How Barracks King Schukin Privatized a Closed City.
Nuclear Physics Against the 'Chemistry' of the Entrepreneurial Mayor
Moscow LITERATURNAYA GAZETA, 7 Aug 96 No 32, p 13
by Valeriy Pischulin
Snezhinsk-Moscow--Even the largest scale map of this part of Chelyabinsk Oblast which covers the slopes of the Southern Ural mountains shows this area in green with splashes of lakes colored in blue. Although I believe I will not be disclosing any state secrets if I tell our readers what is known to the whole world...
For example, the city called Chelyabinsk-40? And the Mayak Factory? Yes, one of the most horrible tragedies of the nuclear century occurred here in 1957, which has become known to us after almost 40 years. In the meantime, throughout these years the special comrades have been on duty in those villages and settlements covered by a tail of poisonous discharge with the only task of preventing the locals from venturing into the woods for mushrooms and wild berries... But, perhaps, only people with suicidal tendencies would try to fish in the Techa River, which is said to hold three times as much heavy radioactive agents as three Chernobyls!
The peaceful-looking Techa River crosses the Chelyabinsk- Yekaterinburg highway, which is frequently used by buses, old Moskvich cars, and impressive foreign automobiles. After we opened whole areas along with certain closed ports as a result of a voluntary striptease in front of the world community, this area was frequented by visitors from the other side of the Ural mountains. Some of them had the honorable mission of researching the consequences for the environment and local residents of the old accident at the factory, while others...
If you take a turn off the busy highway, the road will sooner or later lead to a control post. For example, there are several posts around the city of Snezhinsk. Because it is not really a city, but rather a large wooded area with glades and lakes which are enclosed by a plowed strip which is slightly smaller than Moscow beltway in perimeter--80 kilometers!
During the "good old days," the residents of Snezhinsk along with a dozen more closed Russian cities were known as "people with chocolate." Probably because in the times of general shortages, the local stores were full of produce similar to capital stores these days. The only difference is that the scientists and first-rate experts ("post box" closed cities had a much higher per capita number of academicians) earned salaries worth their contribution and related risks (again, such cities had the "youngest" cemeteries in the country, with the average age of the deceased being 35).
The following are typical episodes that occurred this summer. Before work the head of a design bureau visits one of his specialists responsible for precision operation of nuclear munitions assembly to check if his hands are shaking this morning...
A world-famous scientist who developed a unique specialty, for which he was offered tonnes of money in the West, heads for the bus carrying a chopper to dig up potatoes on his field of six-hundredths... By the way, a few words about transportation in Snezhinsk.
The number of city commuter buses has not increased in the past five years. Old "luxury" items are coming in handy these days--every family in Snezhinsk used to own a personal car. These cars are still parked in the evenings along clean streets--old Zaporozhets, Moskviches, and Zhigulis. It is practically impossible to steal a car and drive it out of the fenced-in area, therefore car owners feel safe. Although, there are only few foreign cars in this city of 50,000 people. A number of powerful Fords stand out, purchased for $250,000 in place of the commuter buses promised by Vladimir Fedorovich Schukin, mayor of Snezhinsk. Now he is the former mayor.
History teaches us not to underestimate one man's role in the fate of nations.
A history teacher played a role in the history of Snezhinsk which can hardly be overestimated.
Following the well-known events of 1991, nobody was surprised that in the fall a man with a completely nontechnical background was chosen to manage the quite complicated municipal economy. The former history teacher at a specialized school in Nizhnyy Tagil and a political economy professor at a local branch of the Moscow Institute of Engineering and Physics was first and foremost known as a people's deputy at the Snezhinsk City and Chelyabinsk Oblast Councils who delivered impressive speeches at all sessions. "Okay, you can do it if you really try," local residents said, and adopted a wait-and-see position. They did not have to wait long. The new mayor actively started to participate in the declared privatization process and first of all managed to destroy the city supply system, which had been formed over decades. Finally at the steering wheel (curiously, this is precisely how Mr. Schukin views himself: "Captain at the bridge, the ship is on course.") he decided to fulfill a long-time plan to completely change the basis of existence of this city of nuclear scientists. An old feud between "physicists and liberal arts folks" was easily resolved: "The institute should be closed and idle scientists should be sent to trade in the market!"
