When Enrique Molina Sobrino, one of Mexico’s wealthiest businessmen, tried to expand his empire by buying the state-owned Sugar Corp which Puerto Rico was hoping to privatize last year, charges of drug trafficking against him finally brought the sweet deal to a screeching halt. The accusations against Molina Sobrino, chairman of Consorcio Azucarero Escorpion and the Gemex (Grupo Embotellador de México) soft-drink-bottling company (Mexico’s biggest distributor for Pepsi-Cola), were made by Eduardo Valle, an intelligence officer in the Mexican justice department during the administration of Carlos Salinas de Gortari.
In May 1994, Valle says he fled to the US after he began to realize that drug traffickers had permeated the top levels of the Salinas government, which had undertaken an ambitious privatization programme. Valle took copies of over 100 files of ongoing investigations with him. Included among them was a warrant for the arrest of Molina Sobrino, whom Valle claims is a businessman for Mexico’s drug kingpins, the Gulf Cartel. “He’s a bad guy,” says Valle. “In Mexico, Molina Sobrino was widely known as the only Pepsi bottler who distributes ‘coke’.”
The highly respected former investigator, who wrote a best-selling book in Mexico called Segundo Disparo (Second Shot) about the corruption of the Salinas government leading to the murder of presidential candidate Luis Donaldo Colosio, is now in hiding in the US. He claims that the Gulf Cartel has placed a half-million-dollar contract on his life.
Molina Sobrino had other questionable business ties. He had been a business partner of Mexico’s fugitive banker, Carlos Cabal Peniche, who built up Grupo Financiero Cremi-Union during the financial industry’s privatization and tried to take over US canned-fruit company Del Monte Foods. After Cabal Peniche allegedly looted Banco Cremi-Union and fled the country with $700 million, the loss-ridden bank had to be bailed out by the government in 1994. Investigators allege that Cremi-Union was set up for the purpose of laundering the Gulf Cartel’s cash.
Enough suspicion
Escorpion’s chairman was also part owner of Banpais – another rogue bank born of Mexico’s privatization spree. It too was placed into government hands after it collapsed last year. The devaluation of the peso battered Molina Sobrino’s business empire in 1995 and he sold a 25% stake in Gemex to Pepsico. The Mexican industrialist has denied the criminal allegations and the Mexican government says he is no longer under investigation. The original files, whose copies Valle carries with him, have since disappeared.
But for Puerto Rico, which had favoured Escorpion (over several other bidders) as a buyer for its Sugar Corp, suspicion itself was enough to derail the deal. The privatization efforts of the government were already under attack. The most controversial had been the sale of its shipping line, Navieras, last March to a group with ties to the Gambino and Genovese mafia families in New York, where their control of the docks has been legendary. Even after a state-financed investigation by US investigative firm Fairfax Group uncovered the mob ties, and financing by CS First Boston fell through, the state sold Navieras to the group anyway. Puerto Rican senator Nicolas Nogueras railed against the government’s decision. “You don’t need absolute proof that these guys are connected with organized crime when you know that ships are a way to carry a lot of illicit cargo,” he argues.
The $132.4 million deal was eventually completed, with financing arranged by BT Investment Partners, the parent of the shell company set up to take over Navieras. But last August, only a few months after the sale, Navieras’ new executive vice-president Robert Murphy, whom Fairfax had reported was “a possible front for organized crime”, was forced to resign to face fraud and money-laundering charges in the US. The incident cast a further shadow across the Puerto Rican government which senator Nogueras suggests was on the take. The senator, who has found himself under investigation for tax evasion in what seems like a counter-charge following his criticism of the government, says the deal was primarily financed by mortgaging the shipping company’s assets, which consequently bled Navieras. The shipping line is now on the verge of closing and the senator believes it will soon be requesting financial aid from the state to stay afloat.
Mafia ties, drug trafficking and money laundering may be some of the most sinister examples of corruption surrounding government privatization efforts but bribes, kickbacks, insider dealing and fraud are also prevalent. While much of the most outlandish illicit activity appears to focus on local players and deals, even some global privatizations have been tainted. In the case of the planned privatization of India’s telecommunications company VSNL (Vdesh Sanchar Ngam Limited), the deal was scuttled after the lead managers, investment bankers Salomon Brothers and Kleinwort Benson, refused to give bribes, according to individuals close to the negotiations.
