Briefing :: Beyond Corporate Raiding: A Discussion of Advanced Fraud Schemes in the Russian Market

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BRIEFING



COMMISSION ON SECURITY & COOPERATION IN EUROPE:  U.S. HELSINKI COMMISSION

BEYOND CORPORATE RAIDING:  A DISCUSSION OF ADVANCED FRAUD SCHEMES IN THE 
RUSSIAN MARKET

WITNESS:
ALEXEI NAVALNY,
FOUNDER,
MINOR SHAREHOLDERS ASSOCIATION

THE HEARING WAS HELD AT 2:00 PM IN 1539 LONGWORTH HOUSE OFFICE BUILDING, 
WASHINGTON, D.C., KYLE PARKER, POLICY ADVISER, HELSINKI COMMISSION, MODERATING 

TUESDAY, NOVEMBER 9, 2010



KYLE PARKER:  I’d like to call the briefing to order.  Welcome everybody, on 
behalf of our chairman, Sen. Ben Cardin, to today’s briefing at the Helsinki 
Commission entitled, “Beyond Corporate Raiding:  A Discussion of Advanced Fraud 
Schemes in the Russian Market”.  We are very happy to have Alexei Navalny here 
as our featured panelist.

This is a public briefing.  It is being recorded and will be transcribed and 
result in an official government transcript, much like a hearing.  We are able 
to take public questions.  So please, while you listen to the presentations, be 
thinking of good questions that really – one of my favorite parts of a briefing 
is that we really can have almost an informal, focused, guided discussion.

Before we begin, I just wanted to mention a couple quick things about the 
commission.  We were founded in 1976 by an act of Congress, and our mandate is 
to monitor the implementation of the Helsinki Accords and subsequent 
commitments; and with particular focus on the third dimension, which is the 
human dimension.  

And one of the things that I’d like to start right out, just sort of to – as 
the basis for our work – one of the commitments, the 1991 Moscow concluding 
documents, states, “The participating states emphasize that issues relating to 
human rights, fundamental freedoms, democracy and the rule of law are of 
international concern.  As respect for these rights and freedoms constitutes 
one of the foundations of international order, they categorically and 
irrevocably declare that the commitments undertaken in the field of the human 
dimension of the CSCE are matters of direct and legitimate concern to all 
participating states, and do not belong exclusively to the internal affairs of 
the state concerned.”

So that’s sort of the framework and the basis in which we operate.  The topic 
of this briefing sort of grew out of a lot of our focus this year on rule of 
law, corruption, transparency, good governance issues – particularly in Russia. 
 And certainly, the past few weeks, there’s been no shortage of items in the 
news.  

I also just wanted to read into the record a couple quick statements on the 
issue of corruption in Russia from three Russian leaders, and the first is from 
President Yeltsin:  “I know that you have some doubt in our victory over 
corruption.  But I have resolve and political will, and your support in this 
fight.  I will fight this to the end.  People will be afraid to misappropriate 
public funds and take bribes.”  That was in 1997.

Something from Putin:  “I make this point now because despite all the efforts 
we have made, we have still not managed to remove one of the greatest obstacles 
facing our development – that of corruption.”  

And now, a couple words from President Medvedev:  “Corruption is the greatest 
enemy of a free and democratic society.”  And a little more at length here, in 
an address to the Federal Assembly in 2009 – President Medvedev again:  

“Personal success, encouragement of initiative, a better quality of public 
discussion and zero tolerance of corruption should become part of our national 
culture, an intrinsic part of who we are.  In Russia, we often say that there 
are a few cases in which corrupt officials are prosecuted.  

I want to cite a few figures:  In just six months of this year, we have 
received more than 4,500 cases of corruption, convicting 532 officials of 
government authorities and local self-government bodies, and more than 700 
law-enforcement officers.  

These figures unfortunately show the extent to which corruption has infected 
our society.  However, simply incarcerating a few will not resolve the problem. 
 But incarcerated they must be.  To successfully combat corruption, all spheres 
of government must become more transparent, including the activities of public 
authorities, courts and other judicial bodies.  We shall overcome 
underdevelopment and corruption because we are a strong and free people, and 
deserve a normal life in a modern, prosperous democratic society.”

I thought it might be helpful to put those out.  I know we’re quite familiar 
with statements of legal nihilism and other things, but to have some of that 
before us in a little bit more detail.  

Today’s briefing also features some testimony for the record from a couple 
people who unfortunately could not be with us today.  The first one is Yana 
Yakovleva, who is a Russian businesswoman.  And she had an experience of being 
arrested under false pretenses and spending, I think, the better part of a half 
of a year in jail; a phenomenon that’s unfortunately all too common in the 
Russian market.  And she now continues her work at her company; as well, splits 
her time with a new NGO called Business Solidarity.  

She has worked with Olga Romanova, who is the editor of Forbes Russia, which I 
might remind people is the publication that the late Paul Klebnikov worked for. 
 She worked with Yana to compile a list of cases that they are working on, and 
that’s been distributed out of the table and will be made part of the record.  

Olga’s husband is currently in jail, in one of these similar types of extortion 
schemes, and it has only recently been discovered what facility he was in.  For 
some time, she was not aware of his whereabouts or whether he was even alive.  
He is alive, and I believe he, with the help of some people on the outside, 
have started an award-winning blog called the “Butyrka blog”.  And Butyrka is 
an infamous Russian detention facility in Moscow.

So please do take a look at their submissions.  And I know Alexei is quite 
familiar with a number of the cases that are in those submissions, so should 
questions arise – we also have something for the record on the case of Fedor 
Mikheev.  Only last Thursday – first time in the public domain, again, a 
similar story of kidnapping, extortion, all manner of, all manner of, well, I 
don’t quite know what you’d call it. (Chuckles.)  I guess, these advanced fraud 
schemes.

And there is a submission, and it’s out there on the table.  Goes into a lot 
more detail than the Financial Times article did.  And one of the interesting 
things is, the people involved in this particular case – again, Fedor Mikheev 
is currently in jail – are almost, to a person, the same people who were 
involved in the fraud against Hermitage Capital Management and the death of 
attorney Sergei Magnitsky.  

I don’t want to delay us much more.  Oh, one last thing in the record.  I am 
happy to have permission to include an article by Thomas Firestone, who was our 
resident legal advisor at embassy in Moscow.  Tom may be joining us today, and 
certainly there is really nobody who knows this issue better in the U.S. 
government than Tom.  And so please, if you have a chance, his article “Armed 
Injustice” is on the table and will be included in the record.

With that, I would like to turn it over to our featured panelist, Alexei 
Navalny, whose bio is on the table.  Alexei was nominated, I believe, last 
year, as “man of the year” by Vedomasti.  And a little humorously, just shortly 
ago, was elected mayor of Moscow in a virtual election that took place online – 

ALEXEI NAVALNY:  Virtual one.  Virtual mayor.  

MR. PARKER:  A virtual one, yeah. (Chuckles.)  But what did you get, something 
– 35,000 votes or 55 thou?

MR. NAVALNY:  In percents, it was 75 percent.  

MR. PARKER:  Right, right.  And his leading contender was against all.  So 
Alexei sort of, in a sense represents a generation that has been locked out of 
politics and have taken to other means.  And Alexei has made extensive use of 
new media and other modern technologies to advance his message and has come all 
the way from New Haven to be with us today.  And with that, I would like to 
turn it over to Alexei.