The following is one of the mathematical paradoxes of our twisted reality: the director of the Federal Nuclear Center- -All-Union Scientific Research Institute of Technical Physics--V.Z. Nechay, purposely never communicated with Schukin directly during his "reign"--What else can he do?-- but only through his assistants. The question of which came first remains--the chicken or the egg, the nuclear center or the satellite city?
Although, because the Russian Federal Nuclear Center-- All- Union Scientific Research Institute of Technical Physics is under Moscow's direct supervision, Schukin could not "crack this nut" and had to implement a different approach. There were attempts to issue stock and sell the most important units of the city's fuel and energy supply system and municipal and other services to his close associates. For him, being at the helm and gradually cooling the discontent on the part of the "eggheads" (we should not forget the severe winters in Snezhinsk!), it proved to be easy to manipulate them. Residents of the city behind barbed wire used to call their mayor "the Barracks King"... During his "reign" Schukin gave birth to more than 700 decrees and directives and single-handedly managed city funds and people's fates. The following is one example of the mayor's most popular epistolary genre: "Due to a temporary halt in financing of budget area workers' compensation in July 1995... R26 million should be credited to the city administration"... That is how funds were mishandled while the families of nuclear scientists waited for three or four months to get paid. Education, health care, and culture received only minuscule financing during the Schukin administration's term in Snezhinsk. For example, according to the last year's budget, only R7.6 million was allocated for the Central Medical Sanitary Unit, while an even smaller amount--R2.7 million--was actually received...
At the same time, the mayor could easily forgive the debts for paying penalties owed by commercial organizations to the city budget in the amount of R78 million. Or help his relatives by granting a deferment in paying back a R65 million credit by the Evroles limited liability partnership (TOO) which employs one of his children! The TOO, by the way, was engaged in cutting down trees to broaden roadways within the zone and shipped a trainload of first-class construction timber to Turkey disguised as third-rate poles. The timber was cut down meticulously, European style. However, it is still hard for two buses to pass on the roads- -the asphalt was laid without a cushion... It is hard not to argue with the classical: Bad roads are built in Russia not by fools!
It is possible to tell long stories about Gleb Schukin, whose father on numerous occasions freed him from the militia by breaking down doors and threatening to demote everybody. Here is just one almost fairy tale story... Schukin allocated a substantial amount of money--almost half a billion rubles--to purchase New Year's gifts for the children of city administration officials! As you well know, any Russian candy factory will pray for the Snezhinsk Santa Claus for a whole year... But true heroes always find an alternative way (to bypass the law). The Snow-Maiden (the mayor's daughter-in-law) and the trusted Page (the mayor's son) were set to travel afar (to the warm shores of the Mediterranean Sea!), from where they brought back for each child of Snezhinsk a pound of cheap (and, as it turned out, completely unhealthy to consume) Turkish candy, whose price had been raised way too high. Naturally, the profit was divided equally between the "sweet couple"...
That was just one example of the incredible metamorphosis that occurred with the city budget during the reign of the Snezhinsk wizard.
The following is an exert from commission hearings on implementation of the Snezhinsk radiological survey program (it is obvious how important this program is for the city of nuclear scientists!):
"Executive Director N. Schur: According to the Board decision of August 1995, R59 million was provided by the city administration to finance the first stage of the program. Where is this money?
"Schukin: Nikolay Aleksandrovich, do not bring up the issue of this money, it has already been spent. "Schur: But our accounting office cannot write off this money, which has been spent on something we have no idea about.
"Schukin: You should figure out how to write it off, this is a task for your accountant!"
