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«    May 2017    »

Crime in the utilities sphere vs the prosecutor’s office: who will win?

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Crime in the utilities sphere vs the prosecutor’s office: who will win?

The number of crimes and frauds in the utilities sphere is growing annually, but the prosecutor’s office asserts that the number of crimes is not growing but the clear-up rate is. Let us check it out. 

The utilities sphere remains one of the most criminalized economic sectors, and the number of crimes and violations is constantly growing. At present the sphere is being reformed. But if the criminals are not defeated, the reform results may turn out differently from what was initially planned.  


There is no such system anywhere

According to official statistics, the annual turnover in the utilities sphere is over 4 trn roubles — that is about 6% of Russia’s annual GDP. It is a vast economic complex: the water-supply systems are 550,000 km long, which is 1.5 times the distance from the Earth to the Moon. There are 1,500,000 multi-family houses totaling 3.5 bln square meters. That surpasses the area of a number of European states.

About 80% of Russian housing stock is owned by citizens. The demand for the industry’s services is huge, as every citizen of the country is a consumer.

The modern Russian utilities sphere is a remnant of the Soviet municipal services, based on vast enterprises.  

The market has brought to light the non-efficiency of the system and the growing problems connected with it. The basic one is that, despite total housing privatization, people have not turned into real owners. Owning a property is not only a right but a responsibility to take care of the housing and save all the resources.

Crime in the utilities sphere vs the prosecutor’s office: who will win?

Retain and increase

Alexander Sidiakin, First Deputy Chairman of the State Duma Committee on Housing Policy and Utilities, thinks the problem of corruption and other fraud in the sphere of utilities is connected with significant financing from the budget which allow utilities jobbers to fish in troubled waters.

Today, the concept of the RF Government and Construction Ministry is to put the majority of utilities enterprises to concession. Formally, the physical assets of the sphere belong to the state, but operative administration and investments are up to private companies. They are to optimize the processes and financial flows and check them.

According to the deputy, this is the right direction in which to develop. As far as statistics are concerned, the growing number is connected with the clear-up rate, not the increase of fraud. 

By now, systems for managing company certification and state housing control have been created. People see the feedback from supervisory bodies, and people’s opinions about the utilities sphere’s work is changing for the better.

 Crime in the utilities sphere vs the prosecutor’s office: who will win?

Prosecutor’s office as a chief superintending body

According to information from the RF Prosecutor-General’s Office, fraud in the sphere of utilities is increasing. More than 2,500 crimes have been registered annually over the last three years.  Last year the amount of loss increased by 12% to 6.5 bln roubles.

The most vulnerable target is the money allotted for the utilities’ needs from the budgets of different levels, and the money paid by people for utility services. Managing companies’ deliberate bankruptcy has started happening more often, and people are doing without utilities services, especially in winter.  

Alexander Kurennoy, Head of the Department for Cooperation with Mass Media of the RF Prosecutor-General’s office, thinks that the utilities sphere has become more transparent lately, so more frauds are being found out.  

Though the balance of 2016 has not been struck yet, the number of fraud cases in the sphere is sure to be lower. There are far fewer new cases of legal violations.

The number of complaints from people about the utilities structures’ work in 2015 was over 121,500. If compared with 2014, total growth was 15%. 

Crime in the utilities sphere vs the prosecutor’s office: who will win? 

Cushy job

According to Alexander Kurennoy, a new criminal area has appeared: the program of capital repairs. It has not been well arranged yet, and it differs greatly from what had been imagined. People often think that the program is far from fair, and do not understand why they should pay for a repair they are sure not to benefit from until the planned term.

Most often, violations in the sphere are connected with the order of capital repair funds being targeted for use of their money, and the fulfillment of contractors’ duties. More than 20,000 law violations have been found in 2016. One of the most painful points is capital repair deadlines. Thus, in the Sverdlovsk region in 2015 about 1,000 houses were to be repaired, but actually they repaired only 134.   

In the Stavropol region only one house out of 400 was repaired fully. In Mordovia, a managing company made false minutes of a general meeting on capital repairs, and the estimate was set 400,000 roubles higher.

There were similar cases all over Russia.

But in 2016 the situation is getting better all over the country, the RF Procurator-General officials state. But it is still too early to say that it is working normally.

 250,000 law violations were found, several thousand officials and heads of enterprises incurred administrative liability, and more than 500 criminal cases were initiated.  

Crime in the utilities sphere vs the prosecutor’s office: who will win? 

Vast volume — grand fraud

The large scale and volume of the Russian utilities sphere give birth to large improprieties. It is necessary to struggle against corruption to enhance trust in the system, thinks Alexander Sidiakin. The high level of debt in the utilities sphere (over 1 trn roubles), premeditated bankruptcy of enterprises, reluctance of law-enforcement agencies to initiate criminal cases on false minutes of general meetings, etc. make the struggle difficult. So, systematic measures should be worked out.

One of the ways to decrease the number of frauds is to introduce direct payments for supplied resources. The fewer intermediaries, the fewer bankruptcies, both real and fake.

The struggle against criminals in the utilities sphere will be long, and much will depend on how successful the reforms of the sphere will be.


Vladimir GURVICH

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