MR. NAVALNY:  Thank you, Kyle, and thank you very much for this president’s 
votes.  It was funny.  It was theory.  And I’m going to talk about practice.

Thank you very much for having me here, and I would like to thank Sen. Cardin 
and Rep. Hastings for the opportunity to brief the U.S. Helsinki Commission on 
Russian efforts to battle corruption in Russian financial markets and on the 
implication of our efforts for American investors large and small.

I will also highlight the ways in which white-collar crimes leads to broader 
human-rights violations.  And finally, I will outline a few possible strategies 
for international cooperation that would resonate with our efforts.

Over the past 10 years in Russia, political changes have given government 
officials broad reach in power.  As a result, some of them have become involved 
in shady criminal business dealings, graft, fraud, embezzlement and money 
laundering.  It can be very difficult to track these white-collar crimes, to 
expose them and to address them.  Difficult, but not impossible, if one knows 
the lay of the land.

My law practice focuses on the shareholders’ rights.  We work within the 
corporate system by pressing management to maintain transparency, to respect 
the law and to abide international standards of accountability.  We use both 
traditional media and grassroots methods, especially blogs, to rally public 
interest in corruption.

My personal blog has about 50,000 readers daily and has proven very efficient 
and effective change.  In other cases, we alert minority shareholders about 
corruption and offer them free proxy advice.  We also apply legal pressure from 
outside of corporate system; specifically, we initiate formal investigation and 
file class-action suits in high-profile cases.  We also work as activists to 
foster systemic change.

I will now review a few salient example of corruption and the strategies we 
have been applying in dealing with them.  Because energy is a big business in 
Russia, I will focus on energy industry in choosing my examples.

First, let’s consider the misappropriation of funds dedicated to the 
construction of major natural gas pipeline.  Two pipelines – they look exactly 
the same.  One in Russia, one in Germany.  And actually, they are the same.  
They are both part of the one big pipeline.  But despite the relatively high 
cost of labor and metal ore in Germany, cost of the Russian part of pipeline is 
approximately three times the cost of German parts, mile for mile.  Why?

Because one, on the Russian project, money appears to have gone missing.  Look 
at this funny couple. (Laughter.)  They have – a construction company was 
engaged to build the Russian part of pipeline without even bidding.  This 
company belongs to Vladimir Putin former judo coach Arkady Rotenberg.  He and 
his brother were named the main constructors for Gazprom, the largest company 
in Russia.  

You can see the official data from the Gazprom reports.  These brothers became 
billionaires in short order.  And Gazprom is refusing to disclose any 
information how the Rotenbergs got the contract.  Actually, they get enough 
information – disclosure of information is a big change for the shareholders 
activists.

And Gazprom is not alone in hiding their dealing from public scrutiny.  This is 
a very short and visual example for work to disclose their information.  
Normally, within a year, company should produce a tall stack of minutes as VTB 
Bank does, whose minutes you can see on the left.

Gazprom, Russian biggest corporation, produced the meager center stack. And 
Sugutneftegaz:  very big company.  The third Russian oil company produced just 
a couple of – literally a couple of pieces of paper.  And they were really 
reluctant to give even these documents.  

I was the first shareholder for all history who succeeded to force them to 
produce these couple of pieces of paper.  And the content of this minutes 
indicate that board meet only a couple of hours throughout the entire year.  

Turning to another natural resource, I draw the commission’s attention to a 
case involving the petroleum trade.  Russia is the biggest oil exporter in the 
world.  We have five major oil companies, all publicly traded.  Four of them 
were forced to sell an undisclosed percentage of their oil through Gunvor.  

Gunvor is a small, privately held middle-man trading company based in 
Switzerland.  Gunvor trades more oil than any other single entity in the world. 
 As a minority shareholder I sent demand letters to all four companies seeking 
disclosure of how much oil they sell through Gunvor, under what conditions, at 
what prices and whether Gunvor received any preferential choice.  

All companies refused to give any information about their cooperation with 
Gunvor.  So I filed suit alleged on disclosure.  Finally, the judge held all 
Gunvor’s documents to be privileged and we can understand pretty well the real 
reason of this decision because the only one piece of information about Gunvor 
is well-known.  That one of the owners of this middle-man company is Gennady 
Timchenko, old friend and colleague of Vladimir Putin.  

His position allows him to skim a small percentage of the top of each of 
millions of barrels sold and all legally.  Very good business and he’s a 
billionaire as well.  Actually, it’s a very interesting Russian phenomenon why 
all friends of Vladimir Putin who wants to be in business they became 
billionaires so soon.  

My third example also comes from the world’s energy resources.  In Russia, a 
company called Trasneft has a monopoly on the transportation of oil.  According 
to the official records, Transeft not only a transportation monopoly but also 
the biggest charitable donor in Russia.  They give half-a-billion dollars in 
charity over to U.S.  Sounds good, indeed, but the problem is that no one knows 
who received the gifts.  

After exhausting considerable efforts we were able to locate just two 
recipients of these mysterious charities.  One of them is Kremlin Line 
Foundation (ph).  Kremlin Line was created by the former secret service 
officials and we have uncovered sufficient ground to allege that this so-called 
charity is just a fraud through which Transneft pays bribe to secret service – 
(inaudible) – when Transeft want to squelch an investigation.  

This strategy is works for them – works for them.  In our case we spent two 
years pressing the interior ministry to investigate this classified charity.  
After several months when the ministry had a deadline to announce the result of 
the investigation the representative came to the hearing and said, oops, we 
lost the file.  There is no case anymore.  

And of course it was a huge scandal, we sued them successfully and we forced 
them to start an investigation again.  A couple of weeks ago when another 
deadline came and they were supposed to announce the result of investigation 
the representative came to the hearing and said, sorry, we lost the file again. 
 Of course, this will set up a huge scandal so our work at least accomplished 
that.  

Transneft still operates in shadows and is still hiding the identity of the 
recipient of the so called charity.  But our litigation drew attention to the 
cover ups so the government was pressured into reinforcing our rules of 
transparency for Transneft.  The company has been forced to disclose their own 
incrimination – even more incrimination information about their work.  So we 
managed to use the system against the system to protect investors’ interests 
efficiently.  

I described just three, very typical, examples of the corruption among the 
dozens we are investigating.  So why does it matter for you?  Corruption in 
Russia effects share pricing for shareholders around the world which hurts 
corporate portfolios and the retirement funds of little American guy.  It also 
made a hit to your tax base and your economy because U.S. funds have invested 
billions of dollars in Russian companies.  

Not only do we fight to reduce the damage suffered by American and other 
investors but our work, also, draws attention to human-rights violations.  When 
we expose corruption officials try to hide their tracks.  At times some of them 
have resorted to violence and degradation to protect their careers. 

In this connection I remind the commission of the chilling story of attorney 
Sergei Magnitsky who was jailed, tortured and left to die in the prison cell 
for his role in exposing corruption.  He wasn’t an activist, he wasn’t a 
politician, he was just a lawyer investigating the crime against the state.  

We are all grateful for emergent congressional support for the Justice for 
Sergei Magnitsky Act of 2010 sponsored by Sen. Cardin.  Passing the bill will 
garner attention and we activists will all sleep more soundly.  I found myself 
especially encouraged that Congress will be considering this bill in the light 
of recent events back home.  

