Chairman of the Board of Directors of JSC Ust-Luga Company Valery Izraylit was arrested in St.Petersburg, Russia on December 29, 2016, writes Russian business newspaper Vedomosti. He is charged with embezzlement of RUR 1.5 bln (USD 25.3) allocated for the development of Ust-Luga Commercial Sea Port. He is suspected of withdrawing the funds to offshore companies.

In 2010 Ust-Luga Company took a loan of RUR 600 mln (about USD 20 mln by the exchange rate of 2010) in one of Russia’s major banks, VTB, with 9.5% annual interest rate until November 2015 under the guarantees of the Administration of Leningrad region. The loan was not paid out in due time and in 2015 the parties agreed on a new deadline, March 2016. However, the borrower again failed to repay and the bank filed a legal action to declare Ust-Luga Company bankrupt. Later, the Leningrad region Administration was held liable as the guarantor of the loan and repaid it in full to the bank, following which the bankruptcy proceeding was stopped. In November Ust-Luga paid out RUR 266 mln to the Administration, which now constitute a half of what was paid by the Administration.

Valery Izraylit is arrested until January, 21. We will follow up on further development.

JSC Ust-Luga Company was established in 1992 to construct Ust-Luga Commercial Sea Port, a deep-water port with a capacity of 180 mln tons in the Gulf of Finland of the Baltic Sea. The port commenced its operations in 2001, at the coal terminal. Today Ust-Luga is a multi-purpose facility of 12 terminals for liquid, dry bulk, containerized and general cargo. According to Baltic Sea Ports Administration, in January-November 2016 the port handled 85 mln tons (+6%, year-on-year), with dry bulk and liquid cargoes showing growth of 9% and 6% respectively, but container throughput fell by 7.1% to 76,533 TEUs.

Valery Izraylit became General Director of the company in 1999 and since 2005 he has been Chairman of the Board of Directors. The developer of one of the first Russian port projects on the basis of public-private partnership, Valery Izraylit was highly recognized by the government and the business community. In 2006, he was awarded a Certificate of Honor by the Russian Ministry of Transport for his contribution to the development of North-Western transport infrastructure. Later, he was recognized as the Best Manager of 2008 by the Top 100 Award Expert Board.

Interestingly, it is not the first legal action taken against Russian port top manager in 2016. In March Dmitry Mikhalchenko, General Director of Forum Holding Company developing Bronka, another deep-water port near St.Petersburg, was arrested on the charges of smuggling alcohol. On December 29, 2016 his arrest was prolonged until 29 March 2017.