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Thursday, 29 November 2012

Fire in Bangladesh’ clothing sweatshop claims more than hundred lives – Didn’t we hear that story before?! Yes, we did!

Ignorance can be a reason for mistakes, but it is seldomly an excuse!
Ernst Labruyère, 2012

On Monday, 28 November, there was shocking news from Bangladesh: the clothing factory Tazreen Fashions, established in a seven story building near capital Dhaka, caught fire, claiming the lives of at least 112, mostly female, workers.

The fire broke out on the groundfloor and worked its way up, while many workers were trapped like rats in a cage.

Yesterday, the news was spread that three managers had been arrested in connection with this fire. From an article at the Dutch website NU (

The Dhaka police arrested three managers of a large clothing factory in connection with last weekend’s fire. This fire killed 112, mostly female, workers.

The three would have obstructed workers in leaving the building and would have stated that it was only a fire-drill.

Chief of police Habibur Rahman told on Wednesday that survivors had told him  that doors were deliberately closed and some of the managers tried to keep their workers inside.

The aforementioned article in ‘Financieele Dagblad’ ( states also that Bangladesh counts about 4000 similar clothing factories, of which many lack sufficient safety measures. Bangladesh exports clothing to the tune of €15 bln, mainly to Europe and the US.

Reading stories like these makes me feel miserable and guilty. I’m almost certain that a substantial part of the clothing that my family and I wear was created in the same kind of factories (Personally, I prefer to call them sweatshops - EL)as Tazreen Fashions.

The fact that many (luxury) fashion brands and almost all inexpensive clothing shops use sweatshops like these for their total clothing production is a reason, but hardly an excuse for wearing clothes coming from these sweatshops. I’m very well aware of that and I hope this is also true for my readers…

Unfortunately, this event was not the first one in its kind, this year. Only two-and-a-half months ago, there were the horrific fires in sweatshops in Karachi and Lahore, claiming more than 300 lives. Also there people were trapped in the fire, while escape routes had been blocked by the managers of these factories.

In this article I came a.o. to the following conclusions:

c.    On the other hand: unfortunately, the events in Pakistan are not particularly new. In the past we heard more horror stories from China, India, Vietnam and almost all other low-wage countries. We know these events happen and we know that there is definitely a positive correlation between the low prices of their products at one hand and the lacking safety and bad and unhealthy labor circumstances at the other;

d.    We know that people in these factories and sweat shops in the low wage-countries often have been treated like cattle, or to state it more modern: like simple, replaceable means of production that have no additional value for the company than the value of their (manual) labor;

e.   We know that some of the most famous, rich and respected multinationals, like Apple, Nike, Adidas and C&A know these circumstances too. Although all of these companies pay lip-service to improvement of labor circumstances in the low-wage countries and some of these companies are even going through the motions for improving these circumstances, in the end the financial bottom line seems to win… too often;

How true this last statement was, became once again clear on November 29, through an ANP press release (Dutch general press agency). Here are the pertinent snips of this release, as it was printed in ‘Het Parool’ (

The Bangladeshian clothing sweatshop [Tazreen Fashions], where at least 112 workers were killed during a fire last Saturday, already had an unsafe reputation for quite some time. The Dutch daily newspaper Trouw stated that it already had been announced that the factory did not meet the safety requirements, when C&A ordered sweaters there at the beginning of 2012.

Company network BSCI investigated the clothing factory in 2011 and gave it an unsatisfactory mark. ‘ Purchase managers must have known that it was unsafe’, according to BSCI. 'C&A and Walmart, which both had clothes manufactured in this factory, are not BSCI-members. However, their investigators use the same common practices as ours. They should have seen similar things’, according to the organization.

C&A could have known, but chose not to know. Also here the financial bottom-line has clearly won the battle. 

In another article, Walmart (mentioned in the aforementioned article), together with Disney, stated not to do business anymore with Tazreen, exactly for these safety reasons.

In the ashes of the clothing factory in Bangladesh, remains were found of clothing from the brands Disney and Walmart. An AP-reporter discovered a Mickey Mouse-sweater and a stack of shorts from the Walmart label Faded Glory.

Walmart mentioned earlier in an official reaction that exactly the safety issues at Tazreen Fashions pushed them to abandon their contract with this clothing factory. Also Disney mentioned that it abandoned its approval for creating their brand clothes in this factory, more than one year ago.

If this is indeed true, it has been a wise decision by Walmart and Disney. It might even keep them out of a lot of trouble from a publicity point-of-view. Unfortunately, I am convinced that these brands still do business with other factories and sweatshops in the low-wage countries, where the labor circumstances of workers are still beneath the desired level. Therefore I don’t want to compliment these brands too early.

One of the celebrity-brands had not stopped yet to do business with Tazreen: P-Diddy’s (or is it Diddy?) brand ENYCE still manufactured clothes there, according to Dutch newspaper AD (; link in Dutch):

Campaigners have called P. Diddy to come into action after the fire in a clothing factory in Bangladesh. Clothing of his brand ENYCE has been found n the burnt-down building. This is stated at the website of the Clean Clothes Campaign organization.

The fire was a reason for the rookie Dutch minister for Foreign Trade and development cooperation Lilian Ploumen to start a discussion with the clothing industry:

The Dutch clothing industry must use its influence to improve the safety situation in the clothing factories in Bangladesh. This was stated by minister Liliane Ploumen for Foreign Trade and development cooperation

Ploumen will soon sit about the table with representatives of the Dutch clothing industry to find out how government and companies can better cooperate at this subject.

This is a nice action by Ploumen, but in general it is too little too late. This is not the first incident and it will - sadly enough - not be the last. The same news message stated that a representative of C&A will travel to Bangladesh to discuss the safety situation with C&A's  suppliers. 

In my opinion, this is exactly the kind of hypocritical 'going through the motions-action' that most brands seem to do in similar situations. 

Like it was stated by the representative of BSCI in the earlier mentioned article (which was from a later date than this last article): 

‘ Purchase managers must have known that it was unsafe’, according to BSCI. 'C&A and Walmart, which both had clothes manufactured in this factory, are not BSCI-members. However, their investigators use the same common practices as ours. They should have seen similar things’, according to the organization.

Sometimes, it seems to me that companies like C&A think: not the crime itself makes us a criminal, but being caught for it.

I end with one advice from my previous article on the similar company fires in Pakistan. An advice, I’m ashamed to say it, that I didn’t follow to the letter myself.

One thing is certain: consumers should not decide with their mouths, concerning brands and companies that do business with factories and sweatshops in low wage countries where the most basic safety and labor rules are neglected, but with their feet and mousehand;

May your feet and your mousehand decide wisely in the near future.

Tuesday, 27 November 2012

And the band played on… The EU after last Thursday’s disastrous budget meeting

This weekend, I planned to write on the disastrous EU budget meeting of last Thursday, November 22.

I wanted to write a serious article, but with a comical overtone, in which I compared PM David Cameron of the United Kingdom and PM Mark Rutte of The Netherlands with the grumpy old-timers Waldorf and Statler from the Muppet Show. Just like these famous Muppets in their show, Cameron and Rutte belong to the key-members of the EU, but never really feel to be part of it.

Instead, ‘Waldorf’ Cameron, ‘Statler’ Rutte and their henchmen showed at numerous occasions their criticism towards the institute EU and their ‘de facto’ obstruction of arrangements that would really help the members-in-distress of the Euro-zone (hence: the PIIGS) or the EU itself.

Mark Rutte has always been a huge advocate of a balanced budget and in itself, this is a sensible policy. However, Rutte’s poorly devised preference for excess frugality and harsh austerity measures on the civil service, education, healthcare, unemployment and welfare benefits made the economic problems in The Netherlands rather bigger than smaller. Politicians often promise to make more achievements for less money, but the sad reality is that people mostly get less achievements for less money from these politicians.

In the EU, PM Mark Rutte starts to sound like a broken record with his endless calls ‘ad nauseam’ for fiscal austerity of the Euro-zone member states. At the same time, Rutte has obstructed every viable rescue package for Greece and all other countries, which are currently in distress. On top of that, he belongs to the group of countries that doesn’t accept that more EU activities require more budget, whether you like it or not.

Rutte’s rigid, unwise and even hostile policy has changed The Netherlands from one of the most treasured members of the EU into the ‘school brat’ of the club. Although I had good hopes for the new Cabinet and especially the new Finance Minister Jeroen Dijsselbloem, he seems like a carbon copy of Jan Kees de Jager concerning his stance towards Europe; and that is not meant as a compliment.

Just like all other European countries, the United Kingdom has been severely hit by the credit crisis. While the City of London remained arguably the most important financial center of the world and a huge money making machine, the rest of the country (‘the real economy’) suffers from the economic decline.

Until now, the United Kingdom could largely cover up its economic problems by letting the money-printing press run at ‘warpspeed’, using the fact that the Pound Sterling is under total control of the Bank of England, in contrary to the despised euro which is not under control of one government.

However, David Cameron has to deal with a population that has become more and more hostile towards the EU and the Euro-zone, to such a level that leaving the European Union became more than just a remote possibility. 

The British population refuses to be sucked in the whirlpool of rescue packages for Greece and the other PIIGS countries and doesn’t really feel connected with Europe and the European Union in the first place. Although some savvy British experts warned the UK that leaving the EU could have some serious blowback for its economic prosperity, it seems that a machinery has been started that will be very hard to switch off for David Cameron.

A few weeks ago, in a non-decisive but tale-telling vote, Labour and Cameron’s Tories as well, urged PM David Cameron to demand a reduction of 5% in the British contribution to the European Union budget: a de facto ‘mission impossible’. 

Cameron, who very well knew that he couldn’t achieve this goal, has nevertheless threatened to use his veto-weapon again, if the EU would raise its budget for the coming years.

This leaves the EU only two options:

·    Either it accepts a budget at the same level or even lower than currently and it moves on like a lame duck for the coming decade.

·    Or it issues an ultimatum to PM Cameron (and the UK) to get his act together, or run the risk of being kicked out of the EU. People, who think this is a longshot, should consider how much more patience with the UK you can expect from the EU. Just like David Cameron plays for keeps, so does the European Union.

So far about the Waldorf and Statler of the EU, who played their usual role to perfection during last Thursday’s failed EU meeting.

Still, I was dissatisfied with putting the full blame on Waldorf and Statler alone and thus with the theme of this weekend’s article.

The question was whether this EU failure could be fully written at the account of both PM’s?! The answer is unfortunately: ‘No’. Last week’s failure had many mothers and fathers.

In the first place, the timing of the EU’s request for a budget raise, although probably unavoidable from a planning point-of-view, has been miserable.

How can you explain to half a billion voters in Europe that the executive institutes in the EU need substantially more money and budget, while governments and European citizens suffer from economic hardship and a vast array of austerity measures and tax increases?!

Secondly, the executive board of the European Union, the European Commission and the government leaders didn’t try hard enough to abolish the image of the EU as a bureaucratic, money-consuming, indecisive and undemocratic monster that decides for the people, but not with the people. At this moment, the EU is not a democratic institute and it doesn’t seem to become democratic within less than ten years.

The European Parliament is a toothless tiger, while the government leaders, who should in fact represent all European citizens, first represent themselves, than their country and only in the end the rest of the European citizens… a little.

People are not stupid and therefore they smell the lack of democracy and the indecisiveness of the European Union. As these are pessimistic times, the people get disappointed in and alienated by the EU and turn back towards their country and their hometown. The grim outside world begins behind their white picket fence and Greece could have been on Mars, as far as they are concerned. Solidarity?! To hell with it!

In the third place, all countries remain looking at the EU as an “eternal slot machine” that pays back €2 for every euro that is thrown in:

·    The UK and The Netherlands demanded their usual multi-billion euro discounts on contributions to the EU budget.
o    Still, The Netherlands had the nerve to be disappointed that a few Dutch infrastructural projects had been removed from the EU subsidy shortlist.

·    France refused to abolish one cent of agricultural subsidies and contributions, although these subsidies have been used to keep an obsolete agricultural system alive.

·    Germany refused to be the sugar daddy of the whole EU, when push came to shove, although it had arguably profited more from the Euro-zone than any other country in the EU.

·    The southern and eastern European countries didn’t want to abandon the European structure funds that they need in order to rebuild their societies and create more jobs.

·    Almost nobody wanted to pay for a higher EU budget, in spite of the increased number of tasks that the EU institutes have to deal with in the foreseeable future.

Looking at all these demands individually, they all make sense. There is no doubt about that.

The point is, however, that we can’t expect the EU to do more work with less money: especially if we consider that the EU works quite cost-efficient, when compared to the national governments.

Besides that: when everybody wants a bigger slice of the pie, then the pie needs to be bigger. And somebody has to pay for this bigger pie. Nowadays, it seems that everybody wants the bigger pie, but nobody feels responsible to pay for it. That’s just impossible.

This brings us to arguably the most important questions: what should be the future of the EU and who’s going to decide on this?!

Should the EU have a future ahead of being a loosely connected union of economically cooperating countries that help each other when they can, but follow an individual course when they must?

Or should the EU be much more economically, financially, fiscally and politically integrated in the near future, in order to prevent the individual European countries (except Germany) from being ‘ground to dust’  by the must larger Chinese, Indian, Brazilian, Japanese and US economies.

