Bombardier and the Putin connection
A single mention in the Panama Papers and a Russian middleman's mysterious exclusion from Canada's sanctions list triggers a round-the-world chase for answers
It was a clear and chilly afternoon in Moscow – March 18, 2014 – when Russian President Vladimir Putin signed the documents to formally annex the Crimean Peninsula away from Ukraine.
Frustrated Western governments soon began rolling out the only response they could agree on to Mr. Putin's brazen redrawing of Europe's borders: economic sanctions. Over the next two days, the United States would designate 27 individuals who would be denied travel to the U.S. and have their financial assets in the U.S. frozen.
In the Treasury Department news release announcing the sanctions, one of the longest sections was devoted to Vladimir Yakunin, then the head of the massive, state-controlled Russian Railways. "Yakunin is being designated because of his official position in the Russian government, but he is also a close confidant of Putin," it read in part.
That same week, the government of Prime Minister Stephen Harper – always keen to confront Mr. Putin and show his support to the large Ukrainian-Canadian diaspora – announced an even longer list of 32 individuals considered close to the Kremlin who would be banned from travelling to Canada and have their assets in the country frozen.
But there was one striking omission: Mr. Yakunin, one of Mr. Putin's oldest and most trusted associates. Before Mr. Putin's rise to the presidency, the two men owned neighbouring dachas – Russian country homes – on the shores of Lake Komsomolsk, near Mr. Putin's native St. Petersburg.
As head of Russian Railways, Mr. Yakunin developed a close relationship with key figures at Canada's flagship transportation company, Bombardier Inc.
During his decade-long tenure at the head of the state railway monopoly – an entity that moves almost a billion passengers a year, and which took in revenue of $31-billion in 2015 – Mr. Yakunin's name became synonymous not only with the Kremlin inner circle, but with allegations of high-level corruption in Mr. Putin's Russia.
He resigned as head of Russian Railways in 2015, several months after a series of media reports alleged Mr. Yakunin had funnelled contracts worth billions of dollars to his close business associates, using shell companies to disguise the ultimate beneficiaries.
A months-long investigation by The Globe and Mail – prompted by a single mention in the Panama Papers leaks – found 100 transactions between Bombardier and Russian Railways that appear to follow a similar, peculiar pattern.
The revelation throws new light on Mr. Yakunin's curious ability to avoid being targeted by Ottawa. Canada's sanctions list has grown 13 times over the past 2 1/2 years – under both Conservative and Liberal governments – and now names 107 individuals and 39 entities. But Mr. Yakunin's name is still not on it.
When asked in 2015 about his omission from Canada's list, Mr. Yakunin hinted that Russian Railways's long relationship with Bombardier may have played a role – and he suggested that there could have been some sort of retribution. "I suppose Canadians are not the same masochists, like, you know, Europeans," he told a meeting with the heads of several news agencies in St. Petersburg. "This is jokingly answering your question. I consider that I am known enough in Canada as a promoter of the idea of collaboration."
In an e-mail exchange this fall with The Globe and Mail, Mr. Yakunin said he saw no reason he should be sanctioned by any country: "I have no sway over Russia's foreign policy." He also denied there was any corruption at Russian Railways under his leadership.
Mr. Yakunin lavished praise on former Bombardier chairman and chief executive officer Laurent Beaudoin. "He was and I believe still is one of the greatest professionals I have ever met. And I always valued the level of personal trust and respect we had in our relations," Mr. Yakunin wrote.
Official lobbying records show that a Bombardier official – the name on the register is Mr. Beaudoin's son Pierre Beaudoin, who succeeded his father as Bombardier's chief executive – visited the office of then-foreign minister John Baird on March 20, 2014, just as the Russian sanctions list was being drawn up.
Bombardier denied having any influence over the Canadian government's sanctions list, and Mr. Yakunin's exclusion from it. "Obviously there was some lobbying," said a well-placed Conservative source, who described the pressure as "fairly circumspect." The source said there was "constant discussion" within the Harper government about adding Mr. Yakunin's name to the list.
Bombardier has been a major player in the Russian transportation business since the mid-1990s. But its relationship with Russian Railways grew rapidly after Mr. Yakunin took the helm in 2005, including the formation of a new joint venture between the two companies.
The transactions examined by The Globe and Mail took place between 2011 and 2016, and involved about $160-million (U.S.) worth of sophisticated train signalling systems, known as Ebi Lock 950s, made at facilities in Sweden that belong to Bombardier's rail unit. Most often, the equipment was sent to one of two companies in Russia that are jointly owned by Bombardier and Russian Railways.
What isn't clear is why the sale of Bombardier equipment to two Bombardier-affiliated businesses needed a middleman.
The firm in the centre of the transactions is called Multiserv Overseas Ltd. It's a shell company that is registered in Britain, has directors living in Cyprus, and has a shifting ownership history that includes a changing series of other shell companies listed in a trio of offshore tax havens: Seychelles, Panama and Belize.
Multiserv appears to have at least an indirect connection to Mr. Yakunin. Its founding director was a man named Yuriy Obodovskiy, who is described in Russian media as a close associate of Mr. Yakunin (although Mr. Yakunin denies this). Mr. Obodovskiy also sits on the board of directors of one of the joint ventures that Bombardier formed with Russian Railways to import its equipment into Russia.
When asked about his company's relationship with the offshore company, Bombardier Transportation spokesman Marc-André Lefebvre said Multiserv Overseas had been part of Bombardier's supply chain since 2011, but could add little other information. "Multiserv is nominated by Russian Railways as the exclusive dealer of critical components to Ebi Lock 950 CBI System," he wrote in response to e-mailed questions.
But despite its apparent involvement in the sale of about $160-million in Bombardier gear, Multiserv appears to have no staff and no operating headquarters.
So The Globe set out to learn more about Bombardier's mysterious middleman in Russia. Our journey took us to London, Cyprus and Moscow, and yielded as many questions as answers.
Bombardier's expanding ties with Russian Railways
Bombardier has for decades been one of the giants of Canadian manufacturing, and one of the country's best-known corporate ambassadors abroad. Based in Montreal, it remains one of Canada's few genuinely global firms – albeit one that has fallen on hard times.
In October, it announced it would cut 7,500 jobs, more than 10 per cent of its total work force, across its rail and aerospace divisions. That move was the latest in an ongoing retrenchment designed to keep the company afloat while it gets a new commercial jet program, the C Series, off the ground. The C Series is billions of dollars over budget, and the cash drain forced the company to seek a $1-billion investment from the Quebec government; it is still waiting to find out whether the federal government will approve its request for a similar cash injection, money that would help buy some time for its turnaround plan.
Russia, meanwhile, has long been one of Bombardier's most important markets in the developing world. In the past three fiscal years it has reported more than $1-billion in sales in the country.
As with many foreign companies in Russia, it operates with the help of local partners. Twenty years ago, Bombardier joined forces with the national Railways Ministry to create a joint venture called Bombardier Transportation (Signal) Ltd., to produce control systems for Russia's 128,000 kilometres of railway tracks. The contract was continued in 2003, when Russia's rail network was partly denationalized with the creation of Russian Railways as a joint stock company.
The relationship did not always go smoothly. In 2004, Bombardier filed a $70-million lawsuit against Russian Railways in a Stockholm court after its Russian partner tried to walk away from a deal to produce high-speed Bombardier locomotives in favour of an offer from a German rival, Siemens AG. "I would say there are certain sectors of the Russian economy where lawlessness still prevails. Unfortunately, one of them is the natural monopoly of the railway," Christian-David Mueller, then-general director of Bombardier Russia, said at the time.
But Bombardier's troubles seemed to disappear shortly after Mr. Yakunin was appointed head of Russian Railways in 2005.
Mr. Yakunin came to the post from a wildly varied background. In the late 1980s, he served as a Soviet diplomat at the United Nations, leading to the widespread assumption that he had KGB training. Like many former apparatchiks, Mr. Yakunin spent the 1990s in private business, before joining the government shortly after Mr. Putin took power in 2000. He served first as deputy transport minister, before moving to become deputy head of Russian Railways upon its creation in 2003.
Bombardier dropped the lawsuit over the locomotives in 2005, when Russian Railways agreed to fulfill the contract. A few months later, Russian Railways announced plans to buy another $3-billion worth of Bombardier equipment.
The relationship expanded in 2007, when Bombardier became involved in a joint venture with Russian Railways, buying a stake of just less than 50 per cent in the railway's signalling division, known by its Russian acronym, Elteza.
