ministry, which said he had sold the government animal insulin while claiming it was the more expensive human gene-engineered insulin.

Bryntsalov still has arbitration cases pending with the Health Ministry and Danish insulin maker Novo Nordisk.