Russia, for instance, has still a very weak economy, but it doesn’t mind that very much. The country sits on some of the world’s largest reserves of oil, gas and many more minerals. If it can’t play the economic game fairly, it doesn’t mind to rig the cards. Doing business with this country on your own is like playing Russian Roulette. You could succeed, but there is a considerable chance that everything goes horribly wrong.

The fact that Europe has become an economic force to be reckoned with can be thanked to that same despised EU. While the UK always takes pride in its special relation with the United States, this relation would not be worth a dime from an economic point-of-view, when there wouldn’t be the EU as a backup.

This brings us to the final question: do we entrust the European citizens with making a final decision on the future of Europe and the European Union? For instance, by having a pan-European referendum on the future of the EU?

When looking at past referendums, held in a.o. The Netherlands and France, this is not an obvious ‘yes’ for most European politicians.

Still, these are the questions that need to be answered very soon in order to prevent from a second disaster during the next EU budget meeting: a disaster that now still seems inevitable.

Sunday, 25 November 2012

Hedgefunds and short-selling back ‘en vogue’?

During the last few years, the ‘powers that be’ have cursed (naked) short-selling and hedgefunds as ‘the root of all evil’ in the credit crisis.

Short-selling is selling shares that you don’t actually own, while speculating on a downward move of the share price. The difference between a normal short and a naked short: in case of the normal short, you have (temporary) possession of the stocks that you short . In case of a naked short, you don’t have these stocks in your possession at all.

If the short succeeds, you buy the shares back at a lower price than the price for which you sold them. The price difference between the sell and the buy action is the profit for the short seller.

Simplified example of a typical short action: 

Shortseller A has 2000 borrowed shares of stock XYZ, that have a stockrate of €25, when the short starts. The fee for borrowing the stock from stockowner B is €750:

Sell action by A yields: 2000 * €25 = €50,000

When the short is underway, the share price drops to €21.95.

Buy action by A costs: 2000 * €21.95 = €43,900

Profit for A = €50000 - €750 (borrowing fee B) - €43,900 =€5,350

A short sell goes awry when the stock rises during the shorting period: not only the short- seller has to pay for the negative difference between the sales and purchase price, but he also has to pay the holding fee for the stock. Besides that, there is generally limited time for a shorting action:not much more than a few days or a week, if you want to reduce the borrowing fee.

This is why you need to be aware of the reason for the stock to drop in price, before you execute a short on it: a big difference with the ‘romantic’ concept of hope that is often part of the buy-and-hold strategy of normal stock-owners. If you just gamble with a short-sell, it would the same as putting your money on ‘red’ in the casino.

The well-informedness of the shortsellers (often hedgefunds), in combination with the seemingly ‘negative’ emotion of feeding on a company’s misery, made that the hedgefunds and short-sellers had a reputation of being the jackals of the stockmarkets. Especially during the years of the credit-crisis, short-sellers were considered to be ‘immoral’  in the eyes of the authorities and many pundits. Naked short-selling has even been abolished for a number of months on a number of occasions in the United States, as well as Europe.

However, if my eyes don’t deceive me, this is about to change.

The authorative Dutch financial newspaper Het Financieele Dagblad wrote this Saturday, November 24, no less than three articles on short-selling. 

One article featured Chris Hohn, the chairman of The Children’s Investment fund (TCI). This was the hedgefund that started the discussion on the performance of ABN Amro, culminating in the bank being sold to the troika of Banco Santander, Fortis and Royal Bank of Scotland for a gargantuous amount of €75 bln. Currently, this hedgefund is targeting the Dutch technical consultancy company Imtech with a short-sell.

Next to this feature article, there were two columns on the necessary evil of hedgefunds and short-selling:

Bank analysts often have a hard time printing negative information on the stock funds that they analyze, as their colleagues at business banking often do business with the same funds. Although there officially should be ‘Chinese Walls’ between the analysts and the business bankers of the same bank, these walls are often made of rice paper in the minds of the analysts, according to the writers of these columns.

This leads to analyses that are often much too positive and too much aimed at holding or buying a stock, even when it underperforms. Seldomly these analysts advise to sell such a stock. Hedge funds and short-sellers don’t feel these obstructions against shorting a stock when they smell money. This is their ‘raison d’etre’: their reason of existence.

Also in the case of the aforementioned company Imtech, it seems that TCI has hit the soft-spots: the fact that the company had seemingly used up almost all its working capital in the seamless series of takeovers of the company and besides this, that daily business (especially payment collection) had suffered from the attention for the takeovers, according to one of the two columns.

While a weak solvability can slowly strangle a company, weak liquidity can kill it at the spot! In 2002, at the end of the internet bubble, this has happened to a company – Aino – where I worked at that moment. Also here, the company had been killed due to weak liquidity as a consequence of poor payment collection.

In the case of Imtech, the TCI hedgefund fired a warning shot at the company: ‘the jackals’ are watching the company, ready to overpower it and feed on it.

If my hunch is right, it might be that the hedge funds and short-sellers are on their way ‘back en vogue’. This is very healthy in my opinion. Companies that become too lazy or too presumptuous and get distracted from their daily business need to know that ‘the sheriff’s back in town’. All violations of the rules for ‘good business behavior’ will be punished severely. 

Of course the comeback of the hedgefunds and shortsellers should not mean that companies must only focus on shareholder value again. This would be the wrong signal. However, it is not necessarily so that the interests of hedgefunds and the personnel of companies are opposed. 

Healthy and sensibly directed companies are in the interest of most stakeholders and, on top of that, these are in general not the companies targeted by short-sellers and hedgefunds.

Sensible authorities value the important role of the hedgefunds and short-sellers and don’t interfere in the cleansing process that these parties often trigger!

Wednesday, 21 November 2012

Open letter to tax-avoiders, ‘untouchable’ government officials, corrupt civil servants and spongers from the clientelistic society in Greece: when Greece defaults, you have the blood of innocent people on your hands!

Dear Sir, Madam,

Greece has been an example for many people in Europe and the whole world.

It was arguably the country with the first hospital in the world. The founder of the concept ‘democracy’. The country in which Plato, Aristoteles, Archimedes and Pythagoras could develop their knowledge and wisdom in the sciences of Philosophy, Physics and Mathematics. The country of a dozen other great scientific, humane and political inventions that I forgot or yet didn’t hear about.

Greece has gone through a number of difficult decades during the last hundred years, of which I hope it will recover. The Second World War; the Colonel’s Regime; the continuous arguments with big neighbour Turkey over Cyprus and other borderline issues; the anemic Greek economy; the enduring difficulties to change the country from an agricultural and tourism-based society into a modern industrial and service-based economy; these are all factors that are stopping Greece from retaining its past grandeur.

Still, I am convinced that Greece will recover from its difficulties, like a phoenix from the flames. As far as I’m concerned, Greece is and will be a member of the European Union and the Euro-zone. Greece is an undividable part of Europe and the EU and Greece belong together.

This morning, I was shocked and strongly disappointed that the negotations between the finance ministers of the European Union on another rescue package for Greece went awry. I didn’t understand why these negotiations failed and why countries like Germany, Finland and The Netherlands were so stubborn on the conditions for the next rescue package.

Remission of Greece from all its debt might be one bridge too far, but at least these countries could have agreed on a strong reduction of the interest rates for the Greek loans, making it much easier for Greece to pay off its debt.

Everybody knew that Greece did the best it could to save money and to deploy further austerity measures: unemployment fees were minimized, pensions were cut, enormous amounts of civil servants have been fired. The IMF was satisfied on the Greek progress and the streets of Athens and other cities were already cluttered with protestors against the harsh and sometimes even inhumane austerity measures.

Asking even more from Greece would be inhumane… Or, wouldn’t it?!

There are a few subjects where Greece didn’t make so much progress.

One of those subjects is tax evasion.

Thousands of government officials, successful business-men and women and other extremely rich people have stashed their black money and possessions in countries like Switzerland, Luxemburg, The Netherlands or in official tax-havens like the Caymen Islands. Sometimes, these people acted at the fuzzy edge of legal (business) behaviour and in many cases far over the edge of legality. 

The latter category had been recorded in the so-called ‘Lagarde List': a list from 2010 with the names of 1991 tax evasionists in Greece, put together by current IMF chairman and former French finance minister Christine Lagarde.

Although the Greek government had been in possession of the Lagarde List since 2010, its representatives failed to do something about it, but instead sat on their hands. This could be called ‘criminal neglect’ or even straight-forward corruption.

When the brave journalist Kostas Vaxevanis decided to run the gauntlet and published this list, he was (and still is) prosecuted like a petty criminal, instead of being treated like the hero that he really is. That could also be called corruption.

Corruption starts at the bottom with small favors in return for actions or favors that should be for free or should be handled with a fixed timetable. A bottle of Ouzo for a quickly delivered passport, a cake or chocolate drops for a driver’s license and a few hundred bucks for a building permit ‘without questions asked’.

At the top, people are bribed with hundreds of thousands of euro’s to look the other way when crimes and frauds are happening.  Also people are paid to do favors to other people that are not in the interest of the community, the city or the whole country. For money, anything is for sale.

Corruption is like the proverbial drop of water that hollows out the hardest stone. One drop is nothing, but a billion drops will ruin the stone.

As far as I’ve heard, nobody in Greece with black money stashed away has turned himself in to the police or other officials: not only to become on terms with himself, but also to help his own country conquer its enemies within.

I also didn’t hear that corrupted and clientelistic civil servants decided ‘not to go with the flow’ anymore and stop the widespread corruption that ruins a country from the inside and ruins the moral of the people that live in it. Neither did corrupted members of parliament and the government: especially the one’s present on Lagarde’s List.

Probably nobody, who owns a large house ‘under construction’, decided that it is finally finished after 25 years and that property taxes should be paid on it.

This kind of morality sounds like: ‘I am prepared to help my country, as long as it doesn’t cost me money. If it will cost me money, then Greece is on its own’.

I am very sorry, but on further consideration I do understand why the Northern Euro-zone countries are reluctant to pay the next tranche of the rescue package.

Of course, this doesn’t mean that these countries are not also part of the Greek problem. The Netherlands is a genuine tax-haven and floods Greece with cheap agricultural produce. German banks took millions in Greek black / grey money without ‘questions asked’. 

Banks from these and other countries flooded Greece with initially cheap loans, until the country was filled to the brim with money. Finland thought only of itself by asking a pawn for its part of the last rescue package. All these countries and others are accomplices in the Greek problem.

Still, these countries do have a point when they stick at refusing Greece the next tranche of the rescue package.

When Greece defaults, this is a disaster for the country and especially for the ‘Giorgios-and-Kristina-in-the-street’. Their already diminished income will further shrink and their lives will be a struggle for survival in an increasingly chaotic society, with bloody protests, looting and rationed provisions.

This will not hurt you, as you are safe in your guarded houses, where provisions will not be in short supply at all. You will have water in your swimming pool, elektricity for your air conditioning and gasoline for your SUV. And when the air in Greece becomes too thin, you just flee the country to your second house in Spain.

But remember, the blood of innocent citizens will be at your hands. It will be your corruption and dishonesty that put Greece in jeopardy, when the next tranche of the rescue package is denied to Greece. Other people may not know it about you, but you will know it yourself.

It is not too late yet to become an honest man or woman. Come on! Just do it!

Sincerely yours,

Ernst Labruyère
Founder of Ernst’s Economy for You

Tuesday, 20 November 2012

Eurocommerce Commercial Real Estate sold at prices far above liquidation value! That’s good news, right?! Well, not really!

In the almost two years that I publish this blog, I’ve written quite a number of times on the ongoing disaster in the Dutch Residential (RRE) and Commercial Real Estate (CRE) industry. Among others, with my ‘fabulous’ saga ”Getting Rich with Commercial Real Estate”. Still, it was almost impossible to cover everything going on in this industry, as there was just too much happening there and I had too little time to bring it all to you. This is the reason that I didn’t inform you yet of the bankruptcy of Eurocommerce.

Eurocommerce was a commercial real estate management company with a CRE-portfolio that, to put it mildly, was not exactly top of the bill; just like Uni-Invest, which has been mentioned earlier in this blog. The crisis in the Dutch CRE-industry hit these 2nd grade Real Estate managers extra hard, due to the lack of quality and saleability in their portfolio. While this lack of quality was ‘manageable’ in the good times that lasted until 2006, afterwards it was killing for the future of these companies. This was probably the reason that Eurocommerce eventually defaulted in July, 2012.  

After the bankruptcy of Eurocommerce, a curator had been appointed whose task it was to sell Eurocommerce’s portfolio of Commercial Real Estate at the best possible price. This was business-as-usual, until today.  

Today, the Dutch financial newspaper Het Financieele Dagblad ( printed in a jubilant article, that forty of the office buildings of Eurocommerce had been sold for prices far above the liquidation value. I thought: ‘well, that’s nice for the creditors’, until I saw who the buyers were… Here are the pertinent snips:

Commercial buildings, previously owned by the defaulted real estate management company Eurocommerce, received bids from the involved banks that are far above liquidation value.

