MMM boss defies state

SERGEI MAVRODI, the secretive entrepreneur who has made himself Russia's fifth-richest man by conning 5 million investors with his giant MMM pyramid scheme scam, failed to turn up yesterday at a meeting he had been ordered to attend by the Finance Ministry and the tax inspectorate.

Because Russia still has no laws against companies issuing shares without a proper economic or financial foundation, the authorities cannot arrest Mr Mavrodi but they had been hoping to have a thorough look through his accounts to find out the exact state of affairs at the investment fund with the catchy name of MMM.

Mr Mavrodi sent a lawyer to the meeting but officials said that was not good enough and would not let him speak on behalf of his client.' We still insist that MMM register all of its shareholders and declare the value of its assets,' said Andrei Vavilov, the First Deputy Finance Minister.

A defiant Mr Mavrodi complained through his lawyer that television advertisments for MMM were no longer being allowed on the air despite the fact that he had paid for them up to September. He also accused journalists of inaccurate reporting of the MMM crisis and vowed that as soon as he had sorted his problems out, he would be taking journalists to court.

MMM attracted both the naive and the greedy by promising fantastic dividends which would make them rich, but experts say MMM was running a classic pyramid scheme in which new share purchases provided the only basis for the dividends.

The pyramid effectively collapsed last week, when the value of the shares plunged by more than 100-fold.

When parliament reconvenes in autumn, it intends to pass a law regulating the securities market. Yesterday the Moscow city authorities, which said MMM owed them 1.5bn roubles (pounds 470m) in unpaid taxes, said they would work out a 'legal mechanism against swindlers' without waiting for a federal bill.

Meanwhile, Mr Mavrodi, still free to operate, is issuing new shares and thousands of people are buying them, despite the Finance Ministry warning that the new issue is 'totally illegal'.