The city administration's neglect in meeting the requirements of public opinion as well as normal behavior and the law was impudent and blunt. The mayor used to drink excessively and could "disappear" for several days. He liked to go on business trips with his "most trusted" associate O. Kholmov, where he would completely lose his hypocritical disguise (according to a bill dated 20 January 1995, R1 million was paid for a broken mirror and a burned pillow at the Slavyanskaya hotel). To put it mildly, the mayor's unorthodox sexual orientation was no secret to anybody in the city... The red administration building was called the "blue house" (in reference to homosexuals).
The "Barracks King" thought he was above the law to the extent that he used to call the local taxation agency a "taxation infection"... He also ignored the tax police until it was headed last year by Major Gennadiy Odintsov, who had an extensive background in special forces. "He is a very brave man who managed to destroy this snake pit!" said Andrey Vladimirovich Oplanchuk, the new head of the city administration. It took several months for the whole department to accomplish this task. Evidence for the file code named "Gang" was collected thoroughly and scrupulously. The investigation faced the problem created by the fact that- -and credit should be given to his knowledge of political economy--the mayor collected illegal profits using other people through dummy companies and proxies. Small fish were caught while the predator went free. Although, Schukin was first caught by law enforcement back in December: "Insurance compensation" to 12 city administration officials by the ASKO company, which received R60 million from the city budget, was the reason for opening his case. Every month these people received unsubstantiated supplementary income equal to their monthly salaries for alleged traumas and broken bones. Although it was clear to everybody that even such illegal income could not explain a recent extreme surge in the standard of living of the former history teacher's family. For instance, the mayor's wife used to shamelessly wear one mink coat in the morning and another more expensive one in the afternoon. We should not even mention the number of jewelry pieces on her hand... She used to say about her husband: "He is a man with a delicate soul!"
According to a warrant issued on 20 May of this year by the deputy city prosecutor, Leonid Bolshakov, an investigative operations unit, which included Major Odintsov of the tax police, the "delicate soul" was finally arrested and then transferred to a holding cell. Prior to this, he was fired from his job by Chelyabinsk Oblast Governor V.P. Solovyev. Shortly before his arrest, Schukin gave an interview to the local newspaper OKNO which was prophetically titled "It is likely I will be arrested under some pretext..." in which he openly declared: "Obviously, I am ready to leave Snezhinsk, I have no significant ties to this place. I only need to swap apartments. Although I will leave the work I started, and I have a moral obligation to stand by my colleagues who are in trouble. (He was referring to N. Gromov, director of the Real Estate Privatization Center, and V. Melnikov, chairman of the Social Security Fund). The "work" he left behind deserves a special discussion.
The Nonbudget Fund for Enterprise Support and Development (VF PRP) was created according to Decree No. 321 dated 9 June 1994 issued by the head of the city administration. This initiative had the honorable goal of "providing decentralized financing for enterprise and business development designed to meet city needs and requirements." Article 66 of the Russian Federation Law "On Local Self- Government in the Russian Federation" and the President's Decree "On Reform of Self-Government in the Russian Federation" were used as the legal basis for the fund's development.
It was flawless from a legal point of view. But arbitrariness was carried out in Snezhinsk rather than self- government.
The board headed by Schukin, its chairman, managed the fund's finances. During the years of operation, R720 million personally authorized by Schukin were transferred to the fund from the city budget; bank transfers were marked as "financing of enterprise development." Financing was carried out in an unorthodox fashion: The money in form of credits was allocated to various commercial entities under humorous conditions--10-30 percent annual interest rates! Moreover, the "businessmen" were not asked to provide any documentation to justify their intentions to serve the city's needs.