Railway signalling equipment has been a big business for Bombardier in Russia. Its Ebi Lock units are sophisticated computer-based systems that help rail companies control routes and trains, to ensure safe operation and minimize the risk of accidents. Some of this gear has gone to the far reaches of the Trans-Siberian Railway, the world's longest railroad, and its Baikal-Amur branch line, which loops around Lake Baikal, the world's deepest lake.
But those epic train journeys were short compared with the route through which money has flowed as the Ebi Lock 950s were sold into Russia.
The Globe and Mail examined documents relating to 99 sales of the signalling equipment. In each case, the producer of the gear is listed as Bombardier Transportation Sweden, a subsidiary that does engineering and manufacturing on railway and transit systems.
In most of the transactions, the importer of the equipment is one of Bombardier's joint ventures with Russian Railways – either Elteza or Bombardier Transportation (Signal). In others, it's a privately held Russian transportation company known as Prommikrotsentr.
On import documents, Multiserv Overseas is listed as the shipper. But the phone numbers attached to the records don't lead to a Multiserv office. In fact, when The Globe called the numbers, the managers at the companies – one Russian firm, one Lithuanian – told us they had never heard of Multiserv.
The data for the transactions – viewed on importgenius.com – are incomplete: They show only the price declared for the Ebi Lock 950s as they were imported into Russia. They do not show whether the $160-million is what was finally paid for the products, since both Bombardier and Russian Railways regard the final sale price of the Ebi Lock 950s as a corporate secret. "Pricing details in regard to individual pieces of equipment … are confidential business information that cannot be divulged," said Marc Laforge, another Bombardier spokesman.
Mr. Laforge said that Multiserv Overseas Ltd. "did not receive fees of any type" for its services.
But a separate, 100th, transaction is more fully revealed because it was contained in the Panama Papers leaks, and reported on by Novaya Gazeta, an independent Russian newspaper.
The documents, shared with The Globe and Mail, go into the details of a January, 2014, deal involving 13 Ebi Lock 950 systems purchased by Multiserv Overseas from Rambo Management Inc., a company controlled by Alexey Krapivin, the son of a long-time associate of Mr. Yakunin.
The transaction involved a $23-million payment to Rambo Management, which is registered in the British Virgin Islands, from Multiserv's account at the Nicosia, Cyprus, branch of First Bank of the Middle East (FBME).
Anti-corruption experts say everything about the deal rings alarm bells.
The British Virgin Islands is a notorious tax haven that provides a business and banking address to hundreds of thousands of non-resident companies. Management of FBME Bank, meanwhile, was taken over by the Central Bank of Cyprus in July, 2014, after it was named as a "financial institution of primary money-laundering concern" by the Financial Crimes Enforcement Network of the U.S. Treasury. FBME was accused of laundering money for organized crime, as well as for Lebanon's Hezbollah militia.
Bombardier's Mr. Laforge said that – although only Bombardier makes the Ebi Lock 950s – his company could not explain the unusual transaction.
"Bombardier Transportation has never conducted business with Rambo Management Inc. and consequently cannot provide any further information," he wrote.
None of the material seen by The Globe and Mail suggests any criminal activity by Bombardier or its Swedish subsidiary. Although two separate investigations into whether Bombardier Transportation paid bribes to win rail contracts in South Africa and South Korea came to light last year, no charges have been laid in either case.
However, The Globe and Mail's research into Multiserv Overseas – which appears to conduct no business other than its relationship with Bombardier – raises questions about whether the Montreal-based company did proper due diligence regarding its partners in Russia. It's also unclear whether Bombardier stayed within the boundaries of its own corporate code of conduct in routing so many transactions through Multiserv Overseas.
Bombardier's code of conduct declares that suppliers "must never make or approve an illegal payment to anyone under any circumstance," and "must disclose any actual or potential conflict of interest, and discuss it with Bombardier's management. Any activity that is approved, despite the actual or apparent conflict, must be documented."
When asked about the Ebi Lock 950 transactions, Russian investigator Sergei Lesnichiy – director of the Centre for Financial Investigations, an anti-corruption body set up by the Russian state – told The Globe and Mail that he saw potential grounds for an investigation. "There are signs of a conflict of interest," Mr. Lesnichiy said in an interview, pointing specifically to Mr. Obodovskiy's roles as both the founder of Multiserv Overseas and deputy chairman of the Elteza board of directors.
Robert Barrington, executive director of the British chapter of Transparency International, concurred. "This has got red flags all over it," he said. Referring to Bombardier's willingness to do business with an entity as murky as Multiserv Overseas, he added: "You would expect the highest levels of due diligence to be done."
