Russian police have raided the Moscow offices of a Bombardier Inc. joint venture as part of an investigation into the Montreal-based transportation giant’s business relationships in the country, according to documents and video footage reviewed by The Globe and Mail.
The searches were conducted as part of a criminal probe into allegations of “corruption during procurement of railway equipment,” according to legal documents. The general-director of the Bombardier-controlled company has received at least five police summons since the probe began in the fall, documents from Russia’s Interior Ministry and the office of the Moscow region’s Transport Prosecutor show.
The legal troubles in Moscow were not disclosed to Bombardier shareholders in the company’s 2017 annual report, which was published in February, 2018.
Ludovic Saint-Pol, communications manager for the rail control division of Bombardier Transportation, acknowledged the legal action and said “the visit conducted on our premises involved a unit of the Moscow Region Customs Office.” He did not comment further on the matter
The Globe initially approached Bombardier Transportation more than three weeks ago with questions about the police action in Russia. A spokesman said at the time that the company had no comment on the matter.
The Globe contacted Bombardier again on April 24 to give the company another opportunity to reply, in light of the emergence of the videos and legal documentation, which were provided by railway-industry sources in Russia. The company again had no comment.
In the videos, Russian police, wearing masks and carrying assault rifles, can be seen entering an office while employees of the company stand away from their desks. A former employee identified the building as the north Moscow headquarters of Bombardier Transportation (Signal), a joint venture formed between Bombardier Transportation and the state-owned Russian Railways.
Bombardier owns 60 per cent of Bombardier Transportation (Signal), which was established in 1996, while Russian Railways owns 36 per cent. According to company documents, the remaining 4 per cent is controlled by a quartet of influential railway-industry executives that Bombardier refers to in its internal memos simply as the “Russian Partners.”
Bombardier’s relationships with those Russian partners − associates of former Russian Railways boss Vladimir Yakunin − have come under increasing scrutiny and led to international legal trouble for the Canadian company.
While it’s unclear from the videos what the armed police are looking for, documents examined by The Globe suggest the focus of the investigation is a Britain-based shell company called Multiserv Overseas Ltd. The shell company served as a profit-reaping intermediary on more than a hundred transactions involving the sale of Bombardier-made computerized rail-control systems, known as EbiLock 950s, into the Russian market.
Bombardier’s relationship with Multiserv Overseas was first revealed in an investigation by The Globe that was published in December, 2016. The Globe found that, while the company had a constantly shifting ownership structure − involving tax havens such as Belize, Panama and the Seychelles − Multiserv Overseas was founded by Yuriy Obodovskiy, one of Bombardier’s “Russian Partners.” The company’s ultimate beneficiary is another of the “Partners,” Alexey Krapivin.
The Russian police documents show that Andrey Golubev, the general manager of Bombardier Transportation (Signal), was first summoned by the anti-corruption office of Russia’s Interior Ministry to answer questions on Oct. 11 of last year. He was instructed to bring his passport when he reported to the Interior Ministry office.
Two Russian railway industry sources, speaking on condition of anonymity, said the videos showing the police raid of Bombardier Transportation (Signal) were taken in October, around the same time that Mr. Golubev was first summoned for questioning.
Mr. Golubev was summoned on three more occasions over the following six weeks, this time by the office of Moscow’s Transport Prosecutor. A Nov. 7 summons also includes some of the questions that prosecutors were seeking answers to.
The document shows that Mr. Golubev would be expected to explain how Bombardier Transportation (Signal) decided on Multiserv Overseas as a partner, who was involved in the decision-making process and how prices were set for the sale of Bombardier equipment via Multiserv Overseas.
The prosecutor also asked Mr. Golubev why his company didn’t just buy EbiLock 950s directly from the producer, Bombardier Transportation Sweden.
“Why didn’t you choose Bombardier Transportation Sweden AB, which is simultaneously the manufacturer of the … EbiLock 950 system, and the cofounder of Bombardier Transportation (Signal)?” reads the Nov. 7 summons, which is signed by Shamil Shakirov, the deputy transport prosecutor for the Moscow region.
Mr. Golubev received a fifth request for information, this time from a different division of the Interior Ministry, on March 6, 2018. Russian sources say a second police raid of the Bombardier Transportation (Signal) offices occurred around the same time.
Bombardier’s relationship with Multiserv Overseas is also at the centre of continuing legal action in Sweden, where the National Anti-Corruption Unit last year opened a wide-ranging investigation into contracts won in Russia and other parts of former Soviet Union by Bombardier’s local arm, the Stockholm-based Bombardier Transportation Sweden.
Swedish prosecutors are currently appealing last fall’s acquittal of a Russian national who was charged with “aggravated bribery” in connection with a contract that Bombardier won in Azerbaijan − a deal that netted Multiserv Overseas US$84-million in profit, while buying signalling equipment from Bombardier Transportation Sweden and selling it on to Bombardier Transportation (Signal). Four other Swedish nationals have been named as suspects in the same case.
Internal Bombardier documents entered into Swedish court show that Multiserv Overseas was one in a network of companies controlled by the “Partners” that served as intermediaries on Bombardier projects in Russia, Mongolia, Kazakhstan, Turkmenistan and Azerbaijan.
The World Bank, which funded the US$380-million project to install modern rail signalling systems in Azerbaijan, is conducting an audit of the deal. If Bombardier is found to have engaged in any corruption, the company could be barred from future World Bank contracts. That would be a devastating blow for Bombardier’s rail arm, which has a growth strategy heavily reliant on winning infrastructure contracts in the developing world.
Last summer, Bombardier announced it was conducting its own internal review of how the company operated in Russia and the former Soviet Union. Several employees in Sweden and Russia were suspended pending the outcome of the review, which Mr. Saint-Pol said was continuing.