In one year, again according to the Mayor's Decree No. 643 dated 9 August 1995, the Nonbudget Fund for Enterprise Support and Development was reorganized as a Municipal Fund for Business Support and Development, which received special status as a legal entity with capitalization valued at R1 billion. The members of the board were not changed due to the change in organizational structure; the only change resulted in the elimination of the Advisory Council and establishment of the position of executive director, which was soon filled by O. Kholmov. The practice of providing "support" to businesses based on the "you scratch my back, I'll scratch yours" policy has not changed either. For example, during 1994 the Nonbudget Fund for Enterprise Support and Development transferred R228 million to the TOO Orlan for the development of a new Center of Innovative Industry. The center does not exist and the loan has not been paid off. A total of R3 billion was provided in credits from the city budget in 1994-95, while only R65 million was paid back.
But Schukin's role in the city is to keep residents on the alert. The mayor's next venture had even greater consequences for the federal budget.
The city of Snezhinsk, along with its colleague Arzamas- 16, belongs to a group of 10 Closed Administrative Territorial Entities (ZATO) which are subject to their own special rules. Schukin and his friends decided to use this legal loophole when they created a "favored economic conditions zone" in their fenced-in city. Again, at least on paper, they had honorable intentions: "To increase production effectiveness and quality of manufactured goods, carry out the most important tasks related to enhanced funding of the Snezhinsk social-economic development program, and provide the most important services to the population."
However, there were only a few enterprises in Snezhinsk, and therefore they decided to attract businesses from around the country. Two municipal enterprises, Kartel (Director O. Kholmov) and Register (A. Drugov), divided the country in half, and... No, money has not started pouring in from both sides of the Urals. But the number of enterprises registered in Snezhinsk has skyrocketed. There were specific reasons for this! The next decree issued by Schukin on 19 July 1995 "On Taxation Agreements" stipulated a decrease in tariffs (on average up to 50 percent) for as many as 45 enterprises, the majority of which operated outside the city. As a result, by the end of the year the federal and oblast budgets were missing R9.2 billion or 28 percent of projected revenues.
It still remains a secret exactly how the out-of-town investors influenced the socioeconomic development of Snezhinsk: The first "dividends"--R5.3 billion--were collected by the city only from the firms which belonged to Register, and only by February after the mayor was fired. One can argue about the merits for the entire country of such experiments conducted in a specific fenced-in "zone," although the work has already begun and it is important who is managing this program. The head of Register, Aleksandr Drugov, who has already generated R27 billion for the city budget, is promising to increase the amount to R60-80 billion by the end of this year; he is trying to obtain the Russian Government's approval to use the Snezhinsk know-how in at least two closed cities-- Snezhinsk and Arzamas, where there is a lack of local production capabilities. He is supported by current head of administration Oplanchuk, who views a renewed economic zone as an additional source of revenue. By the way, Anatoliy Vladimirovich rightfully suggests that the status of closed city mayors should be elevated to that of the president's representatives with a direct relationship with Moscow in order to avoid future incidents similar to the one with Schukin. His predecessor, who was caught embezzling, personified the unshakable power of corrupt local authorities.
...To put it mildly, as far as his apartment swap is concerned, Schukin did not tell the whole truth. According to investigation reports, the "gang" has acquired through proxies several apartments in Chelyabinsk, Yekaterinburg, and Obninsk. The last venture--the construction of four apartments in the near suburbs of Moscow--has been terminated by the Snezhinsk tax police. Gennadiy Odintsov and Inga Shmakova even had to travel to the capital in order to cut off one tentacle of the Snezhinsk octopus. Last October Moscow resident A. Semenov received a forged power of attorney from the fund's executive director, S. Drokin (who simultaneously served as director of the Natalga and KASKO closed-type joint-stock companies). Semenov made a second official seal, opened accounts in three Moscow banks, and started to "channel" Snezhinsk taxpayers' money. Some R2.5 billion worth of state short- term obligations (GKO) was purchased at the National Space Bank commercial bank (KB), while over R3 billion was deposited at the Karina Bank, and R1.3 billion was allocated by the "gang" for the construction of apartments in the Moscow suburbs. Soon, we hope, they will "swap" those apartments for public housing provided by our prison system... Although it is too early to rest content. The trial of Schukin and his "gang" has yet to take place.
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