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. Last Updated: 07/27/2016

Homebuyers Turn to the Courts

Itar-TassA protester decrying Sibol, a contractor that sold its unbuilt housing to a third party, near the White House in April.
Hundreds of defrauded homebuyers are continuing to file criminal complaints against construction companies they say left them homeless or penniless, or both, Deputy City Prosecutor Alexei Grigoryev said.

Grigoryev said city prosecutors recently charged construction company Grad City Development Center with fraud in one of the largest cases involving defrauded homebuyers.

"The exact number of victims has not yet been established, but there are already some 100 people identified as victims, and we are receiving more complaints," Grigoryev said in an extensive interview published recently in Vremya Novostei.

Grigoryev said that, as of January, city prosecutors had opened investigations into 38 cases involving defrauded homebuyers, six of which were recently wrapped up and sent to the courts.

In the court cases, five companies are accused of defrauding a total of 60 people out of more than $1.6 million.

In one of those cases, the Lyublinsky District Court sentenced Lyudmila Ivanova, head of the TaimInvestStroi construction company, to four years in prison for defrauding seven people out of a total of $93,000, Grigoryev said.

Oksana Vzdorika, spokeswoman for the Association of Victimized Investors, an advocacy group for defrauded homebuyers, said that while city prosecutors might be successfully investigating several companies, hundreds of others were left untouched because of lack of evidence.

"The work they're doing is fine, but it's too little," Vzdorika said. "Many of the contracts signed by homebuyers were legally clean, but that doesn't erase the fact that these companies conned them."

Grigoryev said several companies never even attempted to start constructing buildings. "At best, they would just put a fence up around the plot of land," he said.

The government adopted a law last year introducing greater controls over the industry, including a prohibition on early collection of down payments.

But that law, passed in response to complaints about housing fraud, is not retroactive and would not help the homebuyers in question.

Fraud victims accuse authorities of negligence, which allowed construction companies to collect money through pyramid schemes, delay construction and resell apartments.

Exactly how many homebuyers have been swindled in Moscow and across Russia is unknown. Advocacy groups for homebuyers put the number at 80,000 to 200,000, while Audit Chamber chief Sergei Stepashin says it is closer to 32,000.

Vzdorika said more exact figures should be available this fall.

In February, First Deputy Mayor Vladimir Resin, who oversees construction and development, said the number of defrauded homebuyers in Moscow alone was around 25,000. Federation Council Speaker Sergei Mironov put the figure at 15,000.

In March, however, Mayor Yury Luzhkov said the city administration was aware of only 1,779 cases.

Resin, despite his February estimate, told reporters earlier this month that the figure was 2,000, and that they would be compensated, either monetarily or with an apartment, by the end of next year, Rosbalt reported.

Vzdorika dismissed the promise. "Let's assume at the most there are 15,000 defrauded investors in Moscow," she said. "If Resin keeps his promise, that means 13,000 people will get absolutely nothing."

Defrauded homeowners have held a series of protests and hunger strikes in Moscow and the Moscow region since last fall. In May, they demanded that President Vladimir Putin meet with them and personally make sure they were compensated.

The demands, stated in an open letter, came at a news conference three days after riot police shut down an unsanctioned protest organized by homebuyers. The protest took place at Gorbaty Bridge, across from the White House. Police subsequently blocked access to the area.

Besides demanding time with Putin, the homebuyers also wanted to meet with Prime Minister Mikhail Fradkov. They called for the homes they paid for and government oversight of the construction industry.