Police Track Down MMM-Fraud Fugitive
By Nabi Abdullaev
Staff Writer
MOSCOW - After four years on the run, Sergei Mavrodi, the fugitive mastermind of the MMM pyramid scheme that scammed millions of people in the early 1990s, was caught in a police raid Friday. Television showed police using a circular saw to cut open the steel door of a rented apartment on Frunzenskaya Naberezhnaya in Moscow at about 5 p.m. Friday. Mavrodi, 47, was shown looking around groggily in handcuffs as excited police officers cracked jokes and posed beside him for the cameras. Mavrodi has been sought in a fraud investigation since 1998 and was placed on an international wanted list. Investigators long believed that he had fled to Greece. But they said over the weekend that he had probably never left Moscow. "You get the feeling that he never really left and was just good at hiding," said Viktor Prokopov, the Interior Ministry official in charge of Mavrodi's case, Interfax reported. Russian media said that Mavrodi eluded the police by frequently changing addresses and hiring a team of former secret-service officers for protection. It was unclear Sunday how the police managed to pick up his trail. When Mavrodi was detained, he was carrying a forged passport bearing the name of Yury Zaitsev of St. Petersburg, news agencies reported. Prokopov said that the police would start looking for any remaining MMM assets. MMM, which operated from 1992 to 1994, was a sensation thanks to a clever saturation-advertising campaign on national television that promised spectacular overnight returns on investments. MMM shares soared in value from 1,600 rubles (then about $1) to 105,600 rubles (about $65). Dividends were paid with money from new share sales. Some 2 million to 10 million people lost their savings when the pyramid-scheme folded in July 1994, and thousands of panicked people took to the streets. Investigators estimate that Mavrodi made off with up to $100 million. Mavrodi was charged with tax evasion and jailed. But he was released in October of that year to run for a seat in the State Duma, which he won, largely on the promise that he would spend $10 million on improvements in his district, Khimki, in Moscow. About a quarter of the district's voters were reported to hold MMM shares, and many shareholders believed Mavrodi's claim that MMM had been brought down by a government plot. As a lawmaker, he secured immunity from prosecution. A year later, however, the Duma stripped him of his seat, and thus his immunity, and the police resumed their investigation into possible fraud at MMM. Mavrodi remained at liberty during the investigation, and in 1996 he tried to register as a presidential candidate. The police closed their investigation in 1997, citing a lack of evidence. The Prosecutor General's Office reopened the case in 1998 and, when prosecutors attempted to bring Mavrodi in for questioning, they found that he had disappeared. Former MMM shareholders have tried unsuccessfully for years to retrieve their savings. Levon Sarvazyan, a representative of 1,800 former shareholders, said that he did not believe that Mavrodi's capture would help them in their fight. "He will pretend to be a penniless pauper," Sarvazyan was quoted as saying by the Izvestia newspaper on Saturday. "Now, we are suing the Finance Ministry, because it was the state that permitted MMM to violate the law." Television footage showed Mavrodi living in a shabby apartment at the time of his capture. Media reports said, however, that he had moved between apartments in a luxurious Mercedes sedan. While Mavrodi had laid low in recent years, the names of a number of his relatives have emerged in investigations in Russia and the United States. Mavrodi's younger brother Vyacheslav was arrested in 2001, and is now awaiting trial on charges of illegal trade in precious metals and stones and carrying out illegal banking activities. The charges are connected to an investment company with operations similar to MMM's that Vyacheslav Mavrodi set up in 1997. Sergei Mavrodi's wife, Yelena, was detained in 2001 on suspicion of trying to help a girlfriend kidnap a 6-week-old baby from a former lover. No charges were filed, and both women were released. Mavrodi's cousin Oksana Pavlyuchenko is the head of Stockgeneration, a company that courted investors over the Internet with promises of 10-percent monthly interest, according to Wired magazine. The U.S. Securities and Exchange Commission has taken Stockgeneration to court, accusing it of organizing a "classical financial pyramid" that has duped 275,000 investors, according to the SEC's Web site.
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