This weekend journalist Oleg Kashin was assaulted.  Kashin is a friend of mine 
as he is a prominent Russian journalist.  Here’s the clipping from the official 
website of United Russia Youth League, a pro-Kremlin youth movement.  The 
author has – (inaudible) – the words to be punished over a photo of journalist. 
 

Within a matter of a month, he was attacked.  The attackers broke his legs, his 
arms, his jaws; they smashed his hands.  He lost finger as a result.  He also 
sustained serious injuries of the head and has fallen into a coma.  And 
actually, he’s still in a coma.  

The assault is presumed to be tied to Kashin’s criticism to the Kremlin and 
their pro-Kremlin youth movement.  The attack on Kashin highlights the 
connection between corruption and politically motivated violence.  Kremlin 
officials are afraid of political change.  So power is hard to let go – so is 
money.  

The careers of corrupt officials are funded by graft.  We are really eager to 
know who’s funding the pro-Kremlin youth movement.  If corrupt officials and 
private managers who are conspiring with them are forced to disclose this 
information any ties to pro-Kremlin organizations will be exposed.  The Russian 
people and worldwide human-rights organizations will take notice.  

If you’re operating on emerging markets, you will hear a million times that all 
your attempts to fight corruption and to change the situation abroad are 
fruitless because of deep cultural roots of foreign corruption.  I’m here to 
tell you that this is not true.  We have very powerful tool to fight corruption 
in Russia.  And because Russian corruption has passed laundered money through 
the United States we hope they will be prosecuted here, too.  

I’m not a dissident; I’m an activist. I consider investment in Russia to have 
very high potential.  I hope Americans will continue to invest in Russia but we 
need a little more political leverage to protect those investors.  

I do not presume to ask commission to support any particular project or agenda. 
 But I do hope Congress will take steps that will benefit both of our 
countries.  I will leave the commission with a few additional thoughts about 
the battle against corruption.  I’ll start with a general principle, the 
principle of the carrot and the stick.  Trust the carrot.  Russian companies 
note that the greater transparency translates into the higher rating of their 
agencies such as American agencies such as Standard & Poor’s, which means that 
they can borrow cheap money more easily.  

Unfortunately, they also know that America tends to overrate Russian 
transparency.  This tendency needs to be watched by Securities and Exchange 
Commission and, perhaps, legislated.  Our efforts are bolstered by the Foreign 
Corrupt Practices Act in U.S. and the Bribery Act in the United Kingdom.  Many 
of us dedicated to the anticorruption agenda are pleased to see these 
developments.  

We also need to give the Russian corruptionists the stick.  American investors 
should always listen carefully to what competent and – (inaudible) – advisors 
says about specific Russian investments.  These are such RiskMetrics, ICC; 
Glass-Lewis; Lincoln Jones (ph) and so forth.  

Where the concerns arise, fund managers may need to pull out and allow the 
Securities and Exchange Commission to investigate or even initiate legal action 
in the United States.  The SEC must remain fully empowered to tackle this 
problem.  

The stick needs to be applied in another area, too.  Almost all Russian 
state-controlled companies have ADR – American Depositary Receipts – here in 
the U.S.  The privilege of issuing American Depositary Receipts should be tied 
to the rights of American investors, international investors and Securities 
Exchange Commission to bring suit and cases of fraud and embezzlement whether 
the alleged white-collar crime was committed in the United States or abroad.  

Additional monitoring and enforcement of ADR rules is always a good thing.  
Although the Russian legal system is not free of corruption we Russian 
activists are able to make the system work.  However, we need to see the U.S. 
develop a strategy for prosecuting crimes committed by corruptionists on U.S. 
soil.  

I do not want to see U.S. act like a world police force.  I’m not asking 
Congress to be involved itself in policing cover up within Russia.  However, in 
my opinion, the United States could do a better job of investigating the trail 
of stolen money and enforcing consequences.  An enormous amount of money stolen 
from investors have been invested in the U.S. real estate, bank accounts, 
American and European stocks.  

This is money laundering and this is a violation of your federal law.  In order 
to battle money laundering efficiently the Justice Department, the FBI, the 
Securities Exchange Commission, Homeland Security, State Department and so on 
may need to pool their sources in a new way and to be found to do so.  

Making this a high priority would help investors, including Americans, recover 
billions of dollars per year – improving the economy of both our country and 
expose corruption that leads to human-rights violations and abuses.  Thank you. 
 

MR. PARKER:  Thank you, Alexei, for your testimony and for all of those 
examples.  I’m glad you mentioned the Kashin case which is something – I don’t 
know how many have seen the video.  There is a video out there.  

MR. NAVALNY:  This is horrific.  This video is horrific.  

MR. PARKER:  Particularly a brutal – it’s just – again, I don’t even know the 
words to describe the type of brutality that’s seen in the video and, you know, 
and then another journalist on Monday.  And there’s another journalist who was 
involved in opposing this project who is partially paralyzed now and facing a 
libel suit from a regional official, I think.  

So you had mentioned this little stamp that was on the page.  I just would note 
that it’s no longer to be found on the website.  I believe it’s Muldi Aguardia 
(ph) 

MR. NAVLNY:  Yes.  This is Muldi Aguardia but –

MR. PARKER:  It’s been taken – 

MR. NAVALNY:  – fortunately Internet we can find – 

MR. PARKER:  Oh, no, I’m not – I’m actually highlighting that it was – 
(chuckles) – that someone took it down.  I’m not questioning that it was there 
and is well-meant, you know, to telling us a little bit more about Gannady 
Timchenko and Gunvor.  

I brought here an article.  I used the Congressional Resource Service to get 
because Timchenko sued – and I think successfully sued The Economist when there 
was a piece written on him.  I think the piece had something – I think the 
title was something to the effect of “Grease My Palm” or something like that in 
The Economist in 2008.  

MR. NAVALNY:  Actually, he wants to sue them but they decided to have a 
peaceful agreement.  

MR. PARKER:  They had some agreement and, again, and what I have here it’s not 
clear.  But it’s – (chuckles) – it’s clear that this stuff is sensitive and 
that somebody doesn’t want this, you know, want this information in the public 
domain.  As well, Alexei, thank you for mentioning the Magnitsky case.  

Just as I was on my way over to this briefing I discovered that two of the lead 
people who – this is a press release we put out in April when Sen. Cardin sent 
a letter to the secretary of state asking that these people be barred from 
entering the United States.  Well, we’re almost a year later; no one has been 
brought to any justice or held accountable despite voluminous evidence.  

Additionally, a number had been promoted and not only promoted but today I see 
in this announcement here – and I just had time to do a quick Google 
translation – that two investigators Pavel Karpov and Oleg Silchenko – 
Silchenko, I believe, is the person who the Moscow Prison Oversight Committee 
in their report on the Magnitsky case, sort of, argued was the most culpable – 
received today “best investigator” awards from the ministry of internal affairs 
of Russia.  

And I don’t know where to start.  There’s all kinds of – I have all kinds of 
questions.  I hope a number of people out in the audience do.  One thing I want 
to ask is, just on your work in Moscow and the corruption:  Does the dismissal 
Luzhkov; do you expect that, that will disrupt some established, corrupt 
relationships, corruption networks?  Is this something that’s going to be 
severely disruptive or is it just?

MR. NAVALNY:  You mean in Moscow city?  

MR. PARKER:  Yeah, in and around Moscow.  I’m just wondering if this, you know, 
is there any bright side in this, at least, in the near term while people 
rearrange their position or the balance of power is worked out?  I would 
imagine having been in office for so long that there were a number of things 
that – people got pretty comfortable and relationships were established.  

So how disruptive do you think that the change will be to corrupt networks and 
relationships?  

MR. NAVALNY:  I’m pretty skeptical about the possible changes with this Luzhkov 
dismissal because we have a very clear signal for the new Moscow authorities.  
And one of the signals is that Mr. Resin who’s actually, kind of, symbol of 
Moscow corruption is still mayor deputy.  This is the person who supervised all 
construction building and all these relationships in Moscow.  

He’s the person who has a hand watch which cost more than $1 million and all 
his life he was an official.  He never was involved in the kind of business and 
so on.  And I think as this operation to replace Mr. Luzhkov is just an 
operation to connect the federal corrupt practices and Moscow corrupt practice 
because Moscow is a very big and very tasty piece of money.  And I think it’s 
just an operation of corruption – integration of corruption.  

MR. PARKER:  Interesting.  What about the recent raid over the weekend on 
Lebedev’s bank?  Is he done?  How serious is this?  What do you expect?  

MR. NAVALNY:  I think Alexander Lebedev is – sometimes he’s very aggressive in 
disclosing of corruption as in talking about corruption.  And he actually did a 
big job to disclose information about corruption practices in Moscow.  But he’s 
a business man and he’s involved in business himself.  And he’s a very easy 
target.  

MR. PARKER:  He’s a Czechist (ph), as well, if I’m not mistaken, right?  

MR. NAVALNY:  Pardon me?  

MR. PARKER:  Czechist.  

MR. NAVALNY:  Yes, he’s a Czechist – 

(Cross talk.)

(MR. NAVALNY:  He has guys to support him, of course and he’s playing in this 
game using rules of this game.  But I think he’s – maybe this attack on his 
office is the signal for him and to prevent some of his ideas to investigate 
new cases because he’s – he’s a really easy target to attack.  

MR. PARKER:  Like I said, many stories that have been out in the past couple of 
weeks is the possibility that WikiLeaks may be on the verge of a massive dump 
on, sort of, corrupt Russian officials.  Are you hearing much in the 
blogosphere on that?  And, you know, Russia is a tough audience.  What’s it 
going to take to shock the Russians?  

MR. NAVALNY:  Of course I heard about it.  But this statement of the WikiLeaks 
founder didn’t have any impact on Russian audience because actually, for 
example, in Russia we have site compramot.ru (ph).  And we have a lot of very 
evident information.  A lot of real information about the real crimes and a lot 
of proofs.  And using just information from this website, we can put to jail 
half of Russian officials.  

But the problem is that we have a real low barrier of tolerance to the 
information about corruption.  So people are just accustomed to this 
information.  They are taking their morning newspapers and reading, okay, 
another $1 billion was stolen.  Let’s go to their culture department.  We are 
just too accustomed to this information.  So I think that WikiLeaks information 
cannot bring something new, something shocking for the Russian audience.  

MR. PARKER:  It’d be interesting to see what – 

MR. NAVALNY:  Maybe they have some information about, for example, about Gunvor 
because this area still is pretty closed about this mysterious third owner of 
Gunvor because we know that one of the owners of Gunvor is Gennady Timchenko, 
another one is a lawyer from Finland, I guess.  And the third shareholder is 
Hedin (ph) and no one knows him.  

Some people think that this is Mr. Putin.  I don’t think so.  But I do believe 
that maybe all owners of Gunvor they’re just nominal owners and real owner of 
Gunvor and person who got real benefits from this company is Mr. Putin, 
himself.  

MR. PARKER:  I had a quick just – I guess just sort of your take on – you want 
Americans, foreigners to do business in Russia, just to explore that a bit.  
I’m looking in this Washington Post piece – just late October:  “Russian 
corruption takes on a life of its own”.  And this is a piece that came out 
around the new Transparency International ranking, which I think showed Russia 
slipping some at least numbers.  

Although, I think the sense that I heard from, sort of, digesting a lot of the 
ink that was spilled was that, probably, really not significantly worse than it 
had been.  Certainly, probably not, better.  But Sergei Markov, political 
analyst and member of the lower house is quoted in here saying, you know, 
Russia’s leaders have been tentative about fighting corruption because they 
don’t want to upset the stability that the country has finally achieved and 
stability is the main threat to economic growth.  And corruption is not 
contradictory with economic growth.  

Additionally he says, investors won’t pay attention to Transparency 
International.  They pay attention to their own experience.  Some of them are 
quite cynical, for some of them corruption is good.  

How important is this issue?  Certainly, I don’t imagine anyone would argue in 
favor of instability in Russia.  And I guess, sort of, taking the whole 
environment as a whole and understanding, I guess, what’s possible, what’s 
realistic; what would you say to Markov?  

MR. NAVALNY:  I think in Russia we have, very basically, two parties who are 
struggling now in corruption and fighting corruption is a hot issue in their 
fight.  Some of the most advanced managers and officials they realize now that 
it’s much more profitable to be transparent.  That, actually, you can get much 
more money if you’re transparent, if you have a good business.  

But other part, basically, we can isolate with Mr. Putin.  They really want to 
be engaged – still engaged in these heathen practices.  They prefer this scheme 
of enrichment which I described.  It’s overpricing of construction, it’s the, 
kind of, very strange charity schemes and so on and so forth.  They don’t want 
to mind in new styles.  

They still don’t realize that if, at least, they shift their corruption to the 
most sophisticated case it would be much easier for them.  They still prefer to 
just classify all the information to just come to the company and take, 
literally, bags with the cash from the companies.  

But other parties, as I mentioned, they have a real political reach to fight 
corruption.  That’s why I’m addressing to the U.S. and ask for their help 
because I believe that some force that you can apply it here in America will 
help Russian party to fight corruption.  

As I mentioned, this idea of prosecuting Russian officials who are laundering 
money here in America will be real powerful tool and will bring real, positive 
change in Russia very soon because, now, officials and managers with whom I’m 
talking with they just are asking me, Alexei, please explain – give us at least 
one reason to be more transparent.  

We’re absolutely fine without corruption.  There is prosecution here.  There is 
no prosecution abroad.  And the, kind of, potential danger for them will be 
created here in America, in Europe or in London.  This will be a very powerful 
tool because they are stealing money in Russia but they invest it abroad.  

They are buying luxury condos in Miami, Florida, in New York, in London.  Their 
children are living here.  They have education here and so on.  So creating 
this potential danger will be very positive to Russia and to Russia parties to 
fight corruption.  And I do believe that, actually, these efforts that you can 
apply here are not opposing to the Obama strategy of reset button because reset 
button doesn’t mean that we should just ignore any corruption or should we just 
forget everything.  

Reset button means that America is not going to policing in the Russian cases.  
We don’t want you to invade Russian political area or something.  You can use 
your own legal system to protect your own citizens and your own companies and 
through it help the Russia.

MR. PARKER:  Thank you.  Questions from the audience? Please.  We have a mike 
right there, we have some time.  If you could just identify yourself and your 
affiliation and keep it sort of brief and make it a question.  Do we have 
anyone?  John, you have a question?  

Q:  Hi.  Thank you for coming and speaking.  My name is John from Georgetown 
University and I have two quick questions.  A lot of the cases that you worked 
with dealt with a lot of the high-profile companies like Gunvor and Gazprom.  

But I’m sort of interested on a lower level how pervasive is this corruption 
on, I guess, smaller companies or even on a more local provincial level?  And 
are there regional differences in Russia as well?  

