At the foot of the Ural Mountains stands a symbol of how even the best intentions in Russia can enable well-connected individuals to bleed money from the state. It’s a modern hospital built in this industrial city of a million people, and intended to be a flagship of a grand project to improve the country’s healthcare.
The hospital’s chain-smoking director, Sergei Sukhanov, loves his new facility, the Federal Centre for Cardiovascular Surgery, which has beds for 167 patients. He also admires Russian President Vladimir Putin, who championed the hospital and whose letter of thanks to the surgeon adorns his office.
“It’s a huge gift to the Perm region,” said Sukhanov in his new white office. “It’s like we’ve moved from a one-bedroom apartment to a five-bedroom apartment.”
But a Reuters investigation shows the hospital, and a $1 billion construction project of which it was part, were also business opportunities for Putin’s allies. While it isn’t clear whether they managed to turn a profit, their involvement cost Russian taxpayers dearly.
A previous article detailed how two associates of Putin profited from selling high-tech medical equipment to the Russian state and sent money to Swiss bank accounts linked to the building of a lavish estate near the Black Sea.
Those two men, Nikolai Shamalov and Dmitry Gorelov, also had stakes in two companies that received contracts to build a series of hospitals around Russia. The undertaking later led to accusations of “unjust enrichment” against one of the companies. That company ended up going bust, owing around 860 million roubles ($26 million) to the state. Hundreds of people lost their jobs.
Corporate records show there was another major investor in the two building companies: Rosinvest, a Russian investment firm owned by offshore entities.
In 2010 Sergei Kolesnikov, a businessman who used to work with the two Putin associates, went public with a claim that Rosinvest was ultimately controlled by the Russian leader himself. The role of Rosinvest in Putin's $1 billion health project, however, hasn't been previously reported.
Kolesnikov says that Putin owned an offshore entity called Lirus Investment Holding, which had ultimate control of Rosinvest. He told Reuters that he knew this because he
“participated in the creation” of Lirus. Lirus was a Liechtenstein company that, he said, was owned through bearer shares - securities that don’t record the name of the owner.
Putin owned 94 percent of the company, Kolesnikov said, while he, Shamalov and Gorelov owned 2 percent each. Kolesnikov said he was informed by both Gorelov and Shamalov that they had given Putin his bearer shares and that Putin had placed these in a safe. “The situation was specially done in such a way that nowhere would be anyone’s signatures,” Kolesnikov said.
Kolesnikov said he helped to manage a portfolio of investments through Rosinvest on behalf of Shamalov, Gorelov and himself. But the prime beneficiary, he said, was Putin. Kolesnikov said he delivered reports about the investments to Shamalov, and that Shamalov presented them to Putin.
Putin’s ownership role in the project couldn’t be confirmed. The Kremlin did not respond to Reuters questions about Rosinvest, which was liquidated in 2012. In the past, Putin’s spokesman, Dmitry Peskov, has firmly denied any connection between Putin and Rosinvest.
Shamalov and Gorelov did not respond to requests for comment on Kolesnikov’s account.
This series examines Russian capitalism in the Putin era. A complex system of reward and obligation has operated among the elite since Putin gained power in 2000, with associates of the president tapping into the flow of funds from state coffers. In addition to breeding corruption, this system carries another cost: bungling and waste.
The project to create the string of hospitals wound up costing about $700 million more than Putin called for and delivered two fewer hospitals than planned. A state agency involved in steering the project went under, leaving behind debts of $300 million.
The hospital money would have been better spent on simple outpatient healthcare than on high-tech facilities, some Russian healthcare specialists said. Despite a large number of state-run hospitals and an army of doctors, many Russians only get access to the healthcare they need by paying private clinics or bribing state doctors.
Overall, Russians have seen only limited advances in the nation's medical care. Public-sector health spending in Russia remains low compared with the United Kingdom and other countries with government-financed healthcare: It equalled 3.7 percent of economic output in 2011, according to the World Bank. UK public spending on health was 7.7 percent of economic output that year.
In the case of Putin’s hospital scheme, say some specialists, Russian taxpayers overpaid for trophy structures that don’t address the underlying causes of the nation’s health crisis.
“These projects are just about PR,” said Kirill Danishevsky, a doctor and professor at Moscow’s Higher School of Economics specialising in healthcare. “Russia didn’t need new hospitals, and we certainly didn’t need the number of scanners they bought. What Russia needs is primary healthcare.”
