Criminal Corporate Raiding in Russia
![handle is hein.journals/intlyr42 and id is 1223 raw text is: Criminal Corporate Raiding in Russia
THOMAS FIRESTONE*
I. Introduction
The illegal takeover of businesses, commonly known in Russian as reiderstvo (raid-
ing), has become a major threat to domestic and foreign investors in Russia. Reiderstvo
differs greatly from U.S. hostile takeover practice in that it relies on criminal methods
such as fraud, blackmail, obstruction of justice, and actual and threatened physical vio-
lence. At the same time, though, reiderstvo is not just simple thuggery. In contrast to
more primitive criminals, Russian reideri rely on court orders, resolutions of sharehold-
ers and boards of directors, lawsuits, bankruptcy proceedings, and other ostensibly legal
means as a cover for their criminal activity. Reiderstvo is also more ambitious than
classic protection schemes in that it seeks not just a portion of the target business' profits
but the entire business itself. Finally, because raiding typically involves the use of docu-
ments such as corporate resolutions and judicial orders as covers for threats of physical
violence, it is more sophisticated and can be much more difficult to investigate and prose-
cute than straightforward extortion schemes. In short, it is a new and sophisticated form
of organized crime.'
There is growing recognition that corporate raiding has become one of the biggest
criminal problems in Russia. According to statistics compiled by the Ministry of Internal
Affairs (MVD), raiding generates approximately 120 billion rubles (over $40 million) a
year in illegal profits, and, considering that this statistic is based only on the rare cases
actually investigated by the MVD, the true amount is certainly far higher.2 Ivan Novitskii,
a deputy of Moscow City Duma (a municipal legislative body in Moscow), claims that 300
Moscow businesses are raided every year and that thousands more are at risk.3 In a recent
study by Price Waterhouse, businesses operating in Russia identified asset misappropria-
* Resident Legal Adviser, U.S. Dep't of Justice, U.S. Embassy-Moscow.
1. Perhaps the closest historical analogy is the phenomenon of Japanese sokaiya, professional criminals
who exploit their statis as corporate shareholders in order to extort money from the corporation. See, e.g.,
KE,,'ET SZYMKOWIAK, SOKAIYA: EXTORTION, PROTECTION AND THE JAPANESE CORPORATION (East
Gate Books 2002) (2001).
2. PAVEL ASTAKHOV, PROTIVODEISTVIYE REIDERSKIM ZAK-IVATAM 5-6 (Eksmo 2007) [hereinafter As-
TAXFHOV-PROTIVODEISTVIYE].
3. Ivan Novitskii, Tezisy doklada deputata Moskovskoi gorodskoi dumy (Nov. 16, 2007) (unpublished
manuscript, presented at roundtable on raiding, Moscow Oblast Advocates Chamber, on file with author).](ViewImageLocal?handle=hein.journals/intlyr42&div=68&collection=journals&method=preview&ext=.png&size=3)
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Criminal Corporate Raiding in Russia
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