Moscow's ousted mayor summoned in fraud case

24th October 2011, Comments 0 comments

Moscow's deposed mayor Yury Luzhkov said Monday he had been summoned to testify in a probe of a city bank he founded that allegedly issued a fraudulent loan to his wife's debt-ridden firm.

"I was summoned to appear for questioning on Monday, October 24," the once-powerful mayor told the Interfax news agency from an undisclosed foreign location.

"But I am currently abroad, giving lectures," he added. "I will appear before the investigator as soon as I return to Russia."

Luzhkov and his wife Yelena Baturina have spent most of their time abroad since the mayor was ousted in the wake of a heated political squabble with the Kremlin.

The 75-year-old was known to run Moscow like his personal fiefdom during his 1992-2010 term as mayor and has since been replaced by Siberia native Sergei Sobyanin, a Kremlin loyalist who has replaced most of Luzhkov's old team.

The Bank of Moscow finance house that Luzkov founded and used as the heart of the city's real estate and other business operations was raided within months of the mayor's replacement.

Its executives now stand accused of using city budget money in 2009 to issue a 13-billion-ruble ($420-million) loan to a shell company that ended up buying a property at an inflated price from Baturina's construction business.

Baturina admits that her Inteko firm used the proceeds from the property sale to cover immediate debts and stay afloat for several more months. But she argues that the loan was legal and the intermediary company legitimate.

Inteko is now in the process of being taken over by Russia's biggest bank Sberbank. The Bank of Moscow meanwhile has been taken over by the country's number two lender VTB and received a $14 billion cash injection.

Luzhkov's ouster and the Bank of Moscow investigation have provided the authorities with a chance to break the close links between city officials and shadowy businessmen who control some of the capital's most profitable assets.

A VTB investigation has shown that nearly two-thirds of the loans issued by the Bank of Moscow either went to friends of the bank's former manager Andrei Borodin -- a close friend of Luzhkov -- or stood no chance of being repaid.

Borodin has been named as a suspect in the probe and is currently living in exile in London.

Baturina for her part fled to Austria after crack police forces raided the offices of her Inteko firm in February.

© 2011 AFP

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