Ikea Attempts To Build Public Case Against Russian Corruption
MOSCOW — Weeks before the opening of its flagship store outside Moscow in 2000, Ikea was approached by employees of a urban utility firm . If the Swedish retailer wanted to have power for its grand opening, it had to pay a bribe .
Instead, Ikea rented diesel generators large enough to power a shopping mall . The engines roared to life in a loud rebuke to the corrupt executives who thought they had the retailer cornered, and soon the utility turned on the power .
As Ikea opened markets across Russia, and became one of the most outspoken Western corporate critics of Russian corruption , renting generators to thwart removing from power companies became standard practice. Ikea executives took great pride in their creative solution — renting generators “instead of putting ourselves into a squeeze,” as Christer Thordson, an Ikea board member and global director of legal affairs, put it in an interview.
But Russian graft may have proved more stubborn than Ikea.
The board of Ikea’s operating firm , which is based in the Netherlands, has concluded that the Russian executive hired to control the generators was taking kickbacks from the rental company to substantially inflate the price of the service. Ikea said that such a deception could cost it about $196 million over two years.
Ikea canceled the contract and sought redress in Russian local court. But in rulings over the last two weeks, Ikea has lost another 5 million euros in damages that the judges awarded the generator rental firm for breach of contract .
Ikea disclosed the details of its loss to The New York Times last month, saying that it hoped publicity might compel the Russian authorities to investigate.
“We have encountered something here that is outside the scope of what we normally encounter,” Mr. Thordson said, describing the universal retailer’s situation in Russia. “I have never experienced anything like this.”
The leader of the engine rental company and the former Ikea employee accused of accepting bribes denied any wrongdoing.
Russia is a maddeningly opaque but potentially profitable market of 140 million people, whose incomes are supported by trickle-down oil wealth . Many global businesses contend they must have a presence in Russia to remain competitive. On Thursday, Carrefour, the French hypermarket chain , opened its second store in Russia. Wal-Mart, the world’s largest retailer , has an advance command in Moscow but has yet to sponsor .
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