From Moscow to Mexico City to New Delhi, corruption is a problem that threatens to undermine the very market economics privatization is meant to ensure. The end of the Cold War and enthusiasm for market economics has made privatization of state assets a top priority. But the eagerness of the state has led to a variety of misdeeds which have often been exacerbated by the ideological zeal that accompanies privatization fervour. “A greater focus has been placed on shifting assets out of governments’ hands than on seeing into whose hands they would fall,” says Frank Vogl, who heads the Washington DC-based Vogl Communications and is also vice-chairman of Transparency International, a coalition that promotes ethical business practices around the globe. Vogl argues that corruption is one of the greatest threats to the development of the emerging economies. Not only does it create the risk of political backlash but corruption can end up creating even more financial problems for governments.
Most countries in the throes of privatization have not had the regulatory or judicial framework in place to ferret out corruption, much less the democratic process that draws attention to it. On top of that, many of these companies were state-owned monopolies whose accounting systems bore little resemblance to that of a profit-oriented business. All of the above create an “inherent vulnerability of privatization to corruption”, says Peter Eigen, chairman of Transparency International and a former World Bank official. “The valuation of an enterprise itself is an incredibly difficult thing,” he says. “If a country decides to privatize a big electricity plant or a hospital or whatever, you will find very quickly that people who have a lot of political power will use this to enrich themselves. They may spin off assets, and what is left over is a shell with lots of liabilities and a few assets.” He notes that one argument made against privatization in many countries is its tendency for corruption. “There’s some truth to that. If you don’t watch privatization, you can do a lot of damage.”
Until recently, multilateral agencies mostly ignored the potential for corruption, investor enthusiasm glossed over such problems and competition for the business was so keen that investment bankers may have even skirted the law to win mandates. But over the past six months, the privatization mood has shifted dramatically. A number of highly publicized global privatizations have either encountered difficulties getting off the ground or have bombed after their offering. As the business cools and the political environment shifts, there is some hope that abuses will be less acceptable. As Eigen points out, many dictatorial regimes were tolerated “as long as they were on the right side of the Cold War” and their corruption was “supported and kept in power by either the West or East. This is gone.” He says he was particularly encouraged by World Bank chairman James Wolfensohn’s maiden speech at last year’s IMF/World Bank annual meeting, in which he mentioned the problem of corruption. “Before, people at the bank never used that word,” says Eigen. “It was a dirty word.”
Learning curve
The World Bank’s vice-president in charge of Latin American privatizations, Shahid Burki, admits: “We’re learning from experience.” In retrospect, for example, the agency’s encouragement of Panamanian privatization under general Manuel Noriega, now imprisoned in the US for drug trafficking, was not so wise, adds another World Bank official. After Noriega was arrested, it was revealed that insider dealing in the Panamanian privatization programme was rife, with many companies ending up in the hands of Noriega’s cronies.
Yet not everyone is so confident that corruption is any less tolerated in the new world order. Unfortunately, there are other political objectives that tend to promote privatization at any cost. US Drug Enforcement Agency (DEA) officials, among others, have said privately that the corruption of the Salinas government in Mexico and the growing influence of drug traffickers in its economy was well known in Washington but ignored by both the Bush and Clinton administrations because of their commitment to pass the North American Free Trade Agreement (Nafta). Lobbying for last year’s multi-billion dollar Mexican bailout kept a lid on the true dimensions of Mexican crime and the Salinas scandal, even as the corruption began to come to light. (Former president Carlos Salinas fled Mexico after his brother Raul was arrested for his alleged role in the murder of a leader of the ruling party. Suspected of receiving illicit money from drug traffickers and others, Raul Salinas holds some $100 million in Swiss banks.) Law enforcement officials argue that the next politically sensitive country to erupt on a massive scandal could be Russia where the central role of the powerful Russian mafia in the newly privatized economy is likewise underplayed by US officials for strategic reasons.
Moreover, even some bankers fear that corruption could become more acceptable in the financial industry because of the heightened competition among investment banks for privatization business as the visible margins are squeezed. “Everybody is bleeding money, particularly the US banks,” says an Asia analyst based in Hong Kong. “I would think the temptation is greater.”