More than forty buildings of defaulted real estate management company Eurocommerce, with among others football (i.e. soccer) stadium Gelredome in Arnhem, The Netherlands, will probably be sold for prices far above the liquidation value.

SNS REAAL NV (SR:NA), ING Groep NV (ING:AR), Rabobank, Friesland Bank, FGH Bank and NIBC Bank NV made a combined offer of  €426 mln for buildings that had a liquidation value of €270 mln.  These buildings are bearing a combined debt of €552 mln. The offer needs to be confirmed by the court of justice, but it is already endorsed by the curator of Eurocommerce. No other potential buyers have registered at the court of justice.

Officially, the banks, that financed Eurocommerce, don’t bid on the buildings themselves. This bid happens through a series of newly established private limiteds. The advantage is that the banks don’t receive the ownership of the buildings and that they don’t have to pay conveyance duty. The limiteds are going to utilize and eventually sell the buildings, thus keeping the banks at a distance.

It is not unusual in the real estate business, that banks in this way enable a second beginning for the Eurocommerce real estate. When the real estate climate improves, the banks hope to receive more revenues for the buildings, than if these were sold today.

The Dutch CRE market, especially the market for office buildings, is almost totally stalled as a consequence of the credit crisis. The sale of more than forty buildings at once is impossible in this market, according to insiders, or would at best, lead to strongly dropping prices.

The chosen construction by the banks is criticized by some. It would keep the value of the buildings artificially high, thus making it unnecessary for the involved banks to keep high provisions on these buildings.

The following banks are on the hook at Eurocommerce: Rabobank (+/-€300 mln), ABN Amro (€142 mln), ING (€100 mln), SNS (€100 mln) en NIBC (€39 mln). ABN Amro didn’t want to participate in this private sale.

Today, after I read this story, I put the following statement on Twitter (translated to English):

“No, we [the banks- EL] don’t have this commercial real estate in our books for an excess amount of money. Look, today we paid €426 mln for it ourselves”!

Please don’t buy this story, these buildings were and will be not worth their money. Otherwise, other parties would have made a bid on these buildings (red and bold text).

At least this Eurocommerce story proves that the Dutch banks are not yet willing to cut their losses.

The last two statements are exactly the point. These buildings are probably not even worth the liquidation value of €270 mln. The fact that not one of the other real estate management companies even bothered to make an offer, proves that nobody sees business in these buildings. This is not caused by the credit crisis alone: not in a million years.

The real reason is that project developers, cities and communities, the banks, pension funds and insurance companies combinedly financed a zillion crappy buildings in The Netherlands. Ugly and/or badly designed and built commercial buildings at Z-locations that nobody wanted to buy or rent.

The whole Dutch CRE-market currently suffers from a structural vacancy of about 15% and a forecasted non-structural vacancy of 25% within a few years. In contrary to what the FD states, this has very little to do with the credit crisis, but a lot with excess supply in a buyer’s market that already started in 2006. While the best, most beautiful and modern buildings at the best locations still can be sold or rented, this is virtually impossible for buildings in the Eurocommerce / Uni-invest categories.

At the moment that the banks would admit this and would cut their losses on Eurocommerce and Uni-Invest, they would also have to revaluate their total CRE-portfolio. This would cause a technical loss of billions of Euro’s for all the banks and perhaps it could even wipe out most of the equity of the banks involved: even when a bank is as well financed as the Rabobank. This is a nightmare scenario at which the current situation of SNS Reaal pales.

And so the combined banks pulled their wallet and paid €426 mln for these buildings: because they were worth it! Really!

Saturday, 17 November 2012

“Help, our personnel is having financial problems!” Liquidity issues of their personnel cause headaches among Dutch employers.

2012 has indeed become a hard year for many employers and their employees, like I already predicted  in last year’s article The 2012 Outlook for The Netherlands and Europe:

On the (large) employers, I wrote:

Especially the strong Euro-countries in Europe will suffer from the pain that has been postponed in 2008/2009.The manufacturing industry, the financial services industry and exports will be hit hard as a consequence of stalling demand at the domestic markets, in the Euro-zone and abroad

I expect the leading European economies to shrink substantially in 2012; by at least 2%, but maybe even more. And in contrary to the official planners of the Dutch Central Planning Bureau (, I don’t expect the economy to bounce back mid-2012. I think this recession might last well into 2014 and it might take at least 10 years before the economy returns to 2006 growth-figures again.

And on consumer confidence:

What does happen, is that people spend less money during typical sales periods.They will also postpone spending on expensive luxury goods and durable household appliances that don’t need to be replaced immediately. They will also spend less money in hotels, pubs and restaurants. This will have its effect on industrial production and the food-and-beverage industry

It might sound impertinent, but most of the conclusions in this article, including the rise of unemployment with 3%-4%, are still standing firm: the economy is shrinking, unemployment is rising sharply and consumer confidence is still very, very low.

Especially Building and Construction companies and the financial services industry went through a series of mass lay-offs that left almost no department and company unharmed.

My own principal (the largest bank in The Netherlands) is currently going through mass lay-offs at the Commercial Banking department. Next year Domestic Banking will follow with another series of mass layoffs at a.o. the ICT department.

Rabobank, Royal Bank of Scotland, ASR Insurances and SNS Bank already had their share of mass lay-offs and the signals are probably at ‘orange’ for Aegon, Delta Lloyd and ABN Amro.

I can be short on the situation in the Building and Construction industry: it’s dramatic, with soaring numbers of defaults and mass-layoffs.

All these lay-offs and, on top of that, the new government’s austerity measures and tax increases, make that large numbers of households have to pay more and higher bills with less income. The purchase power of the lower and middle class citizens will be dropping country wide; sometimes with more than 5%.

In this situation, it isn’t very strange that some households already experience so much trouble with paying their bills, that they have gotten in arrears. One of the unfortunate consequences of being in arrears can be that the wages of such a person will be officially claimed by his creditors: a distraint on wages. When an employer receives an official request for a distraint on the wages of one of its personnel members, the employer is obliged to follow it up. This is quite a lot of work.

Therefore such an arrears situation can be a very nasty surprise for employers. This became clear in an investigation of the Dutch ‘National  Institute for BUDget education’ (Nibud) on the consequences for employers of financial problems among their personnel.

Here are the pertinent snips from a Nibud press release on this topic:

More and more companies get involved in the financial problems of their personnel, with significant financial consequences for the company itself. This became clear from a poll among Human Resource managers and Organization consultants, held by the Nibud, in combination with the umbrella organization for social security directors ‘Divosa’.

Here are some conclusions of this investigation:
  • 79% of the companies has workers with financial problems
  • 75% has to deal with distraints on wages of their personnel, which cost at least an hour per case.
  • Productivity loss of workers in financial trouble is at least 20%
  • Sickness absence is soaring among such workers
  • So is the number of wage advances.

