The $1.2 billion fraud alleged at Russia’s largest bank

January 22, 2010

Tucked away on page 4 of the Moscow Times today there is a remarkable article which made me wonder whether I wasn’t hallucinating.

The report states matter-of-factly that several branch managers are being investigated for defrauding $1.2 billion from Sberbank, Russia’s largest bank. That’s according to comments made by Sberbank’s regional manager for Moscow. The Moscow Times translated the article from Thursday’s edition of the Russian newspaper Vedomosti, where it appears on page 7.

According to this article, Sberbank suspects managers at three Moscow branches of doling out “thieving” loans, on the basis of “fictitious” documents, to “dubious” companies. The scale of the resulting losses at these three branches? “More than 35 billion roubles” ($1.2 billion).

When you include similar goings-on at other branches, the total figure for Sberbank’s “dubious” loans appears to be even higher still: 46.1 billion roubles, or some $1.6 billion. That it is more than double Sberbank’s total profits for last year.

This isn’t the first time that I have seen reports about fishy goings-on at the Sberbank. The fraud allegations first trickled out last summer (back then the allegations concerned just a single branch, and the figure for the losses was a mere $180 million). The news attracted so little attention it was hard to know what to make of it.

Welcome to the often surreal nature of modern Russia. The muted reaction brings to mind several other major fraud scandals over recent months that have been treated in an equally off-hand fashion.

Last April, for instance, a Moscow court convicted a certain Viktor Markelov for stealing 5.4 billion roubles ($180 million) from the Russian budget. Yet it wasn’t until December – seven months after Markelov’s conviction – that Russia’s state news agency RIA-Novosti reported on the case. It wouldn’t have attracted any attention at all, but for the scandalous death in prison in November of Sergei Magnitsky, a lawyer for the hedge fund Hermitage Capital, who had accused several police officers of complicity in the fraud.

Then there were disturbing reports last year of at least two attempts to steal tens of millions of dollars from Russia’s State Pensions Fund. These faded from the news just as quickly as they came.

And these are just the frauds which we know about. What else, one wonders, have Sberbank’s 250,000 employees been up to at the bank’s sprawling network of 20,000 branches? And what else is going on inside the other vast Russian companies and government agencies, each handling billions of dollars? In a recent survey, PricewaterhouseCoopers claimed that corporate fraud was more prevalent in Russia than in any other country.

One can’t help but wonder whether Sberbank’s extraordinary allegations don’t represent the tip of a very large iceberg.


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