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. Last Updated: 07/27/2016

Motorola Saga Takes New Turn

Itar-TassThe shipment of seized Motorola cell phones being destroyed in April.
The tale of the 167,000 Motorola mobile phones took another turn this week.

In the first chapter seven months ago, the Interior Ministry seized the phones at Sheremetyevo Airport. The ministry said first that the phones were counterfeit, then contraband and then a health hazard. A month later, government officials, with Russian news media cameras flashing, fed thousands of the phones into a chipping machine.

But in the latest chapter, Moscow prosecutors say they were investigating whether 30,000 handsets that were supposedly destroyed were, in fact, sold at knockdown prices in stores in some regions around the country.

The phones were tagged with electronic serial numbers called IMEI, or international mobile equipment identity, which have registered for months on mobile phone networks in Russia, prosecutors said. The investigation is being conducted by the Moscow City Prosecutor's Office.

The revelation raised the possibility that in a brazen example of corruption even by Russian standards, the police had simply seized the phones and sold them for personal profit.

Motorola's case had already became a cautionary tale about doing business in the country, where despite the great economic gains in recent years, demands for kickbacks and bribes are an everyday part of life.

As the state's share of the economy grows, so has the sense of entitlement by government employees at all levels, government experts say.

Motorola has taken a low-key approach to sorting out what happened. The company did not bill the government for the missing phones, valued at $2 million. The balance of the initial shipment of 167,000 was returned in August.

Motorola has not been formally notified of the latest investigation, and so could not comment, said Kirill Lubnin, a spokesman for Motorola in Russia. The company provided the authorities with the identification numbers last spring, he said.

Svetlana Petrenko, a spokeswoman for the city prosecutor's office, confirmed the investigation.

Prosecutors, working with identification numbers and network operators, suspect about 30,000 handsets that were supposed to have been destroyed are now in use, Vedomosti reported Monday.

Phone calls were not answered at the press office of the police division known as Department K, which had previously notified Motorola the 50,000 phones had been destroyed.

Even before the latest revelation, mobile phone market analysts say they noticed strange sales patterns for Motorola's C115 model, a no-frills black plastic phone about the size of a cigarette pack that retails for around $50 but briefly got a lot cheaper last spring.

Prices for C115s during the week of May 7 in the Krasnodar region dropped to between $19 and $22, according to Eldar Murtazin, chief analyst at the Mobile Research Group, a company researching the country's handset phone market.

Murtazin said a private contractor was hired to grind up the phones and that it was not clear whether the latest investigation was aimed at the police from Department K or at employees of the contractor.

"This was not Motorola's problem," he added.