Sergei Mavrodi Convicted of Fraud in MMM Trial
Published: April 27, 2007 (Issue # 1266)
MOSCOW — Sergei Mavrodi, the mastermind behind the notorious MMM pyramid scheme that scammed millions of people in the early 1990s, was convicted of fraud on Tuesday in a Moscow court in what appears to be the end of a bizarre saga that stretches across the entire post-Soviet era.
Reading out the verdict Tuesday, Judge Nadezhda Markina of the Chertanovsky District Court said Mavrodi had defrauded MMM investors “by deception, betrayal and abuse of trust.”
MMM was the first and the biggest in a series of financial pyramids that hit Russia in the 1990s. Mavrodi was found guilty of defrauding 10,000 investors out of 110 million rubles ($4.3 million), though in reality millions of people lost money in the scheme.
Markina is expected to finish reading the 820-page verdict later this week and to sentence Mavrodi on Saturday. Prosecutors have asked for a five-year sentence, but it is likely that Mavrodi will be released soon, as he has already spent four years in custody.
Mavrodi’s lawyer Olga Makarova insisted that her client was innocent.
“We do not consider him guilty,” Makarova said just before Markina began reading the verdict.
There is no article in the Criminal Code that applies to what happened to MMM, Makarova argued.
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’s droll, 60-second television spots, featuring ordinary Russians whose lives improve drastically after they purchase the company’s stock, captured the nation’s imagination.
The advertisements’ fictional heroes, Marina Sergeyevna and Lyonya Golubkov, became household names as 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 have estimated that Mavrodi made off with up to $100 million.
After MMM collapsed in 1994, Mavrodi was charged with tax evasion and jailed. But he was released in October 1995 to run for a seat in the State Duma, which he won, largely on the promise to spend $10 million on improvements in the Moscow suburb.Pages: