Mavrodi Charged, Could Face 7 Years in Jail

Sergei Mavrodi, mastermind of the massive MMM pyramid scheme that recently collapsed, has been charged with two crimes that could send him to jail for up to seven years while the government said Monday it would issue decrees to prevent such scandals in the future.


Officials said Mavrodi, who has been in custody since Aug. 4, was charged Saturday with large-scale tax evasion and resisting search. They also said he would be moved in the next few days to Moscow's Matroskaya Tishina prison, best known for holding the plotters of the October 1991 coup.


Mikhail Andreyev, first deputy head of the investigation department for the Moscow police, said in an interview that Mavrodi could receive up to a five-year sentence for concealing money from the tax authorities and two years for failing to honor the search warrant presented in a dramatic raid by armed OMON troops on his apartment two weeks ago.


The charges were unrelated to the MMM pyramid scheme that collapsed several weeks ago robbing millions of investors of their savings. Instead they concern Mavrodi's dealing with Invest Consulting, one of the dozens of subsidiaries in his multi-billion-ruble empire.


In a separate move, the management of the Russian House of Selenga, a heavily advertised company that promised to add five rubles daily to every one ruble deposited, has suspended its operations, according to Itar-Tass.


The move followed a ruling by a Volgagrad court that the company was operating as a bank but lacked an appropriate license.


Deputy Finance Minister Sergei Alexashenko said in interview the government would soon adopt several measures that would make parts of MMM-style pyramid schemes illegal in the future.


Alexashenko said the government would pass decrees prohibiting companies from quoting their own stocks and strengthening existing security laws that limit the amount of shares a company can issue, require financial reporting and compel lists of shareholders to be maintained.


Among the new proposals will be a requirement that companies with more than 1,000 shareholders submit financial information quarterly to the Finance Ministry.


"We cannot prohibit pyramid schemes, this is an art," Alexashenko said. "We can try to limit some semi-legal procedures."


He said the only apparently illegal aspect of the MMM scheme was that Mavrodi may have sold more than the 991,000 shares he was authorized to issue by the Finance Ministry. But Alexashenko stressed that there was as yet no evidence for that.


Indeed, the government has repeatedly tried to distance itself from the collapse of the MMM pyramid, in which shares fell to 1,000 rubles (50 cents) from a high of 115,000 three weeks ago, prompting protests from angry shareholders in Moscow and St. Petersburg. Andreyev stressed that the charges against Mavrodi deal only with Invest Consulting, in which Mavrodi is accused of failing to report 24.5 billion rubles in company revenue to the tax service.


Mavrodi's lawyers have said that funds were only temporarily loaned to the company and have been returned to the lenders.


MMM shareholders, Andreyev said, "have expressed their anger about the investigation but we are only looking into the Invest Consulting company."


According to Russian law, prosecutors have 1 1/2 years to prepare their case after filing charges.


Mavrodi can be held in prison if the prosecutor chooses.


But Andreyev said the case would probably take only two months to prepare.


On Friday, a Moscow court rejected a petition brought by Mavrodi for his release. A claim that the search on his apartment had been illegal was also rejected by the court.