FSB accused of stealing pharma business after arrest of billionaire

A high-stakes corruption case dominated the news in Russia this week. The star of the drama was billionaire Boris Shpigel, owner of pharmaceutical company Biotech and a former senator in the upper house of parliament. For many years Shpigel was part of Russia’s powerful pharma lobby that enjoyed connections to the highest level of government; now he finds himself behind bars.

• Shpigel, 68, was arrested last Sunday along with Ivan Belozertsev, governor of Penza Region in central Russia. Investigators allege Belozertsev accepted a Mercedes, Breguet watch and 31 million rubles ($400,000) from Shpigel in return for helping Biotech land state contracts. Shpigel is closely connected to Penza: part of Biotech’s assets are here, and he represented Penza Region as a senator in the Federation Council between 2003 and 2013.
• Shpigel insists he is the victim of a ‘raider-style’ takeover of his business by the Federal Security Service (FSB). In an interview with newspaper Kommersant, which the billionaire gave via a human rights activist who visited him in jail, Shpigel described his case as a hit job and said last summer an FSB colonel offered him protection in exchange for a controlling stake in Biotech. Shpigel claimed that, when he refused the offer, the colonel told him that: “we will talk again in another place.” Now, Shpigel alleges the same colonel has visited him in his cell to offer him freedom if he testifies against Belozertsev. The billionaire said he also rejected this proposal. “It’s the easiest solution for them: I rot in here, and they just take my business,” he told Kommersant.
• In modern Russia it’s not unusual for a governor to be arrested for bribe-taking — but Shpigel is not a governor and has been a larger-than-life figure in Russian business for decades. Officially, his career started in 1983 when, as a 25-year-old history graduate from a small Ukrainian college, he was suddenly — and suspiciously — appointed deputy head of Moscow’s Institute of Agricultural Biotechnology. Shpigel set up Biotech in 1991, operating out of one of the institute’s buildings and supplying medicines to hospitals and military units.
• Biotech soon became one of the biggest pharmaceutical wholesalers in Russia and Shpigel acquired a reputation as one of the fiercest lobbyists for an industry that is built on state contracts. Shpigel unsuccessfully ran for a seat in the State Duma in 1995, before becoming an advisor to parliament speaker Gennady Seleznev. In 2003, he finally entered parliament when he became a senator for Penza Region in the Federation Council.
• Unsurprisingly, Shpigel was regularly accused of conflicts of interest during his period as senator, even if he officially transferred his stake in Biotech to his wife. In 2005, Biotech won an enormous contract to supply the whole Volga Federal District (with a population of 30 million). And in 2009, Biotech president Oleg Kovalev was implicated in a criminal case arising from a corruption scandal involving the Health Insurance Fund. But Shpigel’s parliamentary career was largely unaffected by these events, and he resigned in 2013.
• Proximity to power made Shpigel one of the most important figures in the pharmaceutical industry even when Biotech was only Russia’s 10th largest pharmaceutical company. But his star rose during the pandemic: Biotech doubled its sales in 2020 thanks to state contracts to supply COVID-19 tests and drugs. Suddenly, Biotech was one of the top three firms when it came to government contracts.

Why the world should care

Criminal cases in modern Russia often follow the same pattern. An entrepreneur starts out closely connected to the authorities, but then outlives his/her usefulness and is left open to extortion from the security forces or becomes a casualty in a political conflict.