Russian management hurting business for AB InBev

The Moscow Arbitration Court held a session on a high-profile case in which one of the world's largest beer companies, Anheuser-Busch, and a number of its Russian distributors participated. The company's share in the global beer market is estimated at 28%, brewers produce such brands as BUD, Stella Artois, Corona Extra, Leffe, Hoegaarden, Löwenbräu, Franziskaner, Spaten, Efes, Bavaria, Redd’s, Pilsner and many others. The scandal has been developing for several years, acquiring new details, including criminal ones, writes James Wilson.

It is quite likely that Anheuser-Busch is not aware of this fact. Anheuser-Busch is accustomed to working in accordance with international standards and likely hadn’t even accounted for the possibility of such schemes on the part of one of its contractors.

We are also sure that the court and judge are not responsible for the criminals success, due to the intense specificity of bankruptcy cases and huge numbers of documents requiring analysis and comparison, on top of the Moscow Arbitration Court’s workload.

Covering for businessmen

On 15 February, a meeting was held at the Moscow Arbitration Court, where lawyers hired by Sun InBev (part of AB InBev) tried to create a new practice for bankruptcy cases which apparently involved some less than legitimate methods.

During a court hearing in February, Sun InBev’s lawyers submitted a petition to exclude certain directors from liability in the case on behalf of the LLC DIL-Beer Nizhnevartovsk. These directors, however, were directly leading and controlling the economic activities of this company at the time of the incidents being investigated, one A.V. Suslin in particular.

In addition, it seems that the lawyers are attempting to protect ex-directors of Pivnoi mir (Пивной мир) Suslin, Dolgovykh, Malyarchuk and Konstantinov: there is an obvious effort to cover up for their colleagues.

The lawyers 'methods'

Over the entire period of the bankruptcy case, there were a huge number of cases highlighting the unscrupulous work of the company’s lawyers.

To give one glaring example:

In the LLC DIL-Beer case, O. D. Lapshov was forced to accept subsidiary liability.

It seems likely that initially, in order to push the case easily through court, they intentionally sent Lapshov’s notice of accountability to an address in Magadan where he hadn’t been registered since 2010. Moreover, despite that the bankruptcy trustee knew Lapshov’s current address and registration from the tax inspection documents, he used his knowledge of the court system to exploit it by claiming that Lapshov had technically been notified of his accountability despite the trustee being well aware Lapshov wouldn’t ever see the document sent to his old address in Magadan. Thus, he secured Lapshov’s absence at the trial and convinced the court to make a decision, which the victim only found out about after receiving a writ of execution.

Thus, Dolgovych, Lapshov, Zyablov and Turbin, who were obviously not actually ever informed about what was happening, were pushed into taking subsidiary liability. Many people, instead of notifications or letters, received “empty envelopes”, which allowed the lawyer to work around the facts in court later on. The fines they ended up having to pay amounted to around 2 billion rubles (!). Similar initiatives may be taken against ordinary cashiers, operators and directors of partner companies that worked at Pivnoi mir when it was a distributor for Sun InBev.

The second glaring example is the following:

Lawyers hired by Sun InBev, as we have seen, know how to exert hidden pressure on the courts, including by filing documents from other unrelated bankruptcy cases in the ongoing case file, combining the efforts of 4 different and independent bankruptcy trustees, thereby creating the "appearance" of real evidence by producing a flood of documents. By all indications, they do it deliberately, realizing the workload of the Moscow Arbitration and the specific judge leading the bankruptcy proceedings will be too much to analyze accurately.  The practice creates serious difficulties in the analysis of the admissibility or relevance of the evidence and documents that end up being used in the case.

Profits

The motives of the individual top managers at Sun InBev are obvious. Imitating having made large scale and thorough effort by using numerous procedural tricks in arbitration, the sheer volume of documents becomes a smokescreen to hide their scam from the eyes of higher management at Anheuser-Busch. As an added bonus, hiring your own firms provides a convenient opportunity to spend large corporate budgets. In the process of selling off companies after they declared bankruptcy, BMS Law Firm was chosen without any of the normal competitive procedures. The firm incidentally had been working for Sun InBev since 2014 where they had made a lot of money in turn (I believe more than $500,000 of ABInBev’s budget): one hand washes the other.

It is also worth dwelling for a moment on why this long-standing litigation is being conducted.

Financial noose

Recently, several Sun InBev distributors in the Urals and Siberia met a sad fate under suspicious circumstances. Beer brands popular among Russian consumers such as Stella Artois, Hoegaarden, Leffe, Staropramen, Lowenbrau, Franziskaner, Spaten, Klinskoe, Siberian Crown, Fat Man and Bagbier, were all involved in the scandal. In Russia, ABInBev operates through Sun InBev JSC, which is registered in the town of Klin near Moscow, and periodically appears in scandals related to tax violations.

The scam was fairly simple: the local product distributor ABInBev, a company that already has serious contractual obligations and assets, was chosen as a target. Then, they blocked the company’s financial oxygen by discrediting them with banks and creditors. If a convenient time is chosen for the insidious combination, such as a seasonal peak in demand for beer over the summer, they are able to effortlessly kill off an otherwise successful distributor.

A careful analysis of the situation shows that Sun InBev’s local partners, such as UNISAN which held 12% of the Russian beer market, or Pivnoi mir which was previously known in the market as a group of companies called the DIL-Group (15%), one after another experienced financial collapse and were forced to close shop. The essence of the scandal is that these "crisis" events might have had an external artificial nature organised by high-ranking Sun InBev employees, such as Control and Taxes Director Anton Chvanov or the Legal & Corporate Affairs Director Oraz Durdyev.

