Russian collection society fraud deepens

March 2017

Collection societies


Russian collecting society RAO has begun to uncover the extent of the frauds it has suffered following various accusations of embezzlement, one of which resulted in former General Director Sergei Fedotov being placed in custody. He is accused of funnelling over 500 million rubles (£6.9 million) out of the organisation during his time in charge.
Authors’ rights collecting society RAO initially defended Fedotov, but new General Director Maksim Dmitriev said that an audit of the years 2014 to 2016 had uncovered 228 million rubles (£3.1 million) of suspicious activity in the last year alone, including the “transfer of funds on spurious grounds and overstating expenses”. It should be noted that the largest of these payments was taken out in the second half of last year, after Fedotov’s arrest. The fraud(s) have contributed to growing losses at the collecting society – an average of 200 million rubles (£2.75 million) have seeemingly been removed annually by the end of 2015, which in turn meant that RAO has not been able to pay songwriters and publishers the royalties they are due. 
Dmirriev said “By the end of 2015 RAO had an impossible obligation to songwriters to the total amount of 2.8 billion rubles [£38.5 million] ……. obviously, at the end of 2016 the situation has become worse. In the near future we will get the final results of the audit and will be able to draw conclusions and to generate proposals for the improvement of our organisation”.
Late last year RAO was also accused of being part of another fraud with Russia’s other collective rights organisations RSP (which collects the levy electronic goods) and VOIS (neighbouring rights), which may have siphoned off more than £55 million in revenues. The Russian government’s Culture Ministry is considering taking control of the country’s collective licensing. Its latest proposal was to establish a new multi-territory licensing body as part of the Eurasian Economic Union, replacing RAO, RSP and VOIS entirely.

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