Rick Scott, Kalashnikov assault rifles, tax incentives, U.S. sanctions, and Russian oligarchs

By Dan Christensen, 

Kalashnikov USA’s booth at the 2017 SHOT Show in Las Vegas

When Pompano Beach’s authorized manufacturer of Russian AK-47 assault rifles was in jeopardy of losing $162,000 in tax incentives in 2016, Gov. Rick Scott’s administration tried to ride to the rescue.

Broward County records show that Florida’s Department of Economic Opportunity (DEO) sought the county’s cooperation to extend the term of the secret incentives deal that brought Kalashnikov USA to Broward in 2015. But the proposed extension, intended to help the company meet the deal’s job-creation requirements and allow it to collect the tax refunds, soon failed.

The Scott administration’s request, like its 2015 offer of tax incentives to the company, was made in the face of U.S. economic sanctions imposed on Russian-made military assault weapons, as well as indications that Kalashnikov USA was in violation of those sanctions.

Gov. Scott’s office has denied that Kalashnikov USA received any special treatment or that Florida skirted the U.S. sanctions to offer it tax incentives. And, in fact, the incentives contract gave the company the right to request a one-year extension. Still, Scott’s economic development department has not yet made public requested records documenting the state’s effort to address the company’s compliance with the federal sanctions.

Florida Bulldog reported last month that Broward court records filed by Kalashnikov USA’s attorney state that it “holds the U.S. license to manufacture and sell world-renowned Kalashnikov firearms.”

“Under U.S. sanctions law, if a company is engaging in any transaction with a blacklisted entity like Kalashnikov, including licensing its name, technology or services for use in the U.S. or otherwise dealing in its property, that’s a compliance problem,” Washington, D.C. attorney Robert I. Meltzer said in an interview. Meltzer, a partner at WilmerHale, specializes in all aspects of U.S. export control and economic sanctions law.

Ties to Putin allies

Bloomberg Businessweek further reported last week that a “complicated web of shell companies connects Kalashnikov USA to allies of Russian President Vladimir Putin and appears designed to avoid U.S. sanctions.”

Marjory Stoneman Douglas High School

Florida’s use of taxpayer dollars to lure to Broward an out-of-state assault rifle maker tied to Russia’s most recognizable weapons brand has become a focus of controversy and protests in the wake of the Valentine’s Day mass shooting at Parkland’s Marjory Stoneman Douglas High School. Seventeen students, teachers and coaches died in the rampage by gunman Nikolas Cruz. Another 17 people were wounded.

Kalashnikov USA is the brand name of an American company, RWC Group LLC. RWC stands for Russian Weapon Company.

Gov. Scott has supported trying to create jobs by bringing gun makers to Florida. He’s also declared that he’s a defender of “our right to bear arms.”

Still, on Friday, with parents of Douglas high student victims looking on and a U.S. Senate bid looming, Gov. Scott signed into law a bill that raised the age for buying a gun from 18 to 21, created a three-day waiting period to purchase a firearm, banned bump stocks that allow guns to fire faster and allows some school staff to carry guns.

Kalashnikov USA executive Michael Tiraturian did not respond to a request for comment. Company representatives, however, have long maintained that the American company cut ties with Russia’s Concern Kalashnikov when sanctions were imposed.

U.S. sanctions against Concern Kalashnikov

Concern Kalashnikov was one of eight Russian arms makers whose assets were designated and blocked by the sanctions imposed by President Obama in July 2014 in response to Russian actions to destabilize Ukraine and its occupation of Crimea. The action immediately froze its assets and generally prohibited transactions with it “by U.S. persons or within the United States.”

Prior to the sanctions, RWC Group was Concern Kalashnikov’s exclusive dealer in the U.S., according to Sputnik News, the Russian government-controlled news agency. A five-year agreement signed in January 2014 anticipated Kalashnikov would export up to 200,000 units a year to the U.S. and Canada, Sputnik said.

“Shotguns going out!” Kalashnikov USA announced when it tweeted this photo last August.