And my second is, you spoke about, sort of, the political will of who would 
find it more profitable to be more transparent.  Are there people in the duma 
or even in the government right now that currently have that belief?  Are they 
silent about it and is waiting for someone to come and sort of push this?  Or 
where is this kind of sentiment and where does it hold most?  Thank you.  

MR. NAVALNY:  Okay, thank you.  About lower level of companies – it’s 
interesting because the fight for their minority shareholder’s rights or fight 
with corruption on the lower level could be more efficient in Russia because 
there’s no political agenda.  For example, when I come to Russian court and I’m 
trying to sue Rosneft for their dealing with Gunvor.  It’s a kind of taboo for 
all judges.  They’re just afraid of hearing this word.  

So this is a political issue.  If you’re going to sue Gazprom because of their 
corruption practices that everyone understand that actually you’re suing, 
personally, Mr. Putin because it’s his people making all of this corruption.  
And lower level you can – we can use successfully and we do use successfully a 
Russian legal system to fight corruption.  

Sometimes on the lower level we can – much more violence, especially, in the 
regions.  And if police or our special service involved in these crimes they 
can act much more violent because of lack of media attention to these cases.  
But anyway, we can succeed and people who are fighting corruption with this 
company they can succeed their aims.  

About people in duma or in government who are – now who want to fight 
corruption.  We have such people.  And I think we can, generally, (isolate ?) 
them with Mr. Medvedev.  I don’t want to push this idea of bad president and 
good president so I – actually it’s not true that we have a bad Mr. Putin and 
good Mr. Medvedev.  

But anyway, around them – around Mr. Medvedev there are some people who really 
understand.  They’re open-minded and they understand that it’s much more 
profitable to be more transparent.  You can attract cheaper money and you can 
attract more investors and so on and so forth.  

For example, Mr. Barkovich (ph) and actually Mr. Medvedev, himself – they are 
promoting the idea of replacing all officials on the company boards – replacing 
them by the independent members of the board.  They are promoting the idea 
privatization of companies.  Of course companies is extremely reluctant.  

For example, they hid an idea to privatize Transneft which I mentioned here.  
But Transneft was powerful enough to cancel this idea.  And a couple of weeks 
ago the government declared that they are not going to privatize this company.  

But anyway, the Russian people who are really making it a tough job to fight 
corruption.  But they have a lack of real levers because all the energy 
industry is under the cover of Mr. Putin and his colleagues.  

MR. PARKER:  Along those lines – those questions.  A quick point, you know, the 
Russian legal system, really, is a mixed bag.  They’re really some very good 
parts of it where lots of progress has been made in terms of rule of law and 
setting things up.  And then there are other parts of it where you certainly 
wouldn’t want to find yourself alone at night.  

And also on the duma, I’d like to ask you, Alexei, what about Grishankov?  
Mikhail Grishankov who, I believe – at least, I know for a long time was 
associated with the Duma Security Committee.  I think he has – was also in FSB 
or SVR or something like that.  And he’s someone we have met with and talked to 
over the years.  

He’s taken part in a lot of exchanges that have happened between our 
parliaments.  And I notice him in this Wall Street Journal article on Yana 
Yakovleva’s story, being quite supportive.  Is there anything you can say about 
Grishankov’s efforts or other like-minded deputies?

MR. NAVALNY:  I cannot say something about Grishankov personally.  But for 
example, duma’s comments on the property are – they attract me as an expert, 
which was very surprising for me because sometimes I’m considered to be, kind 
of, official enemy of the state-controlled company.  

And they ask me to give them some proposals.  How to make company transparent 
and what kind of changes should be applied.  And they are really open-minded 
now.  And this project of a bill that they are preparing is a real revolution 
in these relationships.  

The problem is that when these theoretical ideas would be applied to the 
particular company, the company realized that it would be a tragedy for them.  
And all officials who are connected with the companies who are sitting on the 
board of the companies; they support the idea of transparency in theory.  But 
then they are thinking about the practice that we should disclose all this 
charity.  What consequences would it be?  

No one knows who gave these billions of dollars – millions of dollars to 
charity donors.  We should disclose all the information about Rosneft, we 
should disclose all documents, we should play in the rules.  And this is real 
money for real people.  And of course, people who got this real money, they are 
absolutely reluctant to these new ideas.  

So people who are sitting in duma and who are not engaged in the companies who 
are just making papers; they are ready to promote this idea.  People in the 
government who should approve this idea; they are reluctant because they’re 
connected and they are living by graft.  Does that answer your question?  

MR. PARKER:  Yes, no, very good.  Other questions?  Please.  

MR. NAVALNY:  There’s a question.  

MR. PARKER:  Oh, okay.  Yep.  Tom?  Yeah, if you don’t mind.  It just helps the 
transcribers get it better.  I’m sure we’ll all hear – and then Tom.  

Q:  Hi.  Richard White, Hudson Institute.  Two questions.  One, to what extent 
do these ties extend across the former Soviet republics?  I’m particularly 
interested in the Caucasus and Central Asia.  

And second, I have heard some of the people here worry that there’s actually 
another problem that we’re, perhaps, overlooking in that the Russian 
authorities have, sort of, a power to provide kompromat to Western and 
international institutions against people they don’t like.  And so for example, 
we are placing them in a position of, say, if they are having problems with a 
business person having them tell us that he’s actually engaged in terrorism or 
corrupt practice and so on.  

And knowing how energetic our U.S. Treasury, that means that person loses all 
access to international business and so on, so that in a way we’re empowering 
the authorities to do something like that.  And I’ve heard that just mentioned 
as a theoretical possibility from people.  So I was curious if this is actually 
a problem.  

MR. NAVALNY:  (Off mike.)  

MR. PARKER:  Could you?  

MR. NAVALNY:  Just briefly – 

MR. PARKER:  Question on the first question?  

MR. NAVALNY:  You rephrase the first question?  I’m sorry.  

Q:  (Off mike.)  

MR. NAVALNY:  I think everyone can speak Russian here.  (Laughter.)  

Q:  (Off mike.)  

MR. NAVALNY:  How corruption – (inaudible, cross talk).  

MR. PARKER:  I think the question about the linkages and some of these corrupt 
– (inaudible, cross talk) – 

MR. NAVALNY:  Oh, yes.  

MR. PARKER:  – going over the border.  

Q:  (Off mike.)  

MR. NAVALNY:  Yes.  I think, first of all, it’s Kazakhstan and because we have 
very close relationships and of these – Kazakhstan and Turkmenistan because 
both countries – 

MR. PARKER:  But not Kazakhstan.  

MR. NAVALNY:  Sorry?  

MR. PARKER:  It couldn’t be Kazakhstan.  

MR. NAVALNY:  Why?  

MR. PARKER:  They’re the chair-in-office of the OSCE this year.  

MR. NAVALNY:  (Chuckles.)  Yes.  But anyway, it’s Kazakhstan and Turkmenistan.  
People with a very closed economy and a very well-connected with the Russian 
companies.  They are – actually, Russia gave infrastructure for these countries 
to transport their oil and gas and so on and so forth through Russia.  

And all this industry of transportation of their gas and oil is absolutely 
hidden and closed.  So I think it’s a very – a lot of cover ups in this area.  
And like, in Gazprom for example.  I investigated several cases of how they are 
dealing with the gas – the natural gas of independent production companies.  

