Russian Sports Teams Learn Diversification Can Be Deadly

As she relaxed in her country home on a quiet Sunday morning last month, Larisa Nechayeva, the general director of the national champion soccer team Spartak, didn't notice the red car that had pulled into her yard.

Two men left the car and went inside the cottage. Using Makarov handguns outfitted with silencers, the intruders killed Ms. Nechayeva and a friend and severely wounded her brother.

Perhaps the most shocking thing about this gangland-style killing is that it's not new. Nechayeva's murder is the second of a top Russian sports executive since April, and one of a half-dozen attempts since 1994.

Sports was once the pride of the Soviet state, an international forum akin to the space program and the military, where the superiority of the communist way could be flaunted. But today's chronically broke Russian government can't fund the sports machine in the grand style of the Soviets. What Westerners would consider traditional sources of income, such as ticket sales and television rights, don't pay the bills for teams. So in the scramble to stay afloat, sports organizations have diversified into the same hugely lucrative deals as the rest of Russian business, such as oil exports and alcohol imports.

But big money in Russia brings with it the risk of involvement by organized crime. And as in many profitable spheres of Russian business, the stakes are so great, and the judicial system so weak, that murder often becomes the preferred method of conflict resolution. "Anyone who has a link to money is getting killed now," says Lev Rassoschik, editor of the newspaper Sport Express, "so why should sports be any different?"

Nechayeva's death comes two months after Valentin Sych, the president of the Russian Hockey Federation, was murdered with his wife as they were being driven from their suburban home into Moscow. Last year, assailants tried to kill Boris Fyodorov, then head of the National Sports Foundation, a shadowy organization set up by the Russian government ostensibly to raise money for the sports machine built under the Soviets. No one has been arrested in any of these cases, including Nechayeva's murder two weeks ago.

Alexander Lvov, Spartak's spokesman, vigorously denies that Nechayeva's death was linked to her work. Mr. Lvov says police have told Spartak that gangsters were trying to extort money from Nechayeva simply because she was well-off. Law-enforcement sources declined to comment on possible motives for the murder, except to say that they are looking into Nechayeva's business dealings at Spartak.

A former publisher, Nechayeva came to Spartak more than three years ago at the behest of team president and coach Oleg Romantsev. Her main task, say those who knew her, was to make money for Spartak.

The financial affairs of most sports teams, like that of most businesses, are murky in Russia. Basic financial information, such as the team budget, is hard to come by. But it's obvious that nearly all teams and federations are weathering a tough time. Attendance at sports events is low because Russians now have other entertainment options and because most of Russia's best athletes play abroad. Tickets cost $3 to $4. There's nothing in the way of team merchandising. And until recently, teams had to pay television channels to carry games, not the other way around.

Many teams, including Spartak, stay afloat by finding corporate sponsors, whose logos are emblazoned on jerseys and stadium walls.

But Nechayeva also relied on other forms of business. Many who knew Nechayeva say that she, as well as Mr. Sych, may have been killed because their organizations at one time enjoyed tax exemptions on imported goods that netted various companies tens of millions of dollars.

"There was a 'trail' of debt and obligations from when the tax breaks were taken away," says Mr. Fyodorov of the National Sports Fund (NSF). "Once the exemptions ended, the shooting began."

A NERVOUS man, Fyodorov says that the men who knifed and shot him last year may have been sent from a company that owed NSF money from the tax-exemption scheme.

In late 1993, Russian President Boris Yeltsin signed a decree that allowed nonprofit groups and sports organizations to import consumer goods duty-free, in an effort to provide them with income.

NSF quickly became the chief importer of alcohol and tobacco to Russia, accounting for 70 percent to 80 percent of all such goods in 1994 and 1995, according to the World Bank. But critics of the tax exemptions, such as the bank and the International Monetary Fund (IMF), argued that they cost the cash-strapped federal budget about $2.5 billion in lost revenues until they were repealed in November 1995.

Fyodorov insists that the tax breaks were justified, though critics argue that it's still unclear where NSF's millions went. According to Fyodorov, who knew and worked with Nechayeva and Sych, Spartak and the hockey federation also imported liquor and cigarettes duty-free.

In 1995, the hockey federation was Russia's third-largest importer of alcohol, just behind two NSF organizations. Spartak used the exemptions more sparingly, Fyodorov says. The hockey federation declined to comment. Lvov denies that Spartak ever used tax exemptions.

Importers such as NSF and others made money by bringing in goods in their own name and then turning over the goods to wholesalers and taking a commission of 10 percent to 15 percent of the invoice price for getting the shipment through customs duty-free. Even after paying the NSF, Russian wholesalers saved money by avoiding huge customs duties.

But once the tax breaks were nixed under IMF pressure, wholesalers saw their profit margins sharply narrow. They didn't have the money to pay the importers. So debtors may have tried to liquidate their debts, Fyodorov says, by liquidating their creditors - that is, people such as Nechayeva and Sych.

Now at the height of its season, Spartak has shrugged off Nechayeva's death as it tries to win another national championship. There are no signs of mourning at the club's headquarters in central Moscow. Lvov explains that the team owes its fans this business-as-usual attitude.

"Spartak for generations has been an unusual team, the nation's team, you might say," he explains. "We belong to the people. We are their achievement. We reflect their happiness and their grief."