Nibud advises companies to develop a prevention policy, in order to prevent from higher expenses.

There are various clues for financial problems among workers: regular sickness leaves, concentration problems and even fraud or theft are common signs. Distraints on wages are the most common signal.

Deploying a distraint on wages is expensive for companies:
  • For 50% of companies, it takes an hour to deploy one
  • For 25%, it takes 1-3 hours
  • For another 25%, it takes more than 3 hours.

It is especially expensive, when you consider that more than 50% of the investigated companies has to deal with about 10 distraints on wages per year. However, the financial impact is even bigger, when sickness absence and loss of productivity are taken into account. Sickness absence among financially troubled people is estimated at 9 days per year. The 20% loss of productivity costs one improductive day per week for a fulltime worker. These financial problems press heavy on the employer and can be a reason for not prolonging a temporary contract for such a worker.

These figures are quite shocking. While employers at one hand are often involuntary responsible for (at least a part of) the financial trouble of their workers (by carrying through lay-offs or wage restraints / lower wages), this can be a serious blowback for companies too. The last thing that companies can use in these trying times, are workers not working at full force.

Still, this is and will be a considerable and increasing problem for years to come, is my expectance.  The chance that the Dutch and European economy will suddenly start to grow again, is very limited. Besides that, this government is gambling all its cards on austerity and balancing the budget: a recipe for higher unemployment and higher arrears among Dutch citizens. 

Dutch economy shrunk in October by 1.1% Q-o-Q and 1.6% Y-o-Y, while unemployment soared: The Netherlands pays the price for its short-sighted government policy and ‘beggar-thy-neighbour’ exports tactics

Only weeks after the start of the new Cabinet Rutte II, liberal-conservative Prime Minister Mark Rutte received about the worst data on the Dutch economy in a long time.

The Dutch Central Bureau of Statistics displayed the economic growth for 2012Q3 and the unemployment data for October 2012. Saying that the numbers were bad is a blatant understatement.

The negative economic growth was comparable to 2009Q1, when the credit crisis became fully ablaze in The Netherlands. The unemployment data showed the worst level since 2005Q1 (see the following chart).

Economic growth vs unemployment in The Netherlands 2005-2012
All data courtesy of Charts courtesy of
Click to Enlarge
With this information in mind, it is hard to believe how little vision and ideas the new government agreement displayed to spur economic growth, develop an industrial policy for the 21st century, diminish the Dutch dependence on exports and increase the lagging domestic consumption in The Netherlands.

Here are the most important snips from the CBS data:

Economy shrinks by 1.1% compared with previous quarter
Compared with same quarter last year:
• economy shrinks by 1.6%,
• exports 1.6% higher,
• household consumption 1.8% lower,
• investment 6.4% lower,
• 75,000 fewer jobs.

Economy shrinks compared with previous quarter

According to the first, provisional estimate of Statistics Netherlands, the Dutch economy shrank by 1.1% in the third quarter of 2012 compared with the second quarter. In the first two quarters of the year, the economy grew slightly, by 0.1%.

Year-on-year growth also negative again

Compared with the third quarter of 2011, the economy shrank by 1.6%.  Consumption by households and investment were down, exports still grew slightly but by less than in previous quarters. The third quarter of 2012 had one working day fewer than the third quarter of 2011.

Exports growth weakening

Exports of goods and services grew by 1.6% in the third quarter compared with the same quarter last year. In the second quarter, exports had grown by 4.4%. Exports of goods produced in the Netherlands fell by 1.7%. Re-exports, which are relatively less lucrative for the Netherlands, grew by 3.9%.

Investment substantially lower

Investment in fixed capital was 6.4% lower than one year previously. Investment spending on dwellings and commercial buildings and on civil engineering projects was down. Compared with the second quarter of this year investment in transport equipment was also significantly less. The largest decrease in investment was for cars, but spending on machines and installations also fell.

Consumption down further

Consumption by households shrank by 1.8% compared with twelve months previously. In the five preceding quarters consumption also decreased. Consumers spent less on durable goods in particular. Spending on cars was especially down on the same period last year.

Consumption by the government rose slightly, by 0.2%. This was mainly the effect of a further increase in spending on care. Spending on public administration was down again.

Construction shrinks by most

With the exception of government and care, production in all sectors of industry was lower than in the same period last year. The decrease was largest in the construction industry, at 8.0%. Construction has been declining since 2009, with the exception of a slight pick-up in 2011.

Fewer jobs again

In the third quarter of 2012 the number of jobs was 21,000 lower than in the second quarter, after adjustments for seasonal effects. Compared with the same quarter last year, the decrease was 75,000. This is a decrease of 0.9%. The number of jobs was down on last year in nearly all sectors of industry. The decrease was largest in the construction industry, 17,000. The number of jobs rose slightly in the care sector, but this increase was much smaller than in the preceding quarters.

  • Unemployment in October rose to 6.8%
  • More unemployed people over 45
  • Almost 6,000 more unemployment benefits (WW)
  • Fewer benefits terminated because of work resumption
According to the latest figures released by Statistics Netherlands, seasonally adjusted unemployment increased by 17,000 in October 2012 so that 536,000 people are now unemployed.

The latest figures released by the UWV show that there were 310,000 unemployment benefits paid (WW) in October, 6,000 more than in September.
Higher unemployment rate than in 2005

536,000 people were unemployed in October 2012. This represents 6.8% of the labour force. In September the unemployment rate stood at 6.6%. It was also high at the start of 2005, but then it never exceeded 6.6%.

More unemployed people over 45

In the last three months, unemployment rose by an average of 9,000 a month. Over half were people aged 45 to 65. The number of unemployed people over 45 reached 191,000 in October, which represents 5.8% of the labour force aged 45 to 65.

If I read the CBS statistics correctly, Dutch exports (first red and bold text) are currently losing their importance in Europe. It seems that The Netherlands is turning from an exporter that offers domestic goods, produce and services with added value into ‘the mail-man for China’. That is not an enviable position for our country.

The second red and bold text is something that worries me on a personal level, as I’m 46 years of age. Although unemployment of people above 45 is still relatively low, this number seems to be increasing above average in these statistics. That is especially worrisome, if you take in mind that we seem to be in the middle of a ‘hurricane of mass lay-offs’ all over The Netherlands and people above 45 are having a very hard time finding a new job in these trying times.

With reduced industrial production and anemic economic growth as my scenario for the next 10-15 years, most companies will choose for youngsters in the coming years; this in spite of the widely expected scarcity of qualified personnel, due to the aging process in The Netherlands.