Source: Reuters
The hospital’s chain-smoking director, Sergei Sukhanov, loves his new facility, the Federal Centre for Cardiovascular Surgery, which has beds for 167 patients. He also admires Russian President Vladimir Putin, who championed the hospital and whose letter of thanks to the surgeon adorns his office.
“It’s a huge gift to the Perm region,” said Sukhanov in his new white office. “It’s like we’ve moved from a one-bedroom apartment to a five-bedroom apartment.”
But a Reuters investigation shows the hospital, and a $1 billion construction project of which it was part, were also business opportunities for Putin’s allies. While it isn’t clear whether they managed to turn a profit, their involvement cost Russian taxpayers dearly.
A previous article detailed how two associates of Putin profited from selling high-tech medical equipment to the Russian state and sent money to Swiss bank accounts linked to the building of a lavish estate near the Black Sea.
Those two men, Nikolai Shamalov and Dmitry Gorelov, also had stakes in two companies that received contracts to build a series of hospitals around Russia. The undertaking later led to accusations of “unjust enrichment” against one of the companies. That company ended up going bust, owing around 860 million roubles ($26 million) to the state. Hundreds of people lost their jobs.
Corporate records show there was another major investor in the two building companies: Rosinvest, a Russian investment firm owned by offshore entities.
In 2010 Sergei Kolesnikov, a businessman who used to work with the two Putin associates, went public with a claim that Rosinvest was ultimately controlled by the Russian leader himself. The role of Rosinvest in Putin's $1 billion health project, however, hasn't been previously reported.
Kolesnikov says that Putin owned an offshore entity called Lirus Investment Holding, which had ultimate control of Rosinvest. He told Reuters that he knew this because he
“participated in the creation” of Lirus. Lirus was a Liechtenstein company that, he said, was owned through bearer shares - securities that don’t record the name of the owner.
Putin owned 94 percent of the company, Kolesnikov said, while he, Shamalov and Gorelov owned 2 percent each. Kolesnikov said he was informed by both Gorelov and Shamalov that they had given Putin his bearer shares and that Putin had placed these in a safe. “The situation was specially done in such a way that nowhere would be anyone’s signatures,” Kolesnikov said.
Kolesnikov said he helped to manage a portfolio of investments through Rosinvest on behalf of Shamalov, Gorelov and himself. But the prime beneficiary, he said, was Putin. Kolesnikov said he delivered reports about the investments to Shamalov, and that Shamalov presented them to Putin.
Putin’s ownership role in the project couldn’t be confirmed. The Kremlin did not respond to Reuters questions about Rosinvest, which was liquidated in 2012. In the past, Putin’s spokesman, Dmitry Peskov, has firmly denied any connection between Putin and Rosinvest.
Shamalov and Gorelov did not respond to requests for comment on Kolesnikov’s account.
This series examines Russian capitalism in the Putin era. A complex system of reward and obligation has operated among the elite since Putin gained power in 2000, with associates of the president tapping into the flow of funds from state coffers. In addition to breeding corruption, this system carries another cost: bungling and waste.
The project to create the string of hospitals wound up costing about $700 million more than Putin called for and delivered two fewer hospitals than planned. A state agency involved in steering the project went under, leaving behind debts of $300 million.
The hospital money would have been better spent on simple outpatient healthcare than on high-tech facilities, some Russian healthcare specialists said. Despite a large number of state-run hospitals and an army of doctors, many Russians only get access to the healthcare they need by paying private clinics or bribing state doctors.
Overall, Russians have seen only limited advances in the nation's medical care. Public-sector health spending in Russia remains low compared with the United Kingdom and other countries with government-financed healthcare: It equalled 3.7 percent of economic output in 2011, according to the World Bank. UK public spending on health was 7.7 percent of economic output that year.
In the case of Putin’s hospital scheme, say some specialists, Russian taxpayers overpaid for trophy structures that don’t address the underlying causes of the nation’s health crisis.
“These projects are just about PR,” said Kirill Danishevsky, a doctor and professor at Moscow’s Higher School of Economics specialising in healthcare. “Russia didn’t need new hospitals, and we certainly didn’t need the number of scanners they bought. What Russia needs is primary healthcare.”
Source: Reuters
