AvtoVAZ shares manipulators may be sentenced to up to 7 years of prison

The Rostekh State Corporation reported to the prosecutor’s office on the fact of manipulations with the shares of AvtoVAZ, according to Sergey Chemezov, the head of the state corporation. The top manager said: “We asked to find the wise guy. Let them sort the things out”. He stated that the false information concerning the AvtoVAZ offer, which had caused a sharp change of over 20% of the shares’ value, is “purely criminal”.

The management of AvtoVAZ resorted to the law enforcement agencies. Igor Komarov, the president of the company, informs that the plant’s security service has joined the case. I.Komarov explained in an interview for “Russia 24” TV channel: “We take all steps to find those people, to understand their intentions”.

We remind that on December 20, an announcement was published in the “Vedomosti” newspaper in the form of an advertisement, informing of the buyback of the AvtoVAZ shares from individuals and legal entities. The buyback price was fixed at 24 roubles 17 copecks, which exceeded the value of the securities at the previous closing day by over 40%.

The publication was ordered by an advertisement agency, and the final client was a certain “Favorit” LLC and Mikhail Mykalo, introducing himself as a deputy general director of the company. The shares of the Company and the amount of the bidding responded by a sharp growth. However, the offer information was disproven within several hours, and the value of AvtoVAZ securities fell drastically.

Notably, the controlling shareholder of AvtoVAZ was nominally changed one week prior to the incident: a joint venture of the Franco-Japanese alliance Renault-Nissan and the “Rostekhnologii” State Corporation received 74,5% of the shares of the automobile manufacturer. Simultaneously with that, the investment company “Troyka Dialog” left the AvtoVAZ alliance. At the same moment, Carlos Ghosn, the head of Renault-Nissan, declared that there will be no buy-out of the shares from the minority shareholders of the Russian automobile manufacturer.

Evgeny Zhilin, Associated Partner of the Law Firm "YUST", agrees that there are obvious indications of a criminal act. The expert prognosticates: “Should a case be initiated, the prosecution will have to prove the intent of the publication, and that its author wanted to receive an unfounded income or to avoid losses. Taking into account the circumstances of the incident, the prosecution’s chances of success are quite high”.

If the income resulting from the market manipulation is equal to or exceeds 2,5 million roubles, it will be classified as serious, and the culprit may be sentenced to up to 4 years of prison or to a fine of up to 500 thousand roubles. If the income resulting from the market manipulation is equal to or exceeds 10 million roubles, it will be classified as very serious. The sanction for that is up to 7 years of prison.

According to the evaluations by Andrey Tolstousov, manager of the assets of the “Grandis Capital” investment company, the manipulator could earn approximately 12 million roubles. He explains: “Usually the bidding volume for the AvtoVAZ shares does not exceed 700 thousand dollars, but it reached 6 million dollars on that day. Most were completed for 16-16,2 roubles per share, which is approximately 15% more than the average price during the last week”.

If a criminal case is initiated, and the culprits are sent to prison, this will be the first precedent of the Russian securities market. Criminal liability for market manipulation was introduced back in 2009, but until now no one has been brought to responsibility under the respective article. The first criminal case on market manipulation was declared in August of 2011, but the case itself was opened only in August of 2012.

For more details see BFM.ru website.