Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- Acknowledgments
- Note on the text
- 1 Introduction
- 2 Power and Property
- 3 Autocratic Elections and Property Rights
- 4 Courts and Connections
- 5 Reputation and the Rule of Law
- 6 Social Norms and the Banker's Gold Watch
- 7 Conclusion
- Data Appendix
- References
- Index
2 - Power and Property
Published online by Cambridge University Press: 31 March 2017
- Frontmatter
- Contents
- List of figures
- List of tables
- Acknowledgments
- Note on the text
- 1 Introduction
- 2 Power and Property
- 3 Autocratic Elections and Property Rights
- 4 Courts and Connections
- 5 Reputation and the Rule of Law
- 6 Social Norms and the Banker's Gold Watch
- 7 Conclusion
- Data Appendix
- References
- Index
Summary
Police Officer: “Would you like to buy a cell phone?”
Our Hero: “Are you checking documents or selling cell phones?”
Police Officer: “Both.”
From the movie Boomer: Film Number Two (2006)It was a familiar, but frightening scene. On September 7, 2005, dozens of men in camouflage outfits and automatic weapons stormed into Togliattiazot, a large chemical factory in Togliatti about 600 miles east of Moscow. The deputy director of the firm noted: “We thought it was a terrorist attack” (Bush 2008). Far from being terrorists in the strict sense, these were members of the local OMON, a paramilitary branch of the police force accompanied by detectives from Moscow. They seized thousands of financial documents and soon the CEO and General Director of Togliattiazot faced charges of tax evasion and fraud. The two top managers fled the country, but did not sell their shares. Soon the company faced 270 court cases across Russia's regions aimed at paralyzing financial operations, depressing the value of the firm, and compelling the owners to sell at a knockdown price (Rossisskaia Gazeta, November 29, 2007). Investigations by the Ministry of Internal Affairs and the Tax Police followed, but the owners refused to sell (Tishchenko 2009). Operating from outside Russia, the General Director rallied the workforce to take to the streets of Togliatti in protest at the hostile takeover attempt, helped publish a book, Togliattiazot Against Raiders, and turned to the powerful Union of Russian Industrialists and Entrepreneurs for defense. In addition, the owners managed to get the governor of the Samara Region, Konstantin Titov, to take their side (at least in public) in the dispute, and opened merger negotiations with several “White Knights,” including energy sector giants, Gazprom and Sibur, in hopes of keeping a modicum of independence. They countersued state agencies who, in their view, had overstepped their authority. They also sued the firms thought to be organizing the raids. They even transferred ownership of the firm to the son of the Chairman of the Board, who was not under investigation.
After five years of court cases, bureaucratic lobbying, and intense political maneuvering, the case was dropped, but only briefly. In 2012, the Investigative Committee brought new charges against Togliattiazot at the request of minority shareholders who accused the majority owners of engaging in transfer pricing to avoid taxes and cheat minority shareholders out of profits.
- Type
- Chapter
- Information
- Property Rights and Property WrongsHow Power, Institutions, and Norms Shape Economic Conflict in Russia, pp. 38 - 81Publisher: Cambridge University PressPrint publication year: 2017