Vybornov Fired Following Company Audit

Sergei Vybornov, the ousted president of Russian diamond miner Alrosa, left his post following a “comprehensive” audit of the company’s books, Interfax reported after the much publicized departure. The audit may result in legal steps, according to the report.

“We carried out a comprehensive check of Alrosa and the Audit Chamber recommended replacing the head of the company," Audit Chamber Chairman Sergei Stepashin told Interfax.

“Unfortunately the check identified numerous violations in company operations and that is why we recommended replacing Alrosa's president,” he said, adding that the review results have been forwarded to the General Prosecutor's office.

Russia’s Finance Minster Aleksey Kudrin, who chairs Alrosa’s supervisory board, told Vybornov he was terminated, affective July 13. Vybornov is replaced by new board member Fyodor Andreyev.

Vybornov led a controversial policy during the recent economic crisis. While most diamond producers sought to decrease mining operations, Alrosa kept mining as usual and maintained high prices. The policy resulted in continued high expenses with very little income. It is believed, despite Stepashin’s statement, that this policy led to Vybornov’s dismissal.

Accusations of accounting irregularities were raised in the past against Alrosa by the Audit Chamber. An audit of Alrosa's financial results for the 2004-05 fiscal year showed the Russian diamond giant had a shortfall of 1.6 billion rubles in tax payments although the company and the Ministry of Finance have denied the claims.

The Audit Chamber said the shortfall was caused by a price lag between list prices and actual prices. In August 2005, the Moscow Public Prosecutor’s Office told Alrosa it was clearing it of criminal charges.

“The list prices for rough diamonds in the auditing period, approved by the Ministry of Finance, were substantially lower than market prices. In 2004, the diamonds were valued at about $1.45 billion according to list prices, whereas their sale value at the actual price exceeded $1.85 billion,” the chamber said in a statement.