The new government wants people to work until 67 in 2021, but yet seems utterly clueless at how to keep people above 55 at work. When the official Unemployment Benefit will indeed drop to ‘social welfare’ level after a year of unemployment, like the new cabinet wants, it could very well be that unemployed people above 55 might become the paupers of the near future.

Today, I had a discussion on Twitter with the distinguished Dutch professor in Financial Geography, Ewald Engelen, on the senseless Dutch policy of keeping wage restraint, while mostly gambling on the Dutch export and distribution power. 

We both agreed that wage restraint is 'the road to hell' for Dutch consumers and retailers and that we don't understand why government officials and representatives of important lobby groups are still in favor of it, while it really hurts the Dutch and European economy.

This policy had not only been advocated by the subsequent goverments of Jan Peter Balkenende and Mark Rutte, but also by the employer’s organizations for Small and Medium Enterprise (MKB Nederland)  and large companies (VNO/NCW).

It has dealt a heavy blow to exports and domestic production in especially the PIIGS-countries and France, but it also brought Dutch consumers to their knees.

The Dutch consumers already suffered from sky-high mortgages on their homes that have been getting more and more underwater, since 2007. The wage restraint policy, in combination with the mortgage millstone, impotent governments, eight years of austerity measures, an unsecure job-market and mounting unemployment, and last-but-not-least the endless eurocrisis, was enough to get even the worst ‘shopaholics’ running to the bank to store their savings.

Domestic consumption dropped to miserable levels and many retailers and SME-enterprises were forced to close their doors forever.

What has been the answer of the last four cabinets? Nothing… In The Netherlands, the land of the blind, the one-eyed man has been king during the last decade.

Today, PM Rutte stated that ‘he didn’t see a reason for further austerity measures yet’, according to De Telegraaf:

PM Mark Rutte sees in the disappointing figures on the Dutch economy ‘no cause for additional austerity measures’. Rutte stated this on Friday, November 17, during his weekly press conference.

Rutte stated that he didn’t use the CBS data as a guideline. Political decisions on austerity measures are based on data from the Dutch Central Planning Bureau (, as these take the effects of economic contraction on the fiscal budget into consideration, according to Rutte. “The CPB will present new data in December. That will be the time to reassess the economic situation.”

Gee, I get the unpleasant idea that we should be celebrating the fact that we won’t get additional austerity measures yet, from this clueless Prime Minister. A well-known Chinese proverb states: ‘if your only tool is a hammer, every problem soon starts to look like a nail’. Austerity and a balanced budget seems to be Rutte’s hammer… 

Friday, 16 November 2012

In Russia everything is big, even corruption: did former defense minister Serdyukov commit massive fraude with Russian army real estate?

If you steal a bread, you are a thief;
If you steal a billion, you are a successful business-man…

At this moment, Russia is the real land of the unlimited possibilities… for some people.
  • People that have a ‘healthy’ disliking for the concepts ‘fair and honest’;
  • People that don’t know the difference between private and public property;
  • People that don’t give one bit about other Russians, but instead look at them with disdain; 
  • People also, who have a good position for arranging their opaque deals, in other words, people that reside in the top of the Russian foodchain.

People like this can be found among: 

  • governors, mayors, local politicians, members of the Duma (Russian parliament);
  • directors of large museums, palaces and other touristical attractions; 
  • executives of current and former state companies;
  • executives of private companies that have close relations to government officials;
  • the well-known billionaires, who acquired large shares of Soviet property for a token price in the 'wild' years after Gorbachev's retreat;

One of the things that many of these people have in common, is being a close acquaintance of Vladimir Vladimirovich Putin or Dmitriy Anatolyevich Medvedev. The president and prime minister of the mighty Russian empire, sometimes jokingly called 'Batman and Robin'.

Some were close friends of Putin during his student years at the State University of St-Petersburg, other people know him from his time as FSB-agent (the successor of the KGB intelligence service). Yet others owed him their job during his first two stints as president.

Vladimir Putin is a very loyal friend, once you have gained his trust. He helps his friends and lets them profit from his access to the wealth and vast resources of the Russian Federation. If his friends stay under the radar of public opinion and the press, don’t betray or attack Putin personally and don’t rob the state too openly, they can virtually do what they want with the state possessions they are entrusted with.

One person that didn’t seem to learn this lesson well is the former Russian Finance Minister and Defense Minister Anatoli Serdyukov.

As a defense minister, he was entrusted with the restructuring of the large Russian army, in order to adjust it to modern warfare and make it more cost-efficient. During this restructuring process, many obsolete army buildings, baracks and terrains became superfluous and ready for sale to public and private parties.

Instead of selling these buildings and terrains for a fair price at the highest bidder, Serdyukov reportedly sold these buildings at very low prices to personal acquaintances and 'straw men' via a business vehicle, called Oboronservis. 

During this sales process, he probably used a method that is well-known in The Netherlands from the massive 'Klimop' (i.e. Ivy) real estate fraud scheme, involving executives from the Philips Pension fund and Bouwfonds:

A real estate object (building or terrain) is sold for a price far below the ‘marked-to-market’ value to a straw man (straw company), who works for the seller. Days or even hours later, the object is again sold, but now to the eventual buyer at fair value. The profit of (sometimes) many millions is for the original seller and his straw men; the loss is for the company or organization that owned the real estate before the sales operation.

In some cases in The Netherlands, there had been one extra sale of the object at an intermediate price between the ‘token’ first sales price and the final sales price. The sellers did this to make the price difference between the first and the last sales price not too conspicuous for outsiders. This pattern of sequential sales of the same real estate objects, has been used over and over again for dozens of office buildings. There have been yields to the tune of hundreds of millions of Euro’s for the fraudulent sellers, while Philips workers and Bouwfonds investors have been robbed from their hard-earned investments.

It was a world of Ferrari’s, luxury yachts, expensive callgirls and €100,000 wrist watches for the people who were part of this fraud. In The Netherlands, the small country that it is, this kind of fraud demanded a ‘reliable’ network of corrupted notaries, attorneys and realtors, who kept their mouths shut about these suspected transactions, in exchange for a slice of the pie. The only way to let this fraud continue for years and years was keeping everybody happy, with lots of money and presents.

This is a problem that the Russian defense minister Anatoli Serdyukov hardly could have had in the years that his fraud continued. He has probably used the largeness of Russia to his advantage, as it is less visible that the same people and companies are constantly making their opaque deals with military real estate objects.

Besides that, the power and influence that Serdyukov’s ministerial position brought, his close friendship to ‘Vladimir Vladimirovich’ Putin and the respect that he commanded against subordinates in the very hierarchic country Russia, was guarantee enough that people would keep their mouth shut, or else….

