Corrupt Anti-Corruption There seems to be no end to the stories of
deceit and dishonesty behind the scenes of Russia's ruling class.
Yet some officials are somehow more corrupt than others!
That was the case for Colonel Dmitry Zakharchenko, an anti-corruption officer in Russia who was
arrested in 2016 on – you guessed it – corruption charges.
Government corruption is a global problem.
In Russia, it's all part of the system.
Accepting bribes is common practice in Moscow, but the staggering amount of money found in
his possession put him in a league of his own.
Authorities found the equivalent of 9 billion rubles, or nearly 140 million U.S. dollars,
stashed in a home connected to Zakharchenko.
They took him into custody on suspicion of bribery.
More than two years after his arrest, he was convicted of bribery and obstruction of justice
and sentenced to spend 13 years behind bars.
Authorities also fined him roughly $1.8 million and stripped his official titles.
It's unclear how long he'd been misusing his position to get rich, but an encounter with
one specific businessman sealed his fate.
Prosecutors say he demanded a $5 million bribe from a restaurant owner to ignore health code
violations, but the two eventually settled on a payoff of just $800,000.
There was no definitive proof that Zakharchenko received that amount.
Still, he continued his shakedown of the restaurateur by requiring steep discounts on food and services
for himself and at least one other individual.
Throughout the scheme, he saved the equivalent of $46,000, which led to his conviction on
a single bribery count.
He also tipped off one prominent banker of an ongoing criminal probe into a high-profile
client.
Police soon zeroed in on his sister's home, where they found a massive stockpile of cash.
The discovery of various currencies with a combined value of about $139 million led to
additional bribery and embezzlement charges.
Market Feudalism Although there’s always money flowing from
one source to another in Russia, its economic system bears little resemblance to the free-market
capitalism preferred in America.
Some describe it as market feudalism, which pits different groups of people against each
other to rise through the nation's social ranks.
In the end, it was probably this framework that resulted in Zakharchenko's downfall.
Russia's Federal Security Service had already been working to decrease the number of illegal
goods traveling to and from the nation when agents discovered that he had millions stashed
away in foreign bank accounts.
Such contraband is a major part of Russia's shadow economy as powerful brokers arrange
for the black-market resale of goods that would otherwise be subject to high tariffs
or import taxes.
Since most of the institutions involved have rules in place to prevent business deals with
foreign political operatives, it wasn't apparent how Zakharchenko even opened these accounts.
Russian authorities, however, weren't too concerned over the details of his criminal
enterprise.
Instead, they remained laser-focused on reclaiming millions of dollars and returning that money
to the Kremlin.
This investigation enriched Russia's ruling class, but it also gave the oligarchs something
arguably even more important in the feudalist system: power.
Soviet Union So what led to the rampant spread of corruption
throughout Russia?
Much of it can be traced back to the end of the Soviet Union in 1991.
At that time, the elite ruling class looked for ways to safely tuck their cash away.
This process involved the widespread and fraudulent use of personal banking accounts in Western
nations to launder money amassed during the Cold War.
Moving cash around allowed the ruling class, or oligarchy, to flourish even as ordinary
Russians suffered under extreme poverty.
As the chasm between the elite and the commoners grew wider, powerful oligarchs saw an opportunity
to profit from their corruption.
When Vladimir Putin became president, the problem only got worse.
By 2004, Russia had sunk to number 126 in the annual Corruption Perceptions Index even
as the number of individual bribes continued to soar higher.
In 2011, the average bribe was 236,000 rubles – or roughly 26 times higher than in 2008.
Corruption and bribery became deeply ingrained across various industries, including construction,
education, healthcare, and housing services.
It was law enforcement, however, where the problem spread like wildfire.
Even the law enforcement agencies that governed traffic safety were bought off.
In addition to a drastic increase in individual bribes, authorities began demanding payments
for new reasons.
In the early days, Russians were forced to pay to bypass failed inspections or certain
unlawful behavior.
As the problem grew worse, officials demanded bribes just to do the jobs.
Russia has repeatedly claimed that its illegal economy only makes up a small percentage of
its gross domestic product.
Independent researchers disagree, though, insisting that corruption accounts for one-quarter
of the national economy.
Hidden Money At the helm of this corrupt government is
essentially one man.
Putin has ruled Russia as a strongman since he was first elected prime minister in 1999.
Since then, his grip on the nation grew along with his fortune.
It's hard to say how much money he has since his wealth is purposely shrouded in mystery.
However, there's no doubt that he ranks near the top of any list of the richest world leaders.
In the wake of the Ukraine invasion, harsh sanctions hit many oligarchs and some of Putin's
family members where it hurt the most.
Still, it doesn't seem that Putin has suffered any measurable impact on his own fortune.
Meanwhile, the citizens living under his corrupt regime bear the brunt of the international
backlash over his reckless decision.
As for the assets that Putin desperately protects, they aren't tied to his yearly income.
After all, he officially makes $140,000 per year as Russia's president.
Other public disclosures list a modest apartment, three vehicles, and a trailer.
On paper, Putin's got about as much as the average American family.
In reality, he has access to way more than anybody knows about.
He's believed to have untold resources hidden away in secret accounts around the globe and
is believed to be worth several hundred million dollars.
