$100M Heating Fraud Exposed

$100M Heating Fraud Exposed

Published: December 5, 2012 (Issue # 1738)

St. Petersburg authorities have dismantled a syndicate they say cost the city budget 3 billion rubles ($100 million) by installing some 600 kilometers of substandard heating and water pipes.

Top officials in the city’s energy and engineering committee and the state treasury’s energy infrastructure construction and remodeling department, as well as the heads of several private firms, including installer Petrokom and supplier Rustrubprom, took part in the scheme to defraud the city budget, the Interior Ministry said Thursday.

More than 200 law enforcement officials participated in exposing the scheme and conducting 30 searches, the ministry said in a statement. Police seized 18 million rubles, $100,000 and 100,000 euros ($130,000) from the apartment of the head of the city’s energy and engineering committee, Vladislav Petrov.

On Friday, City Governor Georgy Poltavchenko accepted Petrov’s resignation. At present, Petrov is only considered a witness in the investigation.

Four people involved in the case have already been taken to Moscow. The other four suspects remain under written oath not to leave their place of residence.

One of the suspects in the case, Andrei Kadkin, founder of Petrokom, has been taken into custody and investigators have up to two months to question him. The warrant for the arrest was issued by Moscow’s Tverskoi court.

“The criminal group has been active for a long period of time, they’ve developed strong connections,” one of the investigators was cited by Interfax as saying, explaining the court’s decision to arrest Kadkin. “Kadkin played one of the key roles in the group and one of the witnesses is dependent on him, therefore Kadkin could pressure him,” the investigator added.

Kadkin in turn asked to be bailed for 48 million rubles ($1.5 million). Kadkin’s lawyer reportedly intends to appeal against his client’s detention.

A criminal fraud investigation has been opened, as investigators believe that money allocated for construction and capital repairs to the city’s heating and water facilities was stolen.

During searches of offices and officials’ homes, police seized a total of about 25 million rubles ($810,000), 200,000 euros and $100,000. They also seized evidence that the suspects own property in elite districts of St. Petersburg, as well as out-of-town real estate and land.

St. Petersburg has suffered a constant stream of burst pipes during the last few years, often with devastating consequences. Dozens of people have died or suffered serious injuries as a result of accidents involving burst pipes, often sustaining serious scalding from hot water.

Ironically, on Friday, when Petrov resigned, another hot water pipe burst on the city’s Vasilyevsky Island. The hot water gushed out onto the road, covering an area of 1,200 square meters. A 61-year-old man suffered burns to his hand and legs at the scene of the incident.

A day before, another pipe burst at the intersection of Voznesensky Prospekt and Sadovaya Ulitsa in the city center.

The risk of burst water pipes leaving homes with no central heating and hot water in freezing winter weather is already an uncomfortable reality for many city residents.

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