Taking over Nizhpharm was an adventure in Russia's brand of wild capitalism. Andrei Mladentsev, who got control of the 75-year-old pharmaceutical manufacturer when he was just 26, had to master the arts of bluff and bravado to pull off the deal.

Nizhpharm was privatized in 1994 by local government decree. Fifty-one percent of its shares were offered for sale to the employees, who were invited to bid for as many shares as they wanted to buy.

Mladentsev and two partners saw this as an opening. They backed 30 employees friendly to their effort to take over the company. These 30 each bid to buy all the shares that were being sold. Under the rules, shares were to be distributed to employees in proportion to the number they had offered to buy. These 30 therefore got to buy the most. All together, they purchased 60 percent of the shares being sold to employees, or 30 percent of the company. And the price was right--"about the cost of a two-room apartment," Mladentsev said, or $10,000.

The existing management, which opposed Mladentsev, and the government authorities running the privatization realized they had been outfoxed, Mladentsev recounted. They found a pretext for annulling the sale and then rewrote the rules. The second time, they simply allocated the same small number of shares to every employee of the firm.

The next stage of privatization called for the auction of about 30 percent of the company's shares for "vouchers," the certificates the Russian government issued to every citizen to enable them to participate in the privatization of the country's factories, enterprises and retail stores.

Mladentsev and his partners had bought a great many vouchers in the open market and were able to acquire 24 percent of Nizhpharm's stock at the auction. The existing management of the company bought 6 percent.

Mladentsev was now the largest stockholder in the company. He called for a meeting of all stockholders at the end of December 1994 to try to oust the old management. When he did this, officials of the local government--still run by the reformist governor of the region, Boris Nemtsov--warned Mladentsev that his gambit would not succeed.

"We know you're acting legally," one official told Mladentsev, "but you won't get anything out of it." Why not? Because, he was told, he would never get his hands on the official company stamp that would have to appear on any document authorizing a change in management. "The old management can refuse to give the stamp to you," an official told him.

Facing this official hostility and the opposition of the entrenched management, Mladentsev offered a deal. A meeting of shareholders would be held on Jan. 28, 1995. A vote that day would resolve the question of who would run the company. When he made this suggestion, he and his allies owned 24 percent of the company's stock, the existing management owned 6 percent and the employees held 51 percent. The remaining 19 percent was held by the local government's privatization commission. Whoever won the election, the old managers agreed, would get the company stamp.

When he made this deal, Mladentsev recounted, he didn't know that the management and the government commission had secretly agreed to sell about 14 percent of the company, then held by the commission, at an auction shortly before the Jan. 28 meeting. The management hoped to buy these shares, adding them to its previously acquired 6 percent and at least 31 percent of the company held by employees.

Mladentsev had no cash available at the time--his enemies knew this, he said. But he didn't give up. When the 14 percent was offered for public auction, friends of his bid unexpectedly high prices for the stock. The old management could not match the bids. In fact, Mladentsev's friends had no intention of actually paying the high prices they had bid, but this would not become clear until they had to put up the cash to confirm their bids a few days after Jan. 28--after the important shareholder meeting.

Their bluff worked. The showdown meeting went ahead with the distribution of shares unchanged. The government commission decided it should not participate in the election.

"We ran an election campaign" to persuade the workers who held stock to support the insurgents. This included leaflets from Mladentsev outlining a five-point plan of action to make the company profitable and a good place to work. In large letters, the leaflet concluded:

"My fundamental position: legality, openness, honesty. Everything that I have today I earned through my own strength and persistent daily effort. Everything that we will have in the future we will earn together."

A clear majority of the workers voted their shares for Mladentsev. From that day forward, Nizhpharm effectively belonged to him.