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Wednesday, March 3, 2010

Vodka Business in Russia Creates Severe Hangover in St. Louis

Posted By on Wed, Mar 3, 2010 at 10:44 AM

Russian vodka stands? Sign us up!
  • Russian vodka stands? Sign us up!
In hindsight, you'd have to blitzed on cheap grain alcohol to fall for the following offer, but back in 2006 the deal sounded, well, too good to be true.

It was.

Paul Burkemper, a financial consultant with his own firm in Sunset Hills had a friend, Russian-born Ilya Vishnevetsky, with contacts back in Moscow and St. Petersburg.

Burkemper and Vishnevetsky met a decade or so ago while their kids played hockey at the Brentwood ice rink. Soon the two men were friends and a few years back conceived a plan to invest in Vishnevetsky's homeland.

The idea was to build beverage kiosks in Russia -- sort of like coffee stands here in the United States. Only instead of coffee, the kiosks would sell vodka to satisfy Russians seemingly unquenchable thirst for the liquor.

A customer could stroll past the vodka stand, order a couple shots and be on his way. According to a "cease and desist order" filed yesterday by the Missouri Secretary of State, the men figured that the kiosks could generate $600 a day. Build a dozen or more of the vodka stands and the profits would roll in.

  • Paul Burkemper
Unfortunately for Burkemper, his broker-dealer -- VSR Financial Services -- (which oversees his security trading) wasn't as gung-ho as he was on the vodka stands and expressly prohibited him from offering investments in the Russian business to his clients.

Undeterred, Burkemper decided to offer the vodka-stand opportunity only to family and close friends. All told, eleven individuals invested some $1.9 million into the scheme.

For awhile, at least, it looked like the venture would pay off in spades. Vishnevetsky went to Russia and began work to set up the vodka stands in St. Petersburg and Moscow. The Russian sent back photos of some of the kiosks under construction and Burkemper boasted that outside offers had been made to purchase their business model for $5 million to $14 million.

Around the same time, Vishnevetsky and Burkemper set up another business, called Select Auto, that purchased high-end used cars in the United States and shipped them over to Russia for resale. Proceeds from the sales would be poured into the vodka business.

But then a curious thing began to happen. Vishnevetsky began corresponding less and less with Burkemper.

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