August 21, 1993
Saturday
The business had hit a dead end. People, like zombies, kept bringing money to the fund. We took in millions and hauled them over to Vadim, who’d become a cash-conversion kingpin.
At our Saturday sit-down at the Terem, he explained the mechanics of the cash schemes. Drew two squares on a napkin:
– This is the «Poopsies» outfit, and this is the «Cupcakes» outfit. Poopsies buy beads from Cupcakes for three hundred thousand and sell them for a million three hundred thousand. The whole business is non-cash, and Poopsies are left with a million clean profit on their account. Get it?
– Uh-huh.
– If you pay every tax owed on that million, what’s left in the till to blow is maybe two hundred grand.
– You’re kidding!
– Do the math. VAT — twenty-eight percent, profit tax — thirty-five percent, into the medical, insurance, and pension funds — about the same again, plus the road fund. Three-quarters of a million, gone, minimum.
I shrugged, unable to picture how anyone could run a business under such murderous taxes. Vadim went on explaining. Drew another square below, tapped it with a finger.
– This is where we come in, the «Handsome Devils» outfit. The cycle gets longer. Poopsies still pay Cupcakes three hundred thousand for the beads and still sell them for a million three, but partway through the cycle they send Handsome Devils nine hundred thousand for «consulting and marketing.»
– What’s that supposed to be?
– Whatever, – Vadim waved vaguely. – Poopsies send Handsome Devils money for any old thing that counts toward cost of goods.
– Why?
– So that on paper the beads cost them a million two hundred thousand. All legal. Bought the beads from Cupcakes for three hundred thousand, got advice from Handsome Devils on how to sell them properly for nine hundred thousand. Total official spend on the beads — a million two hundred thousand. Official profit on the million taken in — a hundred thousand. Poopsies pay every tax under the sun on that official profit, even send a little something to starving African kids. Then Poopsies come to us with a briefcase and get nine hundred thousand in cash… whoa, hold on! They get seven hundred and change, because our cut is fifteen percent.
– Brilliant! – I marveled. – And what happens to the non-cash that lands on Handsome Devils’ account?
– Nothing happens to yours, – Vadim shrugged. – Like we agreed, I convert it to bucks on the exchange and put it in your currency account. What happens after that is your problem. Zhora doesn’t say anything.
Actually, Zhora did say something.
On Saturday, after we went over the week’s results, Zhorik mentioned that the underwear production wouldn’t get up and running before winter, no sooner. He counted on his fingers how many months were left, and boiled over:
– We need to get some business going so the money doesn’t just sit there dead weight! Remind me, how much do we have?
– A hundred and five thousand in bucks on Vadim’s account. Two hundred million rubles at Interbike. That’s from your clients who sent money and never showed up.
– They won’t show up before New Year’s, don’t worry about it. Ah, who would’ve thought raking in cash could be this easy? Need to get some other business going. But what? Five years back it was the kiosk racket. Where do you even find the next hot thing now?
