Bilked by Con Artists, Thousands in Russia Raise Ruckus

With blind faith in this country’s nascent capitalist system, as many as half a million people handed their savings over to con artists here on the promise of a 250% profit within three months.

But last week, many of the investors realized they had been had.

And they have been throwing fits ever since.

Two shadowy firms, Revanche and Amaris, took advantage of confusion about Russia’s privatization program, the naivete of rank-and-file investors and the absence of consumer protection to rip off as much as 10% of St. Petersburg’s population, city officials said.

The firms solicited money and privatization vouchers, promising to nearly quadruple any sum within 90 days minus 12% for taxes and a small service charge.

But last week, Revanche and Amaris disappeared, leaving behind locked offices and empty apartments.

That, in turn, has produced furious crowds--whose parallel St. Petersburg has not seen since the August, 1991, coup attempt when thousands poured out to defend the pro-democracy barricades around Palace and St. Issac’s squares.

On Monday, club-wielding police threw back the most active members of a crowd of 1,000 that tried to force an entry to City Hall.

Earlier, the same crowd roared in anger when journalists showed up. “You’re thieves too!” one woman cried. “You newspaper people let these people advertise. You helped them cheat us!”

The scams and the angry reaction pose a threat to Russian President Boris N. Yeltsin’s plan to lead Russia from communism to capitalism. The government’s ambitious privatization program, in which citizens are exchanging vouchers for shares in thousands of companies across Russia, is an open invitation to con artists.

Officials here admit that the government, in its race last fall to give a voucher to each of Russia’s 148 million eligible citizens, failed to clearly explain what to do with it.

Each voucher is worth 10,000 rubles at face value--about $17 at the current exchange rate--but far more than most Russian wage-earners make in a month.

“People still don’t understand privatization. Why privatize so quickly, right this minute, while people are still unprepared?” asked Sergei Zrentiev, one of Mayor Anatoly Sobchak’s chief assistants. “I expect this will just be the first of many such cases.”

So many auto workers at the giant Kirov factory fell for Revanche’s scam that they have organized a vigilante committee to find the ringleaders and “hang them by their legs in St. Issac’s Square.”

The swamped police have asked victims to stop calling. “Write your statements and keep them at home,” Police Col. Anatoly Anisimov said in a televised appeal. “We simply aren’t in a position to process so many statements at once. We’ll take them later.”

Victims have formed impromptu action groups to register their grievances. One group annexed the empty Amaris office on Moscow Prospekt: People who months ago stood in weeklong lines to hand over their savings are returning to the scene of the crime. This time, the lines are to add names, addresses and losses to a growing list of those seeking compensation.

Vladimir Barashikov, an official of the mayor’s Privatization Committee, said that Amaris disappeared with 200,000 vouchers (worth $1.7 million) and 800 million rubles ($1.3 million), Revanche with 200,000 vouchers and 300 million rubles ($500,000).

That may be just the beginning.

Government investigators say they are looking into at least 10 similar frauds here. One victim, Maria Yagimorva, and her parents’ organization for crippled children gave 680,000 rubles ($1,333) to a firm that promised profits similar to those offered by Amaris and Revanche. “We brought them our money Feb. 8, but when we arrived Feb. 10, there was no one there, just workers removing the company’s office furniture,” Yagimorva said.

Revanche and Amaris have been charged with fraud, and city police have set up a 14-member task force to investigate them. Police Maj. Gen. Alexei Petrov said the firms were legally registered but lacked licenses to handle vouchers or guarantee cash deposits.

Many victims are demanding government compensation. But they are unlikely to get any.

Yuri Yakovlev, a member of the mayor’s Privatization Committee, admits that the firms--whose ads flooded the media last fall and winter--should have been better regulated. But he added, “The government can’t pick up the tab for other people’s stupidity.”