And this area of just giving infrastructure but buying gas and oil from the 
independent production company is very corrupt and very hidden and it’s all 
about middle man, about overpricing and so and so forth.  So did that answer 
your question?  Okay.

And second was about – I’m sorry.  

Q:  The possibility that because there’s only certain bodies – (inaudible) – 
they can tell business people so you better do what we tell – (inaudible) – or 
we’re going to tell the West that you’re financing terrorism and therefore that 
means you won’t ever get – (inaudible).  

MR. PARKER:  Sort of the notion that there’s credible kompromat on everybody or 
that kompromat is fabricated easily – or both?  

Q:  Right, theoretically being both because, I mean, as we know in the 1990s it 
was hard to make any money with filing then – (inaudible) – laws.  This 
actually for – (inaudible) – modeling this at Brookings.  And I’m curious if 
this is actually – (background noise).

MR. NAVALNY:  I agree.  Now, the thing works like this.  It’s a kind of 
bargaining.  Everyone has a kompromat on everyone and okay, if you oppress us 
abroad with our accounts in Switzerland, we will press you here and we will 
press your company because they are engaged in corruption.  And we can press 
American company.  We can reveal some information about American companies 
which means that they will be prosecuted because of the Foreign Corruption 
Practices Act and will be fined over billions of dollars.  

Now it works like this.  It’s a kind of bargaining.  That’s why I really think 
that we should eliminate this system because it just leads to increasing of 
corruption.  We should apply real formal process and we should formalize all 
the system.  If some American companies involved in criminal practices in 
Russia this company must be prosecuted in U.S. and without any – without any 
swaying and so on.  

And I think U.S. officials, they should not afraid that pressing on Russian 
companies and Russian officials will bring some bad consequences for American 
companies.  Because if any bad information about American companies exist, it 
would be revealed anyway.  So it’s better to play in a fair game.

MR. PARKER:  There’s a question over here.  Tom?

Q:  Tom Firestone.  I’m with the U.S. Embassy in Moscow and I’m assigned there 
by the U.S. Justice Department.  I worked as a prosecutor for many years here 
and I wanted to follow up on, make a comment really, on some of the – what you 
had said about the importance of prosecuting corrupt Russian officials in the 
United States.

I think it’s a very good idea, and the Department of Justice has been pushing 
in that direction.  Their organized-crime section came out with a new, 
international organized-crime strategy in 2008 which recommends exactly what 
you have recommended in your talk today:  a new focus on international 
money-laundering cases, domestic prosecutions of foreign government officials 
for all the reasons that you’ve mentioned.

The problem with these cases and the reason more of them are not brought, it’s 
not because any American prosecutor is necessarily afraid of the consequences 
for U.S.-Russian relations.  It’s just extremely difficult to make these cases 
in the United States.  

To prosecute somebody – if you take a corrupt Russian government official from 
Krasnoyarskaya (ph) who’s stolen money from the budget through a rigged 
privatization and then taken that money and moved to the United States – 
prosecuting him for money laundering in the United States essentially requires 
the prosecutor to prove all of the corrupt actions from Russia.

That’s very difficult because you’re going to have to get all the evidence from 
Russia.  If the guy still has influence there, he can prevent the delivery of 
the evidence.  Even if you do get the evidence, you’re going to have to get 
witnesses from Russia to come here and testify, and you’re going to have to 
convince an American jury that there was a crime committed.  And you’re going 
to have to explain to an American jury what the privatizations rules were in 
Russia in the 1990s, whenever he did this; why it’s a fraud, what the money was 
lost.  

And it’s just extremely difficult.  And that’s why – and it’s faced with the 
choice of doing that kind of case or prosecuting some drug gang that’s running 
around in the neighborhood terrorizing people in your backyard.  Most 
prosecutors are going to do the latter kind of case, and it’s an understandable 
decision.  It doesn’t mean these cases shouldn’t be pursued.  I agree with you. 
 But it’s just difficult.  It’s not as easy as it may sound.

What I do think is promising – but you didn’t mention it explicitly in your 
talk – is private litigation at the international level.  We’ve seen a lot more 
of this in recent years.  Yukos brought a $100-billion claim against the 
Russian government in the European Court of Human Rights because the European 
Convention protects companies, not just individuals.  Yukos investors have 
filed arbitration claims in various European arbitration fora.

Gene Burd, who’s here today, has been involved in civil litigation brought on 
behalf of people who claim to be victims of corporate raiding in Russia here in 
the United States.  What do you think of private – and it seems to me that 
those cases might be easier to make because the plaintiffs in those cases, 
having been involved in these businesses, are already in possession of a lot of 
the evidence which U.S. prosecutors are going to have to get through official 
channels.  What do you think of private civil litigation?

MR. NAVALNY:  Okay, thank you for question.  First of all, about difficulties 
in prosecution of this white-collar crime.  As I said, yes of course, is 
difficult to treat them and to address them, this white-collar crime.  But 
anyway, you have here in America some very successful examples.  When you have 
a political wish, we can remind Mr. Borodin case, Mr. Adamov case.  And 
American regulation by this very efficiently had a deal with these guys.

Q:  If I could just – I was the prosecutor on the Borodin case.  First of all, 
we didn’t prosecute him; Switzerland prosecuted him for money-laundering.  He 
was arrested here and extradited to Switzerland to face the charges, and they 
let him go for a small fine right away.  So we never made any domestic case 
against Borodin.

The Adamov case, we did bring charges.  He was arrested in Switzerland, at 
which point Russia brought its own charges against him and got him extradited 
to Russia –

MR. NAVALNY:  Yeah.

Q:  So that he never faced the charges here in the United States.  So – 
(inaudible, cross talk.)

MR. NAVALNY:  But then you – wait – you launched this process, and these people 
had some nice experience to be in jail.  (Laughter.)

Q:  There was some justice, yeah.  (Chuckles.)  I guess you could say some 
justice.

(Cross talk.)

MR. NAVALNY:  But anyway, it was very powerful and it was a huge impact inside 
of Russia.  So of course, white-collar crimes is very difficult to investigate. 
 But I think we should start it.  

For example, Daimler case.  Everyone knows about it.  Daimler was fined here 
and there was no investigation at all in Russia.  But all money, which were 
paid like a bribe from Daimler to Russian officials – actually Daimler paid on 
the foreign accounts, to the offshore , in the offshore countries and so on.  

And I do believe that all this money which Daimler paid like a bribe, now here 
in U.S. or in United Kingdom.  So I think we should just put more efforts here. 

What about private litigation?  Yes.  I do believe that it could be most 
efficient.  As I mentioned, if some new regulation will give opportunity for 
the American investors – or for Russian investors, for example – bring 
class-action suits, that would change everything.

Now, for example, if you are American and if you invested some money in 
company, and you have real grounds about the money embezzling in this company.  
You will sue them next day.  And you can sue them very efficiently here in 
America.  Why we cannot do the same for the Russian company, which have ADR 
here in America?  

Because Russian company, they connect it very well with American system.  They 
borrow money from America and so on and so forth.  And if we can figure out how 
to use American legal system, civil system, to sue companies here, that would 
be verily huge impact.  Because the way how they’re stealing money now, it’s 
very simplistic.  Very evident.  And with this proof and with these grounds, if 
we will find the way to sue them here, we can put a real pressure on all these 
corruptionists. 