Insider dealing
The seamy side of privatization is indisputable, though not always illegal in the countries where it has occurred. From the beginning of privatization in the former communist world, insider dealing was the norm as the nomenklatura routinely became capitalists, securing big stakes in most of the newly privatized companies. Perhaps nowhere has corruption been any more pervasive than in the former German Democratic Republic (GDR) where a former Treuhandanstalt director says that as many as 500 scandals plagued the agency’s rapid privatization of the country’s industry. “Often we had very major problems in establishing the honesty of investors or of the existing management,” says Oltmann Siemens, who now works for the World Bank’s IFC in Washington. Many critics have argued that the speed with which the Treuhand undertook its mission increased the likelihood of crime. Siemens doesn’t take issue with that. “From the moment Treuhand opened its doors and said these companies are for sale, the whole country was up for grabs. We had an average of 8,000 deals pending.”
The east German experience offers a microcosm of privatization’s many abuses. At first, unscrupulous lawyers and accountants who were not allowed to practise in the west took advantage of the neophyte east German capitalists, engaging in fraudulent contracts and overcharging for advice. Then investors came to the Treuhand and asked for working capital loans in exchange for small investments and fled with the money. “Hundreds of millions are believed to have been siphoned out of companies by various methods and the money ended up not only in Swiss banks but also in Norwegian banks or the Cayman Islands,” says Siemens.
“We could not avoid that sometimes there were real criminals who were entering our offices – people experienced at dealing with the communists. After the Berlin Wall came down they knew with whom they could make a deal,” says Siemens. Although westerners tended to be responsible for “the sophistication of the crime”, he says, the east Germans weren’t always innocent lambs. In one case, Communist Party money, totalling Dm550 million, that was supposed to be turned over to the Treuhand, was illegally disbursed in loans made to Communist Party trustees, leading to numerous prosecutions and law suits against banks. Siemens regrets that the Treuhand didn’t have the human resources to go after all suspected cases. But one reason many of its scandals have come to light – in contrast to other countries – is because the former GDR was incorporated into Germany and became answerable to its legal system.
Since government officials are in charge of privatizing assets, bribes, payoffs and kickbacks are other crimes routinely suspected in privatization, particularly in countries where governments are known to be corrupt, where bribery is a well-known business practice or where dictatorships exist.
The fate of India’s thwarted VSNL telecommunications privatization is one stunning example. Salomon Brothers and Kleinwort Benson were delighted towards the end of 1993 when they snared the hotly contested mandate to place 35 million VSNL shares worldwide. But the delays that inevitably accompany such highly politicized dealings put the launch off until April when the bankers suggested the price range be reduced by approximately 15% to take account of the emerging markets blowout in early 1994. The bankers knew the lower price would be difficult for the Indian government to accept but went ahead building the book in the hope that “once it was built, they’d agree on a price reduction”, says one banker close to the deal. Then things got confusing. “First they said ‘yes’ to the new price range but then they said ‘no’,” says this banker. “Not only that, but it came back very quickly that if we wanted to go ahead, then a certain amount of money would have to be transferred to a bank in Switzerland. We were basically told that we would have to pay off people if the deal were to go ahead, and we said ‘no’.”
Last laugh
The Indian government blamed the investment bankers for the deal’s collapse, creating a flurry of bad local press for Salomon and Kleinwort. “We couldn’t make a statement saying that someone wanted a bribe in order to get the deal,” says this banker. “You can’t say that in public. At least nobody wants to be the first to say it.” The bankers may have had the last laugh. Scandals have shaken the government and a few ministers have already resigned.
While some bankers say that corruption is a way of life and unavoidable in certain countries, most are horrified by the very idea of bribe-seeking. “We would be unwilling to consider such a thing,” says David Mulford, CS First Boston’s vice-chairman who is active in the firm’s privatization business. “I don’t have any direct experience with any efforts to seek bribes or kickbacks from us.”
US companies are forbidden by the Foreign Corrupt Practices Act of 1977 to bribe foreign companies or governments. Since the US outlaws the bribing of foreigners while in most other countries such payments are not only legal but tax-deductible, the act is widely viewed by US businessmen as disadvantaging them in global competition. Some may seek to find ways around the prohibitions, often by paying consulting or attorney fees to locals. Indeed, most bribes are made through middlemen. “Where corruption comes in is the use of locals to joint venture with you or represent your interests,” says Michael Hershman, president of the Fairfax Group. “It’s pretty fierce bidding. Bankers want to do everything they can to get a foot up. They look for a well-connected local guy to assist in putting in their bid and in marketing their bids.” As a result, he notes, bankers may not even know about bribes that are paid.
