Poor Return on Defense Ministry Auctions

 On 10 January, Interfaks-AVN reported that the Defense Ministry has sent the federal budget a fraction of an expected 10 billion rubles in proceeds from sales of its property in 2009, according to a Federation Council committee source.  The Audit Chamber expected 10.6 billion rubles, but only 1.5 billon has been forwarded to the budget.  The income was supposed to come from the sale of vacant land, unused property, and excess equipment.  So, either the sales did not produce the anticipated profits or corruption in the Defense Ministry drained them away.  The source said there was accurate accounting of what was to be sold, and what should be gained from the sales, and so there’s an obvious temptation to steal.

 In a November Duma roundtable, the Deputy Chairman of the Defense Committee, Mikhail Babich said:

“Corrupt practices in the army and navy increase every year, not least because of the Defense Ministry’s noncore functions.  At present the Defence Ministry itself takes stock of its noncore assets, values them itself, and sells military property, land, real estate, and entire military cantonments itself. Is this really the Defense Ministry’s function?  Why doesn’t the Defense Ministry hand its noncore assets over to the Federal Agency for the Management of State Property and the government, for a subsequent sale in accordance with the law?”

It doesn’t because pretty early on Defense Minister Serdyukov won a battle to keep this right inside his department.

Nezavisimaya gazeta’s Vladimir Mukhin picked up on this story yesterday.  He concludes right off that Serdyukov’s ambitious plans to profit from unused Defense Ministry property turned into a fiasco.  He notes the Defense Ministry hasn’t made a secret of this, saying on its auction site that more than half of planned auctions didn’t occur because of the lack of applications to participate.

Mukhin quotes Aleksandr Kanshin, chairman of the Public Chamber’s veterans, servicemen, and families committee, saying the unmet plan for selling excess military property (VVI) is more or less connected with last year’s economic crisis, but from the other side, it’s not really the Defense Ministry’s business to be salesman for state property, and military men have no experience, personnel, or resources for this.  Another interlocutor says there have been significant instances of corruption arising in the sale of VVI.

Simultaneously, the Defense Ministry’s Personnel Inspectorate and the Main Military Prosecutor (GVP) have launched a widespread anticorruption inspection under orders from Serdyukov.  The inspection covers Defense Ministry directorates, the armed services, branches, military districts, and fleets.  A law enforcement source told Interfaks the inspection aims to prevent crimes by officers and generals and will continue until 1 March.

The source said corruption and other offenses by several generals and senior officers had already been uncovered, and the central attestation commission might relieve them of their duties.  Offenses were noted in the VVS, VDV, Railroad Troops, and Ground Troops.

More than 40 percent of offenses by officers involved the theft of property or funds, and crime by senior officers is rising.  The GVP reported damages to the state from military corruption exceeded 2.5 billion rubles.

Krasnaya zvezda’s interview with the MVO military prosecutor is quite astounding.  He says he’s been implementing the national anticorruption plan since 2008, using an interdepartmental group, including “state security organ employees in the troops” [FSB officers] and command representatives.  So, in 2009, prosecutors and FSB officers investigated 190 cases.  Based on these, they gave commands 200 reports leading to disciplinary action against more than 300 “responsible parties.”  More than 130 investigations were directed to the “military-investigative organs” [the military section of the Investigative Committee or SK].  More than 100 criminal corruption cases were developed.  He credits the system of coordination among the “organs” involved.  But corruption sometimes has a very organized character.  He cites the loss of 128 million rubles to a corruption ring of officers from the Defense Ministry’s “central apparatus,” the apartment management directorate and staff of the MVO who stole and sold 140 vehicles and pieces of equipment in 2005-2008.

Mukhin gives some attention to the GVP’s figures too.  He adds that the GVP uncovered 1,500 corruption crimes in the ‘power’ ministries as a whole in 2009.  Every other case was either aggravated, or especially aggravated.  In 70 percent of cases, officers were the culprits.  In the GVP, they say that dishonest military commanders are making a fortune on auctions and contract bidding.

Mukhin then reminds everyone that it was Prime Minister Putin who, in late 2008, gave the Defense Ministry the right to handle its own VVI, rather than the Federal Agency for the Management of State Property.

Commenting for Grani.ru, Vladimir Temnyy also blames Putin for letting the Defense Ministry run these auctions.  The first thing Serdyukov intended was to inventory and get rid of noncore property and functions which lead generals to embezzle state funds, but this has apparently happened anyway since 9 billion rubles are missing.  So why wasn’t somebody like Serdyukov, as everyone expected, able to pull off a successful process of shedding VVI and benefiting the state.  Two reasons–the crisis and theft by his subordinates surpassing all conceivable limits.  Could the reformer become a victim of his own trust in his people?  The state won’t get the money back anyway because it’s already gone into fabulous suburban homes occupied by modest colonels and generals, according to Temnyy.  So the sale of VVI has raised military living standards after all, at least for some.

Recall also that Nikolay Poroskov said one source told him the recent command changes weren’t just about age and rotations, a third reason was the results of the personnel [and GVP?] inspection above.

Also, there’s the talk about devising a new “officer’s honor code.”  Certainly, it will prohibit corruption.  Can’t be a coincidence.

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