The Globe decided to pay Multiserv a visit.
A mystery address in the heart of London
At first glance, Multiserv Overseas has the hallmarks of the kind of big player you might expect to be involved in major transactions between giants of the Canadian and Russian transportation industries.
The company is registered in Britain, with an office at 5 Fleet Place, a nine-storey building that sits atop a trendy tea-and-salads restaurant in the heart of London's financial district. The building is a short walk from the grey dome of St. Paul's Cathedral, though during the business day the ringing of the ancient bells is drowned out by the groaning of construction cranes and the rumbling of double-decker buses.
But the address turns out to be the first of many chimeras.
The receptionist at 5 Fleet Place – who sits at a metallic desk in the middle of a vast lobby that is empty but for a pair of thin, potted trees in the corner – says she has never heard of Multiserv Overseas. The lobby wall isn't much help: While 484 firms declare 5 Fleet Place as their registered address, only four have their names on it.
The biggest of those is Charles Russell Speechlys, a London law firm whose forerunner, Speechly Bircham, is connected to at least eight offshore entities named in the Panama Papers.
After a search of her computer, the receptionist at 5 Fleet Place confirms that Multiserv Overseas – a company that Bombardier says it has been doing business with since 2011 – is one more company registered inside the offices of Charles Russell Speechlys.
In the seventh-floor offices of Charles Russell Speechlys, questions about Multiserv Overseas initially draw looks of confusion. After a flurry of consultation, a Globe and Mail reporter is escorted into a small anteroom of the law office, which contains only a small black table, four chairs, a box of Twinings tea bags and a black telephone.
The telephone rings immediately. "Do you understand that this is not Multiserv, although they are our client?" inquires a polite female voice with an English accent.
Asked to explain the nature of Multiserv Overseas and its business, the woman replies by asking the reporter to return to the lobby to wait for another phone call.
The response comes less than five minutes later, after the secretary herself takes a phone call. "We are not legally compelled to answer your questions about our client," she said with a smile after hanging up the call. "Have a nice day."
It was the first dead end in a round-the-world hunt to understand one of Bombardier's business partners in Russia. But it would not be the last.
From Alpha to Omega
A trail of documents shows that Multiserv Overseas was founded in 2010 by Mr. Obodovskiy, a businessman in his mid-40s who plays multiple roles in Russia's transportation industry. (In addition to his role at Elteza, Mr. Obodovskiy sits on the boards of several railway-related companies with Alexey Krapivin, the owner of Rambo Management.)
When Multiserv Overseas was first incorporated, its address was listed as 13 John Prince's St., steps from the Oxford Circus tube station in London's affluent Marylebone district. That address, then and now, belonged to a firm called Alpha Commerce Ltd.
So we went there.
The cramped offices of Alpha Commerce are comprised of two rooms full of IKEA-style furniture. On a recent Friday afternoon, one among a trio of women working in them was busy entering data called in by a Russian-speaking client who was looking to form a new corporation.
Two floors down from Alpha Commerce is Omega Group, where Aleksej Strukov, one of two directors of Alpha Commerce, keeps a separate, much more expensively furnished, office.
Mr. Strukov said "hundreds" of companies are registered inside 13 John Prince's St., but he nonetheless remembers the creation of Multiserv Overseas.
"I remember because I went to Moscow for that one," Mr. Strukov said. Which, he adds, is not the usual practice. (Omega Group claims on its website that it can set up a new firm, issuing a certificate of incorporation as well as minutes of the new company's first meeting, within "several hours to one day." It charges about $50 for the service.)
Mr. Strukov, a physically fit 47-year-old with short blond hair, said he met personally in 2011 with Anton Belyakov, a Russian who would succeed Mr. Obodovskiy as the director of Multiserv Overseas.
Mr. Strukov said Multiserv Overseas was what it appeared to be on the shipping records, a "supplier" that purchased equipment from Bombardier Transportation Sweden – "and other companies" – and sold it to Russian Railways.
He said the firm was incorporated in London because having a British address was more beneficial than being listed in Russia "with its reputational problems," or higher-tax jurisdictions such as Canada or Sweden.
"I looked into who the beneficial owners of [Multiserv Overseas] are," Mr. Strukov said of his trip to Moscow. But he wasn't about to share the information. "I'm afraid you'd have to be standing here with a warrant."
