In the commercial area of Volketswil ZH there is a car wash, a body shop and two erotic bars. In between is a gray commercial building. You wouldn’t think that a supplier to the Russian defense industry has its headquarters here: Galika AG.
Anyone who rings the doorbell at the main entrance will not receive an answer. But it’s not done yet. Inside, in front of Galika’s floor, is a glass door and another bell. At the push of a button, a woman and a man appear on the carpet. They are the only remaining employees in Switzerland and cannot provide any information. The boss is in Moscow.
Galika AG is the largest Swiss exporter of machine tools to Russia. Russian industry is dependent on foreign countries because its own machine tools are considered inaccurate even in Russia. However, the weapons industry needs precise high-tech devices, such as those produced in Switzerland and Germany. This trade is Galika’s business model.
The discreet Swiss headquarters has a purpose. The company does not want to attract attention here. For decades she managed to stay under the radar of the Swiss authorities.
Your exports are sensitive. They are dual-use goods because they can be used for both military and civilian purposes. Since the annexation of Crimea in 2014, exports to Russia for military purposes have been banned in Switzerland. To be on the safe side, the State Secretariat of Economic Affairs (Seco) no longer wanted to approve the export of dual-use goods.
But the FDP criticized this anti-business practice and ensured that exports for supposedly civilian purposes remained possible. The Seco inspectors therefore continued to review Galika’s export requests. The papers always contained innocent purposes. The machines were intended for the production of medical devices for the treatment of prostate cancer.
From an administrative to a criminal procedure
It was only in 2020 that the Federal Intelligence Service (NDB) sounded the alarm. He investigated the actual intended use of the machines. They were to produce sensors for Russia’s most important fighter jet project: the Su-57 stealth bomber. The Russian client company belongs to a civil-military conglomerate. The civilian part serves as camouflage for the arms trade.
Seco took the intelligence services’ warning seriously and now rejected the export of Galika. But the authority made procedural mistakes. She did not submit the NDB reports to the company for comment and did not sufficiently address the arguments. That is why Galika achieved an interim victory before the Federal Administrative Court in 2021; she did not receive a fair trial. However, Seco also refused the permits on the second attempt.
In the meantime, the Federal Public Prosecutor’s Office became active. She is investigating suspected multiple breaches of the Goods Control Act, as she confirmed upon request.
The case is important for Switzerland’s image
The criminal proceedings have political significance for Switzerland. Because of the Galika deals, she came under international criticism after the Russian invasion. The Ukrainian Economic Advisory Council, which monitors evasion of Russian sanctions, has sued Switzerland for this, in collaboration with an investigative platform.
A report lists Swiss companies that supported Putin’s war. The long list gives the impression of an economic network and therefore puts pressure on Switzerland. What the Ukrainian activists overlooked: there weren’t many cases, just one. The companies mentioned are related to Galika, as shown in the trade register.
In the summer of 2023, the US Congress’s Helsinki Commission increased pressure on Switzerland. She held a hearing in which she accused Switzerland. The country is a secret hub for illegal dealings with Russia. An anti-corruption activist cited the Galika company as evidence of Swiss support for Ukraine.
Galika’s boss has been under house arrest for two years
The Swiss company operates differently in Russia than in Volketswil. The Russian subsidiary is located in a representative building near Gorky Park. You don’t have to look for the entrance here. There are three flags in front of it: Swiss, Russian and German.
The central figure of the company is founder and CEO Lino Derungs. He is 78 years old, a mechanical engineer and started doing business in Russia during the Soviet era. He is one of the few Swiss businessmen to survive perestroika, the restructuring from socialism to capitalism.
In 1998, Derungs said at a workshop of Swiss machine industrialists in Moscow: “Russia is not a market for the faint of heart.” A quarter of a century later, the quote is more relevant than ever for Derungs. Because Swiss criminal proceedings are currently one of his smaller problems.
On March 3, 2022, agents of the domestic intelligence service FSB arrested him. He has been under house arrest in Moscow ever since. The Russian legal system accuses him of tax crimes and bribery. Procedures are also underway against two Galika employees. It is not clear from court documents available in Moscow what the case against the managers is.
However, an appeal ruling from the Moscow Regional Court reveals the extent of the arrest: Derungs is not allowed to leave his home without permission from investigating officers and is not allowed to communicate with anyone except close relatives, lawyers and the Russian prosecutor. office. Courts have extended house arrest several times over the past two years, most recently until March 2024. A hearing on “continuation of the period of house arrest” was scheduled for this month in Moscow.
The case has a certain significance in Moscow. The investigating prosecutor is responsible for investigating particularly important cases. He justifies the request for house arrest by saying that he accuses the Swiss of a “serious crime” and that otherwise he could threaten other suspects and continue his criminal activities.
Derungs unsuccessfully resisted house arrest. The court does not even allow him to go for a walk with his children, make phone calls or use the internet. Because the documents presented by the public prosecutor would confirm the suspicion against Derungs. It is currently not possible to assess whether the procedure is politically motivated. The fact that Russia actually has an interest in Galika’s affairs contradicts this. But it could be that Derungs has fallen out of favor with the Moscow elite.
Confusion in Moscow: Who Owns What?
The Galika boss has been embroiled in legal disputes for years. It is about the company’s headquarters in Moscow. In 1990, Galika signed a lease for a pavilion in Gorky Park, then demolished it and built the office building. In 2011, the Moscow Real Estate Office claimed that the building belonged to the state.
From a Swiss perspective, the legal dispute is incomprehensible because property rights are clearly regulated in our country. In Russia it is more complicated. In these proceedings, the real estate office alleged that other officials had behaved corruptly and favored Galika.
The dispute with the state escalated after Derungs divorced his Russian wife in an argument. They lived together for ten years and have a son. After the divorce, they took legal action against each other. This was also about property rights.
He sued her for cheating him out of his house. He asked her to draw up a rental agreement to regulate her living relationship with him. Instead, she drew up a purchase agreement for a ridiculous price, which he signed in blind faith. Because he did not understand Russian and did not know what he was signing, he filed a complaint with the court. However, she was able to prove to him that he understood the language very well. He lost.
And she sued him for claiming half of his shares in Galika. But she couldn’t get away with it.
These procedures left Galika incapacitated. Creditors are demanding 15 million francs back. The Uster court has therefore appointed a law firm as administrator, which is now dissolving the company. Estate settlements have been going on since the beginning of March.
The irony of history: the Russian legal system pushed the company into the abyss and thus solved a problem for Switzerland. A company that virtually no one knew existed for decades is now disappearing in the Volketswil industrial area. (aargauerzeitung.ch)
Soource :Watson
I am Amelia James, a passionate journalist with a deep-rooted interest in current affairs. I have more than five years of experience in the media industry, working both as an author and editor for 24 Instant News. My main focus lies in international news, particularly regional conflicts and political issues around the world.
