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. Last Updated: 07/27/2016

Tax Cops Raise Curtain on Film Studio

Olga Darfi was fresh out of film school when she got what she thought was her big break -- an offer from a famous producer to direct a new action movie.

Shortly after she graduated from Russia's premier film school, VGIK, in 2001, a friend introduced her to Maxim Fedoseyev, a producer at the Novy Vek studio who said he was looking for a young and talented director to shoot a movie about bowling. It was called "Sfera," or sphere.

"Fedoseyev told me I would direct the film because they needed a young, dynamic director who could get a good script written. He said there would be plenty of money, a budget of $1 million," Darfi said. "This was huge for me. I turned down other offers to work on 'Sfera.'"

What Fedoseyev did not tell Darfi is that she had just become a small cog in a multimillion-dollar tax-evasion scheme.

After hammering out a number of scripts with screenplay writers over the next two months, Darfi said Fedoseyev suddenly stopped calling.

"When I called him, he said the deal was off because the investors had offered him too small a sum to produce the picture, and that I shouldn't worry about it because they hadn't planned to pay me much either," she said. "I was shocked, it was a very emotional for me."

Darfi had all but forgotten about the episode until a year later, when she received an early morning phone call from the Tax Police asking her to come down to their offices for questioning.

Asking if they were sure they had the right person, Darfi told the Tax Police that she would only answer questions after she received an official request in writing. "Most people don't like getting official written requests from the Tax Police when they haven't paid taxes on $10 million," came the reply, as Darfi remembers it. "I had no idea what they were talking about. But after they said that, I decided to go in for questioning," she said.

During the meeting, Darfi discovered that, at least on paper, the film had been shot with a budget of $10 million and that she herself had been "paid" $1 million. "I didn't even get any money for the two months I worked on the film," she said. "It felt horrible to be a victim."

Convinced Darfi had not profited from the scheme, the Tax Police let her go.

Novy Vek, however, has not been so lucky. On Tuesday, the Interior Ministry announced it had opened a probe into tax-evasion activities by executives at the now-defunct studio. The ministry claims that the film company received 342 million rubles ($11.2 million) from investors to produce "Sfera."

"During the investigation, it was discovered that Novy Vek had not actually shot 'Sfera,' and that the funds where transferred to one-day firms using fictitious documents," the ministry's tax and economic crimes department said in a statement.

In its financial statement for 2001, then state-owned oil giant Slavneft, which has since been sold to TNK-BP and Sibneft, claimed to have spent 722 million rubles ($25 million) to produce "Sfera" and two other films -- an extraordinary sum considering Russia's most expensive film to date, Nikita Mikhalkov's "Barber of Siberia," cost $45 million.

Prior to changes in tax legislation in 2002, the Interior Ministry said Slavneft and many other companies took advantage of a legal loophole that freed companies from paying taxes on profits that were invested into Russian films.

Companies that invested in "Sfera" evaded paying 103 million rubles of profit taxes, the Interior Ministry said in its statement. It did not name the companies, but media reports have said they include Slavneft and Megasfera, Moscow's first bowling alley.

"Some of the largest companies in the natural resources sector financed national film productions with their profits. These sums were exempt from the profit tax," the ministry said. "A number of film studios laundered the money through nonexistent firms or sent it abroad through intermediaries to be spent on various materials ... not related to filmmaking," it said.

Some companies claimed to have invested as much as 2 billion rubles ($68 million) into making a movie, the ministry said without elaborating.

Film industry experts polled Wednesday said the sums being put into movies while the loophole existed were indeed huge.

"In order to use the tax scheme, films had to be officially deemed 'national,' by the Culture Ministry, which means you had to show the movie would be made by Russians," said Daniil Dondurei, editor of film magazine Iskusstvo Kino.

"Between 1999 and 2000, the Culture Ministry issued 700 such approvals, but only 180 films where actually made," Dondurei said.

"This is exemplified by Slavneft, which spent some $17 million on two documentary films, even though making documentaries in Russia costs nowhere near that much," he said.

Slavneft itself blamed any shady dealings on the company's state-appointed former managers. "Questions about how the company's profits were used in 2001 should be addressed to its former management, or more specifically, [then-Slavneft president Mikhail] Gutseriyev," said Slavneft spokesman Ilya Medvedev. "Suffice it to say, the company no longer uses such tax schemes since the tax law changed in 2002," Medvedev said.

Eduard Sarkisov, a former Slavneft spokesman who now works for Gutseriyev's new private oil company, Russneft, refused to say how the 771 million rubles in Slavneft claimed to have spent on movies in 2001 was actually spent.

Darfi said she was told by the Tax Police that Novy Vek has been closed down and that its former managers, including Fedoseyev, have opened a new studio, Artes Productions.

Fedoseyev and Artes Productions could not be reached for comment.

"I don't talk to Fedoseyev anymore," Darfi said. "The last time I saw him I asked him what the [expletive] he thought he was doing, but he didn't seem to think there was a problem."

As for the friend who introduced Darfi to Fedoseyev, Sergei Gliyants, he went on to produce last year's blockbuster "Boomer," one of the highest-grossing Russian films of all time.

Gliyants could not be reached for comment.