Russian Official Arrested in Tax Evasion Scheme

In one of the highest-level corruption cases to hit post-Soviet Russia, the government’s powerful statistics chief and two top aides were arrested for falsifying data to help dozens of corporations evade taxes, authorities said Tuesday.

Yuri Yurkov, head of the Russian State Statistics Committee, was taken into custody after investigators found more than $1 million in cash and a large amount of jewelry in his home.

Authorities charged that Yurkov headed a ring of more than 20 high-ranking employees who were paid bribes for systematically underreporting the financial data of selected companies over the past four years.

“Because of the importance of his agency, Yurkov was ranked as equal to a [Cabinet] minister,” said Alexei K. Volin, chief of the Russian government information department. “Without a doubt, we can say this is the highest-level arrest in a corruption case in the post-Soviet history of Russia.”

The arrests of Yurkov and his aides come at a time when the government is desperate to collect taxes so it can pay its massive debts at home and abroad and maintain the stability of the ruble. Officials said millions of dollars in revenue--and possibly far more--were lost through the scam. Authorities declined to identify companies that allegedly paid bribes to reduce their tax bill.

“The damage is huge,” Volin said. “We don’t know the figure yet or even the order of magnitude. But you can imagine what the gains of the companies involved were if $1 million in cash was discovered in Yurkov’s apartment. We are talking about millions of dollars, that’s for sure.”

The officials are also charged with selling classified information about the performance of companies to competitors and keeping the proceeds, authorities said.

In a holdover from Communist times, the Statistics Committee has maintained a near-monopoly on collection of economic data from around the country, giving economists few independent sources of information. Despite questions about agency figures, the committee’s numbers have served as the basis for government budgets, forecasts and decisions.

“People know that weather forecasters make mistakes, and they continue listening to them every night,” said Michail L. Berger, economic analyst and editor in chief of the newspaper Sevodnya. “We knew something was wrong with our statistics, and we assumed they made mistakes. Now we know they just lied--lied for money.”

The investigation began more than a year ago and intensified in April when investigators began tailing Yurkov. On Monday, police searched the homes and offices of Yurkov, his deputy, Valery Dalin, and the head of the agency’s data processing center, Boris Saakyan, seizing a total of $1.5 million in cash and a “wealth” of jewelry. The three officials were arrested Monday evening.

Video footage taken by investigators and broadcast by NTV television showed shoe boxes and stacks of envelopes stuffed with $100 bills allegedly found in Saakyan’s apartment. A voice identified by the station as Saakyan’s could be heard telling investigators, “It’s the property of my brother. He went to America. He left the money here. He couldn’t transfer it there, so he left it for me to keep.”

Later, presented with the evidence against them, Yurkov and Saakyan confessed their guilt, authorities said. The investigation into about 20 alleged accomplices continues.

Prime Minister Sergei V. Kiriyenko said he and President Boris N. Yeltsin had been informed of the investigation and approved the arrests in advance. “The state cannot allow this, and there will be no compromises for anybody, including state officials,” Kiriyenko told reporters on his arrival Tuesday in neighboring Belarus. “I don’t consider this bad news. On the contrary, it’s a demonstration of the successful work of the law enforcement agencies.”

The Statistics Committee, known by the shorthand Goskomstat, is the successor to the Soviet-era Central Statistical Department, which churned out statistics to suit the Communist Party in its management of the economy. While the breakup of the Soviet Union led to new press freedoms in Russia, the centralized collection of economic data continued under Goskomstat.

In recent years, some low-level staff members complained privately that they were ordered by superiors to doctor numbers. Last year, some economists accused the agency of underreporting the size of the gross national product by 40%--thereby exaggerating the size of Russia’s shadow economy. Goskomstat also reported that the gross domestic product rose 0.5% last year, a statistic trumpeted by politicians as a big success.

Now, with Goskomstat underreporting the output of many companies, economists wonder how big Russia’s gray market truly is and whether the country’s growth rate was greater than reported. “What is the meaning of all this?” asked editor and economist Berger. “To put it simply, you wake up one morning and you find out to your shock and surprise that you are not Ivan Ivanovich Ivanov but you are in reality Petr Petrovich Petrov and all around you is no longer what you thought it was. The powerful State Statistics Committee is now the Ministry of Illusions.”