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Incorrigible or Incorruptible in Ilim Brawl?

At long last someone in this country has been uncovered trying to bribe a high-ranking bureaucrat. The person in question is Zakhar Smushkin, owner of pulp and paper conglomerate Ilim Pulp.

The incorruptible official's name is Igor Kostikov, head of the Federal Securities Commission.

In a nutshell, Smushkin's Ilim Pulp has been waging a war to the death with Oleg Deripaska's Base Element since last winter. Many battles have already been fought, the most recent of which being a struggle for control of Kotlass Paper and Pulp Plant in the Arkhangelsk region. Kotlass is part of the Ilim Pulp group, and the shareholder register until recently was held by PTsRK (St. Petersburg Central Registration Company), controlled by Smushkin's erstwhile partner, St. Petersburg banker Vladimir Kogan.

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In 1998, Kogan's Promstroibank owned 38 percent of Ilim Pulp. Smushkin says he bought out the banker's stake with his full consent and at the price he asked for. Smushkin's foes say Kogan was squeezed out of the business on the cheap.

Then, one fine day, Smushkin discovered that in the no-holds-barred hunt for forestry assets initiated by Deripaska and Co., Kogan was playing on Deripaska's side. To discover that your registrar is on the enemy's side is tantamount to learning on the eve of an enemy invasion that your frontier fortresses are controlled by turncoats. Smushkin sought to replace the commanders posthaste, but was too late.

Unbeknownst to Ilim Pulp, two lawsuits brought in Kemerovo courts by two minority shareholders resulted in the arrest and sale of a 36 percent stake and then a 25 percent stake in Kotlass. In principle, PTsRK was not obliged to carry out the dubious order to confiscate the shares, but, as mentioned above, the registrar was not batting for Smushkin's side. The shares were confiscated without informing Ilim Pulp and sold at auction (also unbeknownst to Ilim Pulp) to companies acting in the interests of Deripaska and Kogan. The buyers claim that their actions are in keeping with that of a bona fide purchaser. However, in this country the concept of bona fide purchaser differs little from that of a fence.

The registrar's actions did not in the least perplex Kostikov; however, he did proceed to strip the Energoregistrator company -- to which Smushkin had transferred the shareholder register -- of its license.

After this, Kostikov declared at a press conference that Ilim Pulp had tried to bribe the FSC.

In this forestry war there are no innocent and guilty parties. To censure Deripaska is the same as saying Alexander the Great should not have invaded Persia. War has a logic of its own: It doesn't matter who has right on his side, but who prevails.

The problem is that in this war, state officials are being used as ammunition. And while Deripaska evokes certain associations with Alexander the Great of a more favorable nature, Kostikov resembles a talking catapult.

Kostikov is, of course, a well-known pauper. Having become FSC head, he not only sold his controlling stake in the St. Petersburg firm AVK to some completely unknown off-shore companies for peanuts, but even after the sale he continued to be very well-disposed toward it. For example, word has it that the best way of registering a share issue is to hire AVK as your consultant. Furthermore, Ilim Pulp suspects that the St. Petersburg firm Fourth Dimension, which on behalf of the northwestern division of the State Property Fund organized the auction to sell 61 percent of the shares in the Kotlass plant, is also pretty close to Kostikov.

In other words, Kostikov's complaint that his FSC was the victim of a bribery attempt is akin to the owner of a strip club saying some of his girls have been approached with indecent proposals.

And the federal official would do well to bear in mind that the respect the aggressive young oligarch Deripaska has earned does not extend to the expendable materials used by him.

Yulia Latynina is an journalist with ORT.

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