THE CASE AGAINST THE CHEMICAL PLANT HAS FAILED

The Avtozavodsky District Court of Togliatti has adjudicated on the illegality of a criminal case initiated against Vladimir Makhlai, the General Direct of TogliattiAzot. Mr. Makhlai was incriminated for tax evasion in 2005. Just before the court ruled to dismiss the criminal case the same decision had been made by the investigating officials. ToAz’s representatives hope that this success will be followed by “closing a similar criminal case related to an alleged tax violation in the period between 2002 to 2004”. Togliatti Department of Internal Affairs, which carried out investigation, made no comment on the case.

Yesterday the Avtozavodsky District Court declared that the criminal suit against Vladimir Makhlai, General Director and Chairman of TogliattiAzot, was illegal. Mr. Makhlai was charged with tax evasion in 2005 The District Court official told a Kommersant reporter that the decision was based on “a lack of constituent elements of an offence in Mr. Makhlai’s actions”.

Initially Vladimir Makhlai’s case was instigated by the Moscow Prosecutor’s Office. Afterwards when the case had been dismissed, the case papers, which were used as the main source for the investigation, were transferred to the Togliatti Department of Internal Affairs for further investigation. On the basis of these papers, the case procedure was revived in Togliatti on 29 May 2007. And on September 292007 the Togliatti Department investigators also cancelled the investigation in the absence of any elements of crime. But by that time the illegality of the suit had been already been appealed in court.

This is not the only suit filed against Mr. Makhlai. Mr Makhlai was initially accused of tax evasion for the period of 2002 to2004. According to the investigators, in that period TogliattiAzot had facilitated the sale of ammonia through Nitrochem Distribution AG (a trader of ToAz products in the world market) to the amount of 14.4 billion rubles, 20% below market prices. According to the investigators, as a result of such actions ToAz’s profits had been reduced by more than 1.2 billion rubles and in this way ToAz underpaid taxes to the amount of more than 280 million rubles. Vladimir Makhlai and Alexander Makarov, ToAz CEO, are charged by virtue of Article 199, Part 2 of the Russian Federation Criminal Code (Large scale tax evasions).

Sergei Zamoshkin, the ToAz attorney, told a Kommersant reporter that the second criminal suit was related to a purported tax evasion in 2005. This case was instigated on the basis of an inquiry conducted by the Samara Region Department of Federal Tax Authority. They alleged that ToAz underpaid taxes to the amount of 346.1 million rubles. According to law-enforcement officers, ToAz had used the same policies, which had been previously employed for sale of their products in the world markets. Zamoshin told reporters that “in the ruling on initiation of the criminal case there is no evidence Vladimir Makhlai has committed the alleged crime. And the tax claims should be contested by the tax authorities in accordance with the established procedure”, the attorney said. Mr. Zamoshkin added that the investigators had not conducted any expert examinations in relation to this criminal case. Togliatti Department of Internal Affairs officials refused to make any comments.

Yesterday ToAz’s representatives said that they strongly hoped that success achieved in this case would be followed by “termination of another similar criminal suit related to tax offences for the tax years 2002 to2004”.

It should be added that in August 2007, the Samara Region Department of Federal Tax Authority filed a tax claim against ToAz for the balance of almost 2.6 billion rubles for the tax year 2004.