But it’s not very easy.  For example, it’s very difficult to persuade American 
huge investment funds like Black Rock and other just to be engaged in these 
cases and to start this war because they consider all these like a kind of 
political story.  They don’t want to be involved in the kind of political 
investigation because all big corruption in Russia, it’s corruption in company 
and in government.

So big companies – American companies – they be afraid about it and they don’t 
engage with politics.  And sometimes they – for example, American mutual funds: 
 they don’t even vote on the shareholders’ meeting.  They just ignore what’s 
going on in Russia.  And I think it’s our common task to encourage them to 
realize that it’s the part of their corporate social responsibility to 
investigate and to put pressure on Russian company where they invest some money.

Q:  Thank you.

MR. NAVALNY:  Thank you.

MR. PARKER:  Gene?

Q:  Gene Burd.  Law firm, Marks & Sokolov; Philadelphia.  Alexei, I just heard 
discussion – your discussion and Tom’s discussion regarding private action in 
connection with corruption in Russia.  And our firm brought several actions 
here in the United States in connection with various misdeeds of certain 
individuals in Russia.

One of the issues that we’re facing in the United States with respect to the 
private course of action is the doctrine which exists here in the United 
States, which is called “forum non conveniens,” which essentially prevents us 
of bringing private actions here in the United States where the events, where 
the witnesses, where there is other factors took place outside the United 
States and where United States court would find, that it is most convenient for 
the justice, that this type of action is not brought here in the United States.

That is why some of the actions get dismissed.  Some of the actions are going 
through in U.S. courts with significant friction.  There is, however, there is 
also another recent impediment which was brought in the United States court 
system.  I don’t know if you’ve heard, but there is the Morrison case which was 
decided this year by the United States Supreme Court which severely limited 
application of the Securities Act outside of the United States.

My understanding is there is a current legislative proposal which is being 
moved here in the United States to provide specific language to the Securities 
Act to allow prosecution of crimes and violations of the Securities Act here in 
the United States, prosecution by the SEC and the Department of Justice.  There 
is also proposal which hopefully will be, which will be supported here on the 
level of the commission and perhaps of the Congress:  a proposal for the 
private right of action to allow the Securities Act – private right of action 
for cases where events took place outside the United States.

Finally, with respect to the FCPA, for the Foreign Corrupt Practices Act, there 
was a positive development in the United States.  In the summer, the Foreign 
Corrupt Practices Act was amended to provide for the whistleblower provision.  
I don’t know if familiar with that but essentially, at this point of time, any 
person with information – which relating to the corruption, the corrupt 
activities by U.S. companies or companies subject to jurisdiction under Foreign 
Corrupt Practices Act – can provide this information to the Securities and 
Exchange Commission and the Securities and Exchange Commission will consider 
this information for prosecution.  And this whistleblower would be prosecutors. 
 

So there are certain devices – there are some certain devices which are 
available here in United States for a private fight with corruption in Russia.  
But there are certain things that can be done and which, perhaps, should be 
done to give more ammunition to private lawyers to be able to defend interests 
of their clients.  Thank you.

MR. NAVALNY:  Thank you.  I absolutely agree with you.  And I think, yes, we 
have some tools which we can apply right now here in U.S.  But we have a lack 
of jurisdiction.  That’s a big problem and a big issue.  And I saw the 
statistic of the class-action suits against – class-action suits in America and 
amount of class action against foreign issuers is increasing.  

So it’s a good signal.  Not just against Russian but all of foreign issuers.  
But anyway, I agree with you that we have connect all interests and connect all 
efforts, from the regulation budget, from Congress and from the private sector. 
 Because we should realize that each – this is a problem, not just a Russian 
problem.  The American investment funds  -- they are the same victims like me.

So the managers who are embezzling money from the countries:  They are stealing 
money from the small American guy who have his retirement fund in the mutual 
fund invest company.  And we should connect interests on these enormous and big 
American investment funds, and connect interests of American lawyers who can 
act very efficiently, how we know, and interest of the Congress and other 
regulation bodies.  

And interest of Russian shareholders who are ready to give proofs, grounds, 
papers and so on and so forth here in America to prove this is the corruption.  
This is a fraud, this is money embezzlement.

Q:  Thank you.

MR. PARKER:  Anyone else?  Another question?  I wanted to ask just quickly, 
Alexei – what prospects or promise and maybe how effectively are the mechanisms 
being utilized, that are provided for by the UNCAC, the Convention against 
Corruption?  As well, I believe, there’s a Council of Europe group on 
corruption that has mechanisms that could be used.  And then also, what if any 
effect could WTO membership for Russia have on corruption writ large?

MR. NAVALNY:  I have never, ever seen the real consequences of these acts – of 
these organization.  I think they are very – not reluctant, they just don’t 
care about what’s going on.  They just don’t care about what’s going on.  

And now, maybe we have some opportunities to use this act and this organization 
are now vital.  But now, it doesn’t work, and I cannot see how it could work in 
the future.  It’s a kind of very – they have some – in theory, they have some 
tools to fight corruption, but it’s very vague and unclear, and no one – it 
couldn’t be an engine or a vehicle to fight corruption, unfortunately.  

MR. PARKER:  What about WTO membership?  Will that have any effect at all?  

MR. NAVALNY:  I don’t think so.  

MR. PARKER:  What about – 

MR. NAVALNY:  For example, China and India and other countries, they are 
members of the WTO but they have the same problems like Russia.  And WTO didn’t 
give some additional opportunities to fight corruption.  

MR. PARKER:  What about this new hotline, I believe, that the investigative 
committee has set up?  I saw it was in the press some weeks ago where people 
could call in and open investigations, corruption.  Is that something you’re 
hearing much about?  Are there ways to sort of use that – 

MR. NAVALNY:  I didn’t hear.  What kind of hotline?  

MR. PARKER:  It’s a new number, a hotline that I believe – 

MR. NAVALNY:  Oh, oh.  This is ridiculous.  We’re establishing these hotlines 
every single year, and every single year, they are starting another campaign to 
fight corruption, and they are establishing hotlines.  And this is just a – 

MR. PARKER:  I’m wondering if you in the activist sector can find innovative 
ways to make use such mechanisms.  Whether it be simply symbolic protests, mass 
call-ins – (inaudible, cross talk) –

MR. NAVALNY:  Actually, we used this opportunity.  We don’t use particular 
hotlines, but we use campaign of mass complaint.  For example, we mentioned 
Daimler case.  When I appealed my supporters in the Internet and blogs to write 
complaints about this case, Russian persecution office got more than 1,000 
complaints.  And it’s really, actually, a press for them not because they 
should have investigated more accurately, but because it just bring more 
attention from the media, from the public and so on.  

And so, like a method to attract media attention, it works.  

MR. PARKER:  Media attention does not seem to – at least in a number of the 
occasions we’ve watched, blistering, withering media attention and has seemed 
to been powerless to sort of disrupt what looks very much like a culture of 
impunity around a lot of these cases.  

That said, I think the media intends – needs to be there for the record and –

MR. NAVALNY:  Yes, of course, media attention, it’s not a kind of universal 
appeal, but sometimes it works.  And, anyway, it works better when you have 
media attention than when you don’t have it.  

MR. PARKER:  Yeah.  What strikes me is how, even the smallest, even symbolic 
efforts – and I’m thinking particularly of Sen. Cardin’s appeal regarding 
simply the privilege to visit this country or whether or not U.S. banks would 
be required to freeze ill-gotten gains that even these very small, limited 
measures have been able to provoke as much of a howl as they have provokes 
drawing reactions from Russia’s foreign ministry, drawing – so it seems to me 
that we really need to think there’s a variety of sort of plains and realms of 
the battlefield.  There’s the legal realm, the political realm, the media 
realm.  

