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#11 - JRL 7034
The Observer (UK)
January 26, 2003
Russia's rich fuel luxury car theft racket
Nick Paton Walsh in Moscow

Walther Schmelzeng has a problem. The insurance investigator went with the
police to reclaim a luxury car that had been stolen from Germany and traced
to Moscow, where it was being driven with forged documents.

But Schmelzeng cannot return the car to its rightful owners, as it has
again been reported stolen, this time by the well-connected, but dishonest,
Russian owner - a government prosecutor.

'I cannot return it to its German owner as the police will arrest me for
driving it,' said Schmelzeng. 'Once we took the car, the prosecutor gave an
interview to a local newspaper about me, then went to the police.'

The situation has become so grave that last week Schmelzeng gave a press
conference to expose the penchant for stolen top-of-the-range cars that is
rife among the great and the not-so-good of Moscow's high society. He has
appealed to the Kremlin - a call that went unanswered - and pointed the
finger at high-ranking corrupt officials - a notoriously dangerous practice.

An estimated 1.5 million stolen cars are being driven around Russia. The
BMWs, Mercedes, Bentleys, Cherokee Jeeps or Humvees are often stolen to
order in western Europe or the US, then brought across eastern Europe's
porous borders.

Customs officers are paid off and the car is resold, with a new set of
documents often supplied by enterprising police in Russia. The vehicle is
registered in the name of someone who has died, or a homeless person.

The problem goes to the top of Russia's biggest businesses. The
vice-president of one of Russia's largest energy companies drives a
Mercedes S500. The car was registered in his name, and Schmelzeng, who says
it was stolen, won a court battle to get it back.

'But he got another prosecutor - along with his bodyguards and powerful
friends - to stop us taking the car,' he said. 'Sometimes we take a car to
the police station for safe-keeping, and when we return an hour later find
it has been sold on. The police say they don't know where it is.'

Schmelzeng tried to take one car back from a member of the Russian
parliament, the Duma, 'but he took it back the next day', and one from a
Russian pop star, who cannot be named for legal reasons.

For police who are not in on the act, stolen cars present even more
difficulties. Oleg Yelnikov, from the Ministry of Interior's Organised
Crime Directorate, said: 'From one side the former foreign owner has
received his insurance payout and does not want the car back.

'We can't punish the Russian buyer because the majority buy a car that
seems registered legitimately to someone - be they homeless or fictitious.
We can punish the road police - dozens were sacked in 1999 and 2000 - but
after all this, who is going to pay to take the car back to the owner?'

German insurance companies have been hit by the massive cost of organised
auto crime. 'About 30,000 cars are stolen each year from Germany,' said
Schmelzeng. 'On average they cost 15,000 [10,000]. This means the trade
costs 450 million a year. Insurance companies foot the bill and pass it on
to the man in the street. German motorists are paying for criminals in
Russia to drive better cars than them.'

Schmelzeng's firm, Via-Avto, works for many of Germany's insurance
companies. When he started combating car crime in St Petersburg in 1995,
Vladimir Putin was a low-level bureaucrat in the local administration and
provided his business with the necessary permits. His firm tried to work in
Ukraine, but was forced out when some of his colleagues were murdered by
the mafia; he has personally received death threats.

'We need more help here in Russia,' he said. 'But nobody wants this work,
as it is too dangerous.'
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