A group of businessmen whose Russian government connections helped Bombardier Inc. win dozens of foreign railway projects has been ensnared in a sweeping anti-corruption probe that alleges officials at the highest levels were paid bribes in exchange for public contracts.
The arrest last week of one of the men, Valery Markelov, who is a part owner of a network of firms that had a long and lucrative partnership with the Canadian transportation giant, is an astonishing reversal in fortunes for the influential quartet, whose ability to obtain state rail contracts was formidable.
While tenders awarded to Bombardier are not named in connection with the Russian probe, the anti-corruption investigation threatens to draw in numerous corporations that have partnered with the businessmen’s company, Group 1520, which was the rainmaker of Russia’s railway sector.
Olivier Marcil, Bombardier’s vice-president of external relations, said on Wednesday that Bombardier was not involved in the proceedings, and had no knowledge of them other than what has been reported in Russian media.
"Consequently, we have no comments to make on the matter and have no reason to believe that Bombardier should be publicly associated with this case by the simple fact that a shareholder in one of our companies is the subject of an investigation,” he wrote in reply to e-mailed questions from The Globe and Mail.
Mr. Markelov was detained by Moscow’s Basmanny Court on Oct. 2, after being arrested in the Black Sea resort of Sochi, according to legal documents reviewed by The Globe and Mail. He is suspected of making millions of dollars in regular payments to an Interior Ministry official, Russian media have reported.
Mr. Markelov’s partners in Group 1520 – Alexey Krapivin, Yuriy Obodovskiy and Boris Usherovich – are also being sought in connection with the corruption case, according to reports.
Bombardier has tried to disentangle itself from Group 1520 after a separate bribery probe involving Russian partners of Bombardier went to trial in Sweden last year. Ludovic Saint-Pol, a spokesman for Bombardier’s Berlin-based rail arm, Bombardier Transportation, said earlier this year that the company did not "currently have a business relationship” with Group 1520.
But the four men and their firm were once considered essential to the company’s success in the region. Internal Bombardier documents describe Mr. Krapivin and Mr. Obodovskiy as among a “small group of powerful people” who were key to the company’s business prospects in Russia because of their "access” to Vladimir Yakunin, the former head of the state-owned Russian Railways. "Having such connections they can influence to decision taken from both technical and commercials sides,” according to a 2014 memo written in English by a Bombardier executive in Sweden to a superior in Berlin.
Grigory Levchenko, a spokesman for Mr. Yakunin, who resigned as the head of Russian Railways in 2015, said that while Mr. Yakunin had known Mr. Krapivin’s late father, it was a "false conclusion” to say they were close associates. "The two men have never had any business relations in the past,” Mr. Levchenko said.
A separate March, 2017, overview of Bombardier’s business operations in Russia and the surrounding region – marked "private and confidential,” but made public last year in the Swedish bribery case – shows that firms controlled by Group 1520 played a middleman role on two dozen ongoing Bombardier projects in Russia, Azerbaijan, Kazakhstan, Turkmenistan, and Mongolia. Bombardier’s share of the projects was valued at US$360-million in the documents.
Rosbalt, a news website known for its connections to Russia’s security services, reported that Mr. Krapivin, the de facto head of the group, had gone into hiding after several employees of Group 1520 agreed to testify against him in the Russian investigation.
Mr. Markelov is believed to be among those co-operating with that investigation. Rosbalt reported that Mr. Markelov told the investigators that employees of Group 1520 transferred US$150,000 a month to Interior Ministry official Dmitry Zakharchenko, and also gave "assistance” – in the form of cash and real estate – to other government officials, including some "of the highest rank.”
Mr. Zakharchenko, who faces multiple charges of corruption, was found with US$120-million in cash in his apartment when he was arrested in 2016. The money – along with Mr. Zakharchenko’s cars and real estate – has been seized and placed in government coffers.
Mr. Obodovskiy and Mr. Usherovich are both believed to be outside Russia. They are expected to be charged in absentia.
Armed police from the Moscow Region Customs Office have visited Bombardier’s Moscow office at least twice in the past year. The general-director of its Russian subsidiary, Bombardier Transportation (Signal) – which 2017 documents show was partly owned by directors of Group 1520 – has been repeatedly summoned for questioning. It is not known whether the police visits to Bombardier are connected to the investigation into Group 1520.
The presence of a Group 1520 affiliate, Multiserv Overseas Ltd., on a project to install Bombardier’s EBI Lock-950 rail-signalling equipment in Azerbaijan is the focus of the ongoing police investigation in Sweden (due to the involvement of the Stockholm-based Bombardier Transportation Sweden), and a separate audit by the World Bank, which supplied the bulk of the project’s funding.
Multiserv Overseas appears to have made a massive profit within the Azerbaijan deal by buying the EBI Lock-950s at US$20-million from Bombardier Transportation Sweden, and selling them to Bombardier’s local partner at US$104-million.
Multiserv Overseas was the focus of a Globe and Mail investigation in 2016 that found that while the company had no apparent business purpose, it was listed as the "shipper” on more than 100 other transactions involving the sale of EBI Lock-950s into Russia and other parts of the former Soviet Union.
Company records show that Multiserv Overseas – which is headquartered in the United Kingdom, but is managed from Cyprus and has a shifting ownership structure involving other shell companies in Panama, Belize and the Seychelles – was founded by Mr. Obodovskiy. Evidence presented in Sweden shows that Bombardier executives believed the beneficial owner of the company was Mr. Krapivin.
The legal document shows that Mr. Krapivin, Mr. Markelov and Mr. Usherovich – along with a fourth person, Anastasia Kopacheva – together controlled a company, Zheldoravtomatizatsia, that was the third, unpublicized partner in Bombardier Transportation (Signal), a joint venture between Bombardier and Russian Railways that was created in 1996. As of last year, Zheldoravtomatizatsia owned 4 per cent of Bombardier Transportation (Signal).
Separately, Mr. Krapivin and Mr. Obodovskiy controlled 74 per cent of BT Signaling BV, an Amersterdam-registered company that was 26-per-cent owned by the UK-based Bombardier Transportation (Global Holding). BT Signaling BV was the partner of Russian Railways in a joint venture called Elteza, which frequently imported the EBI Lock-950s via Multiserv Overseas.
Earlier this year, Mr. Saint-Pol said that Elteza was no longer a subsidy of Bombardier.