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All rights reserved.<![CDATA[MMM Corporation In post communist Russia great expectations were held for capitalism After years of communist rule many people expected that the benefits of capitalism would be immediately available to the citizens of Russia Although state owned enterprises were being sold to investors wishing to experiment with capitalism there were very few controls to monitor the quickly developing market economy Unlike western countries where legislation had been built up over centuries to ensure probity amongst corporate financiers and public companies in the first few years after Russia dismissed the communist regime a full range of legislation could not be enacted This unsound environment allowed a number of speculative companies to arise with one of the most famous being the MMM Corporation The man behind the MMM Corporation was Sergei Mavrodi a middle aged Russian who concocted a massive scheme to defraud millions of Russians of their savings The other players in the MMM Corporation are not clear The initials of the company were evidently derived from the surnames of three of the directors of the corporation and it is probable that the other people were relatives of Sergei Mavrodi One of the signatories on the initial issue of investment certificates was ‘V P Mavrodi along with ‘S Sergei P Mavrodi The MMM Corporation swindled the people of Russia by creating a huge pyramid scheme A pyramid scheme takes investors money and offers to return interest on their money at unusually high rates Investors are paid the interest as expected but the money used to pay the interest is taken from the investment capital itself or from deposits obtained by subsequent investors The money deposited by investors is never actually used to invest in business or commercial enterprises but is simply used to make interest payments on the investments As long as the rate of investors grows at a certain pace each investor gets paid their interest and they can even liquidate their entire investment Of course the bubble bursts when the interest payments required to be made become greater than the money being deposited The promoters of the scheme have an opportunity to use some of the investments as their personal wealth although most of the money is used to pay interest to make the scheme grow If the scheme is well managed the promoters make most of their profit on the final round of investment just before they disappear with the money Such schemes are not new and in the post communist era many such schemes flourished in the countries of the former Eastern Bloc What makes the MMM Corporation of interest is that not only were they one of the largest of the pyramid schemes but they were also responsible for issuing share certificates that looked very much like banknotes The origin of the MMM Corporation is not clear nor when it commenced its business activities Many reports about MMM state that their activities commenced in 1991 but it appears that their large promotional activities and the implementation of the pyramid scheme began in February 1994 The active marketing of the Corporation was one of the significant aspects of the scheme Twice the Corporation paid for all travel on the Moscow metro for a day During the 1994 Soccer World Cup they sponsored the Russian football team and cornered as much as 40 of television advertising in Russia during the event Their aggressive marketing program particularly on state run television created much comment and their advertisements became the most well known commercials in Russia In one advertisement the Mexican soap opera star Victoria Ruffo was manipulated through computer graphics to endorse the MMM Corporation The soap opera in which Victoria Ruffo starred had been dubbed in Russian and was one of the most popular television programmes in Russia The Corporation s most famous television advertisements portrayed a character called Lyonya Galubkov a seemingly common man who had transformed his life by investing in the MMM Corporation He was seen holidaying in San Francisco buying an apartment in Paris and sometimes in conversation with his friend Ivan with whom he explained his success and defended his method of obtaining his wealth Full page advertisements appeared in Pravda and Izvestia listing the current prices of the shares and addresses where the shares could be bought Accompanying the advertisements were cartoons showing how people had achieved almost instant wealth by investing in MMM shares Small advertisements showing the current and projected buying and selling prices of the shares were published on the front pages of the major Russian newspapers The MMM Corporation offered very attractive returns over the commercial banks in Russia As well as offering better interest rates the banks themselves had been unstable in some instances so many people were encouraged to take their savings from the banks and deposit them with the Corporation By July 1994 when the house of cards began to totter it was estimated that between five and ten million people had invested in the MMM Corporation Investors came not just from Russia but also from former Eastern Bloc countries such as Bulgaria where agencies sold the shares of the Corporation With a promise by the MMM Corporation to pay weekly interest of 10 on their shares the temptation for people to invest large amounts of money was too great especially when it was seen that people were receiving payments on their investments Although the Russian authorities had investigated the Corporation and its associated companies on several occasions they had done nothing to alert people to the issues surrounding the Corporation s activities Simply put a pyramid scheme was not illegal in Russia and they were legally selling shares although it was later reported that they had sold far more shares than they were permitted to sell and their promotion of part shares see below was also seen to be contrary to legislation When questioned as to how they were able to sustain such high returns on investments spokesmen for the Corporation stated when they could be found that they had solid investments but they did not wish to disclose their investment policies for fear their competitors might take advantage of them Several Russian politicians stated that they had reservations about the Corporation and others openly stated that they would not invest in such a company In July 1994 the Ministry of Finance finally issued statements warning about the nature of the MMM Corporation and the impossibility of the situation being sustained to a successful outcome for all investors These statements caused many people to cash in their investments and a run on the Corporation commenced At this time it was estimated that some 10 trillion rubles had been invested in MMM shares which was then equivalent to US 1 7 billion The price of MMM shares had risen from 1 600 rubles in February 1994 to around 115 000 rubles in late July the same year At that time 1 600 rubles was worth about US 1 00 By early July the shares had become so expensive that Mavrodi decided to issue part shares These part shares which were known as biletov but sometimes referred to as ‘Movrodki were made available from mid July at the height of the frenzy The first advertised price of the biletov appeared in Izvestia on 14 July The selling price was 905 rubles and the buying price 870 rubles These prices were one hundredth of the price of a share and this ratio between the prices of biletov and shares continued for the short life of the biletov which saw their demise when the run on MMM shares commenced As soon as the run began it became apparent that Mavrodi s tactics were to pay claims but to pay them at such a slow rate that no great amount of money would be paid out This resulted in the closing of all but one of his offices on 26 July There were sixt]]>http://www.37mileads.com/a2155780/p48/y16558/mavrodi-corporation-history-biggest-memphis-tn.html