He directed all further questions to Charles Russell Speechlys.
Asked to provide evidence that Multiserv Overseas was anything other than an offshore shell company, Bombardier spokesman Marc-André Lefebvre declined to comment. "Our commercial relationship with them is subject to standard confidentiality and non-disclosure obligations."
A company with a curious corporate history
Multiserv Overseas's unexplained role in $160-million of Bombardier rail equipment into Russia is not the only thing that seems odd about the company. Its corporate history, though only six years long, is filled with changes of ownership.
At the time of the company's creation in July, 2010, Mr. Obodovskiy was the only named director, and Multiserv Overseas issued only a single share, valued at one British pound. That share belonged to another British company called Multiserv Management LLP, which had been incorporated three months earlier at the same 13 John Prince's St. address in London.
Multiserv Management in turn had two founding shareholders, according to documents filed at Companies House, the British government agency that handles the registration and dissolution of corporations. The first was named as Sevenseals Management Inc. of Seychelles, an independent archipelago of 115 islands off the east coast of Africa. The second was listed as Yu Mark Trading, headquartered in the Central American country of Belize.
Neither Sevenseals nor Yu Mark appears to have conducted any activity other than their joint ownership of Multiserv Management.
In the government files, Sevenseals is listed as sharing one of the planet's most notorious addresses for shell companies: Suite 310 in the Premier Building in the heart of Victoria, the capital city of Seychelles.
Suite 310 first gained infamy in 2007 when then-U.S. Senator Barack Obama published a letter wondering how a woman named Stella Port-Louis – working out of Suite 310 in the faraway Premier Building – could possibly be the owner of more than 100 companies in the state of Wyoming alone. Mr. Obama said the fact that so many companies traced their ownership to a single Seychelles address was a clear example of the "serious problems confronting law enforcement as a result of minimal company ownership information requirements."
Another dark chapter was added to the history of Suite 310 in 2008, when the address was linked to four firms involved in money laundering for Mexico's Sinaloa drug cartel. Four other companies linked to Suite 310 were connected to a 2009 effort to smuggle weapons from North Korea to Iran.
One year after that, Bombardier began doing business with an entity part-owned – at least on paper – by a firm at the same address.
The ownership saga of Multiserv Overseas only begins there. In 2012, ownership of Multiserv Overseas was transferred to a single Panamanian " sociedad anonima" (anonymous society) called Sistema Amarelo. A year later, Sevenseals was back as part owner, with it and Sistema Amarelo controlling one share each. That structure lasted until January, 2015, when both shares were transferred to an entity called Renson Trading Ltd., newly registered in Belize. The listed address of Multiserv Overseas was briefly moved to yet another central London law office.
"Bombardier Transportation performed a due diligence in regard to Multiserv Overseas Ltd.," Mr. Laforge told The Globe and Mail. "Bombardier Transportation abides by the Bombardier Code of Ethics and Business Conduct and applies the highest standards of ethical business conduct. Our worldwide corporate structure abides by all applicable laws."
When asked whether anyone from Bombardier had visited the Seychelles, Panama or Belize to determine who the real owners of Multiserv Overseas might be, Mr. Laforge replied: "This question should be addressed to Multiserv Overseas Ltd."
Yet another restructuring took place in April, 2015. Multiserv Overseas filed papers declaring that its office had moved again, this time to 5 Fleet Place. It also said its sole director was a woman named Svetlana Tutunaru, a resident of Cyprus.
The Globe and Mail tracked her down, and discovered she spends her days working at a company called Delfi Corporate Services.
'Are you sure you're in the right place?'
Delfi Corporate Services can be found on the fourth floor of a mid-rise office block in the modest business district of Nicosia, the laid-back and sun-drenched capital of Cyprus. The building is conveniently located across the street from the government's overwhelmed Registrar of Companies office, where a small team of bureaucrats sits amid a forest of cardboard filing boxes, trying to keep track of the more than 253,000 corporate entities that are registered in the Republic of Cyprus, a country of just 838,000 residents.
The website of Delfi Corporate Services says it provides "virtual office" services for "clients who want to show their permanent presence in Cyprus." Delfi helps clients look as if they have an office in Cyprus by providing a telephone line, receptionist and local business address.
Ms. Tutunaru initially seemed not to recognize the name of Multiserv Overseas, a company she was listed as the sole director of. "Are you sure you're in the right place?" she politely asked a Globe and Mail reporter who arrived unannounced in the cramped lobby of Delfi Corporate Services. "This is not Multiserv Overseas."
Reminded that she was the director of Multiserv Overseas, Ms. Tutunaru responded with a look of confusion.
In fact, publicly available records show that Ms. Tutunaru is the named director of at least half a dozen companies listed in Cyprus, and one listed in Panama. Asked if she could discuss Multiserv Overseas and its relationship with Bombardier, Ms. Tutunaru leaned into a colleague's office. "There's someone here asking about Multiserv Overseas?" she said in Russian.
The colleague rushed into the lobby and declared that she and Ms. Tutunaru were late for a meeting and had to leave the office immediately.
The next day, the receptionist at Delfi Corporate Services said Ms. Tutunaru was too busy to talk any time in the foreseeable future. "She has meetings all the time, so many meetings." Several follow-up calls and e-mails requesting information about Multiserv Overseas Ltd. went unanswered.
Asked about Ms. Tutunaru's position on paper as the only director of Multiserv Overseas Ltd. – a firm Bombardier Transportation does extensive business with – Mr. Laforge said: "Bombardier has no contractual relation either with Ms. Tutunaru personally or with her company Delfi Corporate Services."
Several weeks after that e-mail exchange, Ms. Tutunaru was replaced as the sole director of Multiserv Overseas by Ekaterina Trofimova, a 28-year-old resident of Cyprus with no previous board experience.
The cost of doing business in Russia?
Vladimir Yakunin insists he has done nothing wrong.
"I vaguely recall the name Maltiserve [sic]," the former Russian Railways boss said in his e-mail answers to The Globe. "The idea that contracts at [Russian Railways] could somehow be awarded on non-market or non-competitive terms is groundless and simply impossible."
Mr. Yakunin acknowledges a relationship with Andrei Krapivin – the late father of Alexey Krapivin – but says the media's portrayal of the Krapivin family (and by extension Alexey Krapivin's colleague, Yuriy Obodovskiy) as part of a web of corruption at Russian Railways was "absurd." He says he is "fairly certain" he has never met Mr. Obodovskiy. "There was not a single case where [Russian Railways] paid money to a contractor that did not do the work that it was contracted to do," he said.
After his surprise resignation last year – part of a generational shakeup in Mr. Putin's "politburo" – the 68-year-old is now trying to reinvent himself as an "unofficial voice" of Moscow, a scrupulously pro-Kremlin commentator on political affairs.
Grigory Levchenko, an aide to Mr. Yakunin, said the corruption allegations in Novaya Gazeta and other outlets were "politically motivated attacks" against his boss. He said that Mr. Yakunin, because he was perceived as close to Mr. Putin, "picked up his fair share of opponents, who will do anything to attack him, including thinking up incredibly elaborate accusations, which are fundamentally baseless."
Attempts to reach Mr. Obodovskiy or Mr. Krapivin for comment via several of their companies proved unsuccessful. Bombardier said it could not help arrange an interview with Mr. Obodovskiy, nor answer questions on his behalf.
Russian media have reported that Mr. Obodovskiy and Mr. Krapivin hold – via a series of shell companies – controlling stakes in the lead contractor carrying out a $16.3-billion upgrade of the Baikal-Amur railway, where many of the Ebi Lock 950s are being installed. Russian media have also reported that a Kremlin-ordered audit of the modernization of the Trans-Siberian and Baikal-Amur railways carried out by the accounting firm Deloitte found costs were 45 per cent higher than necessary.
"Russian Railways is the most extreme example of corruption [in Russia] because they are the biggest state company and give out the largest amount of contracts and tenders," said Gyorgiy Alburov, an investigator at the Fund to Fight Corruption, a non-government organization founded by Russian opposition figure Alexey Navalny.
Bombardier, Mr. Alburov said, likely faced two choices when it came to doing business with Russian Railways: to accept an unusual payment structure involving offshore companies, or risk losing one of its biggest customers. He said it was astonishing that Mr. Yakunin's name had been left off Canada's otherwise lengthy sanctions list.
"He should be forbidden from entering any civilized country. This person is the symbol of corruption in Russia. He's a friend of Putin who controlled a huge state company and made his own friends very rich."
Canada's Office of the Commissioner of Lobbying records six meetings that Pierre Beaudoin had with Conservative government officials in 2014, including the March 20 meeting with Garry Keller, chief of staff to Mr. Baird. (Mr. Beaudoin stepped down last year as Bombardier's chief executive officer, but remains the company's executive chairman.)