The Foreign Corrupt Practices Act’s prohibitions are fairly strict however. If a fee is judged to be excessive, or if a foreign partner ends up using the money to make bribes, the US firm is liable. Penalties are severe and individuals in a company can be prosecuted. At the same time, bribes paid by a local partner are often “very hard to prove”, says one attorney familiar with the act.
During Mexico’s Salinas administration, lawyers were commonly used to funnel bribes, according to US law enforcement officials. “You’re probably going to see the Salinas case spin off into the legal community,” predicts one. Originally investigators believed that drug traffickers were the only source of Raul Salinas’ wealth but now there are indications that some of the money came from payoffs made by foreign companies in order to do business in Mexico.
Details surrounding the $1.2 billion global privatization of Indonesian telecommunications company Indosat have also raised eyebrows. Some bankers looked askance at the disclosure in Merrill Lynch’s Indosat prospectus that 20% of its fees would be paid to a group of local businessmen with close government ties. Merrill has since formed a joint venture with this group, PT Persada Kian Pastilestari, in order to receive a licence for a securities operation in Indonesia. “Some bankers believed Merrill should obtain a letter from the company saying they are not paying bribes” to protect itself legally, says one senior banker at another firm. In general, he notes, “the resources are there, so if people want to take the money to pay bribes, you can’t stop them”. Merrill Lynch declined to comment.
Of course, local contacts are essential for all investment banks working abroad. To avoid any appearance of impropriety, CS First Boston’s Mulford says that the bank does not normally make payments on a deal-by-deal basis but does have arrangements with some local affiliates and advisers that are paid a retainer and given a bonus “depending on how useful they are”. “If you make an arrangement for an individual on a deal with big connections, you run the risk [because] it’s more difficult to control, it’s more open to interpretation,” he explains.
Unwritten rules
The World Bank has spelled out a number of procedures that countries are advised to follow to avoid any undue influence-peddling, insider dealing and other charges of corruption. In other words, they are designed to make the process as transparent as possible. These unwritten rules include an open, competitive bidding process, where the evaluation of the bids is done by reputable institutions, local or otherwise. The World Bank’s Burki says that countries should specify what types of buyers will be qualified to bid. “They should have experience in that sector or in that industry or should have the ability to bring in capital.” Countries are further encouraged to make all documentation public and ensure as wide as possible ownership of the shares. Typically a big privatization will involve strategic partners as well as institutional share ownership. “There’s no point in creating private monopolies instead of public sector ones. We know that public sector monopolies can be inefficient, but private ones can be perverse,” he adds.
The World Bank and the IFC have promoted these standards and occasionally get involved in privatizations in countries “not renowned for financial probity”, says one official. “We are the assurance that the procedures will be fairly transparent.” However, former World Bank officials are not so confident. “There is wishful thinking on the part of many of us to think once you apply our rules, you’ve done the best you can and therefore most likely nothing will happen,” says Eigen. “Since I’ve left the World Bank, I’m convinced this is a delusion.”
In reality, the multilateral agency’s leverage is limited, since the financing it provides is usually minimal and generally relegated to helping pay for advisers or providing technical assistance. But the World Bank has been known to use what little weight it has. When Argentina sought the advice of Spain’s Iberia Airlines to value its airline Aerolineas Argentinas, the World Bank “took a walk”, says a bank official in reference to its refusal to pay the consulting fees. “We wouldn’t allow [the involvement of] one airline that will possibly be in the bidding, for fear it would scare away any other airlines.” As the bank suspected, Iberia ended up buying a controlling interest in the Argentine airline. The IFC, which has increasingly taken on the role of a merchant bank, could potentially have more influence but some think it has abdicated any such responsibilities by its profit-making imperative. “The IFC views itself as a competitor to the investment banking community with its main goal to get the deal done and earn as much in fees as possible,” charges Vogl, a former World Bank spokesman.
