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Russia investigates Bank of Moscow

Dec 22 2010 16:39 AFP

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Moscow - Russian law enforcement officials have opened a criminal investigation into a top Russian bank owned by the Moscow city government, the Kommersant business daily reported on Wednesday.

The probe into the Bank of Moscow, which has been majority-owned by the city since 1995, is linked to a 12.76bn ruble loan the bank issued to a little known firm in 2009, Kommersant said.

That company then went on to purchase a plot of land at what investigators believe was an inflated price from Yelena Baturina, the wife of the now-deposed mayor of Moscow, Yury Luzhkov.

Baturina has risen to become Russia's richest woman according to Forbes magazine on the back of Moscow real estate contracts awarded to her Inteko construction firm.

But the company has been riddled with debt since the 2009 financial crisis.

The Financial Times reported that the transaction took place on the same day as the Moscow city parliament approved a 15bn ruble transfer to the Bank of Moscow.

Russia's interior ministry is now checking to see whether the funds were transferred to help Baturina settle her debts, the Financial Times said.

Luzhkov became mayor of Moscow in 1992 and eventually established himself as one of Russia's most powerful regional bosses.

But he lost a political tug of war with the Kremlin and was fired by President Dmitry Medvedev in September.

The Russian media reported this month that Baturina has been negotiating to sell her company. Inteko officials have refused to publicly comment on the reports.

The investigation surfaced amid attempts by Russia's VTB bank to acquire the Moscow lender.

The Bank of Moscow has accused VTB of making a series of false allegation about the bank that are meant to help reduce its eventual acquisition price.

VTB executives this month said they had questions about the Bank of Moscow's ownership structure and whether some of its city assets were in fact privately held.

The Bank of Moscow reports on its website that it is Russia's fifth-largest bank in terms of assets and capital.

It also says that the Moscow city government owns 46.48% of the bank directly and 17.32% indirectly through another city-controlled firm.

russia  |  fraud
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