As a tourist I would be scared to be in Moscow and have no desire to ever visit there. My colleagues passports were held for ransom by Russian police during sightseeing on Red Square. If you cant trust the police who can you trust in Moscow? Russian President needs to take quick and decisive action to rid itself of widespread corruption at its highest echelons in government especially in its law enforcement agencies to gain the West's confidence that it is a Just and Social society mindful of it citizens and tourist welfare with a deep sense of Right & Wrong, otherwise it will be continued to be seen as a country reliving its violent and oppressive past.

-- Comment on the following story by reader "John"

Business Week reports:

It seemed like any other workday at Togliatti Azot, a giant chemical factory in Russia's Samara region, on the Volga River 600 miles east of Moscow. Engineers were on their morning rounds, and union representatives had just finished a talk about financial support for newlyweds. Then around 11 a.m., dozens of men dressed in camouflage and toting automatic weapons charged into the administration building. "We thought it was a terrorist attack," Sergei Korushev, the plant's deputy director, says of the September, 2005, raid.

In fact, the uninvited visitors were members of the local OMON, Russia's crack paramilitary police, and detectives from Moscow. They seized thousands of financial documents—evidence, they said, of crimes by management. The police later brought charges of tax evasion and fraud against General Director Vladimir Makhlai and CEO Alexander Makarov, both of whom have since left the country. (Neither could be reached for comment.) While the company has been hit with $150 million in back tax claims, many at Togliatti Azot have their own explanation for the events. "Someone wanted to eat up a very good and very lucrative morsel for their selfish goals," says Korushev. The plant's current boss, Yuri Budanov, calls the police probes a "shakedown," which a local politician links to a rival company.

Budanov and Korushev, like many Russians, believe the police and courts have become weapons in the capitalist arsenal. Some 8,000 companies a year are targets of lawsuits or investigations at the behest of rivals seeking to put them out of business or take them over, the Russian Chamber of Commerce & Industry says. Russians call this process reiderstvo, or raiding. In some of these cases, companies pay off police and courts with a goal of harassing competitors. Often raiders rely on corrupt courts to rule that they are legal owners of a company. In other cases, raiding companies or their agents use legal pressure as a tool to force controlling shareholders to sell their stakes. While targeted companies sometimes don't know who is behind the legal attacks, the practice is common enough for the Russian press to name the prices corrupt officials allegedly charge for various "services": Getting police to open a criminal investigation costs $20,000 to $50,000, an office raid is as much as $30,000, and a favorable court ruling runs anywhere from $10,000 to $200,000, according to press reports.

Rampant lawlessness is the No. 1 barrier to Russia's economic development, says President Dmitry Medvedev. The former law professor, who promised to make law and order a top priority, has coined his first catchphrase, "legal nihilism," to describe widespread disrespect for the law at all levels of society. Medvedev, who took over the Presidency from Vladimir Putin on May 7, has called for legislation to rein in reiderstvo, and Parliament is debating a 20-year jail sentence for raiders who illegally acquire companies.

VENALITY ON THE VOLGA

Sometimes Russia's legal shenanigans make global headlines. Oil giant Yukos was broken up and renationalized by the Russian government between 2003 and 2007. Police on Mar. 20 raided the Moscow offices of BP (BP) and its Russian joint venture, TNK-BP. And on Apr. 6, Hermitage Capital Management, a British investment fund, said Russian police, under cover of an investigation for alleged tax evasion, stole documents that were then used in an attempt to defraud the fund. (The police did not comment.)

While such cases capture worldwide attention, reiderstvo more typically targets small and midsize companies in places like Samara. Located on the historic trade route with Asia, Samara has long had a wild streak. In the 17th century, the city—the capital of Samara province—was the base for Russia's most notorious outlaw, a Cossack named Stepan Razin who held up riverboats. In the 1990s criminality in the region centered on the giant AvtoVAZ car factory in Togliatti, Samara's second city, where mobsters stole cars and gunned down managers.

These days life is calmer. While assassinations of businessmen and officials still happen, Samara has seen an economic revival in the Putin era. Crumbling 19th century buildings give the city an air of faded elegance, but the streets have been brightened by the arrival of big electronics chains, mobile-phone shops, and Western brands such as Citibank (C) and Adidas. Today, the region's businesses worry less about mobsters and more about cops and their bureaucratic masters.

That's certainly the case at Togliatti Azot. Surrounded by Russia's ubiquitous birch forests, the factory is one of Russia's most profitable petrochemical plants, producing ingredients for plastics and fertilizer. (Azot means "nitrogen.") Built in the 1970s with technical assistance from U.S. billionaire Armand Hammer, the plant is relatively modern by Russian standards. The perestroika economic reforms of the '80s hurt, but the company revived, helped by new partners and markets.

Many credit Togliatti Azot's survival to fugitive General Director Makhlai. He ran the company during the Soviet era and stayed at the helm when it was privatized in the early 1990s, becoming its largest shareholder. The plant's staffers are surprisingly loyal to their boss and have organized dozens of demonstrations. Their banners and placards—"Hands off Togliatti Azot!" and "We won't let the dirty raiders pass!"—make clear what the workers think of the accusations. "If the workforce has come to the defense of the manager, it's because he isn't guilty," fumes Olga Sevostyanova, head of the plant's trade union.