One investigation in 2012 put that number at a whopping $40 billion.
Much of that money came out of his close association with massive Russia-based corporations – particularly
gas giants Gazprom and Surgutneftegas.
Official Kremlin sources downplay the outrage over his immense wealth.
He allegedly uses bank accounts of various associates and friends to store his money,
and his representatives deny that he controls any illegal foreign accounts.
In practical terms, Putin's wealth might be impossible to express accurately.
Like those who work under him, he's been accused of demanding payoffs from wealthy oligarchs.
Furthermore, critics say he doesn't believe it's necessary to possess cash and property
to consider it his own.
Sergei Pugachev, a wealthy Russian who had been exiled from the country, affirmed in
2015 that Putin counts every resource within Russian borders as part of his empire.
The Extortionist For anyone wondering where Russia's oligarchy
got the idea to start demanding payoffs from citizens, just look at the example set by
the president.
In 2003, Russia's richest resident was arrested, and the development gave Putin an opening
to start shaking down other wealthy elites.
According to reports, nearly two dozen oligarchs went directly to the Kremlin to ask how they
could avoid their own jail time.
The answer was pretty clear.
Hand over half your money.
While the Oligarchs maintained a disproportionate amount of wealth, Putin spent it as he pleased.
He instructed them to put their money into real estate, financial funds, and similar
vehicles to create a complex network of investments that would make it difficult, if not impossible,
to determine how rich he really is.
The sanctions placed on Russian institutions and oligarchs by the U.S. and other Western
nations don’t directly name Putin.
Still, he's indirectly impacted by these restrictions since his wealth intertwines with virtually
every facet of his country.
Circle of Crime Following Putin's lead, countless powerful
Russians engage in corruption to get rich.
A prime example involves Vyacheslav Gaizer, who was a fierce Putin loyalist as he rose
through the ranks to become governor of the Komi Republic.
He faced tons of charges related to a criminal enterprise that officials accused him of running.
Several prominent Russians were allegedly involved in the complex scheme.
Some associates stayed with Gaizer since he was an influential banker in the early 2000s.
After being named governor in 2010, he became one of Putin's favorite politicians and looked
for ways to profit from his position.
According to prosecutors, his scheme included establishing an organized crime ring with
at least 15 business and government leaders.
Authorities conducted raids of their homes and found an array of expensive possessions
and evidence of cash deposited in foreign banks.
Gaizer and the others allegedly involved in the illicit activity were skimming cash off
the top of various lucrative government-owned industries, including dairy and lumber.
In one case, investigators said that one of the governor's top associates orchestrated
the bankruptcy of one profitable lumber company only to turn it over to a firm headquartered
in St. Petersburg.
This scheme caught the attention of regulators and led to a probe that uncovered similar
actions involving other Russian businesses.
Of course, Gaizer is just one in a long line of governors accused of contributing to Russia's
corruption epidemic.
The Kremlin is more than willing to look the other way most of the time.
But if these crimes become a distraction from Putin's agenda, politicians and oligarchs
can expect harsh sentences for their crimes.
The charges against Gaizer warned other corrupt officials that their illegal actions couldn't
cost Putin or the Kremlin any money.
After all, the Komi Republic begged for cash despite being rich in natural resources.
When the governor's criminal enterprise translated to an economic downturn, even being a prominent
Putin cheerleader wasn't enough to save him.
Corruption Perceptions Index The Corruption Perceptions Index makes it
easy to gauge where Russia stands compared to other nations around the world.
Each year, analysts take a look at a wide range of data and assign 180 nations a score
of between 0 and 100.
The lower the score, the more corrupt a country is said to be.
The average score is 43, so it’s clear from Russia's score of 29 that it's more corrupt
than most other countries.
They tie with Angola, Liberia, and Mali near the bottom of the list, ranking 136th.
On the other end of the spectrum, Denmark, Finland, and New Zealand tied for first place.
Each country boasts a score of 88 on the index.
Russia might be near the bottom, but many other countries are even more corrupt.
South Sudan ranks dead last with a horrendous score of 11.
Two other countries – Syria and Somalia – aren't any better.
Both of them have an index score of 13.
For comparison, the United States ranks higher than average, with a score of 67.
That rating is enough for a tie with Taiwan to put America in 27th place overall.
Corruption Consequences Russia suffers at the hands of a corrupt government.
These consequences were on full display in the early days of that nation's war in Ukraine.
Even though some experts expected Russia's military to dominate, the reality was quite
different.
Much of the poor performance links to a lack of sufficient supplies or a cohesive strategy.
Russian soldiers generally suffered from low morale.
They were also forced to use old or inoperable equipment.
Even worse, some of the food they brought along reportedly expired as far back as 2015.
Some of these field rations were said to be infected with the deadly E. coli virus.
Further revealing the pitiful state of Russia's military was the fact that vehicles regularly
ran out of gas.
Despite the nation's extensive natural resources, corruption by those in charge made it impossible
for the military to receive the fuel it needed.
Of course, the fog of war makes it hard to report anything on either side accurately.
However, from what we know about Russia's history of corruption, these stories wouldn't
be surprising.
Even as soldiers were sent into Ukraine with expired food and antiquated technology, oligarchs
back home continued to live the high life thanks to a political system dominated by
corruption.
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