business

U.S. Investigates Florida ‘Kalashnikov’ Factory With Ties to Putin Allies

  • Subpoena seeks records on state, local tax-break application
  • Executives say previous ties to Russian firm have been cut

Activists protest in front of Kalashnikov USA, a gun manufacturer that makes an AK-47 rifle, in Pompano Beach, Florida on Feb. 25. 

Photographer: Joe Raedle/Getty Images

U.S. prosecutors have opened a criminal investigation into a Florida factory that makes shotguns modeled after the iconic AK-47 assault rifle and is run by executives with ties to top allies of Russian President Vladimir Putin.

The U.S. attorney’s office in Miami is seeking records related to Kalashnikov USA’s 2015 request for state and local tax breaks, according to a grand jury subpoena sent to the city of Pompano Beach, Florida this week. Federal prosecutors are investigating the business practices of RWC Group LLC, which owns Kalashnikov USA’s plant in Pompano Beach, a person familiar with the investigation said.

It’s unclear which business practices are under investigation, and a spokeswoman for the U.S. Attorney’s office in Miami declined to confirm or deny any probe. Representatives for the company didn’t respond to repeated requests for comment, but a top executive for RWC Group and Kalashnikov USA has said the manufacturer is doing nothing wrong.

Nonetheless, the company’s past links to Russia -- and its storied state arms maker Kalashnikov Concern JSC -- have drawn increasing scrutiny in the weeks since the Feb. 14 mass shooting at a high school in nearby Parkland, Florida. RWC Group became Kalashnikov’s sole U.S. distributor in 2012, and the Russian company planned to sell 200,000 guns a year in America through that arrangement.

But in 2014, the U.S. Treasury imposed economic sanctions on Kalashnikov Concern and other Russian arms makers to punish Putin for supporting separatists in the Ukraine. RWC Group has said that since then, it has cut all ties to Russia and Kalashnikov Concern and is fully complying with the U.S. sanctions.

Tax-Break Application

Bloomberg Businessweek reported this month that there’s evidence that some ties persisted after sanctions were imposed. In an April 2015 application for $162,000 in tax incentives -- the subject of this week’s federal subpoena -- Kalashnikov USA said it planned to assemble guns at its Pompano Beach plant from parts imported from Russia. (The tax breaks were approved in October 2015, but RWC never received them because it didn’t deliver on commitments to create dozens of high-paying jobs.)

In addition, in December 2016, RWC Group said in court filings that it still had a license to make and sell Kalashnikov guns.

The sanctions ban any U.S. person or company from doing business with Kalashnikov Concern, so any ties between the Florida factory and the Russian arms maker could raise red flags with the U.S. Treasury, said Daniel Fried, a former U.S. Department of State diplomat who crafted Russia sanctions during the Obama administration.

Executives for Kalashnikov USA have said generally in interviews and statements that their company isn’t violating sanctions because it makes guns of its own design and doesn’t source any parts from Russia.

‘Museum’ Factory

Kalashnikov Concern sits at the crossroads of business and power in Russia. Putin once likened Kalashnikov’s factory there to a “museum of modern art.” Last year, he presided over the unveiling of a 16-foot statute of the AK-47’s late inventor, Mikhail Kalashnikov, near the Kremlin.

Kalashnikov Concern CEO Alexey Krivoruchko has the confidence of some of Putin’s closest allies -- so much so that he has been allowed to buy 75 percent of the company from the Russian government since 2014. Krivoruchko has spent his career managing companies under Sergey Chemezov, a powerful Putin appointee who runs Rostec State Corp., a state conglomerate. Chemezov was personally targeted by same the U.S. sanctions that named Kalashnikov Concern.

"Krivoruchko is close to Chemezov, who right now is probably the most influential person next to president Putin," said Evgeny Minchenko, a Moscow political consultant who advises the Kremlin. "Chemezov and Putin know each other since they both worked in Germany in the 1980s."

Krivoruchko, who wasn’t been personally sanctioned by the U.S., didn’t respond to requests for comment.

Interlocking Companies

Kalashnikov Concern, the Russian company, has said that neither it nor its managers or shareholders, have any business relationship with Kalashnikov USA. But a closer look shows how interlocking companies, some of them set up since sanctions began, connect Kalashnikov USA executives to Krivoruchko.

For example, Michael Tiraturian is listed as senior vice president of Kalashnikov USA and as manager of its parent, RWC Group. He’s a longtime business associate and friend of Krivoruchko. Tiraturian also is a manager of Florida companies that Krivoruchko created and used to buy a $2.4 million condo, a yacht and luxury cars in Miami over the last seven years.

Tiraturian also is listed as the manager of another Florida company, Solomon Asset Management LLC, which owns 65 percent of RWC Group, documents filed with the state of Florida show.

Tiraturian didn’t respond to requests for comment. In an interview earlier this month, Tiraturian said he’s friends with Krivoruchko but denied any current business relationship.

Since sanctions were put in place, in 2014, the two men don’t even discuss business or Kalashnikov, Tiraturian said. Kalashnikov USA has spent years restructuring the company to comply with sanctions, severing all ties to Russia, he said. “We were very, very, very careful about what we do,” said Tiraturian, who recently changed his name from Tiraturyan in corporate records. “Everything we are doing is by the book, and clearly we are not doing anything wrong.”

— With assistance by Ilya Arkhipov

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE