07MOSCOW178, RUSSIAN TAX, CBR OFFICIALS CAUGHT IN FSB STING

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Reference ID Created Released Classification Origin
07MOSCOW178 2007-01-18 13:42 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXYZ0000
RR RUEHWEB

DE RUEHMO #0178 0181342
ZNY CCCCC ZZH
R 181342Z JAN 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 6470
INFO RUEHFT/AMCONSUL FRANKFURT 3108
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC

C O N F I D E N T I A L MOSCOW 000178 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EUR/RUS, EB/ESC/IEC, EB/CBA 
FRANKFURT FOR TAX ATTACHE SUSAN STANLEY, BILL COTTER 
TREASURY FOR BAKER/GAERTNER 
NSC FOR MCKIBBEN, GRAHAM 
USDOC FOR 4231/IEP/EUR/JBROUGHER 
 
E.O. 12958: DECL: 01/18/2017 
TAGS: EFIN ECON RS
SUBJECT: RUSSIAN TAX, CBR OFFICIALS CAUGHT IN FSB STING 
 
REF: MOSCOW 81 
 
Classified By: ECON M/C Quanrud, Reasons 1.4 (b/d). 
 
1.  (SBU) Summary. Court proceedings began this week in a 
bribery case brought against two mid-level officials (one 
from the Federal Tax Service and one from the Central Bank) 
in connection with what is fairly routine business in Russia 
-- an attempt by the tax service to extort money from a 
taxpayer in the face of potentially trumped up tax charges. 
What is interesting about this case is both the alleged bribe 
amount (some USD 5.3 million -- which is a considerable sum 
given the rank of the officials involved) and the fact that 
the FSB (not MVD) conducted the sting operation.  Contacts in 
western tax firms aren't certain what to make of the case, 
but take it as a generally positive sign that finally someone 
seems to be paying attention to the poor behavior of the tax 
service.  End Summary. 
 
2.  (SBU) The Moscow Municipal Court began proceedings on 
January 16 in a tax fraud case involving Oleg Alekseev, 
Deputy Director for Credit Organizations at the Federal Tax 
Service and Aleksey Mishkin, Chief Legal Advisor in the 
Central Bank's Moscow Regional Office.  The Moscow district 
attorney's office has charged the two men with extorting a 
USD 5.3 million bribe in 2005 from Aleksey Ivashchenko, CEO 
of Russian Capital Bank, in exchange for making a 2004 unpaid 
taxes claim of USD 75 million against the bank disappear. 
Ivashchenko reportedly informed the Federal Security Service 
(FSB) about the solicited bribe in September 2005, and FSB 
officers organized a sting the following month and reportedly 
caught Alekseev and Mishkin in the act of taking the bribe. 
 
3.  (C) Ernst and Young (EY) Partner Vladimir Abramov told 
Econoff that evaluating the Alekseev-Mishkin case was 
difficult because of the questions surrounding the matter. 
On one hand, he said he could believe that officials would 
solicit bribes; he said EY clients have occasionally provided 
anecdotal evidence of similar incidents.  On the other hand, 
he questioned why Russian Capital Bank apparently did not 
pursue the appeals process.  (Note: Russian Capital lost in 
the initial instance.  End Note)  Abramov considered the 
sting somewhat unusual since, at that time, other large banks 
routinely won their tax cases in the appeals process or 
succeeded in reducing their tax claims. 
 
4.  (C) Deloitte's Financial Services Director Ekaterina 
Emelianova echoed Abramov's concerns about the validity of 
the original unpaid tax claim and about the FSB's tactics. 
Nevertheless, she expressed hope that this case would 
ultimately serve as evidence that the senior FTS leadership 
is sincere about improving the organization's effectiveness 
and transparency.  In addition, FTS has pledged to increase 
the legitimacy of the audit process by making it less 
susceptible to manipulation and fraud.  Emelianova observed 
that the FTS has embarked on a thankless task to uncover grey 
salary schemes in the private sector and to put firms on 
notice that audits will be conducted "vigorously."  She said 
that these programs would be beneficial as long as tax 
officials were kept in check.  She lamented, however, that 
tax issues often remain vulnerable to political pressure, as 
evidenced by the case against PriceWaterhouseCoopers for its 
allegedly falsified audits of former oil giant Yukos 
(reftel). 
 
5.  (C) Comment.  Around the time of the sting operation 
against Alekseev and Mishkin, post was approached by senior 
MinFin officials proposing a similar FSB-led operation 
against the tax service, this time in a case involving a 
bribery attempt against a U.S. firm.  The idea for the sting 
reportedly came directly from FSB head Patryshev and Minister 
of Finance Kudrin, who hoped a high-profile case might have a 
signal effect on bad actors in the FTS.  The U.S. firm 
declined to participate for reputational reasons, but post 
has every reason to believe the offer on the part of 
MinFin/FSB was genuine. 
RUSSELL

Wikileaks

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