Transworld, the British metal trading firm that had most of its 20 percent shareholding in the Krasnoyarsk Aluminum Factory crossed out of the company's register, claims to have lost some $300 million on the deal. Officials at the factory, however, say that Transworld never invested a kopeck in their company.


Both are probably right, and both -- despite the fact that the factory directors had no right to cross Transworld's holdings out of the register -- have a legitimate grievance that highlights the main flaw in Russia's voucher privatization program.


Transworld bought its stake in Krasnoyarsk Aluminum through Russian intermediaries during voucher privatization, when shares in state companies were traded for securities issued to every Russian man, woman and child. By buying 400,000 vouchers and investing them at the factory's privatization auction, Transworld took a gamble that won it a valuable packet of shares.


The factory, however, gained nothing from Transworld's purchase. All the money went to the companies or individuals who sold the vouchers, and to the Russian intermediaries who participated in the auction on Transworld's behalf.


Despite the fact that Transworld claims to have spent a great deal more money helping the factory obtain raw materials and bank loans, one cannot blame the factory's directors -- except the one who represented Transworld -- for being unhappy about giving away 20 percent of their company for no capital investment. The main stimulus for going public, after all, is the huge amount of capital one can attract.


The second stage of privatization has been designed to solve this problem by giving 51 percent of the proceeds of cash auctions to the company, but it comes too late for Transworld and Krasnoyarsk.


In this light, it is easier to understand why the Krasnoyarsk directors wanted to exclude Transworld. The scary part is how easily they did it. The legality of the directors' action is unclear, since the government has yet to submit a final draft of its securities bill to the parliament, which in turn could take months to pass the much-needed legislation. At present, a listing in the shareholders' register remains the only legal proof of ownership.


So, if neither the government nor the State Property Committee can force the company to return the shares to their rightful owners, the lesson will be that all one needs to erase a multimillion-dollar shareholding in Russia is a bottle of white-out and a steady hand.


Having learned that lesson, other directors will likely start looking differently at unwanted partners, and potential foreign investors will be taking their money anywhere but Russia.