After months of inaction, Russia opens inquiry into Mercedes bribery case

By Will Englund
Washington Post Foreign Service
Friday, November 12, 2010; 9:15 PM

MOSCOW - U.S. prosecutors said Daimler, the maker of Mercedes-Benz automobiles, had bribed officials in Russia and 21 other countries in order to make sales. Daimler agreed, and pleaded guilty in a U.S. court in April, arranging to pay $185 million in fines. So, why, wondered Russians, was there so much silence from prosecutors? If Daimler paid the bribes, surely there had to have been officials on this end who took them.

The U.S. criminal complaint - to which Daimler's Russian subsidiary assented - even helpfully steered anyone who might be looking into this case toward the Ministry of Internal Affairs and the City of Moscow. About $4 million to $7 million went to ensure that Mercedes got its contracts from those two entities, the court record said. Smaller bribes went to other agencies, it said, including the Defense Ministry.

Some of the graft went through third parties. Some of it went directly. Only the names were kept out of the public filing.

Soon after the guilty plea, Russian prosecutors asked to see some of the U.S. evidence. And then nothing more was heard of the case, officially.

"The Daimler case. Everybody knows about it," a crusading anti-corruption blogger named Alexei Navalny told a Capitol Hill hearing by the U.S. Helsinki Commission Tuesday. "There was no investigation at all in Russia."

Not so, the prosecutor's office said Friday. A criminal investigation has been launched. The "abuse of trust" will be dealt with. The Interfax news agency quoted a source in the office as saying that the inquiries are being conducted under the "direct instructions" of President Dmitry Medvedev.

"This is a very serious event," Yuli Nisnevich, chief researcher at the Moscow office of Transparency International, said Friday. "We have been waiting for some logical reaction for a long time. . . .The silence was very confusing."

But Friday's announcement leads to further confusion, or bafflement. What's behind it is difficult to guess, Nisnevich said. "Chaotic processes," he said, are afoot. "Our system of management and control is losing its control."

So this may be "an attempt on the part of the country's leadership to rehabilitate itself in the eyes of the country."

If so, this would give ammunition to those who think that Medvedev is engineering a careful turn away from the blatantly arrogant exercise of power that has marked the era of Prime Minister Vladimir Putin. Thus, demonstrators were allowed to gather in support of the right of free assembly on Oct. 31; thus, the bitterly contested highway through the Khimki forest was halted; thus, an inquiry was reopened this week into the near-fatal beating of a Khimki newspaper editor.

On the other hand, Nisnevich said, this could have a lot to do with the recent firing of Moscow Mayor Yuri Luzhkov. The Kremlin might find it convenient to unearth criminal evidence against him or his aides.

The goal is not to clean up Moscow, Navalny said in his Washington appearance this week. "This operation to replace Mr. Luzhkov is just an operation to connect the federal corrupt practices and Moscow corrupt practices, because Moscow is a very big and very tasty piece of money."

If the investigation is limited to the bribery at city hall, while overlooking the Interior Ministry and other departments, Nisnevich said Friday, "it would be confirmation that there is this caste of immune officials here."

As far as public opinion is concerned, he predicted, half a loaf would be better than none. "Our public wants an official's blood, no matter what kind of official."

Polls show that Russians think corruption has increased exponentially over the past decade, and it is one of their biggest concerns. Navalny said there are people within the upper echelons of power in Russian business who realize that transparency and playing by the rules can be more profitable. At the same time, he urged the U.S. to step up prosecutions under the Foreign Corrupt Practices Act - the law that snared Daimler.

Announcing the Daimler probe is a first step. Many other cases never got that far: No prosecutor has investigated members of parliament with modest declared incomes and outlandish villas abroad, nor has there been an inquiry into the death in prison of Sergei Magnitsky, whose offense was that he was willing to testify against government officials in a tax fraud case. (Magnitsky, who died in November 2009, was honored Friday in Bangkok with an "integrity award" from Transparency International.)

But experience has shown that promises of criminal probes tend to peter out, especially where political interests are involved. "We hope this will be a real investigation," Nisnevich said, "and not an imitation of an investigation."

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