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Russia: Fight For Control Over Russian Vodka-Maker

A public fight over who controls Smirnov vodka, one of Russia's oldest and best-known brands, is threatening to sully the company's reputation. RFE/RL correspondent Sophie Lambroschini reports the powerful Alfa group now appears to be managing the vodka-maker, but the former director says he will hang on to his job and his name.

Moscow, 8 November 2000 (RFE/RL) -- Russia's Smirnov vodka may boast in its advertising that it catered to the court of the czars, but a fight over who owns the label has nothing of old world refinement.

On Saturday, law-enforcement officers stormed Smirnov offices in central Moscow, breaking through a wooden door and triggering a mechanism that released a crate of vodka onto their heads. NTV television reported people were injured in the raid.

The raid was conducted by bailiffs acting to enforce a court decision last week that recognizes a change in the management at Smirnov.

The head of the bailiffs says his people used force because the director for the past three years, Boris Smirnov, refuses to let the new director, Sergei Yuzefov of the Alfa-Eko company, inside the building.

The conflict has been brewing since this summer, when Boris Smirnov refused to acknowledge a decision by his cousin and co-shareholder Andrei Smirnov to transfer his 50 percent stake to another company.

Boris Smirnov, who hasn't left his office in five days, tells RFE/ RL he doesn't recognize the deal:

"According to the charter and according to the law, Andrei couldn't sell without my approval. I did not give such an approval. Alfa-group did not show a single authentic document certifying the transfer of the shares."

Speaking at a news conference today, Aleksandr Serov, the legal representative of the new shareholder, confirmed Andrei Smirnov handed over a 50 percent stake in the business.

He said Andrei gave his stake over to a group of foreign companies, but Serov refused to name the group. Serov also denied a rumor the multinational UDV had acquired the stake. UDV controls the Smirnoff brand and has been fighting the Russian Smirnov for years over the right to the sell the vodka on international markets.

Serov says the new foreign shareholders have named local company Alfa-Eko, part of the powerful Alfa-group oil and financial consortium, to manage the vodka-maker.

Serov maintains that Boris Smirnov was ousted from his post in October at shareholders' meeting that Smirnov did not attend. The new shareholders elected Yuzefov to Smirnov's post on the basis of a law that allows a general director to be elected with a 30 percent quorum.

Smirnov, in turn, says this is an outright lie. He brings it back to a family feud and claims that Andrei never forgave him for a fallout they had in 1997. Boris then took over effective control from Andrei saying that as "an adopted child" Andrei was not an heir to the Smirnov empire.

The new management claims there's nothing personal in the deal and that it is simply trying to improve the company. Alfa-Eko says that in two years, vodka production has fallen from 2 million bottles a month to just over 200,000.

Serov sums up why he says Boris Smirnov has to go:

"Boris Smirnov was not the only shareholder. There were always two shareholders: Boris Smirnov and Andrei Smirnov -- on a fifty-fifty basis. The 'House of Smirnov' has been standing in one place for three years. That's a fact. There are figures to prove it. Investments are necessary to go forward. Boris Smirnov can't make such investments, he doesn't have the money and he cannot make any other offers to develop the business."

Serov says the new shareholder is ready to invest $10 million in production and marketing and hopes to attain a production level of 3 million bottles a month.

But Alfa-Eko admits finding a compromise with Boris Smirnov was essential to developing the business further.

Since the conflict started, each shareholder has been producing its own "real Smirnov" vodka in different distilleries near Moscow. This has already had a negative effect on sales. A reporter for the newspaper "Trade News" says store owners are confused because they don't know if they're buying Smirnov, Smirnov or maybe even Smirnoff.