A lovely couple

According to the Compromat-Ural portal, in 2012, the big-time beer distributor UNISAN («Юнисан» in Russian) worked in Moscow, Novosibirsk, Kemerovo and Tomsk oblasts. In 2011, its main servicing bank, Nomos Bank, received a letter about alleged problems in the company's activities, indicating details that only dedicated top managers could know. The letter, however, was sent anonymously "on behalf of the workforce". As a result, all loans were withdrawn and partnerships were broken. The bankruptcy of UNISAN turned out to be a foregone conclusion. According to a report of Russian IRS, the company disappeared in December 2013.

In 2014, the implementation of an even more sophisticated plan for enrichment based on artificially created problems began targeting several distributors: Pivnoi Mir in Surgut, DIL-Beer Nizhnevartovsk, and DIL-Beer Khanty-Mansiysk. The total share of beer sales in Russia was estimated at 15% among the listed suppliers. Today, all of these enterprises are in the process of liquidation.

According to information from the above source, they also used seasonal demand for credit resources falling during summer sales surges against Pivnoi Mir. In summer 2014, Pivnoi Mir needed a usual loan to purchase additional volumes of beer and then sell them, but no such luck.

If you trust the information provided by Kompromat-Ural, some concerned citizens (ostensibly in the name of “distributor support”) independently visited all the banks that served Pivnoi MIr - Nomos Bank, InvestTorgBank and Sobinbank - and told them tales of the incredible difficulties facing their large corporate client. Financiers do not hide the fact that at different times they communicated with Anton Chvanov and Oraz Durdyev.

Following the strange visits, banks not only refused to grant Pivnoi Mir a new loan for the seasonal purchase but also suspended existing loans and refused to refinance. In this way, the scheme against UNISAN was repeated, this time taking Pivnoi Mir out of the picture.

Let us ask ourselves a question: why did the top managers of Sun InBev need to block the credit line of a distributor, condemning the business to certain death? After all, it is objectively more profitable and stable for a central supplier to facilitate an atmosphere where its partners on the ground are able to engage in successful business activity.

Only absolute amateurs (and Durdyev and Chvanov are unlikely to be such) would believe that that Sun InBev had any chance of buying up the debt from the bankruptcy of a distributor in distant Ugra. Only Pivnoi Mir was charged 232.5 million rubles in 2015 as a part of the bankruptcy arbitration. For a normal brewing company, bankruptcy procedure maintenance is a multimillion-dollar expense - but for lovely coupling between Sun InBev and BMS, there is a lot of money to be made.

Nothing personal, just corruption

The next stage of the scheme was the literal seizing of Pivnoi Mir’s property. It is reported that beer products from warehouses in the Tyumen region and the Khanty-Mansi Autonomous Okrug were illegally exported at leadership’s orders. The products were then sold retail for cash. In addition to beer, large quantities of Mars chocolate, Pepsi drinks and hard alcohol disappeared.

“According to one company in the DIL-Group, the goods that went missing were worth 300 million rubles (their monthly sales volume in the Khanty-Mansi Autonomous Okrug). And the cumulative volume could fill about 400 trucks!” Compromat-Ural said in assessing the damage.

The next glaring fact was the cutting, transporting and selling one of the warehouses for scrap (metal construction) on the territory of the Tyumen base (village Antipino, Old Tobolsk Tract 3), owned by Pivnoi Mir. It seems that the dismantling was facilitated by the ex-head of the company, Alexander Suslin (the warehouse, by the way, was the collateral to Investtorgbank).

In 2015-2016, Pivnoi Mir’s warehouse complex worth an estimated 100 million rubles (Surgut, Industrialnaya str., 50), was completely dismantled and sold. The complex included warehouses more than 3 thousand square meters, a two-story office, garages and railway siding.

Here again, there are questions about the role of Sun InBev’s chief lawyer Durdiyev. The beer giant he represents suffered a lot due to the domino effect after the distributor’s business in Ugra almost crumbled.

When a local company loses its solvency, control of the bankruptcy procedure, in one way or another, passes to ABInBev - Sun InBev, which supplied it with large quantities of its products. Industry players know that this same Durdyev oversees the bankruptcy procedures of unlucky distributors.

The question is, did Oraz Durdyev check that the insolvency representative of Pivnoi MIr reflected the loss of the goods in the report turned in to law enforcement agencies? Or did his personal interest in the matter lead him to take a rather different course of action?

According to numerous reports, the insolvency representatives, whose actions were overseen by Oraz Durdyev and Anton Chvanov, to put it mildly, didn't indicate their activity in order to help return losses in the bankruptcy process in order to enlist help from the authorities.

But the story does not end there. All the names listed and contracted for beer sales from ABInBev company have now appeared for the next distributor to be targeted - the El Capitan company. Their directors are the same well-known managers from Pivnoi Mir who are vehemently protected by Sun InBev’s lawyers in the courts. Is everything set up to to be repeated again?

One can reasonably ask, did AB InBev Head Office know about the problems in Russia? What do you think about them? Will a similar scheme be copied in Ukraine, Kazakhstan and other countries of the former Soviet Union? Is there not a danger that, that such activities by Russians managers will have a bad influence on general reputation of the company?

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