The Dutch financial newspaper Het Financieele Dagblad wrote the backgrounds on this explosive story:

Anatoli Serdyukov could have been warned in advance. Already for months, rumours were spread that Serdyukov, who has been sacked yesterday [November 6, 2012 – EL] by president Vladimir Putin, had been involved in a fraud case. About two weeks ago, Serdyukov skipped a personal meeting with PM Dmitriy Medvedev, in order to be around when the Russian secret police held a raid at the Russian sales agency for the Ministry of Defense ‘Oboronservis’.

Serdyukov wasn’t arrested, but three subordinates were. Speculations that the agents had been targeting Serdyukov were soaring when the amounts were disclosed: Oboronservis would have sold military objects and real estate, owned by the Russian Ministry of Defense, for a token price to acquaintances of Serdyukov. This fraud had cost the Russian state more than 3 bln ruble  (€75 mln). Now the moment has come: Serdyukov is dismissed from his function, in order to ‘shape the conditions’ to investigate this massive fraud at Oboronservis.

Serdyukov, who studied economy in Leningrad (i.e. St-Petersburg) in the eighties, became in February, 2007, the first Russian Defense Minister without a military background. The most important task of the former entrepreneur: fighting the corruption in the military organization and restructuring the army, to make it more efficient.

The defense minister started a large restructuring operation. Not only did he fire hundreds of military officers, he also targeted the possessions of the ministry. The establishment of Oboronservis, in September 2008, fitted in his plan to outsource maintenance and logistics. Privatizing these activities would increase efficiency, according to Serdyukov, who was chairman of this agency until last year. However, Oboronservis waisted millions of Euro’s by selling government property below the market price.

According to unofficial sources, it is not so much the fraud that cost Serdyukov his job: Serdyukov is married with the daughter of former Russian Prime Minister and current CEO of Gazprom Viktor Zubkov. Had the family relation between (at the time) Finance Minister Serdyukov and his father-in-law PM Zubkov not been a problem for Putin, this time it was different.

During the raid of the police, Serdyukov had been found in the house of Yevgeniya Vasilyeva, an official of Oboronservis and suspect in the corruption case. This had been shocking for Zubkov, who is still a very close friend of Putin’s. ‘Even as a defense minister, it is not wise to mess with your father-in-law. Especially when he is Viktor Zubkov’, according to the human rights’ activist Vladimir Pribylovski, who was quoted in the Washington Post.

Everybody, who thinks of a conspiracy of Vladimir Putin against a dissident minister, should wake up. The fairly critical and independent Russian newspaper Komsomolskaya Pravda ( printed some juicy details on this massive fraud case. The following snips have been translated from Russian by Google Translate and have been finetuned by me:

This Thursday, October 26, the Investigative Committee of the Russian Federation has conducted searches in an independent commercial organization "Oboronservis". This was on the same day followed by the following statement of Defense Minister Anatoly Serdyukov:

"The Defense Ministry has an interest in conducting a detailed investigation of all charges leveled against officers of the sales agency ‘Oboronservis’. At this moment all public statements, concerning the damage and the involvement of Oboronservis officials, are nothing more than speculation”.

After this statement, Anatoly Serdyukov was summoned to the president at Novo-Ogarevo. Then an official statement was made by the Kremlin: "The president has asked the Minister of Defence to provide full cooperation with the investigation, which is ongoing."
The same day an official statement had been put on the website of the Investigative Committee:

"Investigators from Chief Military Investigative Directorate of the Investigative Committee of Russia have found five possible criminal cases ... of fraud in the sale of real estate, land and shares owned by JSC "Oboronservis". An investigation has been executed at the CEO’s offices of the public corporations' Voentorg "," Agroprom "and" Red Star ", which are part of the holding company" Oboronservis ".

In addition, there has been an investigation at the apartment, occupied by the former head of the Department of Property Relations for the Ministry of Defense, Evgenia Vasilyeva. Besides documents relevant to the case, the investigators seized more than 3 million rubles, antiques, dozens of pictures and a lot of jewelry. The investigation will be continued. "

A few days later, the Russian Audit Office presented an official report concerning the investigation of fraud cases with property under management of "Oboronservis". The following cases were printed:

Krasnodar, Temryuk district

On an area of 30,000 sqr meter, a complex has been built for 300 million rubles (€7.5 mln) at the expense of the Defense Ministry. Afterwards, this area had been sold for only 92 mln rubles.

A complex of buildings, belonging to the 31st State Planning Institute for Special Construction, had been sold for a price of 282 million rubles below market value. (The real sales price is unknown).

An 11-storey hotel has been sold for 600 million rubles, which is less than 50% of fair value.

Three other buildings in the center of Moscow have been sold for 700 mln rubles, at least 200 million below fair value, according to the Special Construction institute.

On November 13, the Russian online magazine ‘Argumentiy y factiy’ (i.e. Discussions and Facts) prints the following details:

A complex of 70 permanent buildings and 20 hectares of land were sold at 30% of market value. The whole property was sold for 320 million rubles, while it had a market value of more than 1 billion rubles, according to experts.

Two other articles in Komsomolskaya Pravda (article one and article two) contain further details on this evergrowing fraud case, that also includes Serdyukov’s sister and personnel.

One especially juicy detail is the fact that 54 valuable paintings of Russian masters, like Ilja Repin and others, moved from the official property of the Ministry of Defense to the personal belongings of Serdiukov. No questions asked…

Unfortunately, this form of art theft is reportedly common practice among directors and officials of Russian museums, palaces and other touristical hotspots. As I said in the beginning of this article: the line between public and private property is very fine in Russia.

Of course, everybody is innocent, until proven guilty in the court of law. Also this former Russian minister is… However, appearances seem to be strongly against him, if you read the mounting list of articles that have been printed on this subject in especially the Russian newspapers.

While it remains unclear what exact motive made Putin fire Serdyukov, a fact is that Putin is loyal to his friends. Very loyal…

According to anonymous sources of the Russian press agency Interfax, quoted in Komsomolskaya Pravda, Serdyukov has been offered a job at ‘Rostechnologiy’, a state engineering agency, where he has worked before. This news message has not been confirmed yet, however.

Has dismissed defense minister Anatoli Serdyukov found a new job?

On Wednesday evening, "Interfax" (referring to an anonymous source) reported that the ex-minister of defense became an adviser to the general director of the state corporation "Rostechnologiy".

In this case, the informant allegedly told the agency: "The appointment of Anatoly Serdyukov has already taken place. Soon he will assume the duties of Advisor for CEO Chemezov at Rostechnologiy.

Officially, however, this information to the correspondent of "KP" in the corporation has not yet been confirmed.

If Serdyukov indeed gets this job, it proves once again that Putin is not really serious about fighting corruption. That makes sense, as his future pension might depend on this.