State knew Pompano gun maker in business with banned Russian firm when tax incentives offered

By Dan Christensen, FloridaBulldog.org 

Russian President Vladimir Putin aiming a Concern Kalashnikov AK-47 in 2014.

Florida Gov. Rick Scott’s administration knew in 2015 when it offered $162,000 in tax-refund incentives to Pompano Beach assault rifle maker Kalashnikov USA that the company was doing business with a Russian arms giant that was blacklisted by the U.S.

Here’s what confidential state records obtained by Florida Bulldog say about RWC Group LLC, a privately held American company which operates under the brand name Kalashnikov USA:

“The Company has the exclusive license to manufacture and distribute products designed and under the brands of Concern Kalashnikov, a Russian military, hunting and sporting firearms manufacturer founded in 1807,” says a July 17, 2015 Department of Economic Opportunity (DEO) memo. “The Company’s products are marketed under the Kalashnikov USA brand and are produced with state-of-the-art computer numeric control design and manufacturing systems, allowing for improved fit and finish. The Company’s product line includes semi-automatic rifles and shotguns. The Company’s products are available through direct dealers nationwide.”

One year earlier, in July 2014, President Barack Obama imposed sanctions against Concern Kalashnikov and other Russian arms makers in response to the conflict in Ukraine. The sanctions immediately froze Concern Kalashnikov’s U.S. assets and generally prohibited transactions with it “by U.S. persons or within the United States.”

A confidential 2015 DEO “Project Brief” notes the imposition of the U.S. sanctions against Concern Kalashnikov and says RWC/Kalashnikov USA had “responded to the change in U.S. foreign policy by redefining its business model from U.S. importer of the products to U.S. manufacturer.”

Gov. Rick Scott

Gov. Scott’s DEO appears to have accepted Kalashnikov USA’s assertion without much inquiry. State records indicate that department analysts only determined via an online search that neither RWC nor any of its officers were on the Office of Foreign Asset Control’s list of “Specially Designated Nationals and Blocked Persons.” The July 2015 DEO memo detailing the state’s “thorough review” of RWC’s application makes no mention of any effort to determine whether Kalashnikov USA was, despite its licensing agreement with Russia’s Concern Kalashnikov, in compliance with the U.S. sanctions on Russia. RWC stands for Russian Weapons Company.

“The due diligence investigation that DSBD (DEO’s Division of Strategic Business Development) conducted revealed no information that justifies DEO not approving the award” of incentives, the five-page memo says.

A state brush off

That state’s apparent brush off of compliance questions about Kalashnikov USA’s ties to the banned Russian maker of the notorious AK-47, said to be the world’s most widely used assault rifle, served to boost the governor’s high-profile, and highly political, job-creation agenda. In exchange for the tax incentives, RWC/Kalashnikov USA had pledged to create 54 high paying jobs in Broward.

In the end, the deal proved a waste of time. DEO formalized its offer to RWC Group in October 2015, but terminated it last year after the company failed to meet job-creation promises. No money was paid.

Marjory Stoneman Douglas High School, Feb. 14, 2018

Florida’s offer of taxpayer dollars to import an out-of-state assault rifle maker tied to Russia’s best-known weapons brand became a focus of controversy and protests in the wake of the shooting deaths of 17 students, teachers and coaches at Parkland’s Marjory Stoneman Douglas High School on Feb. 14.

Bloomberg Businessweek reported last month that a maze of shell companies “connects Kalashnikov USA to Russian oligarchs tied to [Russian] President Vladimir Putin and appears designed to avoid U.S. sanctions.”

Last week, Florida Bulldog reported that a Miami federal grand jury recently subpoenaed records about the economic incentives deal with the DEO and Pompano Beach, which along with Broward County pledged financial support. A records-seeking subpoena was also served on The Greater Fort Lauderdale Alliance, a public-private economic development partnership whose board includes dozens of community leaders, Florida Bulldog has learned.

A letter by Assistant U.S. Attorney Michael R. Sherwin accompanied the subpoenas and announced the existence of “an official investigation of a suspected federal offense.” The offense was not specified.

Florida Bulldog, which first reported the state’s offer of tax refunds to Kalashnikov USA in the face of U.S. sanctions, used Florida’s public records law to obtain DEO records about RWC Group’s application for subsidies under Florida’s Qualified Target Industry (QTI) tax refund program. DEO, however, took more than a month before it released a copy of the state’s memorandum and other records regarding its processing and assessment of RWC’s application, code-named Project 762 to keep it secret.

RWC requests confidentiality

The records show RWC Group asked for confidentiality when it first inquired about state job- creation incentives on May 16, 2014, as it was considering relocating from Pennsylvania. It told DEO and Enterprise Florida, the public-private partnership that is the state’s principal economic development organization, that it intended to create 54 jobs with a wage commitment of $51,266. The state said it would pay $3,000 per job, for a total of $162,000.

The records do not mention that Kalashnikov USA would be manufacturing military-style, rapid-fire, magazine fed assault rifles and shotguns. The QTI target industry category assigned to RWC Group: “Small Arms, Ordnance, Ordnance accessories, Manufacturing & Sporting and Recreational Goods and Supplies Merchant Wholesalers.”

RWC Group said it planned to export 95 percent of the firearms it produced. The records do not say where those weapons would be sent.

The U.S. State Department’s Directorate of Defense Trade Controls licenses companies that seek to permanently export firearms. The agency, however, does not make public the names of companies that have obtained those U.S. licenses and would not confirm whether RWC/Kalashnikov USA holds an export license.

RWC/Kalashnikov USA has not responded to repeated requests for comment, and a call Monday to the company’s new public relations firm, North Carolina-based Laura Burgess Marketing, went unreturned. Kalashnikov USA’s website, however, notes that a valid license is required to export “certain Kalashnikov USA products.” Likewise, it notes that U.S. law prohibits exports to “certain restricted parties, destinations and embargoed parties” and cautions its customers not to engage in any unauthorized transactions.

Records identify RWC Group’s majority owner as Solomon Asset Management LLC. State corporate records show that Solomon is controlled by two RWC managers, Mikayel Tiraturyan and Peter Viskovatykh.

Sources said Tiraturyan and Viskovatykh are Russian nationals. Bloomberg Businessweek has reported that Tiraturyan, who also spells his name Tiraturian, as a longtime business associate of Concern Kalashnikov’s chief executive and majority owner Alexy Krivoruchko. The story also reported that Viskovatykh has business ties to a Russian “associate of billionaire rail car, transport and mining magnates Andrei Bokarev and Iskander Makhmudov, two oligarchs close to Putin.”