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Return of the Corporate Raiders

Writing at Time Magazine, Carl Schreck, a journalist we usually see writing at the National, has a piece on the proliferation of corporate raiding by government agencies and the private groups which control them – filling the jails with businessmen who blow the whistle on official abuses.

There are no reliable statistics on the number of corporate raider attacks carried out each year, although media reports have put the number as high as 70,000. But the impact of the criminal practice on the economy is quite clear — business lobbyists and corruption experts say it is paralyzing small- and mid-sized businesses, as well as scaring off foreign investment. “If an Italian is doing business here and is targeted in a raider attack, he’s going to tell his countrymen,” says Alexander Brechalov, vice president of Opora, a Russian lobbying group for small businesses. “Who is going to want to come to Russia after hearing that? It’s an epidemic that needs to be contained.”

Experts say that businessmen not only risk losing their assets when they’re targeted, but they can also end up in jail on trumped-up charges brought by corrupt law enforcement officials and prosecutors. Russian businessman Alexei Kozlov, who claims he was the victim of a raid aimed at seizing his synthetic leather factory in Moscow, was convicted of fraud in May and sentenced to eight years in prison. In a telephone interview from prison, Kozlov said that Butyrka is teeming with entrepreneurs locked up on phony charges brought against them in raider attacks. “Before I landed behind bars, I thought only criminals were in jail,” Kozlov said. “Now I know it’s not only criminals.”The destructive effects of reiderstvo have not escaped the attention of top officials. Medvedev has called the practice “shameful” and expressed support for measures aimed at easing prosecution of such crimes. “The seizure schemes are conducted very professionally, that is a fact,” he told Russian senators on Nov. 5. “Sometimes it’s simply impossible to get to the bottom of them. But that doesn’t mean that our law enforcement authorities shouldn’t be trying.” The issue was even raised during a live call-in TV show with Prime Minister Vladimir Putin earlier this month. Responding to a question about how the government planned to tackle reiderstvo, Putin said a proposal to unify various raider tactics under a single criminal statute would help law enforcement officials work “more effectively.”Then, on Dec. 15, came a sign that authorities may be cracking down on individuals suspected to be involved in the raid on Hermitage’s assets. The Kremlin said that Medvedev had dismissed Anatoly Mikhalkin, the head of the tax crimes department of the Moscow police. Police spokeswoman Zhanna Ozhimina denied the move was linked to the Magnitsky case, saying that Mikhalkin had stepped down because of his age. But Hermitage says Mikhalkin may have been fired because he had signed off on documents used in the seizure of its subsidiaries. (See pictures of Russia celebrating Victory Day.)Even if this is the case, Browder stresses that a harsher response from the government is needed to stem the tide of raiding in Russia, namely criminal prosecution. “There is no comparison between the loss of a job and the loss of an innocent man’s life,” he says.