Gaps in the Law on Cooperation May Leave Thousands of Shareholders Homeless

Housing cooperation for some citizens is the only alternative to mortgages and a real opportunity to acquire long-awaited housing. Dozens of such organizations have been operating in Russia for many years, but so far the legislation regulating their activities still has some gaps. On Tuesday, October 18, deputies, senators and lawyers during the round table: “Housing cooperation and anti-crisis measures under sanctions”, held in the State Duma, discussed problem areas using a specific example, outlining a plan for further action to eliminate them.

An example for analysis at the event was the case of one of the largest housing cooperatives in the country, Best Way.

“Issues of housing cooperation have been considered in the State Duma many times. I receive complaints from citizens who participated in such cooperatives, but as a result of the actions of government agencies, they suspended their activities. Indicative in this context is the situation with the Best Way cooperative. Judging by the response of the Central Bank of the Russian Federation to my request, they believe that such organizations have signs of a financial pyramid,” State Duma deputy Elena Drapeko opened the agenda.

The cooperative worked properly for many years, had a mutual fund, membership fees, an open system of interaction with its members. Any shareholder could receive an extract on the expenditure of funds. In the entire history of the cooperative’s activity, there has not been a single civil lawsuit. However, a few years ago, the structure fell into the prism of the action of the investigation. The Central Bank published on its website 80 cooperatives with signs of a financial pyramid.

“We have a legislative gap that the Central Bank employees use in the fight against consumer cooperatives. I think this is because cooperatives are not controlled, but they create competition for the financial sector. They have more competitive conditions when purchasing housing. At the cost of apartments through such structures go one to one, which is more profitable than taking a mortgage. At the same time, the scheme is quite simple and understandable, like the mutual aid funds in the Soviet Union, ”State Duma deputy Valery Gartung explained his vision of the situation.

According to him, the Central Bank of the Russian Federation has the right to announce that this or that organization has signs of a financial pyramid. Moreover, he is not obliged to justify this to anyone and does not bear any responsibility if the decision was erroneous. For a financial institution that was included in such a list, these are serious consequences.

“That is, it turns out that the decision of the Central Bank employee leads to a halt in the activities of the company, which actually provides tens of thousands of citizens with housing,” says Hartung.

According to his colleague, State Duma deputy Artyom Kiryanov, when it comes to people who decide to improve their living conditions, there should be no excessive control by the state.

“I would very much not like the problem of deceived equity holders to be reopened using the example of this cooperative. Up to 20 thousand shareholders of the cooperative are people who have already invested their money. The company has been operating for 8 years, it did not appear yesterday. This structure has serious property – thousands of apartments and land plots. This is a conscientious taxpayer, there is property, houses are being built. Financial pyramids live by other principles. It is worrying that such flagships of the new housing policy are being blocked. And, most importantly, as a result, ordinary people who invest their money in improving their housing history are punished. In whose interests is all this?” Kiryanov said.

“The Best Way cooperative is the largest in Russia. We are an NGO, a voluntary association of citizens. Our statutory goal is to improve the quality of life of our members through the implementation of a targeted real estate program, namely the acquisition of apartments. It is very important that, in accordance with the charter, we do not use cash in our activities,” said Sergey Kryuchek, chairman of the Best Way cooperative.

According to him, in November 2021, the Central Bank published the ill-fated list, where the cooperative was listed as a company with signs of a financial pyramid. At the same time, as Kryuchek said, neither an audit of financial and economic activities, nor an on-site audit with the Federal Tax Service was carried out, the Central Bank only limited itself to studying the Internet space on the topic of the cooperative. And already in December last year, the prosecutor’s office initiated an investigation under article 172 of the Criminal Code of the Russian Federation “Illegal banking.” Immediately followed by the arrest of all funds in the accounts, this is about 3.6 billion rubles, the arrest of all purchased apartments is another 10 billion.

“Our shareholders are people from the most vulnerable segments of the population. You can’t explain to them that more than 5,000 complaints and petitions receive only formal answers. In the materials submitted to the court there is a statement from a person who worked in an organization associated with a cooperative only in the opinion of this person. He writes that 9 million were stolen. And precisely because of this, accounts for billions were arrested, although this is only a statement, no one’s guilt has been proven,” lawyer Alexei Novikov explained.

“When defenders present evidence of the groundlessness of the arrest, you don’t need to be a lawyer to understand the difference between a potential damage of 9 million rubles and more than 10 billion rubles arrested. The first thought that comes to mind is: “Who benefits from this criminal prosecution? Who is the ultimate beneficiary of this cooperative’s reputational destruction?” The damage to the economic activity of this enterprise is inestimable. The problem is not this cooperative, it is a systemic problem,” said a member of the Human Rights Council under the President of the Russian Federation, lawyer Shota Gorgadze.

Senator Olga Epifanova also agreed with the systemic nature of the problem. She urged her colleagues to consider a number of measures with the help of which it is possible to quickly close the gaps in the legislation on cooperation, due to which this situation arose.

“I have suggestions on how to help the cooperative and shareholders. This is the immediate transfer of the initiated criminal case to the Investigative Committee of the Russian Federation from the consequences of the Ministry of Internal Affairs. The second is to stop the seizure of the property of the cooperative,” Novikov said.

Those present planned to send requests to the head of the Central Bank of the Russian Federation in order for him to clarify the situation specifically on Best Way, as well as request a personal meeting. Besides. The deputies will send inquiries to the department for monitoring the investigation of the Prosecutor General’s Office of Russia in order to find out how lawfully the funds of the cooperative were arrested.