Broward records show that in June 2016 DEO sought to “streamline the approval process” and change the job-creation schedule for Project 762, the state’s code-name for Kalashnikov USA. The state asked both Broward County and Pompano Beach officials to agree to changing the incentives contract because both had agreed to chip in funds to make the jobs-for-incentives deal happen.

The Scott administration offered Kalashnikov USA state tax breaks in October 2015 to get the company to relocate from Pennsylvania. Kalashnikov USA’s sponsor was the Greater Fort Lauderdale Alliance, Broward County’s official public/private economic development group. The deal was terminated in April 2017 and no money paid because Kalashnikov USA did not live up to its incentives contract.

“Right now it’s easy to say it was a bad decision, but we looked at it as 54 skilled advance manufacturing jobs,” Alliance President/CEO Bob Swindell said Friday. “Obviously we don’t want jobs at any cost…[but] it’s a challenge for us if we have to become an arbiter of social policy. Is the company legally licensed to do business? If those boxes are checked, we feel an obligation to help them.”

Swindell said the Alliance will continue to pursue incentives for interested arms makers looking to create jobs in Broward.

Bloomberg Businessweek’s story identified several Putin allies with ties to Kalashnikov USA, including Alexy Krivoruchko, the chief executive officer and majority owner of Concern Kalashnikov. Krivoruchko’s company, TransKompektHolding, last year bought the Russian government’s stake. The purchase followed Putin’s broad privatization push announced in 2016, according to CNN.

Mikayel Tiraturyan

According to Bloomberg, Krivoruchko is a longtime business associate and friend of Michael Tiraturian, whose Linked In listing spells his name Mikayel Tiraturyan. Tiraturian is identified in state records as a manager of RWC/Kalashnikov USA.

Tiraturian, a 41-year-old Sunny Isles Beach resident, was arrested in March 2016 on felony charges of fleeing a police officer and providing false information on a driver’s license application. He was also charged with DUI, Miami-Dade court records show. The state attorney’s office dropped the charges in March 2017 after Tiraturian completed a pretrial diversion program.

Kalashnikov USA’s owners

 Using Florida’s public records law, Florida Bulldog obtained a copy of RWC Group’s 2015 state application for tax incentives. It identifies Solomon Asset Management LLC as owning 65 percent of the company. State corporate records show that Tiraturian and fellow RWC manager Peter Viskovatykh control Solomon Asset Management.

According to Bloomberg, Viskovatykh has business ties to “an associate of billionaire rail car, transport and mining magnates Andrei Bokarev and Iskander Makhmudov, two oligarchs close to Putin.”

Eldad Oz is another RWC manager. His brother, Moshe, is a retired Israeli commando who owns Command Arms and Accessories, which operates at the same Pompano Beach location.

RWC’s incentives application states the company’s net worth exceeded $5 million. It wrote that it would assemble, test fire and ship 95 percent of its firearms and accessories outside Florida. (Its website indicates it exports some of those weapons to other countries.) After three years, RWC expected to employ 54 people. RWC also declared that it was not the subject of any pending criminal investigation “or governmental enforcement action.”

Question 18 on Florida’s due diligence checklist for incentive programs asks applicants if they, their parent or any of their officers and directors are on the sanctions list of the U.S. Treasury’s Office of Foreign Asset Control. The checklist for RWC was unavailable, and while the state maintains that it conducts a “thorough investigation” of all applicants, it is unclear whether due diligence efforts regarding RWC/Kalashnikov included checking whether it had indeed severed all ties to its former Moscow-based partner.

The Office of Foreign Asset Control (OFAC) enforces U.S. economic sanctions. A Treasury spokesman declined to discuss Kalashnikov USA or say whether OFAC was even aware of the company.

“Treasury does not comment on investigations, including to confirm whether or not one exists, and we do not discuss specific OFAC licenses,” said Treasury spokesman Seth Unger. “We do not telegraph sanctions or prospective actions.”

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