Tuesday the Russians could watch justice at work: Sergey Mavrodi, founding father of the biggest economic “bubble” MMM in the modern history of Russia had to face the sentence.

16 June, 1993 Sergey Mavrodi founded a so-called commercial company MMM, which turned out to become an extraordinary huge financial pyramid. According to the case papers, Mavrodi under the name of MMM issued 991 thousand shares with face-value of 1000 rubles, but the real amount of shares sold to the population was three of four times bigger. A great role in this story played Russian mass media: MMM produced several TV commercials convincing people of the need to acquire the shares doubling their cost within two or three weeks. Most citizens unsophisticated in new marketing technologies that Mavrodi used bought shares, since they believed in better life coming with post-Soviet changes.

Thus, within quite a short period Marvrodi managed to get unfold wealth later divided in three parts: one part of newly received funds were invested in stocks of leading Russian companies, another third of the capital was transmitted to his firms’ accounts and later cashed and the rest he invested in development of his business (commercials, new points of sale, new equipment).

Analysts believe the economic “bubble” of that kind had to burst one day. The scheme was simple: payments of interests on deposits were made from funds recently invested by new participants of the “pyramid”, which inevitably led to the day when payments exceeded sums invested in the company. MMM collapsed in 1994 but its founder was elected as a deputy to the City Duma of Moscow. Finally, in 1995 a criminal case concerning MMM was opened and Mavrodi disappeared. He was arrested in 2003 in Moscow, where he lived using a forged passport.

The verdict on Mavrodi’s case written on over 800 pages has not been fully read yet, as not only transgressions committed by the accused must be made public, but names of all victims as well – nearly 11 thousand people. Unofficial data state the total number of investors is 10 million. Most investors are assured that Mavrodi is not the only one to blame, but civil servants who overlooked this machination must share years of imprisonment with the founder of MMM.

Besides, there are those who want Mavrodi to be sentenced to life imprisonment, not 5 years as the prosecutor claims. Nevertheless, Mavrodi can’t face longer punishment, since MMM functioned when the Russian Criminal Code hadn’t come into force yet and the old Soviet Criminal Code lacked the section on extra large-scale fraud. Therefore, only the section of large-scale fraud can be considered and Mavrodi can be sentenced to 5 years of imprisonment only. Taking into account the time he already spent in prison, 4 years, he soon will be freed. Moreover, right after the verdict announced, Mavrodi can calculate on parole.

Thus, in Russia the person who robbed over 10 million people may enjoy freedom in less than two years. Insufficiently considered legislation, connivance of the authorities and total financial ignorance of post-soviet people caused the said result. Never believe commercials and check the reputation of the company you are going to invest money into is the lesson the Russians had to learn after MMM crashed.

Sources:

    www.vz.ru
    www.vremya.spbstu.ru
    www.svobodanews.ru

Olga Pletneva