Moreover, these rules are not as simple as they sound. “It becomes very difficult to have all bids open,” adds Vogl. “They are often very complicated. When you’re talking about the transfer of a nation’s telecommunications system, it’s not a question of day one, all bids will be opened and the person with the highest figure wins.” And what about choosing banking advisers? When it comes to global deals, if countries use price as the main guide in choosing their lead manager, they may not always get the best advice – even though the process seems transparent. Bankers are so keen to get the business that they may overstate the value of the assets to be privatized. Typically, developing countries value their assets much higher than an investment bank does, in part because the assessed value also includes a discount for the country risk. “And if you give the government too low a price because you foresee problems, you’ll lose the bid right then,” says one banker. Even in the best of times, the evaluation of the assets leaves room for confusion. Industries that are technologically complicated such as telecommunications “lend themselves to mystification” and possible fraud as a result, says a World Bank official. Interestingly, telecommunications have been the most sought-after privatization deals and most popular with investors. Stock performances have been mixed, however.
Keeping in the dark
Most importantly, the rules are only as good as the political environment in which they exist. Notes Hershman of Fairfax: “You could have open bidding, closed or competitive bidding. It doesn’t matter if you don’t have an independent party to examine the process.” Investment banks may be hired to evaluate bids, “but they are not usually the decision makers. The real power lies in the hands of an individual minister.” If he should act contrary to the bank’s advice, it is doubtful whether it would come to light, since the bankers have signed a confidentiality agreement, he adds.
A refusal to open the process to public scrutiny often leads to charges of foul play. Puerto Rican senator Nogueras complains that the clique which runs the island’s government (which he calls Los Honorables, or the honorable ones, in a book of the same name) conspire to keep the public in the dark about their business dealings. As he puts it: “Nothing is ever done in a public square.” When he tried to protest against the Navieras deal, pointing out the group’s possible link to organized crime: “I was told by my own people in the party and the government to stay away from this,” he says. Even though the group did not have any real capital to invest, he was told: “If we don’t sell to them, who will buy it?”
In the case of the Sugar Corp, the Puerto Rican government appeared to favour Escorpion despite the presence of other bidders. “All the statements that there were going to be auctions so that the government would pick the best only covered the government’s prior decision to sell to Escorpion,” says senator Nogueras. Since bidders had to sign confidentiality agreements with the government, his charges cannot be proved.
However, when the local newspaper the San Juan Star began reporting about Molina Sobrino’s alleged drug trafficking, the government was forced to undertake its own investigation of the Mexican entrepreneur. Although the Puerto Rican government claimed its investigation found no evidence of charges against Molina Sobrino, it never made its findings public. Nor did those in charge of the probe ever contact Eduardo Valle, the former Mexican official who made the original charges, according to Valle.
In Mexico, similar refusals to open the privatization process to full public view have raised the ire of the opposition party, the Perredists (PRD). Critics have argued that leading industrialist Carlos Slim, a close associate of former president Salinas, was given preferential treatment when he purchased a controlling interest in Teléfonos de México (Telmex), the country’s closest approximation to a blue- chip company. Telmex stock is widely held by foreign investors. Leading the PRD charge, senator Porfirio Munoz Lado has called for an investigation of the Telmex privatization which he says the government has been able to avoid by listing the sale as “not final”.
A former US intelligence officer who has investigated corruption, drug trafficking and money laundering in Mexico says that many of Mexico’s industrialists were given “sweetheart deals” during privatization. As for Telmex, he says, there are some “unexplained aspects” of the deal but no “smoking gun” to prove any illegal actions. “Carlos Slim paid a remarkably low price for the company and was lent almost all the money to buy it,” he explains. He claims it was common practice in privatizations for money to be lent by Nafinsa, Mexico’s national development bank. Some of these monies have not been repaid. He adds: “The reason individuals or groups got special deals was because they gave kickbacks to the politicians.” Such monies are alleged to be part of the illicit fortune of Raul Salinas.
Banks are “some of the worst”
“Not every privatization was corrupt but a lot of them were and they involved hundreds of millions of dollars,” the officer notes. “All of the banking system was privatized and that was some of the worst. The corruption in the privatization of the banking system was gigantic, which is one of the reasons the banks are in such bad shape now.” In its 1995 annual report on drug trafficking and money laundering, the US state department appears to confirm his allegations. It says: “US concerns have been intensified by reports that drug traffickers have been buying bank stocks and seeking election to bank boards, after which they open numerous accounts through which they funnel drug money, often into real estate or other assets in Mexico.” Another US investigator adds: “A number of big Mexican banks are involved with money laundering now.”