Again, they’re all important – 

MR. NAVALNY:  I absolutely agree with you.  And my main point is that you 
cannot fail a fight against corruption totally.  Any efforts will bring some 
positive results, any efforts.  So it looks like it’s absolutely useless but, 
actually, it works.  

We should just reinforce our efforts and be flexible and invent new mechanisms 
and new ideas how to fight corruption.  

MR. PARKER:  Yes?  Shelly?  

Q:  Hi.  I’m Shelly Han with the Helsinki Commission. And I just wanted to draw 
your attention to something that our commission heads, Sen. Cardin and Sen. 
Lugar, changed the provision in the securities law this summer as a part of the 
Dodd-Frank financial reform bill.  And part of the purpose of that provision is 
to give investors a bit more of a voice in the oil and gas and mining industry. 
 

Specifically, what it does is requires companies that are listed on U.S. stock 
exchanges and, also, have ADRs  to report in their SEC filings the amount that 
they’ve paid for extractions of oil and gas and the – (inaudible) – in any 
foreign government and, also, in the U.S. as well to the U.S. federal 
government.  So that’s one tool that we think is going to be helpful.  It’s 
still being – the rules are still being written by the SEC.  

But we’ve also started trying to expand that jurisdiction by getting the London 
stock exchanges to do the same thing because one of the companies that is not 
covered by U.S. stock exchanges is Gazprom, and so we’d like to see Gazprom, 
which is listed in the U.K. – we’d like to see them make this type of 
reporting, and I think that would be useful for investors as well to have that 
type of transparency.  

Another thing that I wanted to ask you about is to see if you’re familiar with 
the extractive industry’s transparency initiative.  Are you familiar with that? 
 It’s an international initiative where countries sign up to have their own 
companies and their government itself to – basically for the companies to 
publish what they pay to the government.  And so it’s a way of reconciling 
within a certain country – for example, Azerbaijan – (inaudible).  And what 
they do – all the companies that are working in Azerbaijan make a report on a 
regular basis as to what they’ve paid for extraction to the government, and 
then the government is then reporting, and then the public – it’s a 
transparency mechanism.  

We’re working as commission to try to get the U.S. to do the same thing because 
we think that transparency is good for everybody, not just other countries.  
But we’d also like to see Russia do it.  And I’d like to ask, as an investor, 
if you think that type of initiative would be helpful to address some of the 
concerns that you mentioned in the extraction industries.  

MR. NAVALNY:  Thank you.  I am not very familiar with this last initiative that 
you said which works in Azerbaijan.  But people from transparency international 
actually told me that it works very good in Azerbaijan.  So I think we can try 
to apply it in Russia.  

As for your first idea, your first bill you mentioned about more regulation for 
the company which has ADR it would be great.  It would it be very powerful.  
And I believe that more regulation of the ADR, especially if you will be able 
to transform it to London, where most of the countries have leasing, it will be 
really powerful because Russian companies – we should understand it very 
clearly – they cannot just escape to Hong Kong.  

Q:  But Hong Kong – 

MR. NAVALNY:  Oh, great.  (Laughter.)  

So anyway, they cannot just ignore it or go out from the stock exchange all 
over the world.  We should just frame it, and we should just make their area 
for corruption more narrow from every step.  

I think if you will succeed to accept this bill, it would be very, very 
powerful tool.  

Q:  (Off mike.) 

MR. NAVALNY:  I mean, if you will be able to transfer to London.  

Q:  Yeah.  

MR. PARKER:  Yeah.  It passed this summer.  

Any last quick questions?  We’re winding down here on time.  Does anyone have 
one last before we close up the record?  

I certainly would like to thank everybody today.  It’s been an interesting 
discussion.  This really is a massive topic, and, you know, I sort of am left 
still scratching my head wondering if it’s as bad as it seems; has it always 
been this bad; is there any hope for it getting better.  

You know, on the one hand, you know, it seems like just, you know, picking up 
the newspaper that things have gotten so bad that could we be at sort of the 
proverbial darkness before the dawn or thinking of this as, you know, a frog in 
the water and somebody’s just spiked the temperature and maybe, you know, 
something’s going to change because sort of the universal recognition of the 
problem.  

On the other hand, there’s always sort of the turn towards increased cynicism 
and apathy.  So again, it’s hard to know.  From our perspective, beginning it 
back to what we do here, the human dimension, you know, it’s certainly one 
thing to lose money in a country, and it’s one thing to have wealth destroyed.  
It’s another thing to lose your life.  

And very sadly, in too many of these cases, there’s really an incredible and a 
heartbreaking human cost of corruption.  Whether that be in the many people who 
are wrongly accused who fill Russia’s jails, which is part of the problem of 
overcrowding is the fact that there are a lot of people sitting in jail who 
shouldn’t be sitting in jail, or whether it’s that, you know, this – I really – 
there’s a lot of material on the table there that will be in the hearing record 
here that we have not been able to even get into today.  And I really urge you 
to take that, like I said, Tom Firestone’s article, “Armed Injustice,” the 
story of the Mackievs, Romanova and Yakova’s (ph) submission.  

I mean, these are heartbreaking cases.  You know, Mrs. Mackiev is a mother of 
two, and her husband is up in Komi Republic in jail still.  And this whole 
criminal network has been exposed.  We’ve known about it for a number of 
months.  It was in the Financial Times on Thursday.  We are releasing some 
additional information on the story, and yet today, as I said, on my way here, 
some of the lead players are awarded best investigator.  

So what does this mean?  And they know this is being discussed here.  I mean, 
you know, our hearings, what we do here is on the record.  We put out press 
releases.  So really, that’s something I just would like to underscore, you 
know, from our perspective of the human dimension.  You know, there’s 
corruption around the world, and I don’t think any of us are naive enough it 
think that we’re going to end corruption.  

But can it be limited?  Can be it moved from a sector where it does more damage 
to a sector where it does less damage?  Can it be less brazen and in-your-face? 
 And, again, there’s – I don’t mean to set our sights too low and say we’re 
prepared to accept a certain amount of corruption, but it is a reality.  Human 
nature is a reality and, certainly, we’re not changing that any time soon.  

We’ll have a video and a transcript of this event up very soon, probably today 
or tomorrow.  And before we go, I would like to draw your attention – we do 
have a notice outside, and many of you maybe have seen the poster we have up – 
next week, an event that the Helsinki Commission will convene one week from 
today at 5 o’clock in the Capitol.  We will do the world premiere of the film 
“Justice for Sergei”.  It’s just under an hour.  It’s a very moving film, 
particularly highlighting sort of the human costs of corruption.  Everybody is 
invited.  Please tell your friends and neighbors.  The more the merrier.  We 
have a big room, and we have a very interesting lineup of speakers to offer 
remarks before the event.  

And I also mention that Olga Romanova, who submitted testimony for today’s 
event, is in the film.  So you didn’t get to see her today, but come next week 
and see her.  Her husband happened to share a cell with Sergei Magnitsky during 
his incarceration.  And so she offers some very personal insights to what it 
was like for Mr. Magnitsky during his year-long detention.  

With that, we’ll adjourn the briefing.  And, again, I thank you all for coming. 

(END)