Palms & Company Document

What Happens To U.S Expatriate Investment Pioneers In Russia

by

Dr. Pyotr Johannevich van de Waal-Palms

From cswan@ptc.voronezh.suWed Apr 24 11:48:15 1996

Date: Sun, 21 Apr 96 11:02:09 +0400

From: cswan <cswan@ptc.voronezh.su>

To: palbank@PeterPalms.com

Subject: Goodbye and Hello from Voronezh

Dear Pyotr Johannevich, 21 April 96

It has been quite some time since I wrote you. Thank you for keeping me on your mailing list. This is a goodbye and (I hope) hello message. In a few words, I am in the process of closing Contact Voronezh and, at the same time, opening a legal research institute, one function of which will be to facilitate foreign investments and provide legal support to foreign businesses in the Central Chernozemya Region.

At the end of March, I gave up a major portion of my office space to cut rising costs in this unprofitable "for profit)business. (The new occupant/neighbor will be a group with a Soros grant to support the creation and maintenance of NGO's in south central Russia.)

Early in April, I was informed that the Governor had ordered a study of Voronezh firms with foreign investments, many of which were not performing well and paying sizeable taxes. I was called to the Migration office and was given the "suggestion" that I close Contact Voronezh and "told" that my visa (which expired April 1) would be extended only to May 30.

The second week in April, the Visa Officer politely told me that he (who had said he could extend my visa to Sept. 1) now had to act under orders of the federal Migration Office and could only extend my visa to May 30 (which he did), but he also advised that I could go anywhere I like, with an invitation to return in hand, and apply for a visa to return. (A number of my friends suspect there will be no visa approval, but I am currently operating on the assumption there WILL BE a new visa.)

We have consulted with several lawyers who tell me (a) that no authority other than the founders of a company or a court of law can REQUIRE a company to close and (b) that the process of closing a company takes a minimum of 3-4 months. I will use this info to twit the Migration Officer, they I am also advised (c)that I don't need to be in country for the process - I can just give my power of attorney to someone.

Because Contact Voronezh has been a business flop since the day it opened, I am proceeding happily with its closure. I plan to leave Russia the last week in May and go to NYC. I have family members in the neighborhood and also want to look for help for a number of cultural and legal projects in NYC and D.C. I will, of course, apply for a return visa.

The legal research institute is the result of an almost-4-year effort to get something like this started. It is finally accomplished by two women law professors, who have helped the Voronezh Duma create an Institute for Regional Legislation, and the head of the Voronezh Juridical Tekhnikum. I will be the Executive Director of this new, private, non-profit NGO. We have been invited by the Eurasia Foundation to apply for a grant which will allow us to buy a 486 computer with large memory, an adequate modem, and pay for a lot of hours on the World Wide Web.

I have bought a book called "Law on the Internet" which will provide us access to thousands of law schools, libraries, offices and think tanks. With this base and with the connections in Voronezh and elsewhere, we can provide info to Voronezh law schools, lawyers, professors and students, businesses, and the Duma's Institute (which cannot seek foundation help because it is a totally State-organized and State-funded creature which accepts only State clients). Part of the intention is to earn money by consulting for private clients - and lobbying the Duma for necessary legislation.

When I went last week for a meeting with my former "host" in the Foreign Economic Relations Committee, I gave him a copy of your latest message on construction ventures. His staff is busy translating it. The new legal research institute, with its potent Russian members, may be far more effective at stimulating and supporting foreign business in the Central Chernozemya Region and I was through Contact Voronezh.

This week I will be busy moving out of the released office space, organizing a "closure meeting" of Contact Voronezh, and getting the new institute established. So this is goodbye from Contact Voronezh and hello from -I don't know its official name yet. Thanks for your help, past, present and future. Charles

From cswan@ptc.voronezh.suMon Apr 29 18:24:01 1996

Date: Fri, 26 Apr 96 11:49:57 +0400

From: cswan <cswan@ptc.voronezh.su>

To: palms@PeterPalms.com

Subject: VORONEZH Keeping in Touch with You

Dear Peter, 25 April 96

You may also want to add that our lawyer says the authorities (other than a court) cannot force me out of the company; I could retain it, sell it or a part of it. But, of course, they "have me" on the necessity for a Work Permit from the Migration Office if I want to work in the company.

And now to your 2nd message, "Syanora, not goodbye."!

I hope to hell you are totally wrong about the cost of a new business visa. I am assuming something under $100; $3000 would blow me out of the water. I will look into that, but I have heard nothing like your $3000 to date. I wonder if that is through the "black market" route for visas, which I hope I do not have to use.

I cannot really comment on your questions about visa renewal as a means of getting rid of foreign investors; I don't know the law (as if that were the decisive issue!) I think it would take a concerted effort by several levels of government to use it that way. Some of my democratic friends fear that the FSB may tell the Consulates not to issue a new visa to me, but I don't THINK that is going to happen. That assumes a lot of coordinating among government offices.

I am sure you have heard the tale of the fight over the Americom office in the Radisson Slavjanskaya Hotel. I don't recall the Russian "partners" using a visa denial as a tool, although they used just about everything else in the book. And somehow or other the Russian partners screwed the Irish out of" The Irish House". I don't know the means by which these deals were done.

I have been told by the Visa Officer that I can take an invitation with me and return. I am operating on the assumption that that will work. I am also organizing people in "high places" to go to bat for me, just in case it doesn't work. And I am told by "others" that, if all else fails, a few hundred dollars can get a visa without any trouble. I have never resorted to that channel and hope I have no need to think seriously about it.

"an American part or sole owner" MAY have "no right to be in Russia just because he owns a business there", but I am told that I can return on ANYBODY's invitation (not just a business partner's invitation) and that I can own shares in my company until I (or the other founders and I) close the company. I don't KNOW whether I have a right to a BUSINESS visa as long as I own a business. I rather THINK I do, but I still have to register with the Migration Office in order to WORK here on a long-term basis.

I failed to mention in my April 21 message to you that the Migration Officer, during our meeting with him in early April, out-and-out stated that the Administration suspected that these unprofitable "for-profit" businesses were not reporting their full income or were keeping the income outside the country. I am sure many are and I assume he believes that I do one or the other or both those things. In my case, it isn't worth arguing the legalities of the issue; I just want to get out from under the financial burdens of keeping this unprofitable "for-profit" business going.

The matter of a Russian wife is being delayed until my return; there are as many hurdles to marriage as there are to opening and closing a business. The process takes documents from Colorado, attested by Colorado authorities, then statements and seals from the Consulate in Moscow, approvals of the Foreign Ministry in Moscow, then approval by the local Marriage "Palace". I THINK that, assuming I register a marriage at the Consulate, my wife could go with me to the USA in case I got thrown out. However, she has no desire to LIVE in the USA.

I am very interested in the "pravovoe instityt". One of the founders is the chair of the Constitutional Law section of theVor. State Univ. Law Faculty. In '93, I helped her get a grant to study the Swiss constitution in Lucerne and she returned to work on the current Russian Constitution, then helped the Speaker of the Voronezh Duma create a charter for Voronezh. She then developed a plan I suggested and helped the Voronezh Speaker and speakers of some of the surrounding oblasts create the Institute for Regional Legislation, which is an office to study issues which need legislation and draft good legislation and help Duma members get it passed.

Another founder is Tatyana's partner and fellow law prof, Marina. Marina is Prof. of Financial Law and has spent a year studying at Bowling Green Univ. in Ohio. The third founder is the head of the local Juridical Tekhnikum, whose facilities we will use. I will be Exec. Director and my deputy will be a young woman, recent outstanding graduate of VSU Law. We are all interested in helping the growth of the Rule of Law - in business, in government, and in society. And I think we have some real possibilities of governmental support in the effort -as well as business and academic support. While I am in the USAI will be looking for American support - government, foundation, academic, and anybody else who likes the idea.

I WILL stay in touch.

All the best to you from Charles

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