Extortions a Fact of Business Life in Moscow

From time to time, a flashy foreign car pulls up outside the Patio Pizza, a Venezuelan-Russian joint venture restaurant, sharp-suited men get out, ask for the manager, and demand a pay-off.


According to the restaurant's deputy director Alexander Nechayev, the restaurant handles the problem in the same way as many other foreign businesses faced with a criminal "shake-down": they ask their own security guards to see the men off.


"We say we are not competent to deal with these questions, but we can connect you with the right people," Nechayev said, referring to a security group used by the restaurant. "Somehow they then agree, but how, well, that's our secret."


Like many foreign businesses operating in Russia, Patio Pizza counters the threat of criminal extortion by hiring an unusually large number of security staffers. Such guards sometimes have uncertain origins, but they often succeed in repelling the demands of organized crime gangs.


One American white-collar business recently decided to hire security guards after two heavies dropped by, seeking to expand their extortion business.


"They said we must have enemies, we must have problems, and they would protect us from them," said the firm's director, who asked not to be named. "We assessed them to be serious."


The firm decided to hire two security guards. When the extortionists returned, the new guards were able to convince them to leave in peace, the official said.


In many cases, businesses preempt the threat of so-called Mafia problems by hiring their own guards from the day they open shop. "When they know you have security, they do not come by," said Yerzhan Musayev, commercial distribution director for the Italian clothing firm Benetton.


It is advice that many foreign business take very much to heart. Benetton keeps an armed guard at each of its five retail outlets, Musayev said. The World Class Fitness Center, a fancy health club and store, employs six guards in its 150-square-meter facility. Pizza Hut keeps two guards just to watch over its 150-seat restaurant in downtown Moscow.


For larger operations, the in-house security staff is enough to man a military platoon. For example, the Arbat Irish House, one of the most bustling centers of commerce in the city, employs a total of 60 guards, with ten on duty at any one time in the store, according to John Whelan, who heads the non-food department.


"We're not too happy to have so much security, but it's something we have to have at the moment," he said.


Whelan said that a major function of all the security is to prevent shoplifting, but added that warding off Mafia extortion was also an important consideration.


Hotels are also major employers of security forces. The 86-room Hotel Savoy, a Finnish-Russian joint venture, has a total guard staff of 31 people, with six on duty at any given time, said general manager John Kivinen.In Finland, by contrast, security guards are virtually unknown, while most European countries would only have one guard for a hotel of its size, Kivinen said.


Despite the threat of criminal extortion, many businesses and experts say that some have exaggerated the danger. An official at the U.S. Embassy said they receive only one or two complaints a month about attempted extortion. "Russian businesses get hit considerably more," he said.


Peter Charow, head of the local American Chamber of Commerce, said that until Wednesday's incident at Newsweek, he knew of only one American business recently pressed for payoffs.