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Russia: Audit Agency Says Norilsk Tender Illegal

Moscow, 25 July 1997 (RFE/RL) - Russia's independent state auditor, the Accounting Chamber, has called for a halt to the government's auction of Norilsk Nickel shares, terming the tender now under way a violation of a presidential decree and government resolution.

The Chamber is sending a letter this week to President Boris Yeltsin urging him to halt the share sale, which is due to conclude next Friday. The Chamber has already sent its report on the alleged violations to the General Procurator's office.

Valery Mishalkin told RFE/RL "the auction of the state shares [in Norilsk Nickel] is illegal." Mishalkin is the Chamber official in charge of an audit of Russia's giant metals producer that was ordered early in the year by the State Duma, the lower house of the Russian parliament. At the time, the deputies voted in a non-binding resolution to have the government halt the sale of its shares in the company until the year 2000.

Mishalkin says the sale of the state's 38 percent shareholding in Norilsk Nickel violates the provisions of the presidential decree issued two years ago, May 11, 1995. It prohibits sale of the Norilsk shares for three years.

Mishalkin also says a government resolution of September 18, 1995, bars accelerated sell-off of state stakes in industries and enterprises classified as "having strategic significance for the national security." Norilsk Nickel is explicitly listed.

The Accounting Chamber has been investigating the Norilsk Nickel transaction, along with other transfers of state shares for bank loans, since the start of 1996.

"From the very beginning," a Chamber inspector reported last April, "the whole record of the loans for shares scheme did not fit the concept of privatization, nor the plans of the bodies responsible."

He said there were violations of the sub-law acts and added: "If there are violations of the law from the beginning, then all the deals [that followed] should not be recognized."

The Chamber's conclusion was that the acquisition of the controlling interest in Norilsk Nickel by the Uneximbank-MFK group was illegal.

A leading American lawyer in Moscow, who specializes on privatization issues, says there have been many flaws in the privatization process. "You could find a mistake in almost all the major privatizations that could have serious legal consequences," he said.