Russian Wins Parliament Seat and Immunity : Election: Sergei Mavrodi bilked thousands with his MMM pyramid scheme. But voters took him at his word again.


Taking his investment firm’s you-can-be-rich message to the political arena, the protagonist of Russia’s biggest post-Communist financial scandal has won a seat in Parliament and immunity from prosecution as an alleged tax evader, according to election returns Monday.

Sergei Mavrodi, whose MMM financial giant provoked panic among millions of investors when its ballooning share prices collapsed in July, was declared the winner over 11 rivals in Sunday’s special election to select a new representative for a north suburban Moscow district in the Duma, Parliament’s lower house.

The 39-year-old Mavrodi, freed from jail to run but barred by court order from leaving Moscow, promised in a flood of leaflets and television ads to spend $100 million improving the depressed military-industrial district and getting every household there a telephone.

Arguing that government meddling had provoked MMM’s collapse, he also told the estimated 36,000 MMM investors in the 489,000-voter district that his election and consequent immunity from prosecution would be their best hope for recovering the value of their depressed shares.

“Now I have new chances to defend the rights of my shareholders,” Mavrodi said through a spokesman Monday after election officials announced that he had finished first with 27.8% of the vote, nearly double that of his nearest challenger. No runoffs are held in races for Parliament.


The election, called after the district’s deputy was gunned down gangland-style in April, was closely watched as an indicator of the national mood two years before Russians are scheduled to elect a new president.

It appeared to show that most people are disillusioned by politics--fewer than one-third of those eligible voted--and that any candidate appealing aggressively to their most selfish interests can win, especially in such a divided field.

“Most of (the voters) were ready to believe anybody who would promise to make them wealthy,” said Alexander Fyodorov, one of the also-rans. “They voted not for a political program but for a sack of money. . . . It is a Wizard of Oz they elected to Parliament.”

Alexander Zharov, Communist mayor of the district town of Solnechnogorsk, finished second with 14.5% of the vote. Millionaire democrat Konstantin Borovoi, a free-marketeer who promised that his “business contacts” would enrich the district, was third with 13.6%.

Fyodorov finished sixth with 5.9%. His Russian National Unity party, whose swastika-bearing supporters flashed straight-armed salutes, failed to match the surprising success of neo-fascist Vladimir V. Zhirinovsky in last year’s parliamentary election. In fact, the ultranationalist camp split, as Zhirinovsky backed Mavrodi in hopes of future financial backing.

Mavrodi’s investment fund became the hottest game in Russia last spring, promising 3,000% annual dividends. Lured by slick, fictional TV ads that showed poor Russians cashing in MMM shares to buy apartments in Paris and jet to tropical vacations, millions bought in, and many indeed became wealthy.

Government investigators called MMM a classic pyramid scheme that used income from new investors to buy back shares from old investors at ever-rising prices. The price of one share rose from 1,000 rubles in February to 125,000 rubles (then more than $60,000) in July.

Then the government announced that MMM was under investigation, investors panicked and soon there was no more new money to buy back old shares. Many Russians lost their savings.

Mavrodi was arrested Aug. 4 on charges that another of his companies evaded taxes and that he was obstructing the investigation. MMM suspended trading but did not close down. Freed from jail Oct. 12, Mavrodi promised voters that, if elected, he could restore MMM shares, now valued at 13,000 rubles each, to their July value within three months. He didn’t say how.

MMM offices received instructions from Mavrodi to reopen today but to keep the trading in old shares suspended until Jan. 1. Instead, MMM will sell new shares for 1,000 rubles each, with promises to raise the price twice a week.

Gennady Ponomarev, the Moscow city prosecutor, said the investigation of Mavrodi will continue. If there is enough evidence to bring a criminal case to court, he added, the government will ask the Duma to strip Mavrodi of his immunity.