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Police Extend Detention of Investment Company President

August 7, 1994

MOSCOW (AP) _ The shadowy head of Russia’s biggest investment company will stay behind bars for another 10 days while police investigate him and his failing firm.

Sergei Mavrodi, president of the MMM investment company, was detained Thursday on suspicion of tax evasion. His company, meanwhile, has effectively been shut down, and millions of investors are unlikely to get their money back.

Though Mavrodi has not formally been charged, his detention will be extended for another 10 days, the ITAR-Tass news agency reported Sunday, quoting MMM spokesman Sergei Taranov.

Tax police say Mavrodi has failed to pay 49 billion rubles ($25 million) in taxes and penalties for Invest-Konsulting, one of 44 companies police say make up the MMM empire.

MMM, which claims 10 million shareholders, is widely considered a pyramid scheme without any real investments. Share prices collapsed 99 percent recently after the government announced it could not back money put into MMM.

The panic cast harsh light on Russia’s largely unregulated securities market, where companies promise huge returns to an inexperienced population desperate enough to risk their money on high-stakes gambles.

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