Spring–summer 1995
The Tonton Macoutes showed up while I was polishing the facade in California.
Marina, along with the whole accounting department, was transferred to a company called Proma Finance. To deal with the Khryakino tax inspectors, who registered dozens of companies under Proma’s umbrella, Proma Finance rented a floor of a hotel in Khryakino and put relatives of the local Khryakino elite on the payroll. Marina and Lena were ordered to take turns showing up in Khryakino, but every day, to bark at the local bigwigs so they wouldn’t slack off and would keep working accounting miracles: paying taxes at the bare minimum — a «smidge,» as Zhorik put it — or else they’d be cut off the payroll!
Meanwhile, at Metallsnab, a proper finance department had grown up in place of the cozy little accounting office: two financiers on astronomical salaries of five thousand dollars each — Vladlen Grigoryevich and Sergei Pavlovich — and a dozen bespectacled clerks.
Zhorik had poached the financiers from a secret enterprise in the Khryakino suburbs, luring them to build up production. Building up production turned out to be simple.
The moment a targeted OJSC transferred its assets to a CJSC, a combined detachment of bespectacled clerks and Chicha’s athletes — dubbed the «Tonton Macoutes» on Zhorik’s suggestion — would move in. On arrival, they would legally throw the director out of the office and start the reorganization. The old OJSC, now stripped of assets, would cease operations and be declared bankrupt, with all the maneuvers permitted under Russian law.
The new owners — that is, us — would stop paying employees’ wages, stop paying utilities, stop sending money to suppliers for old debts, stop dealing with the local tax office... In short, we’d stop paying anything to anyone at all.
Zero!
Who are you? Move along! Take your questions to the previous owners. If you’ve got questions for our organization, address them to our place of registration — that is, Elista. We’re waiting, we’ll be glad to see you, we’ll treat you to some dotur.
Work at the plant? Buddy! Time to formalize your employment with the new owners. Once you’re on the books, you’ll start getting paid. We just need to figure out — does the plant actually need you?
The workers who weren’t needed went to demonstrations, shareholders made noise, suppliers held on. Tax officials and utility companies tried to gather their thoughts and find some way to bring us to heel. No luck.
There was no way to bring us to heel. Zhorik had already been in touch with people at the Prosecutor General’s Office, the Interior Ministry, the FSB, and the Presidential Administration, working out in advance how to localize the coming conflict and understand how to squeeze the tails of anyone unhappy. Especially the unhappy security-services types. Zhorik stuck to his principle: «We’ll fend off small hits ourselves, but before fending off the big ones, we need to know what it costs and where to deliver it.»
Minor malcontents were sent off to deal with the bankrupt OJSC.
Zhorik would visit suppliers and write off the enterprise’s debts down to zero. Zeroing out a debt cost an envelope with three or four zeros in it, depending on the size of the debt and the type of creditor: government types cost more. Then Zhorik would make the rounds of governors and mayors, whose pacification cost one zero more, but got us the cards in hand.
The supervising authorities kept quiet, having received a «Shut it!» from above and an envelope from us.
Grumbling from below was neutralized using the «Russian Horizon» scheme: loudmouths and champions of justice were invited to head up a Committee for Justice. Once the committee was formed, its ringleaders automatically got positions at the CJSC and turned into allies, urging the working class to hold on a little longer for the sake of a bright future in which wage debts would be paid off... eventually... not to everyone...
Then came the promissory-note stage. Having zeroed out the debts, Zhorik would settle with suppliers using Vatrobank notes at a seventy-percent discount, explaining that with a shortage of cash on hand, he was ready to pay with highly liquid securities. You could double your money, if you weren’t afraid! Or you could wait a month or two. Suppliers squirmed, but had no real choice. After a personal phone call with Vadim and assurances of legality, they’d accept the notes as payment. When the redemption date arrived, they’d head to Vatrobank in Moscow and run into a surprise — an invalid endorsement. Instead of the proper OJSC «VatrOInvestЪ,» the note listed an LLC «VatraInvestment,» bankrupt for a year already.
In the end, thanks to Zhorik’s maneuvers, a plant would go six months to a year without any expenses beyond wages. Five or six bribes of ten thousand dollars apiece to local authorities, watchdogs, the regional press, and justice committees were small change. Moscow-level spending was practically theoretical. Under Zhorik’s old scheme, a chunk of the CJSC’s non-voting shares would be registered to yet another LLC, whose founders were the same crew of Vadik’s homeless men — Buzykin, Zilov, Novoseltsev... An account was opened for the LLC, into which Proma transferred twenty percent of the CJSC’s profits. Where the money went from there — not our concern.
While Zhorik was working the suppliers, Vladlen Grigoryevich and Sergei Pavlovich would balance the books, calculate margins, figure out the break-even point, and consider — should we open the valve? Time to pay, or wait a while longer? If the numbers showed the plant could generate profit without any funny business, they’d start dealing with the local utility companies and tax officials. Debts would be settled, and the smartest shop-floor manager in the Proma Holding would be appointed plant director.
The scheme came together on its own: the moment we squeezed the first plant, I asked Pasha, head of the Technical Directorate and, as it happened, director of the Khryakino plant: «Where do we find a director as sharp as you?»
Pasha didn’t think long: «Take Slava from the hot shop. Sharp kid.»
Slava refused to relocate from Khryakino to the Non-Black-Earth region. He was talked into moving with ten percent of the CJSC’s shares, held in trust: as long as he was director, a tenth of the profit went into his pocket.
The scheme proved workable.
The best shop-floor manager could raise his salary a hundredfold, if the chance came up. Shop-floor managers experienced a sudden surge of labor enthusiasm.
At the final stage of a squeeze, Vladlen, Sergei, and I would go meet the governor, where in tough negotiations we’d hash out who was responsible for what on the ground and how much it would cost to keep the region from a social explosion — that was one thing. And two, so that we wouldn’t be hindered from exploiting the proletariat. Then we’d run the same routine with the mayors. After that, Seva and I would make the rounds of cops, deputies, and other locals eager to say a word in support of the oppressed class and get an envelope with a sigh: «It’s all Yeltsin’s fault!»
A convoluted contraption, but there was nowhere else to go.
The new director of the enterprise would rewrite the staffing table: which workers were needed and which vacancies should go to fresh high-school graduates uncorrupted by Soviet proletarian ethics.
Needed workers were transferred onto the CJSC’s books; the unneeded ones were advised to sue the OJSC, where their work records sat gathering dust. Those transferred — roughly a quarter of the total headcount — had their wage arrears cleared and their salaries doubled. That way the wage fund shrank by half. Costs on suppliers, after Zhorik’s tricks, dropped by a third. There’d be profit, if the governor turned out to be reasonable.
We didn’t work with unreasonable ones. We didn’t bother with money-losing enterprises. Some turned up that way: after the cuts and recalculations, they kept generating losses just as before. In that case, we’d strip the industrial giant down to zero — carving the shop floors into sections and leasing them to private tenants, turning the office space into business centers and the warehouses into markets. Within six months, any enterprise that fell into the holding either started turning a profit or turned into a flea market. In the first case, Vladlen Grigoryevich would report: «Restructuring successfully completed!» In the second, Sergei Pavlovich would recommend dumping the flea market at peak price on the local gangsters. Seva would say which ones.
