Five facts about RAO: how the “business” of the arrested Sergey Fedotov

General Director of the Russian authors ‘ society Sergey Fedotov (center) in the Tagansky district court

Thursday, June 30, Fedotov was charged with fraud in especially large size (see “Real estate business”). Fedotov himself does not admit his guilt and is ready to cooperate with the investigation.

Copyright Council of RAO, which consists of 16 composers, musicians and artists, including Yuri Antonov, Igor Matvienko, Dmitry Malikov, Valeriy Syutkin, on the same day, June 30, issued a statement saying that the RW is not devoid of accreditation, continues to work and expects its partners to perform contractual obligations in full”. “Different periods in the history of the organization, but never the artificially created hype and dirt that last years result in the press, he does not overshadow her existence,” says the poet and author of the Council of RAO, Andrey Dementiev. He believes that the question of responsibility Fedotov, the authors should be addressed within the organization, not be heated from inside by hunters to other people’s success.”

Director and President of the Council of the Russian Union of rights holders (RBC; Fedotov before the end of 2015 and headed the Union at the same time with raw) Nikita Mikhalkov said about the readiness to intercede for mitigation of a measure of restraint for Fedotov. The Director stressed that he “never worked” in RAO, had him “nothing”.

How does the work of RAO and its competitors?

Billions of dollars in fees

In Russia since 2007 a so-called system of collective management of copyright. Now, four organizations have a accreditation from the Ministry of culture, which allows them to collect money from users of music, texts, programs and other copyright works and to distribute the money between the owners.

Russian authors ‘ society, the oldest of the organizations, donates money to the authors of music and lyrics. The all-Russian intellectual property organization (WIPO) distributes funds between performers and phonograms. The Russian Union of rights holders (RBC) collects tax discs 1% of the cost of equipment from manufacturers and importers for the performance and reproduction of phonograms and audiovisual works for personal purposes. Partnership for the protection and management of rights in the sphere of art (UPRAVA) controls the rights in respect of fine art and manuscripts.

; RAO, whose members include more than 27 thousand authors, significantly ahead of the CPR and WIPO. By the end of 2015, the company has collected about 4.5 billion rubles., of which the holders listed 3.6 billion RUB, the CPR in the form of rewards transferred 1.5 billion rubles. of the 2.2 billion rubles., WIPO about 0.8 billion from RUB 1 billion this data was given in the reply of the Metropolitan Prosecutor’s office at the request of state Duma Deputy Sergei Obukhov, who in March 2016 requested from law enforcement “to reach transparency of spending funds collected”.

While RSP had the chance to get ahead: at the end of 2014 directed Fedotov and Nikita Mikhalkov suggested to collect “tax” from all owners of devices with access to the Internet. It was assumed that collecting the money will be operators at the rate of 25-30 per month with each device, and in return the user would get unlimited access to content in a Network videos, music, books, which would extend the effect of a single global license. So RSP was intended to solve again the problem of Internet piracy, and the problem of royalties to authors whose works are distributed online.

But “Internet tax” have met with stiff resistance from market participants and operators, and officials of the Ministry of communications, Ministry of justice, Ministry of economic development and the Federal Antimonopoly service (FAS). In June 2015, the President’s administration “buried” the project, recognizing its inappropriateness.

“Family business”

The graduate of economic faculty of the Russian state humanitarian University (RGGU) Sergei Fedotov started his career in Bank “the Russian credit”. RAO he headed in 2004, this was preceded by four years when he was CEO of the music publishing house at RAO.

“For me it [RAO] a very special organization, because all of my family’s life and my life are connected with it,” he said in an interview with RBC. The mother of the businessman, Vera Fedotova, “in the market” since the late 1970s; it has gone from head of Department to the chief accountant of the all-Union copyright Agency, the successor of which became raw. Now Fedotov is technically the first Deputy Chairman of the Board of Directors of RAO, that is the Deputy of his son. Several sources RBC, close to different societies, it is often pointed out that in the absence Fedotov RAO, in fact, controlled by his mother.