The police's case rests on the claim that between 2002 and 2004, the factory sold ammonia at artificially low prices to a trading company in Switzerland. The police maintain the Swiss outfit was a front for Makhlai, and that it resold the ammonia at market prices, pocketing the difference. The factory disputes this and has received backing from experts at the Justice Ministry who support Togliatti Azot's claim that the police case rests on insufficient evidence. The Samara police declined to comment, as did the Internal Affairs Ministry in Moscow. But Alim Dzhiganshin, investigations editor of the official police newspaper, Shield and Sword, says: "The position of the investigators is close to the truth. [Makhlai] crudely stole from his company, and now he's trying to blame raiders."

To be sure, the case against Togliatti Azot is complex, resting on such arcane matters as the fair export price for ammonia. Commentators note that such cases are rarely black and white. "Opening a criminal case is of course a kind of corporate war," says Boris Titov, head of Business Russia, a lobbying group. "You don't know who's attacking whom."

Murky as it is, the conflict has led to local outrage. "It's obvious that all signs point to a hostile takeover of the company—a so-called raider," says Anatoly Ivanov, a deputy of the pro-government United Russia party who represents the city of Togliatti in Russia's Parliament. He points a finger at Renova, a Moscow-based company owned by Victor Vekselberg, a tycoon with interests in the petrochemicals sector. Renova Group, a minority shareholder in Togliatti Azot, emphatically denies involvement in a corporate raid, while acknowledging past disagreements with the plant's management over dividends and shareholder rights. "The Renova Group can't have any connection with the investigation of Togliatti Azot by the law enforcement agencies, because it is a private Russian business group," Renova told BusinessWeek.

The onslaught of criminal and tax investigations against Togliatti Azot coincided with civil suits affecting it. In 2006 managers were amazed to learn of a case lodged in Ivanovo, near Moscow. In it, one small company accused another of reneging on an agreement to sell 100% of Togliatti Azot's shares. After the plaintiff presented the court with a share register that appeared to prove the defendant owned the stock, the judge halted trading in Togliatti Azot's shares. But that was reversed after the company proved the document was forged. In another unsuccessful case, executives say, a plaintiff lodged a lawsuit against Togliatti Azot citing papers that had been taken in the 2005 police raid. "They had documents that this company should never have had access to," says Oleg Klyukhov, Togliatti Azot's legal director.

The region of Samara doesn't lack for other examples of alleged reiderstvo. In the city of Samara, the Smarts cell-phone company could hardly be more different from Togliatti Azot. The plant was a product of the Soviet industrial complex, passing into private ownership as a result of Russia's controversial privatization process. Smarts, by contrast, is a creature of Russia's post-communist consumer boom. It has some 4 million subscribers in the Volga region and occupies a shiny office block in Samara. Unlike the gray-haired engineers who head up Togliatti Azot, Smarts' general director, Andrei Girev, is young, trim, and sharply dressed. But Smarts has one thing in common with Togliatti Azot: For the past three years it has been hit by legal challenges and criminal probes, which Girev calls "a classic raiders' attack."

The problems began in 2005, when Smarts was planning an initial public offering. It hired a Russian consulting firm, Marshall Capital Partners, which was working with Sigma, a Moscow investment firm. Smarts alleges that Marshall failed to do what it promised, leading the phone company to terminate the contract. Then the legal troubles began. "It used to be gangsters who ran rackets, and now it's consultants and lawyers wearing ties, who are civilized on the surface but carry out the same blackmail," says Girev, who suspects Sigma is acting on behalf of a company that wants to buy Smarts.

A Marshall spokesman said: "For us the case finished a long time ago." Sigma didn't respond to requests for comment. But the group has told Russian newspapers it wasn't involved in a raider attack on Smarts. Sigma says Smarts violated its contract and that Sigma had an option to buy 20% of the company's shares. Sigma has brought several court cases against Smarts but lost appeals last year.

A regrettable, but not uncommon, commercial dispute. Yet what happened next wouldn't be part of a routine commercial dustup. Smarts' major shareholder, Gennady Kiryushin, is now under investigation for alleged criminal offenses, including fraud, illegal entrepreneurship, and money laundering. "There is no foundation for the criminal case," says Kiryushin, who is under legal order to remain in Samara. Girev says the allegations followed threats from individuals who promised to land Kiryushin in jail unless he agreed to sell his shares.

A BARRAGE OF LAWSUITS

The basis for the criminal claims? Smarts is accused of failing to obtain permits for its base stations, violating licensing rules. Girev admits the company has sometimes operated stations before the licensing process was completed, but only on frequencies already allocated to Smarts. Such technical violations are normally punishable by a fine of $400-$800. The police declined to comment.

Smarts has also been hit with dozens of civil lawsuits in regional courts. These suits, using virtually identical language, ask that trading in Smarts shares be halted on the grounds that a private individual hadn't honored a contract to sell bonds issued by Smarts. "What does Smarts have to do with this?" Girev asks. In one town, police identified the plaintiff, who said she had been approached by a stranger in a park and offered 5,000 rubles ($200) to sign a form. In another, the plaintiff died three weeks before the case was filed. While a few judges initially ruled against it, Smarts has been able to reverse the decisions by arguing the cases were frivolous. "We win in the end. But then, in another part of Russia, exactly the same thing happens," says Girev.

With thousands of such cases across Russia, executives and entrepreneurs are pressing for action. Yet it's doubtful that new legislation alone will solve the problem. After all, some tools in the reiderstvo playbook—corruption of courts and prosecutors, forgery, and bribery—have always been illegal. What's needed is a cleanup of the culture of lawlessness—and it's not clear Russia's new President has the clout to do that.