Mr. Keller said the records are inaccurate in suggesting that he met Mr. Beaudoin one-on-one. Mr. Keller said the March 20, 2014, meeting was actually with Pierre Pyun, Bombardier's vice-president of government affairs, to discuss a dispute between Bombardier and the Greek government over payment for four fire-fighting water bombers the transportation company had sold to Athens.
Bombardier, through Mr. Laforge, the spokesman, declined to comment on the March 20 meeting. Mr. Laforge said Bombardier had "regular and frequent contacts with a large number of departments and offices of the Government of Canada," and that those contacts were "in compliance with applicable laws."
Several sources said that the final decision about which names were put on the sanctions list was made in Mr. Harper's Prime Minister's Office.
Austin Jean, a spokesperson for Global Affairs Canada, refused to comment on whether the current Liberal government was still considering adding Mr. Yakunin's name to the sanctions list, which grew again last month when 15 new names were added. "Decisions to list certain individuals and entities are made strategically, and in close co-ordination with our international partners," Mr. Jean said.
Several Western businesspeople based in Moscow agreed with Mr. Alburov's assessment that a struggling Bombardier – which is in constant competition for Russia contracts with Siemens AG of Germany – likely had little choice but to accept a payment structure dictated to it by Russian Railways. They said conducting transactions via apparently superfluous offshore entities was often a condition of winning the deal when seeking contacts from enterprises owned by the Russian state.
"This type of arrangement is quite common in Russia, where a related-party firm is given exclusivity for a certain function or service connected with a large conglomerate or state-owned company," said one Western businessman with extensive experience in Russia, speaking on the condition of anonymity.
"There is no amount of due diligence a Western company could do avoid these arrangements, except to avoid the market altogether," said another Moscow-based Western businessman.
But completely avoiding Russia and other countries where corruption levels are high is probably not a realistic option for Bombardier – certainly not in its current state. As the company's C Series jet program has floundered, its aerospace division has been bleeding money. Over 2014 and 2015 alone, Bombardier Inc. burned nearly $3-billion in cash, forcing it to take significant measures to raise new money – including seeking the help of governments in Quebec City and Ottawa.
The aerospace unit has already been hurt by the sanctions war over Ukraine. The company signed a letter of intent in August, 2013, that would have seen it sell 100 of its Q400 turboprop planes to Russia's Rostec. The deal, worth $3.4-billion at the time, was put on hold after Russia annexed Crimea and Canada joined other Western governments in applying sanctions.
In the midst of this corporate crisis, the Bombardier rail unit has been a rare bright spot. Last year it posted an operating profit of $465-million, and it has $31-billion in future orders. While it has had its share of troubles – its failure to deliver new streetcars on time to the Toronto Transit Commission is one black eye – its future prospects are good enough that when Bombardier needed to raise money, it was able to sell 30 per cent of the rail division for $1.5-billion to the Caisse de dépôt et placement du Québec.
At least some of those prospects are based on the company's ability to make sales in big developing markets including China and Russia, which get poor scores from anti-corruption bodies such as Transparency International – places where mysterious middlemen sometimes appear in corporate deals to take a slice of the action.
Mr. Alburov of the Fund to Fight Corruption said the real victims of the alleged schemes at Russian Railways were ordinary Russians, who had to pay higher train fares – and higher prices for food and other goods shipped by rail – to compensate for what he said were the billions of dollars skimmed from Russian Railways.
Mr. Lesnichiy, the Russian financial-crimes investigator, said that the shifting ownership structure of Multiserv Overseas suggested the company's purpose was to be a "flexible" intermediary. He said it was very unlikely that the offshore firm took no profits, as Bombardier's spokesmen claimed.
"The end goal of any deal is for it to be profitable for all sides, including the middleman," Mr. Lesnichiy said.
"How do you define the sum that the middleman is owed in a negotiation? One hundred rubles or one million? Has he earned it, or has he stolen it? And has he stolen from me or stolen from you?"
Editor's note: An earlier version of this story incorrectly said that Bombardier sold $2.46-billion (U.S.) in Ebi Lock 950 equipment into the Russian via Multiserv Overseas. That figure was based on incorrect currency information provided by ImportGenius.com, a provider of trade data. In fact, the correct figure is about $160-million (U.S.). The story has been updated.