The lawyer of Faith Fedotova was present at the court session, after which the head of RAO arrested until mid-August, and assured that she has not yet been called in for questioning.

Over the years, Fedotov, according to SPARK, was listed as a founder or co-owner of more than 20 legal entities, including LLC “NAIS” (National Agency of intellectual property), “the Hollywood reporter Rus”, LLC “Independend publisher group (publishing), and several trading companies. Most firms ceased to exist, only five, LTD had revenues for 2013-2014: total it does not exceed a few tens of millions of rubles a year.

The Hollywood reporter Rus publishes the Russian version of the American magazine on the world of the film industry to The Hollywood Reporter (THR). In the United States THR is published weekly, in Russia once a month, also there is a website of the same name. Revenue in 2014 amounted to 38.7 million RUB In 2012 Fedotov ceased to be registered as owners of the firm, and the owner of 37% of the company was the “Studio “Trite” Nikita Mikhalkov. Fedotov himself has always said that is not civil servants, therefore, can do anything and the report is not required.

The attempt to unite

Since Fedotov was headed by RAO, the market management of copyright began to change dramatically. Fedotov became the initiator of creation of WIPO the organization since inception in 2008, headed by General Director of FSUE “Melodiya” Andrey Krichevsky. In turn, RAO and WIPO in 2010, together with the Union of cinematographers and a number of individuals have established RSP: President of the Board of this Union became Mikhalkov, and Fedotov to the end of 2015 was the CEO (then it was replaced by Krichevsky).

In 2012, in an interview with Forbes Fedotov recognised the competition in the field of copyright “kills the very idea of management rights.” “We wanted to build some kind of natural monopoly <…>. And she has in fact now constructed, because, in reality, almost all organizations that have state accreditation in the country, I manage and developed a team of specialists,” said Fedotov.

In 2015, RAO, CPR and WIPO have agreed to merge into a single structure the trade Union of workers of culture “Russian authors ‘society” (MAC “RAO”) and even filed the necessary documents to the justice Ministry. The idea of unification of societies was supported by the Minister of culture Vladimir Medinsky.

As told RBC in early August 2015, the representative of RAO, the new organization created, formed governments and elected CEO became pregnant. But instead of creating a new structure, RAO just been renaming: in the register a record of the renaming appeared on 8 September, while Krichevsky received the right to act on behalf of the organization. As tell the sources of RBC, Fedotova is not satisfied, and he was one of the initiators of the claim to the Ministry of justice submitted 27 November.

Mikhalkov has urged the leaders of authors ‘ societies “not to wash dirty linen in public” and to withdraw the claim, said the interlocutor of RBC, close to one of the societies. “RAO began the complexity of the internal nature, and the management of waste has seen some difficulties, it was a joint decision procedure of the Association to suspend”, said Mikhalkov RBC.

Attempts to reform

In 2015, authors working with RAO, CPR and WIPO, publicly talking about the fact that disgruntled senior staff, the activities of societies and collections. For example, the poet-songwriter Ilya Reznik seized all rights to their works from the management of RAO wrote a letter to Prime Minister Dmitry Medvedev that the Russian open society “dictates onerous conditions and impose rock-bottom rates. For their works Reznik in 2013, received from RAO 12 kopecks., the letter said.

In November a group of Russian producers turned to RAO and WIPO with a proposal to reform these societies, wrote the newspaper “Vedomosti”: the letter was signed by representatives of producers Victor Drobysh, Konstantin Meladze, Igor Matvienko, Igor Krutoy, Maxim Fadeev. Matviyenko later said that in societies there is a “civil war” accounts of organizations “frozen”, and the authors do not receive royalties. “I even could not imagine that such sums may appear, it is a sum of 1 billion rubles”, said the composer. Fedotov suggested to take this statement “as for the emotional thing to do.”

President Vladimir Putin in his message in August of 2015 called on the government to increase the level of transparency in the management of rights; it has been designated and the deadline for the task until September 15, but the Duma was not introduced any bill.

