Russia's rich fuel luxury car theft racket

Walther Schmelzeng has a problem. The insurance investigator went with the police to reclaim a luxury car that had been stolen from Germany and traced to Moscow, where it was being driven with forged documents.

But Schmelzeng cannot return the car to its rightful owners, as it has again been reported stolen, this time by the well-connected, but dishonest, Russian owner - a government prosecutor.

'I cannot return it to its German owner as the police will arrest me for driving it,' said Schmelzeng. 'Once we took the car, the prosecutor gave an interview to a local newspaper about me, then went to the police.'

The situation has become so grave that last week Schmelzeng gave a press conference to expose the penchant for stolen top-of-the-range cars that is rife among the great and the not-so-good of Moscow's high society. He has appealed to the Kremlin - a call that went unanswered - and pointed the finger at high-ranking corrupt officials - a notoriously dangerous practice.

An estimated 1.5 million stolen cars are being driven around Russia. The BMWs, Mercedes, Bentleys, Cherokee Jeeps or Humvees are often stolen to order in western Europe or the US, then brought across eastern Europe's porous borders.

Customs officers are paid off and the car is resold, with a new set of documents often supplied by enterprising police in Russia. The vehicle is registered in the name of someone who has died, or a homeless person.

The problem goes to the top of Russia's biggest businesses. The vice-president of one of Russia's largest energy companies drives a Mercedes S500. The car was registered in his name, and Schmelzeng, who says it was stolen, won a court battle to get it back.

'But he got another prosecutor - along with his bodyguards and powerful friends - to stop us taking the car,' he said. 'Sometimes we take a car to the police station for safe-keeping, and when we return an hour later find it has been sold on. The police say they don't know where it is.'

Schmelzeng tried to take one car back from a member of the Russian parliament, the Duma, 'but he took it back the next day', and one from a Russian pop star, who cannot be named for legal reasons.

For police who are not in on the act, stolen cars present even more difficulties. Oleg Yelnikov, from the Ministry of Interior's Organised Crime Directorate, said: 'From one side the former foreign owner has received his insurance payout and does not want the car back.

'We can't punish the Russian buyer because the majority buy a car that seems registered legitimately to someone - be they homeless or fictitious. We can punish the road police - dozens were sacked in 1999 and 2000 - but after all this, who is going to pay to take the car back to the owner?'

German insurance companies have been hit by the massive cost of organised auto crime. 'About 30,000 cars are stolen each year from Germany,' said Schmelzeng. 'On average they cost €15,000 [£10,000]. This means the trade costs €450 million a year. Insurance companies foot the bill and pass it on to the man in the street. German motorists are paying for criminals in Russia to drive better cars than them.'

Schmelzeng's firm, Via-Avto, works for many of Germany's insurance companies. When he started combating car crime in St Petersburg in 1995, Vladimir Putin was a low-level bureaucrat in the local administration and provided his business with the necessary permits. His firm tried to work in Ukraine, but was forced out when some of his colleagues were murdered by the mafia; he has personally received death threats.

'We need more help here in Russia,' he said. 'But nobody wants this work, as it is too dangerous.'