Few Mexican cases were as outrageous as the rapid rise and fall of the aforementioned Carlos Cabal Peniche, now wanted on fraud charges. According to the former US intelligence officer who is now a consultant specializing in money laundering, Cabal Peniche was a “creation” of the Gulf cartel, who had close ties to Raul Salinas. “His [Cabal Peniche’s] own rise was meteoric. He was a lower middle class young man who all of a sudden became extremely wealthy. He had access to huge resources.” Helped by loans from the infamous Bank of Credit and Commercial International (BCCI), Banco Cremi-Union was set up precisely for the purpose of laundering the cartel’s cash, claims the consultant. US officials estimate the Mexican cartel launders about $4 billion to $5 billion a year. Before fleeing, Cabal Peniche’s most brazen act was a failed $1 billion takeover bid for Del Monte Foods. He had already purchased Fresh Del Monte Produce, whose banana export business was allegedly used to transport cocaine.
Drug traffickers have invested with otherwise legitimate Mexican businessmen who often had little choice, according to investigators. And druglords from Colombia, the Cali Cartel, who work closely with the Mexicans involved in the transport of cocaine, have also invested heavily in Mexican privatized companies, according to reports in the Mexican financial publication, El Financiero.
Money laundering of drug proceeds has become a huge problem for business, and is no longer confined to the banking system. Mexico’s new government is now tightening up its money-laundering laws to include in its definition the purchase of legitimate companies with illicit cash. With technical assistance from the World Bank, it is also helping to establish the banking regulations it lacked during the wild privatization spree. A second wave of privatizations of state assets, such as railways and power plants, is planned and they are expected to be clean. “The corruption level is much lower now,” says the former US intelligence officer. “There isn’t much left to steal.”
Sadly, the privatization of Russia’s economy, which is still in its infancy, promises to offer similar scope for dirty dealings and the same kid-glove treatment by western governments that has been afforded Mexico. As yet, there are still actual shares in Russian companies and no statute outlawing money-laundering. Organized crime is so pervasive that it is seen as an inevitable, if not natural, player in the process. For example, reports have been rampant that managers forced workers to turn over their privatization vouchers. “Who knows what’s going on in these deals?” asks one World Bank official. “If you know, you might not be living tomorrow.”
Fiduciary responsibility
CS First Boston’s Moscow office, under the initial direction of Boris Jordan and Steven Jennings, was one of the big winners in the first wave of privatization. The investment bank amassed huge stakes in Russian companies by scooping up vouchers in procedures that are now viewed as questionable. The two left CS First Boston last year to set up their own shop. Sources close to the investment bank say their departure was partly due to their insistence on operating in a way that was unacceptable to an international investment bank required to follow western securities law to meet its fiduciary responsibilities. Mulford, head of CS First Boston Europe, says: “We’re glad they’re no longer there. We might have run into a problem.”
The current wave of Russian privatization may end up being even more troublesome however. In the first place, the trend in Russia is to effectively exclude foreigners from buying a substantial interest in the natural resources companies being privatized – in part a reaction to the economic power CS First Boston garnered previously. Yet such a nationalistic response “essentially excludes those who could exert a watchful eye”, worries the World Bank official.
Already the latest privatization scheme, which allows Russian banks which lent the government money last year a chance to bid for enterprise shares in an exchange for the debt, has been controversial. “Insider dealing has been fairly blatant,” notes Mulford. Tactics are primitive. For example, Norilsk Nickel, a major producer of nickel and platinum, apparently wanted to cut its deal with Unexim Bank. To thwart rival bidders (including Rossiyskiy Kredit, which offered to pay twice as much), the company insisted that those making an offer do so at the company’s offices in Russia’s hinterland. The company then proceeded to close the local airport so that no other bidders could meet the requirements – hardly a model of transparency.
The blatant favouritism has created political heat for president Boris Yeltsin, and is believed to have been the impetus behind his recent sacking of Anatoly Chubais, the last reformer in Yeltsin’s government and an unfortunate supporter of the loans-for-shares plan.
Perhaps even more ominous than the political shake-up is the transfer of ownership in the making. If the programme continues, Russia’s banks – 40% of which are estimated by the interior ministry to be controlled by the Russian mafia – could end up owning many of Russia’s enterprises, along with much of its vast natural resources.