The Ministry of communications has proposed to completely abandon the management rights on a non-contractual basis, to cancel the state accreditation and thereby create competition among the collecting societies they would have to fight for the rights holders. While the leaders of the collecting societies could not hold the office more than four years in a row, to lead multiple organizations simultaneously and have interests in the companies-holders”. The same RAO 2012, through subsidiaries, owns 80% in one of the oldest Russian record labels studios “the Union”, follows from the SPARK database.

In December 2015, a meeting of representatives of the CPR and WIPO Deputy Minister of communications Aleksey Solinym: following the meeting, they took the course “change”. Staff RAO at the meeting, was not present.

Regulator for RW

Initiatives from the Ministry of communications has criticized the Ministry of culture, noting that the regulation of copyright and related rights is the concern of this Ministry. The Ministry of culture objected to the transition to Treaty-based rights management, and instead proposed to create a special information system with the registry of right holders and works with the “personal Cabinet”, which will track the accrual of rewards.

But in the future the powers of the Ministry of culture in the field of copyright can go to Rospatent: at the end of July 2015, first Deputy Prime Minister Igor Shuvalov instructed to create on the basis of a single regulator in the field of intellectual property, its head appointed former Deputy Minister of culture Grigory Ivliev.

Representatives of the Ministry and Rospatent explained that the handover process will take some time. Meanwhile, from the March letters of administration of the President of the government apparatus (copy have RBC) showed that market reform was “premature.”

In early June of 2016, the government Commission for administrative reform, confirmed the necessity of creating a database of Rospatent of a single body in the sphere of intellectual property, reported the press service of Rospatent. Three members of the authors ‘ Council of RAO told RBC that Fedotov was invited to “high post” in Rospatent. The representative of Rospatent reported that he was unaware of such a proposal.

Real estate business

On 30 June, the Investigation Department of the Ministry of internal Affairs brought the head of RAO Sergey Fedotov on charges of fraud in especially large size (part 4 of article 159 of the Russian Criminal code). The investigators believe that Fedotov in 2012 was misled by the author’s advice RAO on the objectives of the creation of the subsidiary, ZAO Service and maintenance company (SEC), the balance of which was later transferred belonging to RAO real estate and cars.

The maximum penalty under part 4 of article 159 of the criminal code ten years imprisonment. On June 28 the court concluded Fedotov during the investigation into custody, the defense is trying to soften the measure of restraint and to seek his detention under house arrest for medical reasons.

The main Directorate of economic security and counteraction of corruption (Guebipk) of the MIA in August 2015 began check of RAO “on the subject of embezzlement of royalties through the acquisition and subsequent conclusion through false firms of real estate”. Officers then became interested in the transactions conducted through subsidiaries of the organization. 2007-2011 RAO has acquired the four properties with a total area of over 2 thousand sq. m., after which they were contributed to the authorized capital of JSC “SEC”. In the next two years the premises were transferred to the balance other firms, some of which were subsequently liquidated.

It is for the materials of the check of the Ministry of interior filed June 17, a criminal case on the fact of theft of funds from the RAO, followed from the statement of the Ministry. The consequence insists that SBEs was established fraudulently: “unidentified person” provided to the Registrar a false positive decision of the copyright Board, follows from the decision about excitation of criminal case, seen by RBC. In doing so, the members of the Board of RAO in August 2015, claimed in a conversation with RBC that supported the idea of establishing a CEA. The investigation assesses the damage from these operations more than 500 million rubles.

Fedotov insists that it is not engaged in operational management of SEK he did his Deputy Andrey Krichevsky. Krichevsky denies it.

Lawyer Fedotov Denis Baluev calls the creation of SBEs is “absolutely legitimate” step as the RW is a public organization and cannot profit, for example, from the rental of real estate for rent. The proceeds from the sale of real estate money, as explained in an interview with “Izvestia” in 2015, Fedotov, was spent on the creation of an electronic system, which should ensure transparency in the distribution of royalties between authors in RAO. The representative of RAO RBC did not answer the question whether in the end such a system.